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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-05426
AIM Investment Funds
(Exact name of registrant as specified in charter)
11 Greenway Plaza, Suite 100 Houston, Texas 77046
(Address of principal executive offices) (Zip code)
Philip A. Taylor 11 Greenway Plaza, Suite 100 Houston, Texas 77046
(Name and address of agent for service)
Registrant's telephone number, including area code: (713) 626-1919
Date of fiscal year end: 10/31___
Date of reporting period: 10/31/06
Item 1. Reports to Stockholders.
INTERNATIONAL/ AIM CHINA FUND
GLOBAL EQUITY
Annual Report to Shareholders o October 31, 2006
Emerging Markets
Table of Contents
Supplemental Information ......... 2
Letters to Shareholders .......... 3
Performance Summary .............. 5
Management Discussion ............ 5
Fund Expenses .................... 7
Long-term Fund Performance ....... 8
Approval of Advisory Agreement ... 10
Schedule of Investments .......... F-1
Financial Statements ............. F-3
Notes to Financial Statements .... F-5
Financial Highlights ............. F-11
Auditor's Report ................. F-13 [COVER GLOBE IMAGE]
Tax Disclosures .................. F-14
Trustees and Officers ............ F-15
[AIM INVESTMENT SOLUTIONS]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[DOMESTIC [INTERNATIONAL/ [SECTOR
EQUITY] GLOBAL EQUITY] EQUITY]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[FIXED [ALLOCATION [DIVERSIFIED
INCOME] SOLUTIONS] PORTFOLIOS]
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM China Fund
AIM CHINA FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2006, and is based on total net assets.
ABOUT SHARE CLASSES changes in the value of the --Registered Trademark--) is a group of
portfolio's securities. For some foreign securities tracked by Morgan
o Class B shares are not available as an derivatives, it is possible to lose more Stanley Capital International.
investment for retirement plans maintained than the amount invested in the
pursuant to Section 401 of the Internal derivative. Over the counter derivatives o The unmanaged MSCI CHINA INDEX measures
Revenue Code, including 401(k) plans, (including equity participation the performance of the 30 largest Chinese
money purchase pension plans and profit certificates) are subject to counterparty equity funds tracked by Lipper Inc., an
sharing plans, except for plans that have risk, which is the risk that the other independent mutual fund performance
existing accounts invested in Class B party to the contract will not fulfill its monitor.
shares. contractual obligation to complete the
transaction with the Fund. o The unmanaged LIPPER CHINA REGION FUNDS
PRINCIPAL RISKS OF INVESTING IN CATEGORY AVERAGE represents an average of
THE FUND o There is no guarantee that the all the China Region Funds tracked by
investment techniques and risk analyses Lipper.
o Foreign securities have additional used by the Fund's managers will produce
risks, including exchange rate changes, the desired results. o The Fund is not managed to track the
political and economic upheaval, the performance of any particular index,
relative lack of information about these o The Fund is subject to currency/exchange including the indexes defined here, and
companies, relatively low market liquidity rate risk since it may buy or sell consequently, the performance of the Fund
and the potential lack of strict financial currencies other than the U.S. dollar. may deviate significantly from the
and accounting controls and standards. performance of the index.
o The Fund's return during certain periods
o Investing in emerging markets involves was positively impacted by its investments o A direct investment cannot be made in an
greater risks than investing in more in initial public offerings (IPOs). There index. Unless otherwise indicated, index
established markets. Risks for emerging can be no assurance that the Fund will results include reinvested dividends, and
markets include risks relating to the have favorable IPO investment they do not reflect sales charges.
relatively smaller size and lesser opportunities in the future. Moreover, the Performance of an index of funds reflects
liquidity of these markets, high inflation prices of IPO securities may go up and fund expenses; performance of a market
rates, adverse political developments and down more than prices of equity securities index does not.
lack of timely information. of companies with longer trading
histories. In addition, companies offering OTHER INFORMATION
o Prices of equity securities change in securities in IPOs may have less
response to many factors including the experienced management or limited o The returns shown in the management's
historical and prospective earnings of the operating histories. For additional discussion of Fund performance are based
issuer, the value of its assets, general information regarding the Fund's on net asset values calculated for
economic conditions, interest rates, performance, please see the Fund's shareholder transactions. Generally
investor perceptions and market liquidity. prospectus. accepted accounting principles require
adjustments to be made to the net assets
o The value of convertible securities in o The prices of securities held by the of the Fund at period end for financial
which the Fund invests may be affected by Fund may decline in response to market reporting purposes, and as such, the net
market interest rates, the risk that the risks. asset values for shareholder transactions
issuer may default on interest or and the returns based on those net asset
principal payments and the value of the o The Fund may invest in A shares which values may differ from the net asset
underlying common stock into which these have limitations to repatriate Fund assets values and returns reported in the
securities may be converted. back to the United States. Financial Highlights.
o Debt securities are particularly o Investing in a single-country mutual o Industry classifications used in this
vulnerable to credit risk and interest fund involves greater risks than investing report are generally according to the
rate fluctuations. in a more diversified fund due to lack of Global Industry Classification Standard,
exposure to other countries. which was developed by and is the
o The Fund may use enhanced investment exclusive property and a service mark of
techniques such as leveraging and ABOUT INDEXES USED IN THIS REPORT Morgan Stanley Capital International Inc.
derivatives. Leveraging entails special and Standard & Poor's.
risks such as magnifying o The unmanaged MSCI EUROPE, AUSTRALASIA
AND THE FAR EAST INDEX (the MSCI EAFE Continued on page 9
====================================================================================== =========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares AACFX
====================================================================================== Class B Shares ABCFX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class C Shares CACFX
AIMinvestments.com =========================================
2
AIM China Fund
Dear Shareholders of The AIM Family of Funds
--Registered Trademark--:
We're pleased to provide you with this report, which
includes a discussion of how your Fund was managed during
the review period ended October 31, 2006, and what factors
affected its performance.
As we approach the end of 2006, it seems likely that
[TAYLOR many investors may see the value of their investments
PHOTO] increase this year. Global equity markets, collectively,
recorded double-digit gains for the year ended October 31,
2006, as did the U.S. stock market. Also, the investment
grade bond market in the United States rose for the same
Philip Taylor period.
While stock and bond markets generally enjoyed positive
year-to-date returns, their performance was affected by
short-term economic and geopolitical events. For example,
the U.S. stock market was weak in the second quarter of 2006
when it appeared that inflation might be rising. Only after
the U.S. Federal Reserve Board decided in August that
inflation was contained and that short-term interest rates
need not be increased--the first time it kept rates
unchanged in more than two years--did equities truly surge.
Short-term market fluctuations are a fact of life for
all investors. At AIM Investments--Registered Trademark--,
we believe that investors can do two things to deal with
short-term market fluctuations: maintain a long-term
investment horizon and maintain a diversified portfolio. AIM
Investments can help by offering a broad product line that
gives your financial advisor the necessary tools to build a
portfolio that's right for you regardless of market
conditions. AIM Investments offers a comprehensive range of
retail mutual funds, including domestic, global and
international equity funds, taxable and tax-exempt
fixed-income funds, and a variety of allocation
portfolios--with varied risk and return characteristics to
match your needs. We maintain this extensive set of product
solutions for one reason: We believe in the value of
comprehensive, diversified investment portfolios.
We've changed the look of our annual reports to reflect
that belief. In our marketing and now our shareholder
literature, we represent a fully diversified portfolio
graphically as an allocation pie chart and assign each asset
class a color--green for domestic equity, blue for
international, orange for sector and purple for fixed
income. A legend in the left column illustrates the
methodology. Your report cover now shows your Fund's asset
class color, plus the asset class and sub-asset class name
are shown in the upper-left corner. The reason for these
changes is to help you better understand where your Fund
fits into your overall portfolio.
AIM has a variety of investment solutions, and knowing
which ones are right for your portfolio is complex. That's
why we also believe in the value of a trusted financial
advisor who will work with you to create an investment plan
you can stick with for the long term. Your financial advisor
can help allocate your portfolio appropriately and review
your investments regularly to help ensure they remain
suitable as your financial situation changes. While there
are no guarantees with any investment program, a long-term
plan that's based on your financial goals, risk tolerance
and time horizon is more likely to keep you and your
investments on track.
OUR COMMITMENT TO YOU
In the short term, the one sure thing about markets is their
unpredictability. While past performance cannot guarantee
comparable future results, we believe that staying invested
for the long term with a thoughtful plan offers the best
opportunity for weathering that unpredictability. We at AIM
Investments remain committed to building enduring solutions
to help you achieve your investment goals, and we're pleased
you've placed your trust in us.
Information about investing, the markets and your Fund
is always available on our Web site, AIMinvestments.com. If
you have questions about your individual account, we invite
you to contact one of our highly trained client services
representatives at 800-959-4246.
Sincerely,
/s/ PHILIP TAYLOR
Philip Taylor
President -- AIM Funds
CEO, AIM Investments
December 14, 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. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
3
AIM China Fund
Dear Fellow AIM Fund Shareholders:
At our meeting at the end of June, your Board completed its
comprehensive review* of each fund's advisory agreement with
A I M Advisors, Inc. (AIM) to make certain your interests
[CROCKETT are being served in terms of fees, performance and
PHOTO] operations.
Looking ahead, your Board finds many reasons to be
positive about AIM's management and strategic direction.
Most importantly, AIM's investment management discipline has
paid off in terms of improved overall performance. We are
Bruce L. Crockett also pleased with AIM's efforts to seek more cost-effective
ways of delivering superior service.
In addition, AIM is realizing the benefits of belonging
to a leading independent global investment management
organization in its parent company, AMVESCAP PLC, which is
dedicated to helping people worldwide build their financial
security. AMVESCAP managed approximately $450 billion
globally as of October 31, 2006, operating under the AIM,
INVESCO, AIM Trimark, INVESCO PERPETUAL and Atlantic Trust
brands. These companies are home to an abundance of
investment talent that is gradually being integrated and
leveraged into centers of excellence, each focusing on a
given market segment or asset class. Over the next few
years, your Board will be meeting at these various centers
of excellence to learn about their progress and how they may
serve you through our goal of enhancing performance and
reducing costs.
The seven new AIM funds--which include Asian funds,
structured U.S. equity funds and specialized bond funds--are
an early example of the kind of opportunities the AMVESCAP
organization can provide AIM clients. More information on
these funds can be found on AIM's Web site.
Your Board is very pleased with the overall direction
and progress of the AIM Funds. We're working closely and
effectively with AIM's management to continue this momentum.
As always, your Board is eager to hear your views on how we
might better serve you. Please send your comments in a
letter addressed to me at AIM Investments, AIM Investments
Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board
December 14, 2006
*To learn more about all the factors we considered before
approving each fund's advisory agreement, go to the
"Products & Performance" tab at the AIM Web site
(AIMinvestments.com) and click on "Investment Advisory
Agreement Renewals." The approval of advisory agreement
information for your Fund is also included in this annual
report on pages 10-11.
4
AIM China Fund
MANAGEMENT'S DISCUSSION incorporated in mainland China that are
OF FUND PERFORMANCE listed on the Hong Kong Stock Exchange,
firms incorporated in Hong Kong whose main
====================================================================================== businesses are in China, and other
PERFORMANCE SUMMARY China-related firms listed in or outside
Hong Kong. We research within the stock
Since the Fund's inception on March 31, 2006, through October 31, 2006, Class A shares universe to identify stocks with the
of AIM China Fund, excluding sales charges, returned 9.80%. Despite the Fund's following characteristics:
positive return, it lagged both its style-specific index and peers. However, the Fund
outperformed its broad market index, the MSCI EAFE Index. o Growth stocks selling at a reasonable
price.
The Fund's cash exposure hurt relative performance during the period. The Fund's
underperformance can also be explained by its exposure to certain materials and oil o Quality stocks we believe to be
related stocks and its underweight position in the telecommunication services sector, undervalued that will potentially benefit
in particular CHINA MOBILE. The largest positive contributors to performance came from a pick up in the earnings cycle.
from the financials, materials, health care and consumer discretionary sectors.
In particular, we evaluate four main
FUND VS. INDEXES criteria when we perform stock research:
Cumulative total returns, 3/31/06-10/31/06, excluding applicable sales charges. If
sales charges were included, returns would be lower. o Valuation--in absolute and relative
terms
Class A Shares 9.80%
Class B Shares 9.30 o Management/franchise value--management
Class C Shares 9.20 and ownership, earnings quality, balance
MSCI EAFE Index (Broad Market Index) 8.73 sheet quality, product quality
MSCI China Index (Style-Specific Index) 18.49
Lipper China Region Funds Category Average (Peer Group Index) 9.83 o Earnings growth--earnings per share
growth, growth in market share, origin of
SOURCE: LIPPER INC. growth
======================================================================================
o Liquidity--days to get in and out, total
HOW WE INVEST bottom-up stock selection, where we turnover
believe we can add the most value.
We believe that there are areas of Indexes are listed for reference only, We consider selling a Fund holding if:
inefficiencies in the Chinese equity and the Fund is not managed and the
market that we can systematically take portfolio is not constructed, to mimic o We believe the stock is trading above
advantage of by strictly adhering to a any index. its fair value.
disciplined investment process.
To capitalize on growth in China, we o We believe a stock has negative earnings
Our investment process combines a have a broad-based investment universe, momentum or sequential earnings,
disciplined bottom-up and top-down including all listed companies in China, downgrades, unless its valuation is
multifactor analysis. However, we companies already very low or distressed.
primarily focus on
o We see a permanent, fundamental
deterioration in a company's business
prospects.
o We identify a more attractive
opportunity elsewhere.
(continued)
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Diversified Banks 13.0% 1. China Mobile Ltd. (Hong Kong) 7.4%
2. Wireless Telecommunication 2. Industrial and Commercial Bank
[PIE CHART] Services 7.4 of China-Class H (China) 5.1
3. Integrated Oil & Gas 7.2 3. PetroChina Co. Ltd.-Class H
Energy 12.0% 4. Life & Health Insurance 4.4 (China) 4.8
Materials 8.7% 5. Airport Services 4.3 4. China Construction Bank-Class H
Telecommunication Services 7.4% (China) 4.7
Consumer Staples 4.2% 5. China Life Insurance Co.,
Health Care 3.5% Total Net Assets $20.88 million Ltd.-Class H (China) 4.4
Utilities 3.0% 6. CNOOC Ltd. (Hong Kong) 4.0
Information Technology 1.5% Total Number of Holdings* 44 7. China Merchants Bank Co.
Money Market Funds Plus Ltd.-Class H (China) 3.2
Other Assets Less Liabilities 4.5% 8. Hong Kong Aircraft Engineering
Financials 27.3% Co. Ltd. (Hong Kong) 3.0
Industrials 15.5% 9. Hong Kong and China Gas Co.
Consumer Discretionary 12.4% Ltd. (Hong Kong) 3.0
10. Yantai Changyu Pioneer Wine Co.
Ltd.-Class B (China) 2.5
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
5
AIM China Fund
MARKET CONDITIONS AND YOUR FUND financials sector was a positive Paul Chan
contributor. Overweight positions in CHINA Chartered Financial
Chinese stock markets rose during the EVERBRIGHT and CHINA MERCHANT BANK added [CHAN Analyst, investment
period as liquidity remained abundant, the most value. Economic growth in China PHOTO] director for INVESCO
fuelled by positive fundamentals and continued to be strong, and we believe Hong Kong Limited, is
expectations of further currency selective banks could enjoy good loan portfolio manager of
appreciation. In May, investors took growth. AIM China Fund. Mr. Chan joined INVESCO
profits in emerging markets globally in in 2001. He earned a bachelor's of
response to rising risk aversion, and Although the Fund's return during the science degree in economics from the
China was no exception. Nevertheless, reporting period was positively impacted University of Manitoba.
Chinese equities demonstrated relative by its investments in initial public
resilience in the emerging market offerings (IPOs), there can be no Samantha Ho
sell-off, thanks to robust domestic assurance that the Fund will have [HO Chartered Financial
fundamentals and high levels of liquidity favorable IPO investment opportunities in PHOTO] Analyst, investment
in the system. the future. director for INVESCO
Hong Kong Limited, is
portfolio manager of AIM China Fund.
Overall, economic conditions remained Ms. Ho began her investment career in
robust in China. For the third quarter of We continued to employ our bottom-up 1989. She joined INVESCO in 2004.
2006, China's gross domestic product (GDP) stock selection process. In terms of She earned a B.A. from Bryn Mawr College
rose by 10.4% year-over-year after gaining investment themes, we remained positive on and an M.B.A. from the UCLA Graduate
11.3% in the second quarter. China's infrastructure, energy, materials, School of Management.
industrial output growth remained healthy financials and domestic consumption
at 16.1% year-over-year in September. related stocks.
The markets responded positively to Overall, we maintained our positive
these data, as they expected less need for stance on the Chinese economy and its
additional austerity measures by the stock market. The Chinese economy
government. Trade performance remained continued to be driven by robust fixed
strong, with the year-to-date trade asset investments. Foreign companies have
balance hitting $110 billion, already expanded their investments in China, while
exceeding last year's total. Retail sales infrastructure spending remained strong.
rose by 13.9% in September reflecting Exports also continued to grow at a robust
stronger consumer demand. Inflation at the pace.
consumer level remained benign, rising by
just 1.5% year-over-year in September. IN CLOSING
While the Fund delivered positive We are pleased to have provided
returns over the period, it lagged its shareholders with positive returns for the
style-specific index, or benchmark, mainly seven-month period ended October 31, 2006,
due to an underweight position in the and we thank you for your participation in
telecommunication services sector. In AIM China Fund.
particular, China Mobile performed
strongly amid higher-than-expected monthly THE VIEWS AND OPINIONS EXPRESSED IN
subscriber growth. The stock also was a MANAGEMENT'S DISCUSSION OF FUND
major beneficiary of strong liquidity PERFORMANCE ARE THOSE OF A I M ADVISORS,
inflows into China. Although the Fund's INC. THESE VIEWS AND OPINIONS ARE SUBJECT
underweight position in China TO CHANGE AT ANY TIME BASED ON FACTORS
Mobile--which was partly due to the 10% SUCH AS MARKET AND ECONOMIC CONDITIONS.
single stock limit of the Fund--hurt our THESE VIEWS AND OPINIONS MAY NOT BE RELIED
relative performance, the stock was the UPON AS INVESTMENT ADVICE OR
single largest contributor to absolute RECOMMENDATIONS, OR AS AN OFFER FOR A
performance for the period. Our holdings PARTICULAR SECURITY. THE INFORMATION IS
in the materials sector also detracted NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF
from the Fund's relative performance. ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR
However, stock selection in the THE FUND. STATEMENTS OF FACT ARE FROM
SOURCES CONSIDERED RELIABLE, BUT A I M
ADVISORS, INC. MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR
ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE
INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
See important Fund and index
disclosures on the inside front cover.
6
AIM China Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE together with the amount you invested, to The hypothetical account values and
estimate the expenses that you paid over expenses may not be used to estimate the
As a shareholder of the Fund, you incur the period. Simply divide your account actual ending account balance or expenses
two types of costs: (1) transaction costs, value by $1,000 (for example, an $8,600 you paid for the period. You may use this
which may include sales charges (loads) on account value divided by $1,000 = 8.6), information to compare the ongoing costs
purchase payments or contingent deferred then multiply the result by the number in of investing in the Fund and other funds.
sales charges on redemptions, and the table under the heading entitled To do so, compare this 5% hypothetical
redemption fees, if any; and (2) ongoing "Actual Expenses Paid During Period" to example with the 5% hypothetical examples
costs, including management fees; estimate the expenses you paid on your that appear in the shareholder reports of
distribution and/or service (12b-1) fees; account during this period. the other funds.
and other Fund expenses. This example is
intended to help you understand your HYPOTHETICAL EXAMPLE FOR COMPARISON Please note that the expenses shown
ongoing costs (in dollars) of investing in PURPOSES in the table are meant to highlight your
the Fund and to compare these costs with ongoing costs only and do not reflect any
ongoing costs of investing in other mutual The table below also provides information transaction costs, such as sales charges
funds. The example is based on an about hypothetical account values and (loads) on purchase payments, contingent
investment of $1,000 invested at the hypothetical expenses based on the Fund's deferred sales charges on redemptions, and
beginning of the period and held for the actual expense ratio and an assumed rate redemption fees, if any. Therefore, the
entire period May 1, 2006, through October of return of 5% per year before expenses, hypothetical information is useful in
31, 2006. which is not the Fund's actual return. The comparing ongoing costs only, and will not
Fund's actual cumulative total returns at help you determine the relative total
ACTUAL EXPENSES net asset value after expenses for the six costs of owning different funds. In
months ended October 31, 2006, appear in addition, if these transaction costs were
The table below provides information about the far right table "Cumulative Total included, your costs would have been
actual account values and actual expenses. Returns" on page 9. higher.
You may use the information in this table,
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
A $1,000.00 $1,087.10 $11.05 $1,014.62 $10.66 2.10%
B 1,000.00 1,082.20 14.96 1,010.84 14.44 2.85
C 1,000.00 1,082.30 14.96 1,010.84 14.44 2.85
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 six months ended October 31, 2006, appear in the far right table "Cumulative Total Returns" on page 9.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
7
AIM China Fund
Your Fund's performance
RESULTS OF A $10,000 INVESTMENT
Fund and index data from 3/31/06
====================================================================================================================================
[MOUNTAIN CHART]
LIPPER CHINA
AIM CHINA FUND AIM CHINA FUND AIM CHINA FUND MSCI CHINA MSCI EAFE REGION FUNDS
DATE -CLASS A SHARES -CLASS B SHARES -CLASS C SHARES INDEX INDEX CATEGORY AVERAGE INDEX
3/31/06 $ 9450 $10000 $10000 $10000 $10000 $10000
4/06 9545 10100 10090 10524 10478 10510
5/06 9308 9840 9840 9981 10071 10076
6/06 9317 9850 9840 10188 10070 10079
7/06 9242 9761 9760 10458 10170 10115
8/06 9251 9761 9750 10686 10449 10288
9/06 9704 10241 10230 11084 10465 10573
10/06 10378 10430 10820 11849 10873 11121
====================================================================================================================================
SOURCE: LIPPER INC.
Past performance cannot guarantee his entire investment in the Fund at the index does not. Performance shown in the
comparable future results. close of the reporting period and paid the chart and table(s) does not reflect
applicable contingent deferred sales deduction of taxes a shareholder would pay
The data shown in the chart include charges. Index results include reinvested on Fund distributions or sale of Fund
reinvested distributions, applicable sales dividends, but they do not reflect sales shares. Performance of the indexes does
charges, Fund expenses and management charges. Performance of an index of funds not reflect the effects of taxes.
fees. Results for Class B shares are reflects fund expenses and management
calculated as if a hypothetical fees; performance of a market
shareholder had liquidated
8
AIM China Fund
========================================== ========================================== ==========================================
CUMULATIVE TOTAL RETURNS CUMULATIVE TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/06, including applicable As of 9/30/06, the most recent calendar 6 months ended 10/31/06, excluding
sales charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 8.71%
Inception (3/31/06) 3.78% CLASS A SHARES Class B Shares 8.22
Inception (3/31/06) -2.93% Class C Shares 8.23
CLASS B SHARES
Inception (3/31/06) 4.30% CLASS B SHARES ==========================================
Inception (3/31/06) -2.60%
CLASS C SHARES
Inception (3/31/06) 8.20% CLASS C SHARES
Inception (3/31/06) 1.30%
========================================== ==========================================
THE PERFORMANCE DATA QUOTED REPRESENT PAST THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU THE PERFORMANCE OF THE FUND'S SHARE
PERFORMANCE AND CANNOT GUARANTEE SELL SHARES. CLASSES WILL DIFFER PRIMARILY DUE TO
COMPARABLE FUTURE RESULTS; CURRENT DIFFERENT SALES CHARGE STRUCTURES AND
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CLASS A SHARE PERFORMANCE REFLECTS THE CLASS EXPENSES.
VISIT AIMinvestments.com FOR THE MOST MAXIMUM 5.50% SALES CHARGE, AND CLASS B
RECENT MONTH-END PERFORMANCE. PERFORMANCE AND CLASS C SHARE PERFORMANCE REFLECTS THE A REDEMPTION FEE OF 2% WILL BE IMPOSED
FIGURES REFLECT REINVESTED DISTRIBUTIONS, APPLICABLE CONTINGENT DEFERRED SALES ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
CHANGES IN NET ASSET VALUE AND THE EFFECT CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE THE FUND WITHIN 30 DAYS OF PURCHASE.
OF THE MAXIMUM SALES CHARGE UNLESS CDSC ON CLASS B SHARES DECLINES FROM 5% EXCEPTIONS TO THE REDEMPTION FEE ARE
OTHERWISE STATED. INVESTMENT RETURN AND BEGINNING AT THE TIME OF PURCHASE TO 0% AT LISTED IN THE FUND'S PROSPECTUS.
PRINCIPAL VALUE WILL FLUCTUATE SO THE BEGINNING OF THE SEVENTH YEAR. THE
CDSC ON CLASS C SHARES IS 1% FOR THE FIRST HAD THE ADVISOR NOT WAIVED FEES AND/OR
YEAR AFTER PURCHASE. REIMBURSED EXPENSES, PERFORMANCE WOULD
HAVE BEEN LOWER.
Continued from inside front cover
The Fund provides a complete list of its Copies of the Fund's Forms N-Q may be Client Services department at 800-959-4246
holdings four times in each fiscal year, reviewed and copied at the SEC Public or on the AIM Web site,
at the quarter-ends. For the second and Reference Room in Washington, D.C. You can AIMinvestments.com. On the home page,
fourth quarters, the lists appear in the obtain information on the operation of the scroll down and click on AIM Funds Proxy
Fund's semiannual and annual reports to Public Reference Room, including Policy. The information is also available
shareholders. For the first and third information about duplicating fee charges, on the SEC Web site, sec.gov.
quarters, the Fund files the lists with by calling 202-942-8090 or 800-732-0330,
the Securities and Exchange Commission or by electronic request at the following Information regarding how the Fund voted
(SEC) on Form N-Q. The most recent list of e-mail address: publicinfo@sec.gov. The proxies related to its portfolio
portfolio holdings is available at SEC file numbers for the Fund are securities during the 12 months ended June
AIMinvestments.com. From our home page, 811-05426 and 033-19338. 30, 2006, is available at our Web site. Go
click on Products & Performance, then to AIMinvestments.com, access the About Us
Mutual Funds, then Fund Overview. Select A description of the policies and tab, click on Required Notices and then
your Fund from the drop-down menu and procedures that the Fund uses to determine click on Proxy Voting Activity. Next,
click on Complete Quarterly Holdings. how to vote proxies relating to portfolio select the Fund from the drop-down menu.
Shareholders can also look up the Fund's securities is available without charge, The information is also available on the
Forms N-Q on the SEC Web site at sec.gov. upon request, from our SEC Web site, sec.gov.
9
AIM China Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the "Board") of AIM viduals are competent and able to carry net assets increase because the Advisory
Investment Funds (the "Trust") oversees out their responsibilities under the Agreement includes breakpoints. The Board
the management of AIM China Fund (the Advisory Agreement. noted that, because this is a new Fund and
"Fund") and, as required by law, the way in which the advisory fee
determines whether to approve the Fund's o Overall performance of AIM. Not breakpoints have been structured, the Fund
advisory agreement with A I M Advisors, applicable because this is a new Fund. has yet to benefit from the breakpoints.
Inc. ("AIM"). Based upon the However, the Board considered the overall The Board concluded that the Fund's fee
recommendation of the Investments performance of AIM in providing investment levels under the Advisory Agreement
Committee of the Board, at a meeting held advisory and portfolio administrative therefore would reflect economies of scale
on February 1, 2006, the Board, including services to other mutual funds advised by at higher asset levels and that it was not
all of the independent trustees, approved AIM and concluded that such performance necessary to change the advisory fee
the initial advisory agreement (the was satisfactory. breakpoints in the Fund's advisory fee
"Advisory Agreement") between the Fund and schedule.
AIM for an initial period ending June 30, o Fees relative to those clients of AIM
2007. with comparable investment strategies. The o Investments in affiliated money market
Board noted that AIM does not serve as an funds. The Board also took into account
The Board considered the factors advisor to other mutual funds or other the fact that uninvested cash and cash
discussed below in evaluating the fairness clients with investment strategies collateral from securities lending
and reasonableness of the Advisory comparable to those of the Fund. arrangements (collectively, "cash
Agreement at the meeting on February 1, balances") of the Fund may be invested in
2006 and as part of the Board's ongoing o Fees relative to those of comparable money market funds advised by AIM pursuant
oversight of the Fund. In their funds with other advisors. The Board to the terms of an SEC exemptive order.
deliberations, the Board and the reviewed the advisory fee rate for the The Board found that the Fund may realize
independent trustees did not identify any Fund under the Advisory Agreement. The certain benefits upon investing cash
particular factor that was controlling, Board compared effective contractual balances in AIM advised money market
and each trustee attributed different advisory fee rates at a common asset level funds, including a higher net return,
weights to the various factors. and noted that the Fund's rate was below increased liquidity, increased
the median rate of the funds advised by diversification or decreased transaction
The discussion below serves as a other advisors with investment strategies costs. The Board also found that the Fund
summary of the material factors and the comparable to those of the Fund that the will not receive reduced services if it
conclusions with respect thereto that Board reviewed. The Board noted that AIM invests its cash balances in such money
formed the basis for the Board's approval has agreed to limit the Fund's total market funds. The Board noted that, to the
of the Advisory Agreement. After annual operating expenses, as discussed extent the Fund invests in affiliated
consideration of all of the factors below below. The Board also considered the fact money market funds, AIM has voluntarily
and based on its informed business that AIM set the proposed advisory fees agreed to waive a portion of the advisory
judgment, the Board determined that the for the Fund based upon the median fees it receives from the Fund
Advisory Agreement is in the best effective management fee rate (comprised attributable to such investment. The Board
interests of the Fund and its shareholders of advisory fees plus, in some cases, further determined that the proposed
and that the compensation to AIM under the administrative fees) at various asset securities lending program and related
Advisory Agreement is fair and reasonable levels of competitor mutual funds with procedures with respect to the lending
and would have been obtained through arm's investment strategies comparable to those Fund is in the best interests of the
length negotiations. of the Fund. In addition, the Board noted lending Fund and its respective
that the proposed advisory fees for the shareholders. The Board therefore
o The nature and extent of the advisory Fund are equal to the uniform fee schedule concluded that the investment of cash
services to be provided by AIM. The Board that applies to other mutual funds advised collateral received in connection with the
reviewed the services to be provided by by AIM with investment strategies securities lending program in the money
AIM under the Advisory Agreement. Based on comparable to those of the Fund, which market funds according to the procedures
such review, the Board concluded that the uniform fee schedule includes breakpoints is in the best interests of the lending
range of services to be provided by AIM and is based on net asset levels. Based on Fund and its respective shareholders.
under the Advisory Agreement was this review, the Board concluded that the
appropriate. advisory fee rate for the Fund under the o Profitability of AIM and its affiliates.
Advisory Agreement was fair and The Board reviewed information concerning
o The quality of services to be provided reasonable. the profitability of AIM's (and its
by AIM. The Board reviewed the credentials affiliates') investment advisory and other
and experience of the officers and o Expense limitations and fee waivers. The activities and its financial condition.
employees of AIM who will provide Board noted that AIM has contractually The Board considered the overall
investment advisory services to the Fund. agreed to waive fees and/or limit expenses profitability of AIM. The Board noted that
In reviewing the qualifications of AIM to of the Fund through June 30, 2007 in an AIM's operations remain profitable,
provide investment advisory services, the amount necessary to limit total annual although increased expenses in recent
Board reviewed the qualifications of AIM's operating expenses to a specified years have reduced AIM's profitability.
investment personnel and considered such percentage of average daily net assets for Based on the review of the profitability
issues as AIM's portfolio and product each class of the Fund. The Board of AIM's and its affiliates' investment
review process, various back office considered the contractual nature of this advisory and other activities and its
support functions provided by AIM and fee waiver/expense limitation and noted financial condition, the Board concluded
AIM's equity and fixed income trading that it remains in effect until June 30, that the compensation to be paid by the
operations. Based on the review of these 2007. The Board considered the effect this Fund to AIM under its Advisory Agreement
and other factors, the Board concluded fee waiver/expense limitation would have was not excessive.
that the quality of services to be on the Fund's estimated expenses and
provided by AIM was appropriate. concluded that the levels of fee o Benefits of soft dollars to AIM. The
waivers/expense limitations for the Fund Board considered the benefits realized by
o The performance of the Fund relative to were fair and reasonable. AIM as a result of brokerage transactions
comparable funds. Not applicable because executed through "soft dollar"
this is a new Fund. o Breakpoints and economies of scale. The arrangements. Under these arrangements,
Board reviewed the structure of the Fund's brokerage commissions paid by the Fund
o The performance of the Fund relative to advisory fee under the Advisory Agreement, and/or other funds advised by AIM are used
indices. Not applicable because this is a noting that it contains seven breakpoints. to pay for research and execution
new Fund. The Board reviewed the level of the Fund's services. This research is used by AIM in
advisory fees, and noted that such fees, making investment decisions for the Fund.
o Meeting with the Fund's portfolio as a percentage of the Fund's net assets, The Board concluded that such arrangements
managers and investment personnel. The would decrease as were appropriate.
Board intends to meet periodically with
the Fund's portfolio managers and/or other (continued)
investment personnel to ensure that such
indi-
10
AIM China Fund
o AIM's financial soundness in light of The Board considered the factors annual operating expenses, as discussed
the Fund's needs. The Board considered discussed below in evaluating the fairness below. The Board also considered the
whether AIM is financially sound and has and reasonableness of the Sub-Advisory services to be provided by the Sub-Advisor
the resources necessary to perform its Agreement at the meeting on February 1, pursuant to the Sub-Advisory Agreement and
obligations under the Advisory Agreement, 2006 and as part of the Board's ongoing the services to be provided by AIM
and concluded that AIM has the financial oversight of the Fund. In their pursuant to the Advisory Agreement, as
resources necessary to fulfill its deliberations, the Board and the well as the allocation of fees between AIM
obligations under the Advisory Agreement. independent trustees did not identify any and the Sub-Advisor pursuant to the
particular factor that was controlling, Sub-Advisory Agreement. The Board noted
o Historical relationship between the Fund and each trustee attributed different that the sub-advisory fees have no direct
and AIM. In determining whether to approve weights to the various factors. effect on the Fund or its shareholders, as
the Advisory Agreement for the Fund, the they are paid by AIM to the Sub-Advisor,
Board also considered the current The discussion below serves as a and that AIM and the Sub-Advisor are
relationship between AIM and the Trust, as discussion of the material factors and the affiliates. Based on this review, the
well as the Board's knowledge of AIM's conclusions with respect thereto that Board concluded that the sub-advisory fee
operations, and concluded that it was formed the basis for the Board's approval rate under the Sub-Advisory Agreement was
beneficial to maintain the current of the Sub-Advisory Agreement. After fair and reasonable.
relationship, in part, because of such consideration of all of the factors below
knowledge. The Board also reviewed the and based on its informed business o Profitability of AIM and its affiliates.
general nature of the non-investment judgment, the Board determined that the The Board reviewed information concerning
advisory services currently performed by Sub-Advisory Agreement is in the best the profitability of AIM's (and its
AIM and its affiliates for the Trust, such interests of the Fund and its affiliates') investment advisory and other
as administrative, transfer agency and shareholders. activities and its financial condition.
distribution services, and the fees The Board considered the overall
received by AIM and its affiliates for o The nature and extent of the advisory profitability of AIM. The Board noted that
performing such services. In addition to services to be provided by the AIM's operations remain profitable,
reviewing such services, the trustees also Sub-Advisor. The Board reviewed the although increased expenses in recent
considered the organizational structure services to be provided by the Sub-Advisor years have reduced AIM's profitability.
employed by AIM and its affiliates to under the Sub-Advisory Agreement. Based on Based on the review of the profitability
provide those services. Based on the such review, the Board concluded that the of AIM's and its affiliates' investment
review of these and other factors, the range of services to be provided by the advisory and other activities and its
Board concluded that AIM and its Sub-Advisor under the Sub-Advisory financial condition, the Board concluded
affiliates were qualified to provide Agreement was appropriate. that the compensation to be paid by the
non-investment advisory services to the Fund to AIM under its Advisory Agreement
Fund, including administrative, transfer o The quality of services to be provided was not excessive.
agency and distribution services. by the Sub-Advisor. The Board reviewed the
credentials and experience of the officers o The Sub-Advisor's financial soundness in
o Other factors and current trends. In and employees of the Sub-Advisor who will light of the Fund's needs. The Board
determining whether to approve the provide investment advisory services to considered whether the Sub-Advisor is
Advisory Agreement for the Fund, the Board the Fund. Based on the review of these and financially sound and has the resources
considered the fact that AIM, along with other factors, the Board concluded that necessary to perform its obligations under
others in the mutual fund industry, is the quality of services to be provided by the Sub-Advisory Agreement, and concluded
subject to regulatory inquiries and the Sub-Advisor was appropriate. that the Sub-Advisor has the financial
litigation related to a wide range of resources necessary to fulfill its
issues. The Board also considered the o The performance of the Fund relative to obligations under the Sub-Advisory
governance and compliance reforms being comparable funds. Not applicable because Agreement.
undertaken by AIM and its affiliates, this is a new Fund. However, the Board
including maintaining an internal controls reviewed the performance of other accounts
committee and retaining an independent sub-advised by the Sub-Advisor with
compliance consultant, and the fact that investment strategies comparable to those
AIM has undertaken to cause the Fund to of the Fund.
operate in accordance with certain
governance policies and practices. The o The performance of the Fund relative to
Board concluded that these actions indices. Not applicable because this is a
indicated a good faith effort on the part new Fund.
of AIM to adhere to the highest ethical
standards, and determined that the current o Meetings with the Fund's portfolio
regulatory and litigation environment to managers and investment personnel. The
which AIM is subject should not prevent Board intends to meet periodically with
the Board from approving the Advisory the Fund's portfolio managers and/or other
Agreement for the Fund. investment personnel to ensure that such
individuals are competent and able to
APPROVAL OF SUB-ADVISORY AGREEMENT carry out their responsibilities under the
Sub-Advisory Agreement.
The Board oversees the management of the
Fund and, as required by law, determines o Overall performance of the Sub-Advisor.
whether to approve the Fund's sub-advisory Not applicable because this is a new Fund.
agreement. Based upon the recommendation
of the Investments Committee of the Board, o Fees relative to those clients of the
at a meeting held on February 1, 2006, the Sub-Advisor with comparable investment
Board, including all of the independent strategies. The Board reviewed the
trustees, approved the sub-advisory sub-advisory fee rate for the Fund under
agreement (the "Sub-Advisory Agreement") the Sub-Advisory Agreement. The Board
between INVESCO Hong Kong Limited (the compared effective contractual fee rates
"Sub-Advisor") and AIM with respect to the at a common asset level and noted that
Fund for an initial period ending June 30, this rate was lower than the all-in
2007. advisory fee rates for five affiliated
offshore funds for which the Sub-Advisor
serves as sub-advisor with investment
strategies comparable to those of the
Fund. The Board noted that AIM has agreed
to limit the Fund's total
11
Supplement to Annual Report dated 10/31/06
AIM China Fund
===================================
Institutional Class Shares CUMULATIVE TOTAL RETURNS PLEASE NOTE THAT PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS. MORE RECENT
The following information has been prepared to For periods ended 10/31/06 RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
provide Institutional Class shareholders with ALL RETURNS ASSUME REINVESTMENT OF
a performance overview specific to their Inception (3/31/06) 9.90% DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND
holdings. Institutional Class shares are 6 Months 8.70 PRINCIPAL VALUE WILL FLUCTUATE SO YOUR
offered exclusively to institutional SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
investors, including defined contribution =================================== LESS THAN THEIR ORIGINAL COST. SEE FULL
plans that meet certain criteria. CUMULATIVE TOTAL RETURNS REPORT FOR INFORMATION ON COMPARATIVE
BENCHMARKS. PLEASE CONSULT YOUR FUND
For periods ended 9/30/06, PROSPECTUS FOR MORE INFORMATION. FOR THE MOST
most recent calendar CURRENT MONTH-END PERFORMANCE, PLEASE CALL
quarter-end 800-451-4246 OR VISIT AIMINVESTMENTS.COM.
Inception (3/31/06) 2.80%
6 Months 2.80
===================================
INSTITUTIONAL CLASS SHARES HAVE NO
SALES CHARGE; THEREFORE,
PERFORMANCE IS AT NET ASSET VALUE
(NAV). PERFORMANCE OF INSTITUTIONAL
CLASS SHARES WILL DIFFER FROM
PERFORMANCE OF OTHER SHARE CLASSES
PRIMARILY DUE TO DIFFERING SALES
CHARGES AND CLASS EXPENSES.
A REDEMPTION FEE OF 2% WILL BE
IMPOSED ON CERTAIN REDEMPTIONS OR
EXCHANGES OUT OF THE FUND WITHIN 30
DAYS OF PURCHASE. EXCEPTIONS TO THE
REDEMPTION FEE ARE LISTED IN THE
FUND'S PROSPECTUS.
HAD THE ADVISOR NOT WAIVED
FEES AND/OR REIMBURSED EXPENSES,
============================================== PERFORMANCE WOULD HAVE BEEN LOWER.
NASDAQ SYMBOL IACFX
==============================================
Over for information on your Fund's expenses.
====================================================================================
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.
====================================================================================
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted,
reproduced or shown to the public, nor used in written form as sales literature for
public use.
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE]
AIMINVESTMENTS.COM CHT-INS-1 A I M Distributors, Inc. --REGISTERED TRADEMARK-- --REGISTERED TRADEMARK--
Information about your Fund's expenses
Calculating your ongoing Fund expenses
Example divide your account value by $1,000 The hypothetical account values and
(for example, an $8,600 account expenses may not be used to estimate the
As a shareholder of the Fund, you incur value divided by $1,000 = 8.6), actual ending account balance or expenses you
ongoing costs, including management fees and then multiply the result by the paid for the period. You may use this
other Fund expenses. This example is intended number in the table under the information to compare the ongoing costs of
to help you understand your ongoing costs (in heading entitled "Actual Expenses investing in the Fund and other funds. To do
dollars) of investing in the Fund and to Paid During Period" to estimate the so, compare this 5% hypothetical example with
compare these costs with ongoing costs of expenses you paid on your account the 5% hypothetical examples that appear in
investing in other mutual funds. The example during this period. the shareholder reports of the other funds.
is based on an investment of $1,000 invested
at the beginning of the period and held for Hypothetical example for comparison Please note that the expenses shown in
the entire period May 1, 2006, through October purposes the table are meant to highlight your ongoing
31, 2006. costs only. Therefore, the hypothetical
The table below also provides information is useful in comparing ongoing
Actual expenses information about hypothetical costs only, and will not help you determine
account values and hypothetical the relative total costs of owning different
The table below provides information about expenses based on the Fund's actual funds.
actual account values and actual expenses. You expense ratio and an assumed rate
may use the information in this table, of return of 5% per year before
together with the amount you invested, to expenses, which is not the Fund's
estimate the expenses that you paid over the actual return. The Fund's actual
period. Simply cumulative total return after
expenses for the six months ended
October 31, 2006, appears in the
table on the front of this
supplement.
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
Institutional $1,000.00 $1,087.00 $9.68 $1,015.93 $9.35 1.84%
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2006, through October 31, 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 return after expenses
for the six months ended October 31, 2006, appears in the table on the
front of this supplement.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated
above multiplied by the average account value over the period, multiplied
by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMINVESTMENTS.COM CHI-INS-1 A I M Distributors,Inc.
AIM China Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-95.49%(a)
AIRLINES-1.70%
China National Aviation Co. Ltd. (Hong
Kong)(b) 1,000,000 $ 355,017
======================================================================
AIRPORT SERVICES-4.32%
Beijing Capital International Airport Co.
Ltd.-Class H(b) 420,000 269,290
- ----------------------------------------------------------------------
Hong Kong Aircraft Engineering Co. Ltd. (Hong
Kong) 50,000 632,940
======================================================================
902,230
======================================================================
ALUMINUM-1.68%
Aluminum Corp. of China Ltd.-Class H(b) 500,000 351,555
======================================================================
AUTO PARTS & EQUIPMENT-0.66%
Xinyi Glass Holding Co. Ltd.(b) 400,000 136,703
======================================================================
COAL & CONSUMABLE FUELS-0.84%
China Shenhua Energy Co. Ltd.-Class H (Hong
Kong) 100,000 175,899
======================================================================
COMMODITY CHEMICALS-1.43%
Sinopec Shanghai Petrochemical Co. Ltd.-Class
H (Hong Kong)(b) 700,000 297,848
======================================================================
CONSTRUCTION & ENGINEERING-2.10%
COSCO International Holdings Ltd.(b) 1,200,000 438,015
======================================================================
DEPARTMENT STORES-1.72%
Lifestyle International Holdings Ltd. (Hong
Kong)(b) 120,000 232,470
- ----------------------------------------------------------------------
Parkson Retail Group Ltd. (Hong Kong)(b) 30,500 127,066
======================================================================
359,536
======================================================================
DISTILLERS & VINTNERS-2.53%
Yantai Changyu Pioneer Wine Co. Ltd.-Class B 155,000 528,146
======================================================================
DISTRIBUTORS-1.74%
Integrated Distribution Services Group Ltd.
(Hong Kong)(b) 180,000 363,057
======================================================================
DIVERSIFIED BANKS-13.00%
China Construction Bank-Class H (Acquired
04/03/06-10/27/06; Cost $1,008,236)(b)(c) 2,201,000 989,629
- ----------------------------------------------------------------------
China Merchants Bank Co. Ltd.-Class H(d) 428,000 668,096
- ----------------------------------------------------------------------
Industrial and Commercial Bank of China-Class
H(d) 2,360,000 1,056,010
======================================================================
2,713,735
======================================================================
DIVERSIFIED METALS & MINING-1.33%
Baoji Titanium Industry Co., Ltd. (Equity
Participation Ctfs. issued by BNP Paribas
S.A.), expiring 12/10/09(e)(f)(g) 100,287 277,594
======================================================================
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
DIVERSIFIED REIT'S-1.43%
GZI Real Estate Investment Trust (Hong
Kong)(b) 750,000 $ 298,910
======================================================================
FOOTWEAR-3.45%
Hongguo International Holdings Ltd.(b)(d) 500,000 262,744
- ----------------------------------------------------------------------
Le Saunda Holdings Ltd. (Hong Kong)(b) 2,000,000 457,357
======================================================================
720,101
======================================================================
GAS UTILITIES-2.96%
Hong Kong and China Gas Co. Ltd. (Hong
Kong)(b) 270,000 618,551
======================================================================
HEALTH CARE EQUIPMENT-2.17%
Mindray Medical International Ltd.-ADR(d) 25,000 452,500
======================================================================
HEAVY ELECTRICAL EQUIPMENT-3.68%
Dongfang Electrical Machinery Co. Ltd.-Class
H(b) 140,000 269,814
- ----------------------------------------------------------------------
Harbin Power Equipment Co. Ltd.-Class H(b) 580,000 499,186
======================================================================
769,000
======================================================================
HOTELS, RESORTS & CRUISE LINES-2.22%
Home Inns & Hotels Management, Inc.-ADR(d) 18,900 463,806
======================================================================
INDUSTRIAL MACHINERY-3.68%
China Metal International Holdings Inc. 600,000 207,529
- ----------------------------------------------------------------------
Enric Energy Equipment Holdings Ltd.(b)(d) 620,000 390,185
- ----------------------------------------------------------------------
IPE Group Ltd. (Hong Kong) 1,000,000 171,013
======================================================================
768,727
======================================================================
INTEGRATED OIL & GAS-7.15%
China Petroleum and Chemical Corp. (Sinopen)-
Class H(b) 720,000 499,375
- ----------------------------------------------------------------------
PetroChina Co. Ltd.-Class H(b) 900,000 993,044
======================================================================
1,492,419
======================================================================
INTERNET RETAIL-0.62%
Shanghai Zendai Property Ltd.(b)(d) 3,000,000 129,208
======================================================================
INTERNET SOFTWARE & SERVICES-1.46%
Tom Online Inc.(b)(d) 1,800,000 303,693
======================================================================
INVESTMENT BANKING & BROKERAGE-1.49%
CITIC Securities Co., Ltd. (Equity
Participation Ctfs. issued by BNP Paribas
S.A.), expiring 04/21/10(e)(f)(g) 166,000 310,088
======================================================================
INVESTMENT COMPANIES-1.75%
Pufeng Fund (Equity Participation Ctfs.
issued by UBS A.G.), expiring
12/10/09(d)(e)(f)(g) 3,000,000 366,000
======================================================================
LEISURE PRODUCTS-1.87%
Li Ning Co. Ltd. (Hong Kong) 330,000 390,372
======================================================================
</Table>
F-1
AIM China Fund
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
LIFE & HEALTH INSURANCE-4.35%
China Life Insurance Co., Ltd.-Class H(b) 430,000 $ 907,912
======================================================================
OIL & GAS EXPLORATION & PRODUCTION-4.02%
CNOOC Ltd. (Hong Kong)(b) 1,000,000 839,437
======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.11%
China Everbright Ltd. (Hong Kong)(b)(d) 500,000 441,228
======================================================================
PAPER PRODUCTS-1.83%
Nine Dragons Paper Holdings Ltd.(b)(d) 300,000 381,621
======================================================================
PHARMACEUTICALS-1.36%
Golden Dragon Group (Holdings) Ltd. (Hong
Kong)(d) 1,800,000 284,678
======================================================================
PUBLISHING-1.85%
Next Media Ltd. (Hong Kong) 722,000 385,267
======================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-3.17%
China Overseas Land & Investment Ltd. (Hong
Kong)(b) 220,000 200,300
- ----------------------------------------------------------------------
China Resources Land Ltd. (Hong Kong)(b) 580,000 461,782
======================================================================
662,082
======================================================================
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
STEEL-2.40%
Shanxi Taigang Stainless Steel Co.,
Ltd.-Class A (Equity Participation Ctfs.
issued by BNP Paribas S.A.), expiring
12/10/09(e)(f)(g) 500,000 $ 501,500
======================================================================
WIRELESS TELECOMMUNICATION SERVICES-7.42%
China Mobile Ltd. (Hong Kong)(b) 190,000 1,548,869
======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $18,039,389) 19,935,304
======================================================================
MONEY MARKET FUNDS-8.08%
Liquid Assets Portfolio-Institutional
Class(h) 843,750 843,750
- ----------------------------------------------------------------------
Premier Portfolio-Institutional Class(h) 843,750 843,750
======================================================================
Total Money Market Funds (Cost
$1,687,500) 1,687,500
======================================================================
TOTAL INVESTMENTS-103.57% (Cost $19,726,889) 21,622,804
======================================================================
OTHER ASSETS LESS LIABILITIES-(3.57)% (744,410)
======================================================================
NET ASSETS-100.00% $20,878,394
______________________________________________________________________
======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Ctfs. - Certificates
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(a) Each company listed in Foreign Stocks & Other Equity Interests is organized
in China unless otherwise noted.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2006 was $13,063,866,
which represented 62.57% of the Fund's Net Assets. See Note 1A.
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The value of this security at October 31, 2006 represented 4.74% of the
Fund's Net Assets. Unless otherwise indicated, this security is not
considered to be illiquid.
(d) Non-income producing security.
(e) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at October 31, 2006 was $1,455,182, which represented 6.97% of
the Fund's Net Assets. See Note 1A.
(f) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The aggregate
value of these securities considered illiquid at October 31, 2006 was
$1,455,182, which represented 6.97% of the Fund's Net Assets.
(g) Security is considered an equity participation certificate. Equity
participation certificates are subject to counterparty risk with respect to
the bank or broker-dealer that issues them. The Fund is limited to investing
10% of its net assets in participation certificates.
(h) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-2
AIM China Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $18,039,389) $19,935,304
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $1,687,500) 1,687,500
===========================================================
Total investments (Cost $19,726,889) 21,622,804
===========================================================
Cash 260,820
- -----------------------------------------------------------
Receivables for:
Fund shares sold 160,162
- -----------------------------------------------------------
Dividends 24,877
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 1,172
- -----------------------------------------------------------
Other assets 47,688
===========================================================
Total assets 22,117,523
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,089,421
- -----------------------------------------------------------
Fund shares reacquired 58,628
- -----------------------------------------------------------
Trustee deferred compensation and retirement
plans 1,172
- -----------------------------------------------------------
Accrued distribution fees 7,165
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,146
- -----------------------------------------------------------
Accrued transfer agent fees 6,670
- -----------------------------------------------------------
Accrued operating expenses 74,927
===========================================================
Total liabilities 1,239,129
===========================================================
Net assets applicable to shares outstanding $20,878,394
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $19,393,633
- -----------------------------------------------------------
Undistributed net investment income 160,002
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currencies (570,564)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 1,895,323
===========================================================
$20,878,394
___________________________________________________________
===========================================================
NET ASSETS:
Class A $14,211,888
___________________________________________________________
===========================================================
Class B $ 2,881,092
___________________________________________________________
===========================================================
Class C $ 2,950,440
___________________________________________________________
===========================================================
Institutional Class $ 834,974
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 1,294,883
___________________________________________________________
===========================================================
Class B 263,568
___________________________________________________________
===========================================================
Class C 270,094
___________________________________________________________
===========================================================
Investor Class 75,965
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.98
- -----------------------------------------------------------
Offering price per share
(Net asset value of $10.98 divided by
94.50%) $ 11.62
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.93
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.92
___________________________________________________________
===========================================================
Investor Class:
Net asset value and offering price per share $ 10.99
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
AIM China Fund
STATEMENT OF OPERATIONS
For the period March 31, 2006 (Date operations commenced) through October 31,
2006
<Table>
INVESTMENT INCOME:
Dividends $ 267,528
- ------------------------------------------------------------------------
Dividends from affiliated money market funds 12,165
- ------------------------------------------------------------------------
Interest 21,257
========================================================================
Total investment income 300,950
========================================================================
EXPENSES:
Advisory fees 77,082
- ------------------------------------------------------------------------
Administrative services fees 29,452
- ------------------------------------------------------------------------
Custodian fees 32,184
- ------------------------------------------------------------------------
Distribution fees:
Class A 13,316
- ------------------------------------------------------------------------
Class B 12,288
- ------------------------------------------------------------------------
Class C 12,464
- ------------------------------------------------------------------------
Transfer agent fees -- A, B and C 32,225
- ------------------------------------------------------------------------
Transfer agent fees -- Institutional 39
- ------------------------------------------------------------------------
Trustees' and officer's fees and benefits 8,404
- ------------------------------------------------------------------------
Registration and filing fees 50,256
- ------------------------------------------------------------------------
Professional services fees 68,820
- ------------------------------------------------------------------------
Other 20,110
========================================================================
Total expenses 356,640
========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (170,254)
========================================================================
Net expenses 186,386
========================================================================
Net investment income 114,564
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (570,564)
- ------------------------------------------------------------------------
Foreign currencies (4,686)
========================================================================
(575,250)
========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 1,895,915
- ------------------------------------------------------------------------
Foreign currencies (592)
========================================================================
1,895,323
========================================================================
Net gain from investment securities and foreign currencies 1,320,073
========================================================================
Net increase in net assets resulting from operations $1,434,637
________________________________________________________________________
========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM China Fund
STATEMENT OF CHANGES IN NET ASSETS
For the period March 31, 2006 (Date operations commenced) through October 31,
2006
<Table>
<Caption>
2006
- ---------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 114,564
- ---------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (575,250)
- ---------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 1,895,323
===========================================================================
Net increase in net assets resulting from operations 1,434,637
===========================================================================
Share transactions-net:
Class A 13,252,290
- ---------------------------------------------------------------------------
Class B 2,697,458
- ---------------------------------------------------------------------------
Class C 2,732,692
- ---------------------------------------------------------------------------
Institutional Class 761,317
===========================================================================
Net increase in net assets resulting from share
transactions 19,443,757
===========================================================================
Net increase in net assets 20,878,394
===========================================================================
NET ASSETS:
Beginning of period --
===========================================================================
End of period (including undistributed net investment
income of $160,002) $20,878,394
___________________________________________________________________________
===========================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM China Fund (the "Fund") is a series portfolio of AIM Investment Funds (the
"Trust"). The Trust is organized as a Delaware statutory trust and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of nine separate series
portfolios, each authorized to issue an unlimited number of shares of beneficial
interest. The Fund currently offers multiple classes of shares. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund commenced operations on
March 31, 2006.
The Fund's investment objective is long-term growth of capital.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. 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.
F-5
AIM China Fund
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. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. 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.
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.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to treat 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 to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- 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.
F-6
AIM China Fund
H. INDEMNIFICATIONS -- 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.
I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is recorded as an
increase in shareholder capital and is allocated among the share classes
based on the relative net assets of each class.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
K. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.935%
- --------------------------------------------------------------------
Next $250 million 0.91%
- --------------------------------------------------------------------
Next $500 million 0.885%
- --------------------------------------------------------------------
Next $1.5 billion 0.86%
- --------------------------------------------------------------------
Next $2.5 billion 0.835%
- --------------------------------------------------------------------
Next $2.5 billion 0.81%
- --------------------------------------------------------------------
Next $2.5 billion 0.785%
====================================================================
Over $10 billion 0.76%
___________________________________________________________________
====================================================================
</Table>
Under the terms of a master sub-advisory agreement between AIM and INVESCO
Hong Kong Limited ("INVESCO"), AIM pays INVESCO 40% of the amount of AIM's
compensation on sub-advised assets.
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C and
Institutional Class shares to 2.05%, 2.80%, 2.80% and 1.80% of average daily net
assets, respectively, through at least June 30, 2007. In determining the
advisor's obligation to waive advisory fees and/or reimburse expenses, the
following expenses are not taken into account, and could cause the net annual
operating expenses to exceed the numbers reflected above: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v)
expenses related to a merger or reorganization, as approved by the Fund's Board
of Trustees; and (vi) expenses that the Fund has incurred but did not actually
pay because of an expense offset arrangement. Currently, in addition to the
expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more
fully below, the expense offset arrangements from which the Fund may benefit are
in the form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash. In
addition, the Fund may also benefit from one time credit to be used offset
future custodian expenses. These credits are used to pay certain expenses
incurred by the Fund.
F-7
AIM China Fund
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in
the amount of 25% of the advisory fee AIM receives from the affiliated money
market funds on investments by the Fund in such affiliated money market funds.
Voluntary fee waivers or reimbursements may be modified or discontinued at any
time upon consultation with the Board of Trustees without further notice to
investors.
For the period March 31, 2006 (date operations commenced) to October 31,
2006, AIM waived advisory fees of $77,082 and reimbursed fund level expenses of
$57,631 and reimbursed class level expenses of $21,724, $5,012, $5,084 and $39
for Class A, Class B, Class C and Institutional Class shares, respectively.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. These expenses along with the related expense
reimbursement are included in the Statement of Operations. For the period March
31, 2006 (date operations commenced) to October 31, 2006, AMVESCAP did not
reimburse any expenses.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the period
March 31, 2006 (date operations commenced) to October 31, 2006, AIM was paid
$29,452.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AIS") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AIS for certain expenses
incurred by AIS in the course of providing such services. AIS may make payments
to intermediaries that provide omnibus account services, sub-accounting services
and/or networking services. All fees payable by AIS to intermediaries that
provide omnibus account services or sub-accounting are charged back to the Fund,
subject to certain limitations approved by the Trust's Board of Trustees. For
the period March 31, 2006 (date operations commenced) to October 31, 2006, the
Fund paid AIS $32,225 for Class A, Class B and Class C share classes and $39 for
Institutional Class shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C and Institutional Class shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,
Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the
Plans, pays ADI compensation at the annual rate of 0.25% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and Class C shares. Of the Rule 12b-1 payments, up to 0.25% of the
average daily net assets of the Class A, Class B or Class C shares may be paid
to furnish continuing personal shareholder services to customers who purchase
and own shares of such classes. Any amounts not paid as a service fee under the
Plans would constitute an asset-based sales charge. National Association of
Securities Dealers ("NASD") Rules impose a cap on the total sales charges,
including asset-based sales charges that may be paid by any class of shares of
the Fund. Pursuant to the Plans, for the period March 31, 2006 (date operations
commenced) to October 31, 2006, the Class A, Class B and Class C share Class
paid ADI $13,316, $12,288 and $12,464, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the period
March 31, 2006 (date operations commenced) to October 31, 2006, ADI advised the
Fund that it retained $27,492 in front-end sales commissions from the sale of
Class A shares and $0, $3,223 and $1,462 from Class A, Class B and Class C
shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the period March 31, 2006 (date operations commenced) to October 31, 2006.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 03/31/06 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio -- Institutional
Class $ -- $3,272,448 $(2,428,698) $ -- $ 843,750 $ 6,084 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio -- Institutional
Class -- 3,272,448 (2,428,698) -- 843,750 6,081 --
==================================================================================================================================
Total
Investments
in
Affiliates $ -- $6,544,896 $(4,857,396) $ -- $1,687,500 $12,165 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the period
March 31, 2006 (date operations commenced) to October 31, 2006, the Fund
received credits from these arrangements, which resulted in the reduction of the
Fund's total expenses of $3,682.
F-8
AIM China Fund
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the period March 31, 2006 (date operations commenced) to October 31,
2006, the Fund paid legal fees of $574 for services rendered by Kramer, Levin,
Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that
firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the period March 31, 2006 (date operations commenced) to October 31,
2006, the Fund did not borrow or lend under the interfund lending facility or
borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank 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 contractually agreed upon rate.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
There was no ordinary income or long-term capital gain distributions paid during
the period March 31, 2006 (date operations commenced) to October 31, 2006.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- ---------------------------------------------------------------------------
Undistributed ordinary income $ 229,931
- ---------------------------------------------------------------------------
Unrealized appreciation -- investments 1,755,118
- ---------------------------------------------------------------------------
Temporary book/tax differences (996)
- ---------------------------------------------------------------------------
Capital loss carryforward (499,292)
- ---------------------------------------------------------------------------
Shares of beneficial interest 19,393,633
===========================================================================
Total net assets $20,878,394
___________________________________________________________________________
===========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales. The tax-basis net unrealized appreciation on investments amount
includes appreciation (depreciation) on foreign currencies of $(592).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
passive foreign investment companies.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
F-9
AIM China Fund
The Fund has a capital loss carryforward as of October 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
October 31, 2014 $499,292
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the period March 31, 2006 (date operations commenced) to October
31, 2006 was $28,955,200 and $10,345,247, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $2,204,963
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (449,253)
==============================================================================
Net unrealized appreciation of investment securities $1,755,710
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $19,867,094.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and certain costs incurred during the startup period of the Fund,
on October 31, 2006, undistributed net investment income was increased by
$45,438, undistributed net realized gain (loss) was increased by $4,686 and
shares of beneficial interest decreased by $50,124. This reclassification had no
effect on the net assets of the Fund.
NOTE 10--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A, Class B,
Class C and Institutional Class. Class A shares are sold with a front-end sales
charge unless certain waiver criteria are met. Class B shares and Class C shares
are sold with CDSC. Institutional Class shares are sold at net asset value.
Under certain circumstances, Class A shares are subject to CDSC. Generally,
Class B shares will automatically convert to Class A shares on or about the
month-end which is at least eight years after the date of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------
MARCH 31, 2006
(DATE OPERATIONS
COMMENCED) THROUGH
OCTOBER 31, 2006(a)
------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------------
Sold:
Class A 1,736,742 $17,568,155
- --------------------------------------------------------------------------------------
Class B 404,014 4,092,900
- --------------------------------------------------------------------------------------
Class C 373,811 3,777,696
- --------------------------------------------------------------------------------------
Institutional Class 75,965 761,317
======================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 3,983 40,622
- --------------------------------------------------------------------------------------
Class B (3,992) (40,622)
======================================================================================
Reacquired:(b)
Class A (445,842) (4,356,487)
- --------------------------------------------------------------------------------------
Class B (136,454) (1,354,820)
- --------------------------------------------------------------------------------------
Class C (103,717) (1,045,004)
======================================================================================
1,904,510 $19,443,757
______________________________________________________________________________________
======================================================================================
</Table>
(a) There are two entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 13% of
the outstanding shares of the Fund. ADI has an agreement with these
entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may
make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, AIM and/or AIM affiliates
including but not limited to services such as securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially. 12% of
the outstanding shares are owned by AIM.
(b) Amount is net of redemption fees of $15,408, $4,483, $3,562 and $1,307
for Class A, Class B, Class C and Institutional Class shares,
respectively, for the period March 31, 2006 (date operations commenced)
to October 31, 2006.
F-10
AIM China Fund
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A CLASS B CLASS C INSTITUTIONAL CLASS
-------------- -------------- -------------- -------------------
MARCH 31, 2006 MARCH 31, 2006 MARCH 31, 2006 MARCH 31, 2006
(DATE (DATE (DATE (DATE
OPERATIONS OPERATIONS OPERATIONS OPERATIONS
COMMENCED) TO COMMENCED) TO COMMENCED) TO COMMENCED) TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2006 2006 2006 2006
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00 $10.00 $10.00 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (a) 0.09 0.05 0.05 0.11
- ------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 0.87 0.86 0.85 0.86
==============================================================================================================================
Total from investment operations 0.96 0.91 0.90 0.97
==============================================================================================================================
Redemption fees added to shares of beneficial
interest 0.02 0.02 0.02 0.02
==============================================================================================================================
Net asset value, end of period $ 10.98 $10.93 $10.92 $10.99
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 9.80% 9.30% 9.20% 9.90%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $14,212 $2,881 $2,950 $ 835
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements(c) 2.09% 2.84% 2.84% 1.84%
- ------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements(c) 4.14% 4.89% 4.89% 3.48%
==============================================================================================================================
Ratio of net investment income to average net
assets(c) 1.60% 0.85% 0.85% 1.85%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(d) 80% 80% 80% 80%
______________________________________________________________________________________________________________________________
==============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges, if any, and is
not annualized for period less than one year.
(c) Ratios are annualized and based on average daily net assets of
$9,042,345, $2,086,198, $2,116,007 and $751,206, for Class A, Class B,
Class C and Institutional Class, respectively.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
F-11
AIM China Fund
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
PENDING LITIGATION AND REGULATORY INQUIRIES
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 (Order No. 05-1318). The
WVASC makes findings of fact that AIM and ADI entered into certain arrangements
permitting market timing of the AIM Funds and failed to disclose these
arrangements in the prospectuses for such Funds, 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, including restitution to affected investors, disgorgement of fees,
reimbursement of investigatory, administrative and legal costs and an
"administrative assessment," to be determined by the Commissioner. Initial
research indicates that these damages could be limited or capped by statute.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions (all the claims in
this category of lawsuits were dismissed with prejudice by the court on
September 29, 2006, except for the Section 36(b) claim which was dismissed
with leave to amend to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
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 and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-12
AIM China Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM China Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM China Fund (one of the funds
constituting AIM Investment Funds, hereafter referred to as the "Fund") at
October 31, 2006, and the results of its operations, the changes in its net
assets and the financial highlights for the period March 31, 2006 (date
operations commenced) through October 31, 2006, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian, provides a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
December 20, 2006
Houston, Texas
F-13
AIM China Fund
TAX DISCLOSURES
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended April 30, 2006, July 31, 2006 and October 31, 2006 are
97.19%, 99.77% and 99.50%, respectively.
F-14
AIM China Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm) and
Trustee and Vice Chair of The AIM Family
of Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
- -------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, A I M Management Group Inc.,
Principal AIM Mutual Fund Dealer Inc. (registered
Executive Officer broker dealer), AIM Funds Management
Inc. (registered investment advisor) and
1371 Preferred Inc. (holding company);
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Capital Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, AVZ Callco Inc. (holding
company); AMVESCAP Inc. (holding
company) and AIM Canada Holdings Inc.
(holding company); Director and Chief
Executive Officer, AIM Trimark Corporate
Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund
company) and AIM Trimark Canada Fund
Inc. (corporate mutual fund company);
Trustee, President and Principal
Executive Officer of The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
Powershares Capital Management LLC
Formerly: President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer,
AIM Funds Management Inc.; President,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and Director,
Trimark Trust (federally regulated
Canadian Trust Company)
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder
Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); CompuDyne Corporation
(provider of products and services to
the public security market); and
Homeowners of America Holding
Corporation (property casualty company)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and Director of various
affiliated Volvo companies; and
Director, Magellan Insurance Company
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired Director, Mainstay VP Series
Trustee Formerly: Partner, Deloitte & Touche Funds, Inc. (21 portfolios)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
F-15
TRUSTEES AND OFFICERS--(CONTINUED)
AIM China Fund
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc. and A I M
Advisors, Inc.; Director, Vice President
and Secretary, INVESCO Distributors,
Inc.; Vice President and Secretary,
A I M Capital Management, Inc., AIM
Investment Services, Inc., and Fund
Management Company; Senior Vice
President and Secretary, A I M
Distributors, Inc.; Director, INVESCO
Funds Group Inc.; Senior Vice President,
Chief Legal Officer and Secretary of The
AIM Family of Funds--Registered
Trademark--; and Manager, Powershares
Capital Management LLC
Formerly: Chief Operating Officer,
Senior Vice President, General Counsel,
and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice
President and Secretary, PBHG Funds (an
investment company); Vice President and
Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel
and Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- ------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, AMVESCAP N/A
Vice President PLC; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- ------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Senior Vice President and General
Vice President Counsel, AMVESCAP PLC; Director, INVESCO
Funds Group, Inc.; and Vice President of
The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Vice President and N/A
General Counsel, Fund Management
Company; Director, Senior Vice
President, Secretary and General
Counsel, A I M Management Group Inc. and
A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Senior Vice President, A I M
Distributors, Inc.; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Chief
Executive Officer and President, INVESCO
Funds Group, Inc.; and Senior Vice
President, and General Counsel, Liberty
Financial Companies, Inc. and Senior
Vice President and General Counsel
Liberty Funds Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.; and Vice President,
Financial Officer and Treasurer and Principal Officer of The
Treasurer AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc. and Vice President
of The AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, Senior Vice
President and Senior Investment Officer,
A I M Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); and
President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust Only)
Formerly: Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- ------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc., Fund Management
Company and The AIM Family of
Funds--Registered Trademark--
Formerly: Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Global Head of Product
Development, AIG-Global Investment
Group, Inc.; Chief Compliance Officer
and Deputy General Counsel,
AIG-SunAmerica Asset Management; and
Chief Compliance Officer, Chief
Operating Officer and Deputy General
Counsel, American General Investment
Management
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers INVESCO Hong Kong
Suite 100 11 Greenway Plaza Inc. LLP Limited
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Houston, TX 77046-1173 Suite 100 Suite 2900 Three Pacific Place
Houston, TX 77046-1173 Houston, TX 77002-5678 1 Queen's Road East
Hong Kong
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, Kramer, Levin, Naftalis Services, Inc. Trust Company
LLP & Frankel LLP P.O. Box 4739 225 Franklin Street
1735 Market Street, 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
51st Floor Americas
Philadelphia, PA 19103-7599 New York, NY 10036-2714
</Table>
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INTERNATIONAL/ AIM DEVELOPING
GLOBAL EQUITY MARKETS FUND
Emerging Markets Annual Report to Shareholders o October 31, 2006
Table of Contents
Supplemental Information ......... 2
Letters to Shareholders .......... 3
Performance Summary .............. 5
Management Discussion ............ 5
Fund Expenses .................... 7
Long-term Fund Performance ....... 8
Approval of Advisory Agreement ... 10
Schedule of Investments .......... F-1
Financial Statements ............. F-5
Notes to Financial Statements .... F-8
Financial Highlights ............. F-15
Auditor's Report ................. F-19
Tax Disclosures .................. F-20 [COVER GLOBE IMAGE]
Trustees and Officers ............ F-21
[AIM INVESTMENT SOLUTIONS]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[DOMESTIC [INTERNATIONAL/ [SECTOR
EQUITY] GLOBAL EQUITY] EQUITY]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[FIXED [ALLOCATION [DIVERSIFIED
INCOME] SOLUTIONS] PORTFOLIOS]
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM Developing Markets Fund
AIM DEVELOPING MARKETS FUND PRIMARILY SEEKS TO PROVIDE LONG-TERM GROWTH OF
CAPITAL WITH A SECONDARY INVESTMENT OBJECTIVE OF INCOME.
o Unless otherwise stated, information presented in this report is as of October
31, 2006, and is based on total net assets.
ABOUT SHARE CLASSES subject to greater investment and credit o The Fund is not managed to track the
risk than if it invested more broadly. performance of any particular index,
o Class B shares are not available as an including the indexes defined here, and
investment for retirement plans o The Fund may be substantially invested consequently, the performance of the Fund
maintained pursuant to Section 401 of the in debt securities of both government and may deviate significantly from the
Internal Revenue Code, including 401(k) corporate issuers in emerging markets. performance of the index.
plans, money purchase pension plans and These debt securities are the equivalent
profit sharing plans. Plans that had of high-yield, high-risk bonds, commonly o A direct investment cannot be made in
existing accounts invested in Class B known as "junk bonds." Compared to higher an index. Unless otherwise indicated,
shares prior to September 30, 2003, will quality debt securities, junk bonds index results include reinvested
continue to be allowed to make additional involve greater risk of default or price dividends, and they do not reflect sales
purchases. changes due to changes in the credit charges. Performance of an index of funds
quality of the issuer, because they are reflects fund expenses; performance of a
PRINCIPAL RISKS OF INVESTING IN THE FUND generally unsecured and because they may market index does not.
be subordinated to other creditors'
o Foreign securities have additional claims. Sovereign debt securities are OTHER INFORMATION
risks, including exchange rate changes, subject to the additional risk that,
political and economic upheaval, the under some political, diplomatic, social o The returns shown in the management's
relative lack of information about these or economic circumstances, some discussion of Fund performance are based
companies, relatively low market developing countries that issue on net asset values calculated for
liquidity and the potential lack of lower-quality debt securities may be shareholder transactions. Generally
strict financial and accounting controls unable or unwilling to make principal or accepted accounting principles require
and standards. interest payments as they come due. adjustments to be made to the net assets
of the fund at period end for financial
o Investing in a fund that invests in o Although the fund's return during reporting purposes, and as such, the net
smaller companies involves risks not certain periods was positively impacted asset values for shareholder transactions
associated with investing in more by its investments in initial public and the returns based on those net asset
established companies, such as business offerings (IPOs), there can be no values may differ from the net asset
risk, stock price fluctuations and assurance that the fund will have values and returns reported in the
illiquidity. favorable IPO investment opportunities in Financial Highlights.
the future.
o Investing in emerging markets involves o Industry classifications used in this
greater risks than investing in more ABOUT INDEXES USED IN THIS REPORT report are generally according to the
established markets. Risks for emerging Global Industry Classification Standard,
markets include risks relating to the o The unmanaged MSCI EUROPE, AUSTRALASIA which was developed by and is the
relatively smaller size and lesser AND THE FAR EAST INDEX (the MSCI exclusive property and a service mark of
liquidity of these markets, high EAFE --Registered Trademark--) is a group Morgan Stanley Capital International Inc.
inflation rates, adverse political of foreign securities tracked by Morgan and Standard & Poor's.
developments and lack of timely Stanley Capital International.
information. The Fund provides a complete list of its
o The unmanaged MSCI EMERGING MARKETS holdings four times in each fiscal year,
o Prices of equity securities change in INDEX is a group of securities from at the quarter-ends. For the second and
response to many factors including the emerging markets tracked by Morgan fourth quarters, the lists appear in the
historical and prospective earnings of Stanley Capital International. The index Fund's semiannual and annual reports to
the issuer, the value of its assets, represents investable opportunities for shareholders. For the first and third
general economic conditions, interest global investors, taking into account the quarters, the Fund files the lists with
rates, investor perceptions and market local market restrictions on share the Securities and Exchange Commission
liquidity. ownership by foreign investors. (SEC) on Form N-Q. The most recent list
of portfolio holdings is available at
o Debt securities are particularly o The unmanaged LIPPER EMERGING MARKETS AIMinvestments.com. From our home page,
vulnerable to credit risk and interest FUNDS INDEX represents an average of the click on Products & Performance, then
rate fluctuations. 30 largest emerging markets funds tracked Mutual Funds, then Fund Overview. Select
by Lipper Inc., an independent mutual your Fund from the drop-down menu and
o The Fund is non-diversified, which fund performance monitor. click on Complete Quarterly Holdings.
increases the risk that the value of the Shareholders can also look up the Fund's
Fund's shares may vary more widely. Also, Forms N-Q on the SEC Web site at sec.gov.
the Fund may be Copies of the Fund's Forms N-Q may be
reviewed and copied at the SEC Public
Continued on page 9
================================================================================ =========================================
FUND NASDAQ SYMBOLS
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES Class A Shares GTDDX
AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class B Shares GTDBX
Class C Shares GTDCX
================================================================================ =========================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIMinvestments.com
2
AIM Developing Markets
Dear Shareholders of The AIM Family of Funds --Registered
Trademark--:
[TAYLOR We're pleased to provide you with this report, which includes
PHOTO] a discussion of how your Fund was managed during the review
period ended October 31, 2006, and what factors affected its
performance.
As we approach the end of 2006, it seems likely that many
Philip Taylor investors may see the value of their investments increase this
year. Global equity markets, collectively, recorded
double-digit gains for the year ended October 31, 2006, as did
the U.S. stock market. Also, the investment grade bond market
in the United States rose for the same period.
While stock and bond markets generally enjoyed positive
year-to-date returns, their performance was affected by
short-term economic and geopolitical events. For example, the
U.S. stock market was weak in the second quarter of 2006 when
it appeared that inflation might be rising. Only after the
U.S. Federal Reserve Board decided in August that inflation
was contained and that short-term interest rates need not be
increased--the first time it kept rates unchanged in more than
two years--did equities truly surge.
Short-term market fluctuations are a fact of life for all
investors. At AIM Investments --Registered Trademark--, we
believe that investors can do two things to deal with
short-term market fluctuations: maintain a long-term
investment horizon and maintain a diversified portfolio. AIM
Investments can help by offering a broad product line that
gives your financial advisor the necessary tools to build a
portfolio that's right for you regardless of market
conditions. AIM Investments offers a comprehensive range of
retail mutual funds, including domestic, global and
international equity funds, taxable and tax-exempt
fixed-income funds, and a variety of allocation
portfolios--with varied risk and return characteristics to
match your needs. We maintain this extensive set of product
solutions for one reason: We believe in the value of
comprehensive, diversified investment portfolios.
We've changed the look of our annual reports to reflect
that belief. In our marketing and now our shareholder
literature, we represent a fully diversified portfolio
graphically as an allocation pie chart and assign each asset
class a color--green for domestic equity, blue for
international, orange for sector and purple for fixed income.
A legend in the left column illustrates the methodology. Your
report cover now shows your Fund's asset class color, plus the
asset class and sub-asset class name are shown in the
upper-left corner. The reason for these changes is to help you
better understand where your Fund fits into your overall
portfolio.
AIM has a variety of investment solutions, and knowing
which ones are right for your portfolio is complex. That's why
we also believe in the value of a trusted financial advisor
who will work with you to create an investment plan you can
stick with for the long term. Your financial advisor can help
allocate your portfolio appropriately and review your
investments regularly to help ensure they remain suitable as
your financial situation changes. While there are no
guarantees with any investment program, a long-term plan
that's based on your financial goals, risk tolerance and time
horizon is more likely to keep you and your investments on
track.
OUR COMMITMENT TO YOU
In the short term, the one sure thing about markets is their
unpredictability. While past performance cannot guarantee
comparable future results, we believe that staying invested
for the long term with a thoughtful plan offers the best
opportunity for weathering that unpredictability. We at AIM
Investments remain committed to building enduring solutions to
help you achieve your investment goals, and we're pleased
you've placed your trust in us.
Information about investing, the markets and your Fund is
always available on our Web site, AIMinvestments.com. If you
have questions about your individual account, we invite you to
contact one of our highly trained client services
representatives at 800-959-4246.
Sincerely,
/s/ PHILIP TAYLOR
Philip Taylor
President -- AIM Funds
CEO, AIM Investments
December 14, 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. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
3
AIM Developing Markets Fund
Dear Fellow AIM Fund Shareholders:
At our meeting at the end of June, your Board completed its
[CROCKETT comprehensive review* of each fund's advisory agreement with
PHOTO] A I M Advisors, Inc. (AIM) to make certain your interests
are being served in terms of fees, performance and
operations.
Looking ahead, your Board finds many reasons to be
Bruce L. Crockett positive about AIM's management and strategic direction.
Most importantly, AIM's investment management discipline has
paid off in terms of improved overall performance. We are
also pleased with AIM's efforts to seek more cost-effective
ways of delivering superior service.
In addition, AIM is realizing the benefits of belonging
to a leading independent global investment management
organization in its parent company, AMVESCAP PLC, which is
dedicated to helping people worldwide build their financial
security. AMVESCAP managed approximately $450 billion
globally as of October 31, 2006, operating under the AIM,
INVESCO, AIM Trimark, INVESCO PERPETUAL and Atlantic Trust
brands. These companies are home to an abundance of
investment talent that is gradually being integrated and
leveraged into centers of excellence, each focusing on a
given market segment or asset class. Over the next few
years, your Board will be meeting at these various centers
of excellence to learn about their progress and how they may
serve you through our goal of enhancing performance and
reducing costs.
The seven new AIM funds--which include Asian funds,
structured U.S. equity funds and specialized bond funds--are
an early example of the kind of opportunities the AMVESCAP
organization can provide AIM clients. More information on
these funds can be found on AIM's Web site.
Your Board is very pleased with the overall direction and
progress of the AIM Funds. We're working closely and
effectively with AIM's management to continue this momentum.
As always, your Board is eager to hear your views on how we
might better serve you. Please send your comments in a
letter addressed to me at AIM Investments, AIM Investments
Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board
December 14, 2006
*To learn more about all the factors we considered before
approving each fund's advisory agreement, go to the
"Products & Performance" tab at the AIM Web site
(AIMinvestments.com) and click on "Investment Advisory
Agreement Renewals." The approval of advisory agreement
information for your Fund is also included in this annual
report on pages 10-11.
4
AIM Developing Markets Fund
Management's discussion While research responsibilities within
of Fund performance the portfolio management team are focused
by region and market capitalization, such
====================================================================================== as large- or mid/small-cap, we select
investments for the Fund by using a
PERFORMANCE SUMMARY "bottom-up" investment approach, which
means that we construct the Fund
Emerging stock markets performed strongly over the fiscal year ended October 31, 2006, primarily on a stock-by-stock basis. We
with almost all markets producing double-digit returns. The BRIC countries (Brazil, focus on the strengths of individual
Russia, India and China) were top performers for the 12-month period, beating the companies rather than sectors, countries
broad emerging markets benchmark by a significant margin. More cyclical markets, such or market-cap trends.
as Korea and Taiwan, saw some volatility in the early part of 2006 but ended the
reporting period on a strong note. We believe disciplined sell decisions
are key to successful investing. We
We are pleased to once again provide shareholders with double-digit Fund consider selling a stock for one of the
performance at net asset value. As the table illustrates, your Fund, excluding following reasons:
applicable sales charges, significantly outperformed both its broad market and
style-specific benchmarks. The strong performance by emerging market equities enabled o A company's fundamentals deteriorate,
the Fund to outperform the MSCI EAFE Index, which is composed of stocks from developed or it posts disappointing earnings.
nations. The overall quality of the portfolio and the attractiveness of individual
securities largely explained this relative outperformance versus our style specific o A stock's price seems overvalued.
benchmark.
o A more attractive opportunity becomes
Your Fund's long-term performance appears on pages 8 and 9. available.
FUND VS. INDEXES MARKET CONDITIONS AND YOUR FUND
Total returns, 10/31/05-10/31/06, excluding applicable sales charges. If sales Emerging markets experienced a volatile
charges were included, returns would be lower. fiscal year during which stocks hit
record highs in many countries before
Class A Shares 42.36% correcting sharply lower from early May
Class B Shares 41.38 onward. A combination of higher global
Class C Shares 41.43 interest rates and rising levels of risk
MSCI EAFE Index (Broad Market Index) 27.52 aversion accentuated the sell-off in
MSCI Emerging Markets Index (Style-Specific Index) 35.00 illiquid emerging market securities.
Lipper Emerging Markets Funds Index (Peer Group Index) 34.61 However, most of these markets bounced
SOURCE: LIPPER INC. back from July onward, ending the period
with strong positive overall returns.
====================================================================================== Emerging markets stocks were also
underpinned by positive news on the
HOW WE INVEST (Earnings, Quality, Valuation) strategy macroeconomic front and derived further
focuses primarily on identifying quality support from attractive valuations. The
When selecting stocks for your Fund, we companies that have experienced, or Philippines and Indonesia were two of the
employ a disciplined investment strategy exhibit the potential for, accelerating strongest performers for the reporting
that emphasizes fundamental research, or above average earnings growth but period, with equities benefiting from a
supported by both quantitative analysis whose prices do not fully reflect these growth surge propelled by declining
and portfolio construction techniques. attributes. interest rates. India's stock market also
Our "EQV" rallied strongly with foreign inflows
continuing to bol-
(continued)
========================================= ========================================= =========================================
PORTFOLIO COMPOSITION TOP FIVE COUNTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Brazil 21.2% 1. LUKOIL--ADR (Russia) 2.3%
[PIE CHART] 2. South Korea 11.6 2. Standard Bank Group Ltd.
3. Mexico 9.6 (South Africa) 1.9
CONSUMER STAPLES 8.4% 4. South Africa 8.2 3. Gafisa S.A. (Brazil) 1.9
INFORMATION TECHNOLOGY 8.0% 5. China 7.1 4. Pertroleo Brasileiro S.A.
MATERIALS 6.6% Pfd.--ADR (Brazil) 1.9
HEALTH CARE 2.9% Total Net Assets $637.00 million 5. Hana Financial Group Inc.
UTILITIES 2.3% (South Korea) 1.8
MONEY MARKET FUNDS PLUS Total Number of Issuers* 111 6. Philippine Long Distance
OTHER ASSETS LESS LIABILITIES 6.1% Telephone Co. (Philippines) 1.8
FINANCIALS 18.3% 7. Hyundai Department Store Co.,
CONSUMER DISCRETIONARY 17.2% Ltd. (South Korea) 1.6
INDUSTRIALS 10.9% 8. All America Latina Logistica
ENERGY 9.9% (Brazil) 1.6
TELECOMMUNICATION SERVICES 9.4% 9. Kasikornbank PCL (Thailand) 1.5
10. Anglo American PLC-
(South Africa) 1.4
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
*Excluding money market fund holdings.
========================================= ========================================= =========================================
5
AIM Developing Markets Fund
ster its stock market. In Taiwan, and our lack of exposure to certain The views and opinions expressed in
however, relations with mainland China, strong performing benchmark utility management's discussion of Fund
further problems with retail credit and stocks detracted from comparative performance are those of A I M Advisors,
slowing technology exports led to results. Similarly, although the Fund Inc. These views and opinions are subject
mid-period volatility. significantly outperformed its to change at any time based on factors
style-specific benchmark in the energy such as market and economic conditions.
Fund performance was broadly based, sector (top contributors included These views and opinions may not be
with all regions registering double-digit LUKOIL/Russia and PETROLEO BRASILEIRO), relied upon as investment advice or
gains for the reporting period. Asia an underweight to this strong sector recommendations, or as an offer for a
Pacific, our largest regional exposure, detracted from relative return as well. particular security. The information is
was also our biggest contributor to not a complete analysis of every aspect
outperformance, with strong stock Though broadly diversified across of any market, country, industry,
selection reflected by our Taiwanese, sectors and regions, our exposures security or the Fund. Statements of fact
Korean and Chinese holdings. Despite a continued to be in sectors that are are from sources considered reliable, but
relatively volatile Taiwanese market poised to benefit from increased domestic A I M Advisors, Inc. makes no
environment, our bottom-up stock demand such as in infrastructure, representation or warranty as to their
selection process allowed us to produce property, banking and the consumer completeness or accuracy. Although
double-digit gains, outperforming the sectors. We believed that domestic demand historical performance is no guarantee of
style-specific index in this market. One was becoming a sustainable and important future results, these insights may help
standout holding was CATCHER TECHNOLOGY, growth driver for the region's economies, you understand our investment management
a small-cap tech firm in Taiwan that and we positioned the Fund accordingly. philosophy.
specializes in making alloy-based casings
for notebook computers and handsets. Stock-specific detractors included See important Fund and index
Robust sales led to extremely strong OPTIMAX TECHNOLOGY, DAESANG and YAPI disclosures on the inside front cover.
growth. Technological expertise and KREDI SIGORTA. Taiwanese LCD panel
competitive pricing earned this company component maker Optimax was expected to SHUXIN CAO
the business of several key first-tier see improved profit margins and earnings [CAO Chartered Financial
global wireless firms. due to new product growth. Unfortunately, PHOTO] Analyst, portfolio
this turnaround did not develop, manager, is co-manager
The Fund remains overweight in Latin negatively affecting the stock, which we of AIM Developing
America, predominantly Brazil and Mexico, sold. Additionally, although the Fund's Markets Fund. He joined
a region which proved to be a rich and cash position was relatively in line with AIM in 1997. Mr. Cao graduated from
diverse source of high-quality growth historical levels, not being fully Tianjin Foreign Language Institute with a
companies. Strong stock selection in both invested in the extremely strong emerging B.A. in English. He also earned a M.B.A.
markets gave an additional boost to equity markets detracted from from Texas A&M University and is a
relative returns as well. Top performance. certified public accountant.
contributors included home builder BRAZIL
REALTY which benefited from significantly IN CLOSING BORGE ENDRESEN
low mortgage and home building [ENDRESEN Chartered Financial
penetration (sold stock during period due Emerging markets have made considerable PHOTO] Analyst, portfolio
to stretched valuation) and Mexico's strides over the last decade. We believe manager, is co-manager
wireless provider AMERICA MOVIL which structural and corporate improvements, of AIM Developing
enjoyed high subscriber growth and posted coupled with the size of the consumer Markets Fund. He joined
strong earnings results during the year. pool, maintain a case for emerging market AIM in 1999 and graduated summa cum laude
investments. from the University of Oregon with a B.
Despite delivering double-digit S. in finance. He also earned an M.B.A.
returns in Hungary, South Africa and Over the past 12 months, the Fund has from The University of Texas at Austin.
Turkey, the Fund's overweight position in experienced double-digit returns. It
these more volatile markets detracted would be imprudent for us to suggest that Assisted by Asia Pacific/Latin America
from relative returns. Fundamentals such a level of performance is Team and Europe/Canada Team
continued to remain strong in our sustainable over the long term.
underlying holdings, however, and in some Regardless of macro-economic trends, the
instances we took this as a buying fund maintains a disciplined strategy of
opportunity and added to certain selecting attractive investment FOR A PRESENTATION OF YOUR FUND'S
positions. Similarly, although we opportunities based on its "EQV" LONG-TERM PERFORMANCE, PLEASE SEE PAGES 8
produced double-digit returns in India, investment strategy. At the close of the AND 9.
our underweight exposure to this strong fiscal year, we believe the Fund was
market relative to the style-specific trading at an attractive absolute
index detracted from performance as well. valuation, with little premium paid for
We believed this market was relatively quality growth.
expensive versus other emerging countries
and maintained our underweight position. We welcome new shareholders who
invested in the Fund during the reporting
On a sector basis, every sector we period and thank all our shareholders for
invested in during the period produced your continued investments in AIM
double-digit returns--several more than Developing Markets Fund.
40%. Though we outperformed the
style-specific index in most sectors,
select holdings in the financials sector
6
AIM Developing Markets Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE mate the expenses that you paid over the The hypothetical account values and
period. Simply divide your account value expenses may not be used to estimate the
As a shareholder of the Fund, you incur by $1,000 (for example, an $8,600 account actual ending account balance or expenses
two types of costs: (1) transaction value divided by $1,000 = 8.6), then you paid for the period. You may use this
costs, which may include sales charges multiply the result by the number in the information to compare the ongoing costs
(loads) on purchase payments or table under the heading entitled "Actual of investing in the Fund and other funds.
contingent deferred sales charges on Expenses Paid During Period" to estimate To do so, compare this 5% hypothetical
redemptions, and redemption fees, if any; the expenses you paid on your account example with the 5% hypothetical examples
and (2) ongoing costs, including during this period. that appear in the shareholder reports of
management fees; distribution and/or the other funds.
service (12b-1) fees; and other Fund HYPOTHETICAL EXAMPLE FOR
expenses. This example is intended to COMPARISON PURPOSES Please note that the expenses shown in
help you understand your ongoing costs the table are meant to highlight your
(in dollars) of investing in the Fund and The table below also provides information ongoing costs only and do not reflect any
to compare these costs with ongoing costs about hypothetical account values and transaction costs, such as sales charges
of investing in other mutual funds. The hypothetical expenses based on the Fund's (loads) on purchase payments, contingent
example is based on an investment of actual expense ratio and an assumed rate deferred sales charges on redemptions,
$1,000 invested at the beginning of the of return of 5% per year before expenses, and redemption fees, if any. Therefore,
period and held for the entire period May which is not the Fund's actual return. the hypothetical information is useful in
1, 2006, through October 31, 2006. The Fund's actual cumulative total comparing ongoing costs only, and will
returns at net asset value after expenses not help you determine the relative total
ACTUAL EXPENSES for the six months ended October 31, costs of owning different funds. In
2006, appear in the table "Cumulative addition, if these transaction costs were
The table below provides information Total Returns" on page 9. included, your costs would have been
about actual account values and actual higher.
expenses. You may use the information in
this table, together with the amount you
invested, to esti-
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
A $1,000.00 $1,005.50 $8.75 $1,016.48 $8.79 1.73%
B 1,000.00 1,001.70 12.51 1,012.70 12.58 2.48
C 1,000.00 1,001.70 12.51 1,012.70 12.58 2.48
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 six months ended October 31, 2006, appear in the table "Cumulative Total Returns" on page 9.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
7
AIM Developing Markets Fund
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
Index data from 12/31/93, Fund data from 1/11/94
====================================================================================================================================
[MOUNTAIN CHART]
DATE AIM DEVELOPING MSCI EAFE MSCI EMERGING LIPPER EMERGING
MARKETS FUND INDEX MARKETS INDEX MARKETS FUNDS
-CLASS A SHARES INDEX
12/31/93 $10000 $10000 $10000
1/94 $9538 10845 10182 10253
2/94 9166 10815 10001 9980
3/94 8291 10350 9096 9125
4/94 7881 10789 8914 8874
5/94 8221 10727 9219 9037
6/94 7881 10878 8965 8648
7/94 8209 10983 9522 9164
8/94 9091 11243 10704 10093
9/94 9241 10889 10826 10231
10/94 9121 11251 10631 10016
11/94 8844 10711 10078 9566
12/94 8120 10778 9268 8840
1/95 7323 10364 8282 7936
2/95 6729 10334 8070 7804
3/95 6579 10979 8121 7838
4/95 7193 11391 8486 8090
5/95 7605 11256 8937 8468
6/95 7592 11058 8963 8502
7/95 7800 11747 9165 8798
8/95 7814 11299 8949 8573
9/95 7892 11519 8906 8531
10/95 7604 11210 8565 8176
11/95 7624 11522 8413 7965
12/95 8044 11986 8786 8241
1/96 8730 12035 9410 8990
2/96 8612 12076 9261 8885
3/96 8660 12332 9333 8959
4/96 8965 12691 9706 9275
5/96 9138 12457 9662 9367
6/96 9173 12527 9723 9385
7/96 8930 12161 9058 8841
8/96 9235 12188 9290 9083
9/96 9547 12511 9371 9176
10/96 9505 12383 9121 8965
11/96 9747 12876 9274 9168
12/96 9939 12711 9316 9247
1/97 10283 12266 9951 9954
2/97 10635 12466 10377 10309
3/97 10291 12511 10104 10047
4/97 10427 12578 10122 10047
5/97 10751 13396 10412 10394
6/97 11053 14135 10969 10903
7/97 11404 14364 11133 11222
8/97 10141 13291 9716 9986
9/97 10464 14036 9986 10347
10/97 9020 12957 8347 8619
11/97 8877 12825 8043 8225
12/97 9096 12937 8236 8300
1/98 8297 13528 7590 7722
2/98 8810 14396 8383 8412
3/98 9156 14839 8746 8725
4/98 9352 14957 8651 8767
5/98 8177 14884 7466 7610
6/98 7453 14997 6682 6889
7/98 7581 15149 6894 7099
8/98 5275 13272 4901 5065
9/98 5381 12865 5212 5255
10/98 5674 14206 5761 5760
11/98 6096 14934 6240 6147
12/98 5883 15523 6149 6070
1/99 5715 15478 6050 5947
2/99 5677 15109 6109 5896
3/99 6542 15739 6914 6552
4/99 7293 16377 7769 7463
5/99 7140 15534 7724 7373
6/99 7960 16139 8601 8201
7/99 7638 16619 8367 7996
8/99 7531 16680 8443 7908
9/99 7278 16848 8158 7627
10/99 7554 17479 8331 7857
11/99 8144 18086 9078 8723
12/99 9502 19709 10233 10256
1/00 9264 18457 10294 10137
2/00 9187 18954 10430 10439
3/00 9326 19688 10481 10470
4/00 8188 18652 9487 9331
5/00 7819 18197 9095 8834
6/00 8250 18908 9415 9272
7/00 7735 18116 8931 8894
8/00 8096 18273 8975 8986
9/00 7311 17383 8191 8127
10/00 6835 16973 7597 7520
11/00 6158 16336 6933 6840
12/00 6324 16917 7101 7087
1/01 7136 16908 8078 7908
2/01 6517 15641 7446 7295
3/01 5767 14598 6714 6599
4/01 6115 15612 7046 6936
5/01 6316 15061 7130 7127
6/01 6169 14445 6984 7003
7/01 5728 14183 6543 6569
8/01 5644 13823 6478 6483
9/01 4607 12423 5475 5558
10/01 4886 12741 5815 5850
11/01 5744 13211 6422 6429
12/01 6207 13289 6932 6839
1/02 6403 12583 7167 7109
2/02 6606 12672 7285 7268
3/02 6911 13418 7724 7666
4/02 6934 13445 7773 7760
5/02 6934 13616 7649 7688
6/02 6340 13074 7075 7126
7/02 5746 11783 6537 6594
8/02 5801 11756 6638 6648
9/02 5151 10494 5922 5981
10/02 5449 11058 6306 6267
11/02 5855 11560 6740 6688
12/02 5644 11171 6516 6523
1/03 5644 10705 6488 6485
2/03 5518 10459 6313 6332
3/03 5268 10254 6134 6128
4/03 5784 11258 6680 6718
5/03 6214 11941 7160 7201
6/03 6527 12229 7568 7564
7/03 6847 12525 8042 7910
8/03 7426 12828 8581 8439
9/03 7550 13223 8644 8626
10/03 8222 14047 9380 9298
11/03 8277 14360 9495 9436
12/03 8732 15481 10183 10237
1/04 9115 15700 10545 10530
2/04 9507 16063 11031 11003
3/04 9656 16153 11173 11150
4/04 8849 15788 10260 10272
5/04 8951 15821 10124 10071
6/04 8873 16188 10104 10123
7/04 8654 15663 9925 9974
8/04 8998 15732 10340 10362
9/04 9523 16143 10938 10969
10/04 9953 16693 11200 11304
11/04 10792 17834 12237 12234
12/04 11144 18616 12826 12868
1/05 11144 18275 12867 12913
2/05 12076 19064 13997 13990
3/05 11231 18585 13074 13039
4/05 11035 18148 12726 12720
5/05 11404 18157 13174 13113
6/05 11843 18398 13629 13549
7/05 12658 18962 14593 14484
8/05 13002 19441 14725 14709
9/05 14067 20307 16098 15996
10/05 13174 19714 15046 15031
11/05 14224 20196 16292 16158
12/05 15098 21136 17257 17069
1/06 17242 22434 19195 19034
2/06 17234 22384 19176 18923
3/06 17604 23122 19348 19179
4/06 18652 24226 20729 20538
5/06 16665 23285 18562 18280
6/06 16500 23284 18522 18189
7/06 16784 23514 18799 18580
8/06 17398 24161 19288 19086
9/06 17445 24198 19450 19228
10/06 18762 25139 20374 20233
====================================================================================================================================
SOURCE: LIPPER
Past performance cannot guarantee This chart, which is a logarithmic
comparable future results. chart, presents the fluctuations in the
value of the Fund and its indexes. We
The data shown in the chart include believe that a logarithmic chart is more
reinvested distributions, applicable effective than other types of charts in
sales charges, Fund expenses and illustrating changes in value during the
management fees. Index results include early years shown in the chart. The
reinvested dividends, but they do not vertical axis, the one that indicates the
reflect sales charges. Performance of an dollar value of an investment, is
index of funds reflects fund expenses and constructed with each segment
management fees; performance of a market representing a percent change in the
index does not. Performance shown in the value of the investment. In this chart,
chart and table(s) does not reflect each segment represents a doubling, or
deduction of taxes a shareholder would 100% change, in the value of the
pay on Fund distributions or sale of Fund investment. In other words, the space
shares. Performance of the indexes does between $10,000 and $20,000 is the same
not reflect the effects of taxes. size as the space between $20,000 and
$40,000, and so on.
8
AIM Developing Markets Fund
========================================= ========================================= =========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/06, including applicable As of 9/30/06, the most recent calendar 6 months ended 10/31/06, excluding
sales charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 0.55%
Inception (1/11/94) 5.04% CLASS A SHARES Class B Shares 0.17
10 Years 6.43 Inception (1/11/94) 4.48% Class C Shares 0.17
5 Years 29.39 10 Years 5.62
1 Year 34.52 5 Years 29.03
1 Year 17.18
CLASS B SHARES
Inception (11/3/97) 7.46% CLASS B SHARES
5 Years 29.94 Inception (11/3/97) 6.66%
1 Year 36.38 5 Years 29.60
1 Year 18.07
CLASS C SHARES
Inception (3/1/99) 15.99% CLASS C SHARES
5 Years 30.10 Inception (3/1/99) 15.09%
1 Year 40.43 5 Years 29.73
1 Year 22.15
========================================= ========================================= =========================================
THE PERFORMANCE DATA QUOTED REPRESENT CLASS A SHARE PERFORMANCE REFLECTS THE HAD THE ADVISOR NOT WAIVED FEES AND/OR
PAST PERFORMANCE AND CANNOT GUARANTEE MAXIMUM 5.50% SALES CHARGE, AND CLASS B REIMBURSED EXPENSES PERFORMANCE WOULD
COMPARABLE FUTURE RESULTS; CURRENT AND CLASS C SHARE PERFORMANCE REFLECTS HAVE BEEN LOWER.
PERFORMANCE MAY BE LOWER OR HIGHER. THE APPLICABLE CONTINGENT DEFERRED SALES
PLEASE VISIT AIMINVESTMENTS.COM FOR THE CHARGE (CDSC) FOR THE PERIOD INVOLVED. A REDEMPTION FEE OF 2% WILL BE IMPOSED
MOST RECENT MONTH-END PERFORMANCE. THE CDSC ON CLASS B SHARES DECLINES FROM ON CERTAIN REDEMPTIONS OR EXCHANGES OUT
PERFORMANCE FIGURES REFLECT REINVESTED 5% BEGINNING AT THE TIME OF PURCHASE TO OF THE FUND WITHIN 30 DAYS OF PURCHASE.
DISTRIBUTIONS, CHANGES IN NET ASSET VALUE 0% AT THE BEGINNING OF THE SEVENTH YEAR. EXCEPTIONS TO THE REDEMPTION FEE ARE
AND THE EFFECT OF THE MAXIMUM SALES THE CDSC ON CLASS C SHARES IS 1% FOR THE LISTED IN THE FUND'S PROSPECTUS.
CHARGE UNLESS OTHERWISE STATED. FIRST YEAR AFTER PURCHASE.
INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT YOU MAY HAVE A THE PERFORMANCE OF THE FUND'S SHARE
GAIN OR LOSS WHEN YOU SELL SHARES. CLASSES WILL DIFFER PRIMARILY DUE TO
DIFFERENT SALES CHARGE STRUCTURES AND
CLASS EXPENSES.
Continued from inside front cover
Reference Room in Washington, D.C. You A description of the policies and Information regarding how the Fund voted
can obtain information on the operation procedures that the Fund uses to proxies related to its portfolio
of the Public Reference Room, including determine how to vote proxies relating to securities during the 12 months ended
information about duplicating fee portfolio securities is available without June 30, 2006, is available at our Web
charges, by calling 202-942-8090 or charge, upon request, from our Client site. Go to AIMinvestments.com, access
800-732-0330, or by electronic request at Services department at 800-959-4246 or on the About Us tab, click on Required
the following e-mail address: the AIM Web site, AIMinvestments.com. On Notices and then click on Proxy Voting
publicinfo@sec.gov. The SEC file numbers the home page, scroll down and click on Activity. Next, select the Fund from the
for the Fund are 811-05426 and 033-19338. AIM Funds Proxy Policy. The information drop-down menu. The information is also
is also available on the SEC Web site, available on the SEC Web site, sec.gov.
sec.gov.
9
AIM Developing Markets Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees of AIM Investment services to be provided by AIM under the o Meeting with the Fund's portfolio
Funds (the "Board") oversees the Advisory Agreement was appropriate and managers and investment personnel. With
management of AIM Developing Markets Fund that AIM currently is providing services respect to the Fund, the Board is meeting
(the "Fund") and, as required by law, in accordance with the terms of the periodically with such Fund's portfolio
determines annually whether to approve Advisory Agreement. managers and/or other investment
the continuance of the Fund's advisory personnel and believes that such
agreement with A I M Advisors, Inc. o The quality of services to be provided individuals are competent and able to
("AIM"). Based upon the recommendation of by AIM. The Board reviewed the continue to carry out their
the Investments Committee of the Board, credentials and experience of the responsibilities under the Advisory
at a meeting held on June 27, 2006, the officers and employees of AIM who will Agreement.
Board, including all of the independent provide investment advisory services to
trustees, approved the continuance of the the Fund. In reviewing the qualifications o Overall performance of AIM. The Board
advisory agreement (the "Advisory of AIM to provide investment advisory considered the overall performance of AIM
Agreement") between the Fund and AIM for services, the Board considered such in providing investment advisory and
another year, effective July 1, 2006. issues as AIM's portfolio and product portfolio administrative services to the
review process, various back office Fund and concluded that such performance
The Board considered the factors support functions provided by AIM and was satisfactory.
discussed below in evaluating the AIM's equity and fixed income trading
fairness and reasonableness of the operations. Based on the review of these o Fees relative to those clients of AIM
Advisory Agreement at the meeting on June and other factors, the Board concluded with comparable investment strategies.
27, 2006 and as part of the Board's that the quality of services to be The Board noted that AIM does not serve
ongoing oversight of the Fund. In their provided by AIM was appropriate and that as an advisor to other mutual funds or
deliberations, the Board and the AIM currently is providing satisfactory other clients with investment strategies
independent trustees did not identify any services in accordance with the terms of comparable to those of the Fund.
particular factor that was controlling, the Advisory Agreement.
and each trustee attributed different o Fees relative to those of comparable
weights to the various factors. o The performance of the Fund relative to funds with other advisors. The Board
comparable funds. The Board reviewed the reviewed the advisory fee rate for the
One responsibility of the independent performance of the Fund during the past Fund under the Advisory Agreement. The
Senior Officer of the Fund is to manage one, three and five calendar years Board compared effective contractual
the process by which the Fund's proposed against the performance of funds advised advisory fee rates at a common asset
management fees are negotiated to ensure by other advisors with investment level at the end of the past calendar
that they are negotiated in a manner strategies comparable to those of the year and noted that the Fund's rate was
which is at arms' length and reasonable. Fund. The Board noted that the Fund's below the median rate of the funds
To that end, the Senior Officer must performance was above the median advised by other advisors with investment
either supervise a competitive bidding performance of such comparable funds for strategies comparable to those of the
process or prepare an independent written the one and three year periods and below Fund that the Board reviewed. The Board
evaluation. The Senior Officer has such median performance for the five year noted that AIM has agreed to waive
recommended an independent written period. Based on this review and after advisory fees of the Fund and to limit
evaluation in lieu of a competitive taking account of all of the other the Fund's total operating expenses, as
bidding process and, upon the direction factors that the Board considered in discussed below. Based on this review,
of the Board, has prepared such an determining whether to continue the the Board concluded that the advisory fee
independent written evaluation. Such Advisory Agreement for the Fund, the rate for the Fund under the Advisory
written evaluation also considered Board concluded that no changes should be Agreement was fair and reasonable.
certain of the factors discussed below. made to the Fund and that it was not
In addition, as discussed below, the necessary to change the Fund's portfolio o Expense limitations and fee waivers.
Senior Officer made a recommendation to management team at this time. Although The Board noted that AIM has
the Board in connection with such written the independent written evaluation of the contractually agreed to waive advisory
evaluation. Fund's Senior Officer (discussed below) fees of the Fund through June 30, 2007 to
only considered Fund performance through the extent necessary so that the advisory
The discussion below serves as a the most recent calendar year, the Board fees payable by the Fund do not exceed a
summary of the Senior Officer's also reviewed more recent Fund specified maximum advisory fee rate,
independent written evaluation and performance, which did not change their which maximum rate includes breakpoints
recommendation to the Board in connection conclusions. and is based on net asset levels. The
therewith, as well as a discussion of the Board considered the contractual nature
material factors and the conclusions with o The performance of the Fund relative to of this fee waiver and noted that it
respect thereto that formed the basis for indices. The Board reviewed the remains in effect until June 30, 2007.
the Board's approval of the Advisory performance of the Fund during the past The Board also noted that AIM has
Agreement. After consideration of all of one, three and five calendar years contractually agreed to waive fees and/or
the factors below and based on its against the performance of the Lipper limit expenses of the Fund through June
informed business judgment, the Board Emerging Market Fund Index. The Board 30, 2007 in an amount necessary to limit
determined that the Advisory Agreement is noted that the Fund's performance in such total annual operating expenses to a
in the best interests of the Fund and its periods was comparable to the performance specified percentage of average daily net
shareholders and that the compensation to of such Index. Based on this review and assets for each class of the Fund. The
AIM under the Advisory Agreement is fair after taking account of all of the other Board considered the contractual nature
and reasonable and would have been factors that the Board considered in of this fee waiver/expense limitation and
obtained through arm's length determining whether to continue the noted that it remains in effect until
negotiations. Advisory Agreement for the Fund, the June 30, 2007. The Board considered the
Board concluded that no changes should be effect these fee waivers/expense
Unless otherwise stated, information made to the Fund and that it was not limitations would have on the Fund's
presented below is as of June 27, 2006 necessary to change the Fund's portfolio estimated expenses and concluded that the
and does not reflect any changes that may management team at this time. Although levels of fee waivers/expense limitations
have occurred since June 27, 2006, the independent written evaluation of the for the Fund were fair and reasonable.
including but not limited to changes to Fund's Senior Officer (discussed below)
the Fund's performance, advisory fees, only considered Fund performance through o Breakpoints and economies of scale. The
expense limitations and/or fee waivers. the most recent calendar year, the Board Board reviewed the structure of the
also reviewed more recent Fund Fund's advisory fee under the Advisory
o The nature and extent of the advisory performance, which did not change their Agreement, noting that it includes three
services to be provided by AIM. The Board conclusions. breakpoints. The Board reviewed the level
reviewed the services to be provided by of the Fund's advisory fees, and noted
AIM under the Advisory Agreement. Based that such fees, as a
on such review, the Board concluded that
the range of (continued)
10
AIM Developing Markets Fund
percentage of the Fund's net assets, considered the Senior Officer's written tive, transfer agency and distribution
would decrease as net assets increase evaluation and the recommendation made by services, and that AIM and its affiliates
because the Advisory Agreement includes the Senior Officer to the Board that the currently are providing satisfactory
breakpoints. The Board noted that, due to Board consider whether the advisory fee non-investment advisory services.
the Fund's asset levels at the end of the waivers for certain equity AIM Funds,
past calendar year and the way in which including the Fund, should be simplified. o Other factors and current trends. The
the advisory fee breakpoints have been The Board concluded that it would be Board considered the steps that AIM and
structured, the Fund has yet to benefit advisable to consider this issue and its affiliates have taken over the last
from the breakpoints. The Board noted reach a decision prior to the expiration several years, and continue to take, in
that AIM has contractually agreed to date of such advisory fee waivers. order to improve the quality and
waive advisory fees of the Fund through efficiency of the services they provide
June 30, 2007 to the extent necessary so o Profitability of AIM and its to the Funds in the areas of investment
that the advisory fees payable by the affiliates. The Board reviewed performance, product line
Fund do not exceed a specified maximum information concerning the profitability diversification, distribution, fund
advisory fee rate, which maximum rate of AIM's (and its affiliates') investment operations, shareholder services and
includes breakpoints and is based on net advisory and other activities and its compliance. The Board concluded that
asset levels. The Board concluded that financial condition. The Board considered these steps taken by AIM have improved,
the Fund's fee levels under the Advisory the overall profitability of AIM, as well and are likely to continue to improve,
Agreement therefore would reflect as the profitability of AIM in connection the quality and efficiency of the
economies of scale at higher asset levels with managing the Fund. The Board noted services AIM and its affiliates provide
and that it was not necessary to change that AIM's operations remain profitable, to the Fund in each of these areas, and
the advisory fee breakpoints in the although increased expenses in recent support the Board's approval of the
Fund's advisory fee schedule. years have reduced AIM's profitability. continuance of the Advisory Agreement for
Based on the review of the profitability the Fund.
o Investments in affiliated money market of AIM's and its affiliates' investment
funds. The Board also took into account advisory and other activities and its
the fact that uninvested cash and cash financial condition, the Board concluded
collateral from securities lending that the compensation to be paid by the
arrangements, if any (collectively, "cash Fund to AIM under its Advisory Agreement
balances") of the Fund may be invested in was not excessive.
money market funds advised by AIM
pursuant to the terms of an SEC exemptive o Benefits of soft dollars to AIM. The
order. The Board found that the Fund may Board considered the benefits realized by
realize certain benefits upon investing AIM as a result of brokerage transactions
cash balances in AIM advised money market executed through "soft dollar"
funds, including a higher net return, arrangements. Under these arrangements,
increased liquidity, increased brokerage commissions paid by the Fund
diversification or decreased transaction and/or other funds advised by AIM are
costs. The Board also found that the Fund used to pay for research and execution
will not receive reduced services if it services. This research may be used by
invests its cash balances in such money AIM in making investment decisions for
market funds. The Board noted that, to the Fund. The Board concluded that such
the extent the Fund invests uninvested arrangements were appropriate.
cash in affiliated money market funds,
AIM has voluntarily agreed to waive a o AIM's financial soundness in light of
portion of the advisory fees it receives the Fund's needs. The Board considered
from the Fund attributable to such whether AIM is financially sound and has
investment. The Board further determined the resources necessary to perform its
that the proposed securities lending obligations under the Advisory Agreement,
program and related procedures with and concluded that AIM has the financial
respect to the lending Fund is in the resources necessary to fulfill its
best interests of the lending Fund and obligations under the Advisory Agreement.
its respective shareholders. The Board
therefore concluded that the investment o Historical relationship between the
of cash collateral received in connection Fund and AIM. In determining whether to
with the securities lending program in continue the Advisory Agreement for the
the money market funds according to the Fund, the Board also considered the prior
procedures is in the best interests of relationship between AIM and the Fund, as
the lending Fund and its respective well as the Board's knowledge of AIM's
shareholders. operations, and concluded that it was
beneficial to maintain the current
o Independent written evaluation and relationship, in part, because of such
recommendations of the Fund's Senior knowledge. The Board also reviewed the
Officer. The Board noted that, upon their general nature of the non-investment
direction, the Senior Officer of the advisory services currently performed by
Fund, who is independent of AIM and AIM's AIM and its affiliates, such as
affiliates, had prepared an independent administrative, transfer agency and
written evaluation in order to assist the distribution services, and the fees
Board in determining the reasonableness received by AIM and its affiliates for
of the proposed management fees of the performing such services. In addition to
AIM Funds, including the Fund. The Board reviewing such services, the trustees
noted that the Senior Officer's written also considered the organizational
evaluation had been relied upon by the structure employed by AIM and its
Board in this regard in lieu of a affiliates to provide those services.
competitive bidding process. In Based on the review of these and other
determining whether to continue the factors, the Board concluded that AIM and
Advisory Agreement for the Fund, the its affiliates were qualified to continue
Board to provide non-investment advisory
services to the Fund, including
administra-
11
Supplement to Annual Report dated 10/31/06
AIM Developing Markets Fund
===================================
Institutional Class Shares AVERAGE ANNUAL TOTAL RETURNS INSTITUTIONAL CLASS SHARES HAVE NO SALES
For periods ended 10/31/06 CHARGE; THEREFORE, PERFORMANCE IS AT NAV.
The following information has been prepared to PERFORMANCE OF INSTITUTIONAL CLASS SHARES
provide Institutional Class shareholders with 10 Years 7.09% WILL DIFFER FROM PERFORMANCE OF OTHER SHARE
a performance overview specific to their 5 Years 31.01 CLASSES PRIMARILY DUE TO DIFFERING SALES
holdings. Institutional Class shares are 1 Year 43.11 CHARGES AND CLASS EXPENSES.
offered exclusively to institutional 6 Months* 0.80
investors, including defined contribution A REDEMPTION FEE OF 2% WILL BE IMPOSED
plans that meet certain criteria. =================================== ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
THE FUND WITHIN 30 DAYS OF PURCHASE.
AVERAGE ANNUAL TOTAL RETURNS EXCEPTIONS TO THE REDEMPTION FEE ARE LISTED
For periods ended 9/30/06, most IN THE FUND'S PROSPECTUS.
recent calendar quarter-end
HAD THE ADVISOR NOT WAIVED FEES AND/OR
10 Years 6.27 REIMBURSED EXPENSES, PERFORMANCE WOULD HAVE
5 Years 30.64 BEEN LOWER.
1 Year 24.61
6 Months* -0.63 PLEASE NOTE THAT PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS. MORE RECENT
*Cumulative total return that has RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
not been annualized ALL RETURNS ASSUME REINVESTMENT OF
DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND
=================================== PRINCIPAL VALUE WILL FLUCTUATE SO YOUR
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
INSTITUTIONAL CLASS SHARES' LESS THAN THEIR ORIGINAL COST. SEE FULL
INCEPTION DATE IS OCTOBER 25, 2005. REPORT FOR INFORMATION ON COMPARATIVE
RETURNS SINCE THAT DATE ARE BENCHMARKS. PLEASE CONSULT YOUR FUND
HISTORICAL RETURNS. ALL OTHER PROSPECTUS FOR MORE INFORMATION. FOR THE MOST
RETURNS ARE BLENDED RETURNS OF CURRENT MONTH-END PERFORMANCE, PLEASE CALL
HISTORICAL INSTITUTIONAL CLASS 800-451-4246 OR VISIT AIMINVESTMENTS.COM.
SHARE PERFORMANCE AND RESTATED
CLASS A SHARE PERFORMANCE (FOR
PERIODS PRIOR TO THE INCEPTION DATE
OF INSTITUTIONAL CLASS SHARES) AT
NET ASSET VALUE (NAV) AND REFLECT
THE HIGHER RULE 12B-1 FEES
APPLICABLE TO CLASS A SHARES. CLASS
A SHARES' INCEPTION DATE IS JANUARY
11, 1994.
==============================================
NASDAQ SYMBOL GTDIX
==============================================
Over for information on your Fund's expenses.
====================================================================================
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.
====================================================================================
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted,
reproduced or shown to the public, nor used in written form as sales literature for
public use.
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE]
AIMINVESTMENTS.COM DVM-INS-1 A I M Distributors, Inc. --REGISTERED TRADEMARK-- --REGISTERED TRADEMARK--
Information about your Fund's expenses
Calculating your ongoing Fund expenses
Example divide your account value by $1,000 The hypothetical account values and
(for example, an $8,600 account expenses may not be used to estimate the
As a shareholder of the Fund, you incur value divided by $1,000 = 8.6), actual ending account balance or expenses you
ongoing costs, including management fees and then multiply the result by the paid for the period. You may use this
other Fund expenses. This example is intended number in the table under the information to compare the ongoing costs of
to help you understand your ongoing costs (in heading entitled "Actual Expenses investing in the Fund and other funds. To do
dollars) of investing in the Fund and to Paid During Period" to estimate the so, compare this 5% hypothetical example with
compare these costs with ongoing costs of expenses you paid on your account the 5% hypothetical examples that appear in
investing in other mutual funds. The example during this period. the shareholder reports of the other funds.
is based on an investment of $1,000 invested
at the beginning of the period and held for Hypothetical example for comparison Please note that the expenses shown in
the entire period May 1, 2006, through October purposes the table are meant to highlight your ongoing
31, 2006. costs only. Therefore, the hypothetical
The table below also provides information is useful in comparing ongoing
Actual Expenses information about hypothetical costs only, and will not help you determine
account values and hypothetical the relative total costs of owning different
The table below provides information about expenses based on the Fund's actual funds.
actual account values and actual expenses. You expense ratio and an assumed rate
may use the information in this table, of return of 5% per year before
together with the amount you invested, to expenses, which is not the Fund's
estimate the expenses that you paid over the actual return. The Fund's actual
period. Simply cumulative total return after
expenses for the six months ended
October 31, 2006, appears in the
table on the front of this
supplement.
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
Institutional $1,000.00 $1,008.00 $6.12 $1,019.11 $6.16 1.21%
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 return after expenses for the
six months ended October 31, 2006, appears in the table on the front of this supplement.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMINVESTMENTS.COM DVM-INS-1 A I M Distributors, Inc.
AIM Developing Markets Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-88.03%
ARGENTINA-1.56%
Banco Macro S.A.-ADR (Diversified Banks) 256,800 $ 5,806,248
- ------------------------------------------------------------------------
Tenaris S.A.-ADR (Oil & Gas Equipment &
Services) 106,590 4,113,308
========================================================================
9,919,556
========================================================================
BRAZIL-15.24%
All America Latina Logistica (Railroads)(a) 1,173,000 10,242,867
- ------------------------------------------------------------------------
American Banknote S.A. (Commercial Printing) 601,600 4,930,227
- ------------------------------------------------------------------------
American Banknote S.A. (Commercial Printing)
(Acquired 04/26/06; Cost $1,790,357)(b) 224,100 1,836,542
- ------------------------------------------------------------------------
Companhia Vale do Rio Doce-ADR (Steel)(c) 268,060 6,819,446
- ------------------------------------------------------------------------
Equatorial Energia S.A. (Electric
Utilities)(d)(e) 564,200 4,386,612
- ------------------------------------------------------------------------
Equatorial Energia S.A. (Oil & Gas
Exploration & Production) (Acquired
03/31/06; Cost $2,374,486)(b)(d)(e) 358,400 2,786,533
- ------------------------------------------------------------------------
Gafisa S.A. (Homebuilding)(e) 825,800 12,146,953
- ------------------------------------------------------------------------
Guararapes Confeccoes S.A. (Apparel,
Accessories & Luxury Goods) 97,800 4,288,312
- ------------------------------------------------------------------------
Klabin Segall S.A. (Paper Packaging)
(Acquired 10/06/06; Cost $4,904,259)(b)(e) 706,720 4,950,175
- ------------------------------------------------------------------------
Localiza Rent a Car S.A. (Trucking) 171,500 4,268,480
- ------------------------------------------------------------------------
Net Servicios de Comunicacao S.A.-Rts.
(Broadcasting & Cable TV)(f) 66,502 --
- ------------------------------------------------------------------------
Perdigao S.A. (Packaged Foods & Meats) 377,400 4,396,979
- ------------------------------------------------------------------------
Profarma Distribuidora de Produtos
Farmaceuticos S.A. (Pharmaceuticals)(e) 257,900 3,191,385
- ------------------------------------------------------------------------
Rossi Residencial S.A. (Homebuilding) 427,400 5,268,905
- ------------------------------------------------------------------------
Rossi Residencial S.A. (Homebuilding)
(Acquired 02/14/06; Cost $1,383,422)(b) 119,500 1,473,173
- ------------------------------------------------------------------------
Tam S.A.-ADR (Airlines)(e) 141,100 4,310,605
- ------------------------------------------------------------------------
Terna Participacoes S.A. (Electric
Utilities)(d)(e) 295,400 3,114,701
- ------------------------------------------------------------------------
Tim Participacoes S.A.-ADR (Wireless
Telecommunication Services)(c) 121,900 4,095,840
- ------------------------------------------------------------------------
Totvs S.A. (Application Software)(e) 271,200 5,711,473
- ------------------------------------------------------------------------
Totvs S.A. (Application Software) (Acquired
03/08/06; Cost $2,966,396)(b)(e) 200,000 4,212,001
- ------------------------------------------------------------------------
Unibanco-Uniao de Bancos Brasileiros S.A.-ADR
(Diversified Banks) 59,400 4,677,750
========================================================================
97,108,959
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
CANADA-0.68%
Sherritt International Corp. (Diversified
Metals & Mining) 421,200 $ 4,299,414
========================================================================
CHINA-7.13%
Celestial NutriFoods Ltd. (Packaged Foods &
Meats)(e)(g) 4,047,000 4,428,383
- ------------------------------------------------------------------------
China Medical Technologies, Inc.-ADR (Health
Care Equipment)(c)(e) 182,137 4,626,280
- ------------------------------------------------------------------------
China Petroleum and Chemical Corp. (Sinopen)-
Class H (Integrated Oil & Gas)(g) 10,762,000 7,464,268
- ------------------------------------------------------------------------
FU JI Food & Catering Services (Restaurants) 3,751,000 6,588,317
- ------------------------------------------------------------------------
Longcheer Holdings Ltd. (Integrated
Telecommunication Services)(g) 7,094,000 4,540,638
- ------------------------------------------------------------------------
Ping An Insurance (Group) Co. of China Ltd.-
Class H (Life & Health Insurance)(g) 1,545,000 5,367,520
- ------------------------------------------------------------------------
SIM Technology Group Ltd. (Communications
Equipment)(g) 7,218,000 2,438,292
- ------------------------------------------------------------------------
Xiamen International Port Co. Ltd.-Class H
(Marine Ports & Services)(e)(g) 16,676,000 3,879,115
- ------------------------------------------------------------------------
Xiwang Sugar Holdings Co. Ltd. (Packaged
Foods & Meats)(g) 5,448,000 2,862,773
- ------------------------------------------------------------------------
Yantai North Andre Juice Co. Ltd.-Class H
(Packaged Foods & Meats)(g)(h) 34,735,000 3,216,106
========================================================================
45,411,692
========================================================================
CZECH REPUBLIC-0.72%
CEZ A.S. (Electric Utilities)(g) 116,000 4,585,481
========================================================================
EGYPT-0.86%
Orascom Construction Industries (Construction
& Engineering)(g) 126,897 5,486,497
========================================================================
HONG KONG-2.74%
AAC Acoustic Technology Holdings Inc.
(Communications Equipment)(e) 2,582,000 3,001,245
- ------------------------------------------------------------------------
China Yurun Food Group Ltd.(g) 2,750,000 2,403,762
- ------------------------------------------------------------------------
China Yurun Food Group Ltd. (Packaged Foods &
Meats) (Acquired 09/23/05; Cost
$1,505,349)(b)(g) 3,125,819 2,732,264
- ------------------------------------------------------------------------
CNOOC Ltd. (Oil & Gas Exploration &
Production)(g) 3,606,000 3,027,010
- ------------------------------------------------------------------------
Hopewell Holdings Ltd. (Highways &
Railtracks) 2,121,000 6,299,838
========================================================================
17,464,119
========================================================================
</Table>
F-1
AIM Developing Markets Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
HUNGARY-2.33%
Egis Nyrt. (Pharmaceuticals)(c)(g) 35,867 $ 4,689,062
- ------------------------------------------------------------------------
MOL Hungarian Oil and Gas Nyrt. (Integrated
Oil & Gas)(g) 40,406 4,016,198
- ------------------------------------------------------------------------
OTP Bank Rt. (Diversified Banks) 173,746 6,108,009
- ------------------------------------------------------------------------
Technoimpex (Construction & Engineering)
(Acquired 11/22/90; Cost
$2,989,406)(b)(e)(i)(j) 1,400 --
========================================================================
14,813,269
========================================================================
INDIA-1.36%
HDFC Bank Ltd.-ADR (Diversified Banks) 45,161 3,127,851
- ------------------------------------------------------------------------
Infosys Technologies Ltd.-ADR (IT Consulting
& Other Services)(c) 106,000 5,522,600
========================================================================
8,650,451
========================================================================
INDONESIA-3.02%
PT Astra Agro Lestari Tbk (Agricultural
Products)(g) 1,066,000 1,141,076
- ------------------------------------------------------------------------
PT Astra International Tbk (Automobile
Manufacturers) 3,015,000 4,442,600
- ------------------------------------------------------------------------
PT Telekomunikasi Indonesia-Series B
(Integrated Telecommunication Services)(g) 8,042,500 7,399,898
- ------------------------------------------------------------------------
PT United Tractors Tbk (Construction & Farm
Machinery & Heavy Trucks)(g) 8,745,000 6,285,152
========================================================================
19,268,726
========================================================================
ISRAEL-0.42%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals)(c) 81,387 2,683,329
========================================================================
LUXEMBOURG-0.90%
Millicom International Cellular S.A.
(Wireless Telecommunication Services)(c)(e) 113,900 5,681,332
========================================================================
MALAYSIA-2.34%
Public Bank Berhad (Diversified Banks) 3,835,000 7,192,266
- ------------------------------------------------------------------------
SP Setia Berhad (Real Estate Management &
Development) 7,192,900 7,719,690
========================================================================
14,911,956
========================================================================
MEXICO-9.63%
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 209,300 8,972,691
- ------------------------------------------------------------------------
Corporacion GEO, S.A. de C.V.-Series B
(Homebuilding)(e) 1,149,100 5,268,322
- ------------------------------------------------------------------------
Corporacion Moctezuma, S.A. de C.V.
(Construction Materials) (Acquired
03/01/06; Cost $2,899,780)(b) 1,551,600 3,606,611
- ------------------------------------------------------------------------
Corporacion Moctezuma, S.A. de C.V.
(Construction Materials) 349,900 813,324
- ------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
MEXICO-(CONTINUED)
Gruma S.A.-Class B (Packaged Foods &
Meats)(c) 1,767,900 $ 5,728,487
- ------------------------------------------------------------------------
Grupo FAMSA S.A.-Series A (Department Stores)
(Acquired 05/19/06; Cost $2,327,038)(b)(e) 1,000,000 3,207,736
- ------------------------------------------------------------------------
Grupo Financiero BanCrecer S.A. de
C.V.-Series B (Other Diversified Financial
Services)(e)(i) 0 --
- ------------------------------------------------------------------------
Grupo Financiero Banorte S.A. de C.V.-Class O
(Diversified Banks) 2,028,900 7,357,067
- ------------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 233,912 5,772,948
- ------------------------------------------------------------------------
TV Azteca, S.A. de C.V.-CPO (Broadcasting &
Cable TV)(c) 6,476,100 4,576,217
- ------------------------------------------------------------------------
Urbi, Desarrollos Urbanos, S.A. de C.V.
(Homebuilding)(c)(e) 2,700,500 8,238,154
- ------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series V
(Hypermarkets & Super Centers)(c) 2,246,300 7,811,220
========================================================================
61,352,777
========================================================================
PHILIPPINES-1.80%
Philippine Long Distance Telephone Co.
(Wireless Telecommunication Services)(g) 240,500 11,425,567
========================================================================
RUSSIA-5.74%
LUKOIL-ADR (Integrated Oil & Gas)(k) 180,932 14,637,399
- ------------------------------------------------------------------------
Mobile TeleSystems-ADR (Wireless
Telecommunication Services) 149,700 6,598,776
- ------------------------------------------------------------------------
NovaTek OAO (Oil & Gas Exploration &
Production) (Acquired 07/21/05; Cost
$1,256,250)(b)(c)(j) 75,000 4,354,161
- ------------------------------------------------------------------------
NovaTek OAO-GDR (Oil & Gas Exploration &
Production)(c)(j) 27,000 1,567,498
- ------------------------------------------------------------------------
OAO Gazprom-REGS ADR (Integrated Oil & Gas)
(Acquired 05/25/06; Cost $1,414,824)(g) 106,100 4,524,113
- ------------------------------------------------------------------------
OAO Vimpel-Communications-ADR (Wireless
Telecommunication Services)(c)(e) 73,800 4,870,062
========================================================================
36,552,009
========================================================================
SOUTH AFRICA-8.24%
Anglo American PLC (Diversified Metals &
Mining)(c)(g) 199,500 9,063,798
- ------------------------------------------------------------------------
Barloworld Ltd. (Industrial
Conglomerates)(c)(g) 145,300 2,810,619
- ------------------------------------------------------------------------
Foschini Ltd. (Apparel Retail)(g) 351,600 2,530,829
- ------------------------------------------------------------------------
Impala Platinum Holdings Ltd. (Precious
Metals & Minerals)(c)(g) 18,301 3,227,622
- ------------------------------------------------------------------------
Massmart Holdings Ltd. (Hypermarkets & Super
Centers) 493,500 3,972,788
- ------------------------------------------------------------------------
Naspers Ltd.-Class N (Broadcasting & Cable
TV)(c) 411,900 7,453,761
- ------------------------------------------------------------------------
Standard Bank Group Ltd. (Diversified
Banks)(c)(g) 1,052,686 12,353,216
- ------------------------------------------------------------------------
</Table>
F-2
AIM Developing Markets Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
SOUTH AFRICA-(CONTINUED)
Sun International Ltd. (Casinos &
Gaming)(c)(g) 334,800 $ 4,860,810
- ------------------------------------------------------------------------
Telkom South Africa Ltd. (Integrated
Telecommunication Services)(c)(g) 301,000 5,585,151
- ------------------------------------------------------------------------
Telkom South Africa Ltd. (Integrated
Telecommunication Services) (Acquired
06/18/04; Cost $727,409)(b)(c)(g) 35,300 655,003
========================================================================
52,513,597
========================================================================
SOUTH KOREA-11.55%
Cheil Communications Inc. (Advertising)(g) 12,800 2,817,556
- ------------------------------------------------------------------------
CJ Corp. (Packaged Foods & Meats)(g) 55,370 6,254,794
- ------------------------------------------------------------------------
Daegu Bank (Regional Banks)(g) 311,600 5,144,270
- ------------------------------------------------------------------------
Daesang Corp. (Packaged Foods & Meats)(e)(g) 384,200 4,867,148
- ------------------------------------------------------------------------
Hana Financial Group Inc. (Diversified
Banks)(g) 249,269 11,446,177
- ------------------------------------------------------------------------
Hyundai Department Store Co., Ltd.
(Department Stores)(g) 123,600 10,290,037
- ------------------------------------------------------------------------
Hyundai Heavy Industries Co., Ltd.
(Construction & Farm Machinery & Heavy
Trucks)(g) 27,300 3,993,366
- ------------------------------------------------------------------------
Hyundai Mipo Dockyard Co., Ltd. (Construction
& Farm Machinery & Heavy Trucks)(g) 39,670 5,245,002
- ------------------------------------------------------------------------
Hyundai Motor Co. (Automobile Manufacturers) 49,290 4,007,232
- ------------------------------------------------------------------------
Kookmin Bank (Diversified Banks)(g) 50,100 3,970,530
- ------------------------------------------------------------------------
NHN Corp. (Internet Software & Services)(g) 31,800 3,146,595
- ------------------------------------------------------------------------
Samsung Electronics Co., Ltd.
(Semiconductors)(g) 6,230 4,035,835
- ------------------------------------------------------------------------
Techno Semichem Co., Ltd. (Commodity
Chemicals)(g) 230,741 3,581,104
- ------------------------------------------------------------------------
Woongjin Coway Co., Ltd. (Housewares &
Specialties)(g) 181,600 4,766,408
========================================================================
73,566,054
========================================================================
TAIWAN-3.60%
Catcher Technology Co., Ltd. (Computer
Storage & Peripherals)(g) 476,560 4,105,776
- ------------------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd.
(Electronic Manufacturing Services)(g) 697,314 4,490,489
- ------------------------------------------------------------------------
MediaTek Inc. (Semiconductors)(g) 772,900 7,495,258
- ------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.
(Semiconductors)(g) 1,489,516 2,723,697
- ------------------------------------------------------------------------
Wistron Corp. (Computer Hardware)(g) 3,575,420 4,119,388
========================================================================
22,934,608
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
THAILAND-3.66%
Kasikornbank PCL (Diversified Banks)(g) 4,863,000 $ 9,515,911
- ------------------------------------------------------------------------
Siam Commercial Bank PCL (Diversified
Banks)(g) 4,851,600 8,595,680
- ------------------------------------------------------------------------
Thai Oil PCL (Oil & Gas Refining &
Marketing)(g) 3,151,500 5,231,505
========================================================================
23,343,096
========================================================================
TURKEY-3.09%
Akbank T.A.S. (Diversified Banks)(g) 1,208,439 6,867,074
- ------------------------------------------------------------------------
Haci Omer Sabanci Holding A.S. (Multi-Sector
Holdings)(g) 1,399,150 5,887,171
- ------------------------------------------------------------------------
Tupras-Turkiye Petrol Rafinerileri A.S. (Oil
& Gas Refining & Marketing)(g) 130,814 2,170,339
- ------------------------------------------------------------------------
Turk Traktor ve Ziraat Makineleri A.S.
(Construction & Farm Machinery & Heavy
Trucks)(g) 250,800 2,593,239
- ------------------------------------------------------------------------
Yapi Kredi Sigorta A.S. (Multi-Line
Insurance)(e)(g) 485,200 2,190,897
========================================================================
19,708,720
========================================================================
UNITED KINGDOM-1.42%
Hikma Pharmaceuticals PLC
(Pharmaceuticals)(c)(g) 445,300 3,413,226
- ------------------------------------------------------------------------
Vedanta Resources PLC (Diversified Metals &
Mining)(g) 203,000 5,644,635
========================================================================
9,057,861
========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $391,505,914) 560,739,070
========================================================================
FOREIGN PREFERRED STOCKS-5.93%
BRAZIL-5.93%
Banco Itau Holding Financeira S.A.-Pfd.
(Diversified Banks) 104,300 3,433,645
- ------------------------------------------------------------------------
Companhia de Bebidas das Americas-Pfd.-ADR
(Brewers) 90,600 3,955,596
- ------------------------------------------------------------------------
Duratex S.A.-Pfd. (Building Products) 428,200 5,148,798
- ------------------------------------------------------------------------
Duratex S.A.-Pfd. (Building Products)
(Acquired 04/12/06; Cost $1,526,459)(b) 150,000 1,803,642
- ------------------------------------------------------------------------
Lojas Americanas S.A.-Pfd. (General
Merchandise Stores) 108,400 4,910,016
- ------------------------------------------------------------------------
Net Servicos de Comunicacao S.A.-Pfd.
(Broadcasting & Cable TV)(e) 665,438 6,767,798
- ------------------------------------------------------------------------
Petroleo Brasileiro S.A.-Pfd.-ADR (Integrated
Oil & Gas)(c) 145,000 11,739,200
========================================================================
Total Foreign Preferred Stocks (Cost
$17,845,063) 37,758,695
========================================================================
</Table>
F-3
AIM Developing Markets Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
MONEY MARKET FUNDS-4.48%
Liquid Assets Portfolio-Institutional
Class(l) 14,287,267 $ 14,287,267
- ------------------------------------------------------------------------
Premier Portfolio-Institutional Class(l) 14,287,267 14,287,267
========================================================================
Total Money Market Funds (Cost
$28,574,534) 28,574,534
========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities loaned)-98.44% (Cost
$437,925,511) 627,072,299
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-11.65%
Liquid Assets Portfolio-Institutional
Class(l)(m) 37,108,273 $ 37,108,273
- ------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(l)(m) 37,108,273 37,108,273
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $74,216,546) 74,216,546
========================================================================
TOTAL INVESTMENTS-110.09% (Cost $512,716,765) 701,288,845
========================================================================
OTHER ASSETS LESS LIABILITIES-(10.09)% (64,287,527)
========================================================================
NET ASSETS-100.00% $637,001,318
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
CPO - Certificates of Ordinary Participation
GDR - Global Depositary Receipt
Pfd. - Preferred
REGS - Regulation S
Rts. - Rights
</Table>
Notes to Schedule of Investments:
(a) Each unit represents one common share and four preferred shares.
(b) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at October 31, 2006 was $31,617,841,
which represented 4.96% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(c) All or a portion of this security was out on loan at October 31, 2006.
(d) Each unit represents one ordinary share and two preferred shares.
(e) Non-income producing security.
(f) Non-income producing security acquired through a corporate action.
(g) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2006 was $277,603,330,
which represented 43.58% of the Fund's Net Assets. See Note 1A.
(h) Affiliated company. The Investment Company Act of 1940 defines affiliates as
those issuances in which a fund holds 5% or more of the outstanding voting
securities. The Fund has not owned enough of the outstanding voting
securities of the issuer to have control (as defined in the Investment
Company Act of 1940) of that issuer. The value of this security as of
October 31, 2006 represented 0.50% of the Fund's Net Assets. See Note 3.
(i) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The aggregate
value of these securities considered illiquid at October 31, 2006 was $0,
which represented 0% of the Fund's Net Assets.
(j) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at October 31, 2006 was $5,921,660, which represented 0.93% of
the Fund's Net Assets. See Note 1A.
(k) 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 value of this security at October 31, 2006 represented
2.30% of the Fund's Net Assets. See Note 1A.
(l) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(m) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM Developing Markets Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $406,510,336)* $595,281,659
- -----------------------------------------------------------
Investments in affiliates, at value (cost
$106,206,429) 106,007,186
===========================================================
Total investments (cost $512,716,765) 701,288,845
===========================================================
Foreign currencies, at value (cost
$11,364,028) 11,267,467
- -----------------------------------------------------------
Cash 1,371,313
- -----------------------------------------------------------
Receivables for:
Fund shares sold 4,025,539
- -----------------------------------------------------------
Dividends 909,553
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 20,615
- -----------------------------------------------------------
Other assets 55,405
===========================================================
Total assets 718,938,737
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 5,494,107
- -----------------------------------------------------------
Fund shares reacquired 952,565
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 35,495
- -----------------------------------------------------------
Collateral upon return of securities loaned 74,216,547
- -----------------------------------------------------------
Accrued distribution fees 204,540
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,758
- -----------------------------------------------------------
Accrued transfer agent fees 261,796
- -----------------------------------------------------------
Accrued operating expenses 770,611
===========================================================
Total liabilities 81,937,419
===========================================================
Net assets applicable to shares outstanding $637,001,318
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $537,493,466
- -----------------------------------------------------------
Undistributed net investment income 1,337,675
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (90,266,824)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 188,437,001
===========================================================
$637,001,318
___________________________________________________________
===========================================================
NET ASSETS:
Class A $502,546,128
___________________________________________________________
===========================================================
Class B $ 61,054,914
___________________________________________________________
===========================================================
Class C $ 65,416,342
___________________________________________________________
===========================================================
Institutional Class $ 7,983,934
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 21,112,785
___________________________________________________________
===========================================================
Class B 2,638,848
___________________________________________________________
===========================================================
Class C 2,829,720
___________________________________________________________
===========================================================
Institutional Class 333,978
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 23.80
- -----------------------------------------------------------
Offering price per share
(Net asset value of $23.80 divided by
94.50%) $ 25.19
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 23.14
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 23.12
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 23.91
___________________________________________________________
===========================================================
</Table>
* At October 31, 2006, securities with an aggregate value of $73,429,063 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
AIM Developing Markets Fund
STATEMENT OF OPERATIONS
For the year ended October 31, 2006
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $885,201) $ 10,126,647
- --------------------------------------------------------------------------
Dividends from affiliates (includes securities lending
income of $240,804) 1,453,960
- --------------------------------------------------------------------------
Interest 5,926
==========================================================================
Total investment income 11,586,533
==========================================================================
EXPENSES:
Advisory fees 4,935,366
- --------------------------------------------------------------------------
Administrative services fees 146,461
- --------------------------------------------------------------------------
Custodian fees 945,837
- --------------------------------------------------------------------------
Distribution fees:
Class A 1,012,424
- --------------------------------------------------------------------------
Class B 546,731
- --------------------------------------------------------------------------
Class C 434,351
- --------------------------------------------------------------------------
Transfer agent fees 1,437,072
- --------------------------------------------------------------------------
Transfer agent fees -- Institutional 702
- --------------------------------------------------------------------------
Trustees' and officer's fees and benefits 27,154
- --------------------------------------------------------------------------
Other 322,731
==========================================================================
Total expenses 9,808,829
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (366,363)
==========================================================================
Net expenses 9,442,466
==========================================================================
Net investment income 2,144,067
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 78,837,722
- --------------------------------------------------------------------------
Foreign currencies (1,025,387)
==========================================================================
77,812,335
==========================================================================
Change in net unrealized appreciation of:
Investment securities (net of change in estimated tax on
foreign investments held of $342,267--Note 1J) 67,960,649
- --------------------------------------------------------------------------
Foreign currencies 45,690
==========================================================================
68,006,339
==========================================================================
Net gain from investment securities and foreign currencies 145,818,674
==========================================================================
Net increase in net assets resulting from operations $147,962,741
__________________________________________________________________________
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
AIM Developing Markets Fund
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2006 and 2005
<Table>
<Caption>
2006 2005
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,144,067 $ 1,411,734
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 77,812,335 34,211,491
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 68,006,339 36,657,029
==========================================================================================
Net increase in net assets resulting from operations 147,962,741 72,280,254
==========================================================================================
Distributions to shareholders from net investment income:
Class A (1,870,432) --
- ------------------------------------------------------------------------------------------
Class B (87,623) --
- ------------------------------------------------------------------------------------------
Class C (42,557) --
- ------------------------------------------------------------------------------------------
Institutional Class (2,313) --
==========================================================================================
Decrease in net assets resulting from distributions (2,002,925) --
==========================================================================================
Share transactions-net:
Class A 117,009,122 5,825,461
- ------------------------------------------------------------------------------------------
Class B 10,643,675 (134,117)
- ------------------------------------------------------------------------------------------
Class C 43,745,216 3,879,104
- ------------------------------------------------------------------------------------------
Institutional Class 7,252,902 23,932
==========================================================================================
Net increase in net assets resulting from share
transactions 178,650,915 9,594,380
==========================================================================================
Net increase in net assets 324,610,731 81,874,634
==========================================================================================
NET ASSETS:
Beginning of year 312,390,587 230,515,953
==========================================================================================
End of year (including undistributed net investment income
of $1,337,675 and $1,290,314, respectively) $637,001,318 $312,390,587
__________________________________________________________________________________________
==========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-7
AIM Developing Markets Fund
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Developing Markets Fund (the "Fund") is a series portfolio of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of nine
separate series portfolios, each authorized to issue an unlimited number of
shares of beneficial interest. The Fund currently offers multiple classes of
shares. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class. The assets, liabilities and
operations of each portfolio are accounted for separately. Information presented
in these financial statements pertains only to the Fund.
The Fund's primary investment objective is long-term growth of capital with
a secondary objective of income.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. 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.
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. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. 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.
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.
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
F-8
AIM Developing Markets Fund
ratios of expenses and net investment income reported in the Financial
Highlights, nor are they limited by any expense limitation arrangements
between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to treat 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 to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- 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.
H. INDEMNIFICATIONS -- 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.
I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is recorded as an
increase in shareholder capital and is allocated among the share classes
based on the relative net assets of each class.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
K. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F-9
AIM Developing Markets Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $500 million 0.975%
- --------------------------------------------------------------------
Next $500 million 0.95%
- --------------------------------------------------------------------
Next $500 million 0.925%
====================================================================
Over $1.5 billion 0.90%
___________________________________________________________________
====================================================================
</Table>
Through June 30, 2007, AIM has contractually agreed to waive advisory fees
to the extent necessary so that the advisory fees payable by the Fund (based on
the Fund's average daily net assets) do not exceed the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.935%
- --------------------------------------------------------------------
Next $250 million 0.91%
- --------------------------------------------------------------------
Next $500 million 0.885%
- --------------------------------------------------------------------
Next $1.5 billion 0.86%
- --------------------------------------------------------------------
Next $2.5 billion 0.835%
- --------------------------------------------------------------------
Next $2.5 billion 0.81%
- --------------------------------------------------------------------
Next $2.5 billion 0.785%
- --------------------------------------------------------------------
Over $10 billion 0.76%
___________________________________________________________________
====================================================================
</Table>
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C and
Institutional Class shares to 1.75%, 2.50%, 2.50% and 1.50% of average daily net
assets, respectively, through at least June 30, 2007. In determining the
advisor's obligation to waive advisory fees and/or reimburse expenses, the
following expenses are not taken into account, and could cause the net annual
operating expenses to exceed the numbers reflected above: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v)
expenses related to a merger or reorganization, as approved by the Fund's Board
of Trustees; and (vi) expenses that the Fund has incurred but did not actually
pay because of an expense offset arrangement. Currently, in addition to the
expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more
fully below, the expense offset arrangements from which the Fund may benefit are
in the form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash. In
addition, the Fund may also benefit from a one time audit to be used to offset
future custodian expenses. Those credits are used to pay certain expenses
incurred by the Fund. AIM did not waive fees and/or reimburse expenses during
the period under this expense limitation.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in
the amount of 25% of the advisory fee AIM receives from the affiliated money
market funds on investments by the Fund in such affiliated money market funds
(excluding investments made in affiliated money market funds with cash
collateral from securities loaned by the fund). Voluntary fee waivers or
reimbursements may be modified or discontinued at any time upon consultation
with the Board of Trustees without further notice to investors.
For the year ended October 31, 2006, AIM waived advisory fees of $272,130.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. These expenses along with the related expense
reimbursement are included in the Statement of Operations. For the year ended
October 31, 2006, AMVESCAP reimbursed expenses of the Fund in the amount of
$2,440.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2006, AIM was paid $146,461.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AIS") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AIS for certain expenses
incurred by AIS in the course of providing such services. AIS may make payments
to intermediaries that provide omnibus account services, sub-accounting services
and/or networking services. All fees payable by AIS to intermediaries that
provide omnibus account services or sub-accounting are charged back to the Fund,
subject to certain limitations approved by the Trust's Board of Trustees. For
the year ended October 31, 2006, the Fund paid AIS $1,437,072 for Class A, Class
B and Class C share classes and $702 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C and Institutional Class shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,
Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the
Plans, pays ADI compensation at the annual rate of 0.25% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and Class C shares. Of the Rule 12b-1 payments, up to 0.25% of the
average daily net assets of the Class A, Class B or Class C shares may be paid
to furnish continuing personal shareholder services to
F-10
AIM Developing Markets Fund
customers who purchase and own shares of such classes. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge.
National Association of Securities Dealers ("NASD") Rules impose a cap on the
total sales charges, including asset-based sales charges that may be paid by any
class of shares of the Fund. Pursuant to the Plans, for the year ended October
31, 2006, the Class A, Class B and Class C shares paid $1,012,424, $546,731 and
$434,351, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2006, ADI advised the Fund that it retained $230,814 in
front-end sales commissions from the sale of Class A shares and $9,304, $67,529
and $28,586 from Class A, Class B and Class C shares, respectively, for CDSC
imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances and cash collateral from securities
lending transactions in affiliated money market funds. The Fund and the money
market funds below have the same investment advisor and therefore, are
considered to be affiliated. The tables below show the transactions in and
earnings from investments in affiliated money market funds for the year ended
October 31, 2006.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 5,814,306 $113,198,665 $(104,725,704) $ -- $14,287,267 $ 605,445 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class -- 40,638,909 (26,351,642) -- 14,287,267 217,285 --
- -----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 5,814,306 80,294,705 (86,109,011) -- -- 390,426 --
===================================================================================================================================
Subtotal $11,628,612 $234,132,279 $(217,186,357) $ -- $28,574,534 $1,213,156 $ --
===================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME* GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $5,177,645 $127,292,459 $ (95,361,831) $ -- $37,108,273 $120,043 $ --
- ------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 5,177,645 127,292,459 (95,361,831) -- 37,108,273 120,761 --
==============================================================================================================================
Subtotal $10,355,290 $254,584,918 $(190,723,662) $ -- $74,216,546 $240,804 $ --
==============================================================================================================================
</Table>
* Net of compensation to counterparties.
INVESTMENTS IN OTHER AFFILIATES:
The Investment Company Act of 1940 defines affiliates as those issuances in
which a fund holds 5% or more of the outstanding voting securities. The Fund has
not owned enough of the outstanding voting securities of the issuer to have
control (as defined in the Investment Company Act of 1940) of that issuer. The
following is a summary of the transactions with affiliates for the year ended
October 31, 2006
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Contax
Participacoes
SA-ADR $ 108,868 $ -- $ (196,663) $ 87,795 $ -- $ -- $157,344
- -----------------------------------------------------------------------------------------------------------------------------------
Yantai North
Andre Juice
Co.
Ltd.-Class H
(cost
$3,415,349) 733,201 1,986,331 -- 496,574 3,216,106 -- --
===================================================================================================================================
Subtotal $ 842,069 $ 1,986,331 $ (196,663) $584,369 $ 3,216,106 $ -- $157,344
===================================================================================================================================
Total
Investments
in
Affiliates $22,825,971 $490,703,528 $(408,106,682) $584,369 $106,007,186 $1,453,960 $157,344
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund
F-11
AIM Developing Markets Fund
or portfolio that is or could be considered an affiliate by virtue of having a
common investment advisor (or affiliated investment advisors), common Trustees
and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as
defined under the procedures, each transaction is effected at the current market
price. Pursuant to these procedures, for the year ended October 31, 2006, the
Fund engaged in securities purchases of $1,012,905.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the year
ended October 31, 2006, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $91,793.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2006, the Fund paid legal fees of $5,009
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources exceed
10% of the Fund's total assets. To the extent that the loan is required to be
secured by collateral, the collateral is marked to market daily to ensure that
the market value is at least 102% of the outstanding principal value of the
loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the year ended October 31, 2006, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank 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 contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At October 31, 2006, securities with an aggregate value of $73,429,063 were
on loan to brokers. The loans were secured by cash collateral of $74,216,547
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended October 31, 2006, the Fund received dividends on cash
collateral investments of $240,804 for securities lending transactions, which
are net of compensation to counterparties.
F-12
AIM Developing Markets Fund
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2006
and 2005 was as follows:
<Table>
<Caption>
2006 2005
- ----------------------------------------------------------------------------------
Distributions paid from ordinary income $2,002,925 $ --
__________________________________________________________________________________
==================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 1,366,609
- ----------------------------------------------------------------------------
Unrealized appreciation -- investments 188,169,443
- ----------------------------------------------------------------------------
Temporary book/tax differences (28,935)
- ----------------------------------------------------------------------------
Capital loss carryover (89,999,265)
- ----------------------------------------------------------------------------
Shares of beneficial interest 537,493,466
============================================================================
Total net assets $637,001,318
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales. The tax-basis unrealized appreciation (depreciation) on investments
amount includes appreciation (depreciation) on foreign currencies of $(135,079).
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as of October
31, 2006 to utilizing $78,906,159 of capital loss carryforward in the fiscal
year ended October 31, 2007.
The Fund utilized $77,636,256 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of October 31, 2006 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
October 31, 2007 $ 8,645,765
- -----------------------------------------------------------------------------
October 31, 2008 14,769,982
- -----------------------------------------------------------------------------
October 31, 2009 59,191,537
- -----------------------------------------------------------------------------
October 31, 2010 7,382,001
- -----------------------------------------------------------------------------
October 31, 2012 9,980
=============================================================================
Total capital loss carryforward $89,999,265
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2006 was $391,268,685 and
$238,664,830, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $196,514,711
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (8,210,189)
==============================================================================
Net unrealized appreciation of investment securities $188,304,522
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $512,984,323.
</Table>
F-13
AIM Developing Markets Fund
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and passive foreign investment companies transactions, on October
31, 2006, undistributed net investment income was decreased by $93,781 and
undistributed net realized gain (loss) was increased by $93,781. This
reclassification had no effect on the net assets of the Fund.
NOTE 12--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A, Class B,
Class C and Institutional Class. Class A shares are sold with a front-end sales
charge unless certain waiver criteria are met. Class B shares and Class C shares
are sold with CDSC. Institutional Class shares are sold at net asset value.
Under certain circumstances, Class A shares are subject to CDSC. Generally,
Class B shares will automatically convert to Class A shares on or about the
month-end which is at least eight years after the date of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
2006(A) 2005
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 11,696,334 $ 252,752,508 3,978,681 $ 62,313,747
- ------------------------------------------------------------------------------------------------------------------------
Class B 1,875,366 38,551,820 986,903 14,816,911
- ------------------------------------------------------------------------------------------------------------------------
Class C 3,330,928 69,840,874 930,346 13,543,724
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class(b) 336,833 7,341,257 1,437 23,932
========================================================================================================================
Issued as reinvestment of dividends:
Class A 87,544 1,630,935 -- --
- ------------------------------------------------------------------------------------------------------------------------
Class B 4,342 79,163 -- --
- ------------------------------------------------------------------------------------------------------------------------
Class C 2,097 38,175 -- --
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class(b) 124 2,313 -- --
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 327,986 7,111,628 350,620 5,239,210
- ------------------------------------------------------------------------------------------------------------------------
Class B (336,300) (7,111,628) (358,220) (5,239,210)
========================================================================================================================
Reacquired:(c)
Class A (6,796,226) (144,485,949) (4,100,354) (61,727,496)
- ------------------------------------------------------------------------------------------------------------------------
Class B (1,005,717) (20,875,680) (647,485) (9,711,818)
- ------------------------------------------------------------------------------------------------------------------------
Class C (1,255,931) (26,133,833) (676,864) (9,664,620)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class(b) (4,416) (90,668) -- --
========================================================================================================================
8,262,964 $ 178,650,915 465,064 $ 9,594,380
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are three entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 25% of
the outstanding shares of the Fund. ADI has an agreement with these
entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may
make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, AIM and or AIM affiliates
including but not limited to services such as, securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially.
(b) Institutional Class shares commenced sales on October 25, 2005.
(c) Amount is net of redemption fees of $93,189, $12,401, $10,874 and $861
for Class A, Class B, Class C and Institutional Class shares,
respectively, for the year ended October 31, 2006 and $32,296, $4,298,
$1,389 and $0 for Class A, Class B, Class C and Institutional Class
shares, respectively, for the year ended October 31, 2005.
NOTE 13--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
F-14
AIM Developing Markets Fund
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-----------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.81 $ 12.71 $ 10.52 $ 6.96 $ 6.32
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) 0.12 0.09 0.02 0.04 (0.01)
- -------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 6.98 4.01 2.19 3.52 0.74
=========================================================================================================================
Total from investment operations 7.10 4.10 2.21 3.56 0.73
=========================================================================================================================
Less dividends from net investment income (0.11) -- (0.02) -- (0.09)
=========================================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 -- --
=========================================================================================================================
Net asset value, end of period $ 23.80 $ 16.81 $ 12.71 $ 10.52 $ 6.96
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 42.45% 32.26% 21.05% 51.15% 11.37%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $502,546 $265,583 $197,848 $209,221 $123,812
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.74%(c) 1.83% 2.00% 2.00% 1.84%
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.80%(c) 1.98% 2.22% 2.33% 2.35%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 0.57%(c) 0.62% 0.16% 0.44% (0.07)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 51% 40% 49% 100% 109%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $404,969,496.
<Table>
<Caption>
CLASS B
------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.40 $ 12.48 $ 10.36 $ 6.89 $ 6.25
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.04) (0.01) (0.04) (0.01) (0.05)
- --------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 6.81 3.93 2.16 3.48 0.73
====================================================================================================================
Total from investment operations 6.77 3.92 2.12 3.47 0.68
====================================================================================================================
Less dividends from net investment income (0.04) -- -- -- (0.04)
====================================================================================================================
Redemption fees added to shares of beneficial interest 0.01 0.00 0.00 -- --
====================================================================================================================
Net asset value, end of period $ 23.14 $ 16.40 $ 12.48 $ 10.36 $ 6.89
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 41.38% 31.41% 20.46% 50.36% 10.85%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $61,055 $34,456 $26,447 $30,111 $31,465
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.49%(c) 2.50% 2.52% 2.53% 2.38%
- --------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.55%(c) 2.65% 2.74% 2.86% 2.89%
====================================================================================================================
Ratio of net investment income (loss) to average net assets (0.18)%(c) (0.05)% (0.36)% (0.08)% (0.61)%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 51% 40% 49% 100% 109%
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $54,673,097.
F-15
AIM Developing Markets Fund
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
---------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------
2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.38 $ 12.46 $10.34 $ 6.88 $ 6.25
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.04) (0.01) (0.04) (0.01) (0.05)
- -----------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 6.81 3.93 2.16 3.47 0.72
=================================================================================================================
Total from investment operations 6.77 3.92 2.12 3.46 0.67
=================================================================================================================
Less dividends from net investment income (0.04) -- -- -- (0.04)
=================================================================================================================
Redemption fees added to shares of beneficial interest 0.01 0.00 0.00 -- --
=================================================================================================================
Net asset value, end of period $ 23.12 $ 16.38 $12.46 $10.34 $ 6.88
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 41.43% 31.46% 20.50% 50.29% 10.69%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $65,416 $12,327 $6,222 $4,361 $2,557
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.49%(c) 2.50% 2.52% 2.53% 2.38%
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.55%(c) 2.65% 2.74% 2.86% 2.89%
=================================================================================================================
Ratio of net investment income (loss) to average net assets (0.18)%(c) (0.05)% (0.36)% (0.08)% (0.61)%
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate 51% 40% 49% 100% 109%
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $43,435,122.
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------
OCTOBER 25, 2005
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2006 2005
- ------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.81 $16.64
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.24 0.00
- ------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 6.98 0.17
================================================================================================
Total from investment operations 7.22 0.17
================================================================================================
Less dividends from net investment income (0.13) --
================================================================================================
Redemption fees added to shares of beneficial interest 0.01 0.00
================================================================================================
Net asset value, end of period $23.91 $16.81
________________________________________________________________________________________________
================================================================================================
Total return(b) 43.20% 1.02%
________________________________________________________________________________________________
================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $7,984 $ 24
________________________________________________________________________________________________
================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.23%(c) 1.34%(d)
- ------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.28%(c) 1.45%(d)
================================================================================================
Ratio of net investment income to average net assets 1.07%(c) 1.11%(d)
________________________________________________________________________________________________
================================================================================================
Portfolio turnover rate(e) 51% 40%
________________________________________________________________________________________________
================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $3,276,560.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-16
AIM Developing Markets Fund
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 (Order No. 05-1318). The WVASC makes
findings of fact that AIM and ADI entered into certain arrangements permitting
market timing of the AIM Funds and failed to disclose these arrangements in the
prospectuses for such Funds, 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, including
restitution to affected investors, disgorgement of fees, reimbursement of
investigatory, administrative and legal costs and an "administrative
assessment," to be determined by the Commissioner. Initial research indicates
that these damages could be limited or capped by statute.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions (all the claims in
this category of lawsuits were dismissed with prejudice by the court on
September 29, 2006, except for the Section 36(b) claim which was dismissed
with leave to amend to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
F-17
AIM Developing Markets Fund
NOTE 15--LEGAL PROCEEDINGS--(CONTINUED)
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-18
AIM Developing Markets Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Developing Markets Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Developing Markets Fund (one of
the funds constituting AIM Investment Funds, hereafter referred to as the
"Fund") at October 31, 2006, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
December 20, 2006
Houston, Texas
F-19
AIM Developing Markets Fund
TAX DISCLOSURES
REQUIRED FEDERAL INCOME TAX INFORMATION
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2006, 0% is eligible for the dividends received deduction for
corporations.
For its tax year ended October 31, 2006 the Fund designates 100%, or the
maximum amount allowable, of its dividend distributions as qualified dividend
income. Your actual amount of qualified dividend income for the calendar year
will be reported in your Form 1099-DIV. You should consult your tax advisor
regarding treatment of the amounts.
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS
For its tax year ended October 31, 2006, the Fund designates 1.80%, or the
maximum amount allowable, of its dividend distributions as qualified interest
income exempt from U.S. income tax for non-resident alien shareholders. Your
actual amount of qualified interest income for the calendar year will be
reported in your Form 1042-S mailing. You should consult your tax advisor
regarding treatment of the amounts.
The percentage of qualifying assets not subject to the U.S. estate tax for
the fiscal quarters ended January 31, 2006, April 30, 2006 and July 31, 2006 and
October 31, 2006 are 99.67%, 99.04%, 99.08% and 99.62%, respectively.
F-20
AIM Developing Markets Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm) and
Trustee and Vice Chair of The AIM Family
of Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
- -------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, A I M Management Group Inc.,
Principal AIM Mutual Fund Dealer Inc. (registered
Executive Officer broker dealer), AIM Funds Management
Inc. (registered investment advisor) and
1371 Preferred Inc. (holding company);
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Capital Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, AVZ Callco Inc. (holding
company); AMVESCAP Inc. (holding
company) and AIM Canada Holdings Inc.
(holding company); Director and Chief
Executive Officer, AIM Trimark Corporate
Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund
company) and AIM Trimark Canada Fund
Inc. (corporate mutual fund company);
Trustee, President and Principal
Executive Officer of The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
Powershares Capital Management LLC
Formerly: President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer,
AIM Funds Management Inc.; President,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and Director,
Trimark Trust (federally regulated
Canadian Trust Company)
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder
Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); CompuDyne Corporation
(provider of products and services to
the public security market); and
Homeowners of America Holding
Corporation (property casualty company)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and Director of various
affiliated Volvo companies; and
Director, Magellan Insurance Company
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired Director, Mainstay VP Series
Trustee Formerly: Partner, Deloitte & Touche Funds, Inc. (21 portfolios)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
F-21
TRUSTEES AND OFFICERS--(CONTINUED)
AIM Developing Markets Fund
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc. and A I M
Advisors, Inc.; Director, Vice President
and Secretary, INVESCO Distributors,
Inc.; Vice President and Secretary,
A I M Capital Management, Inc., AIM
Investment Services, Inc., and Fund
Management Company; Senior Vice
President and Secretary, A I M
Distributors, Inc.; Director, INVESCO
Funds Group Inc.; Senior Vice President,
Chief Legal Officer and Secretary of The
AIM Family of Funds--Registered
Trademark--; and Manager, Powershares
Capital Management LLC
Formerly: Chief Operating Officer,
Senior Vice President, General Counsel,
and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice
President and Secretary, PBHG Funds (an
investment company); Vice President and
Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel
and Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- ------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, AMVESCAP N/A
Vice President PLC; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- ------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Senior Vice President and General
Vice President Counsel, AMVESCAP PLC; Director, INVESCO
Funds Group, Inc.; and Vice President of
The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Vice President and N/A
General Counsel, Fund Management
Company; Director, Senior Vice
President, Secretary and General
Counsel, A I M Management Group Inc. and
A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Senior Vice President, A I M
Distributors, Inc.; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Chief
Executive Officer and President, INVESCO
Funds Group, Inc.; and Senior Vice
President, and General Counsel, Liberty
Financial Companies, Inc. and Senior
Vice President and General Counsel
Liberty Funds Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.; and Vice President,
Financial Officer and Treasurer and Principal Officer of The
Treasurer AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc. and Vice President
of The AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, Senior Vice
President and Senior Investment Officer,
A I M Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); and
President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust Only)
Formerly: Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- ------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc., Fund Management
Company and The AIM Family of
Funds--Registered Trademark--
Formerly: Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Global Head of Product
Development, AIG-Global Investment
Group, Inc.; Chief Compliance Officer
and Deputy General Counsel,
AIG-SunAmerica Asset Management; and
Chief Compliance Officer, Chief
Operating Officer and Deputy General
Counsel, American General Investment
Management
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 225 Franklin Street
Floor 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Philadelphia, PA 19103-7599 Americas
New York, NY 10036-2714
</Table>
F-22
[eDELIVERY
GO PAPERLESS
AIMINVESTMENTS.COM/eDELIVERY GRAPHIC]
REGISTER FOR eDELIVERY
eDelivery is the process of receiving your fund and account If used after January 20, 2007, this report must be
information via e-mail. Once your quarterly statements, tax accompanied by a Fund Performance & Commentary or by an AIM
forms, fund reports, and prospectuses are available, we will Quarterly Performance Review for the most recent quarter-end.
send you an e-mail notification containing links to these Mutual funds distributed by A I M Distributors, Inc.
documents. For security purposes, you will need to log in to
your account to view your statements and tax forms. A I M Management Group Inc. has provided leadership in the
investment management industry since 1976. AIM Investment
WHY SIGN UP? Services, Inc. is the transfer agent for the products and
services represented by AIM Investments. AIM is a subsidiary
Register for eDelivery to: of AMVESCAP PLC, one of the world's largest independent
financial services companies with $450 billion in assets under
o reduce the amount of paper you receive. management as of October 31, 2006.
o gain access to your documents faster by not waiting for the CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND
mail. EXPENSES CAREFULLY. FOR THIS AND OTHER INFORMATION ABOUT AIM
FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AND
o view your documents online anytime at your convenience. READ IT CAREFULLY BEFORE INVESTING.
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out for your records. AIMinvestments.com DVM-AR-1 A I M Distributors, Inc.
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This AIM service is provided by AIM Investment Services, Inc.
[YOUR GOALS. OUR SOLUTIONS.]
--Registered Trademark--
Mutual Retirement Annuities College Separately Offshore Cash
Funds Products Savings Managed Products Management
Plans Accounts
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
FIXED INCOME AIM ENHANCED SHORT BOND FUND
Short-Term Taxable Annual Report to Shareholders o October 31, 2006
Investment Grade
Table of Contents
Supplemental Information .......... 2
Letters to Shareholders ........... 3
Performance Summary ............... 5
Management Discussion ............. 5
Fund Expenses ..................... 7
Long-term Fund Performance ........ 8
Approval of Advisory Agreement .... 10
Schedule of Investments ........... F-1
Financial Statements .............. F-5
Notes to Financial Statements ..... F-7
Financial Highlights .............. F-15
Auditor's Report .................. F-17 [COVER GLOBE IMAGE]
Tax Disclosures ................... F-18
Trustees and Officers ............. F-19
[AIM INVESTMENT SOLUTIONS]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[DOMESTIC [INTERNATIONAL/ [SECTOR
EQUITY] GLOBAL EQUITY] EQUITY]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[FIXED [ALLOCATION [DIVERSIFIED
INCOME] SOLUTIONS] PORTFOLIOS]
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM Enhanced Short Bond Fund
AIM ENHANCED SHORT BOND FUND SEEKS TO PROVIDE TOTAL RETURN.
o Unless otherwise stated, information presented in this report is as of October 31, 2006, and is based on total net assets.
ABOUT SHARE CLASSES o The prices of and the income generated o The Fund is not managed to track the
by securities held by the Fund may performance of any particular index,
o Class R shares are available only to decline in response to certain factors, including the indexes defined here, and
certain retirement plans. Please see the including some directly involving the consequently, the performance of the
prospectus for more information. companies and governments whose Fund may deviate significantly from the
securities are owned by the Fund. These performance of the indexes.
PRINCIPAL RISKS OF INVESTING IN factors include general economic and
THE FUND market conditions, regional or global o A direct investment cannot be made in
economic instability and currency and an index. Unless otherwise indicated,
o Foreign securities have additional interest rate fluctuations. index results include reinvested
risks, including exchange rate changes, dividends, and they do not reflect sales
political and economic upheaval, the o The Fund may invest in mortgage and charges. Performance of an index of
relative lack of information about these asset-backed securities. These funds reflects fund expenses;
companies, relatively low market securities are subject to prepayment or performance of a market index does not.
liquidity and the potential lack of call risk, which is the risk that
strict financial and accounting controls payments from borrowers may be received OTHER INFORMATION
and standards. earlier or later than expected due to
changes in the rate at which the o The returns shown in management's
o The Fund may invest in debt securities underlying loans are prepaid. discussion of Fund performance are based
such as notes and bonds that carry on net asset values calculated for
interest rate risk and credit risk. ABOUT INDEXES USED IN THIS REPORT shareholder transactions. Generally
accepted accounting principles require
o The Fund may use enhanced investment o The unmanaged LEHMAN BROTHERS U.S. adjustments to be made to the net assets
techniques such as leveraging and AGGREGATE BOND INDEX (the Lehman of the Fund at period end for financial
derivatives. Leveraging entails special Aggregate), which represents the U.S. reporting purposes, and as such, the net
risks such as magnifying changes in the investment-grade fixed-rate bond market asset values for shareholder
value of the portfolio's securities. (including government and corporate transactions and the returns based on
Derivatives are subject to counter party securities, mortgage pass-through those net asset values may differ from
risk--the risk that the other party will securities and asset-backed securities), the net asset values and returns
not complete the transaction with the is compiled by Lehman Brothers, a global reported in the Financial Highlights.
Fund. investment bank.
o Industry classifications used in this
o There is no guarantee that the o The U.S. THREE-MONTH LONDON INTERBANK report are generally according to the
investment techniques and risk analyses OFFERED RATE (LIBOR) is the interest Global Industry Classification Standard,
used by the Fund's managers will produce rate the world's most creditworthy banks which was developed by and is the
the desired results. charge one another for large loans. It exclusive property and a service mark of
is used worldwide as a base interest Morgan Stanley Capital International
o The Fund is subject to rate for loans to major corporations. Inc. and Standard & Poor's.
currency/exchange rate risk since it may
buy or sell currencies other than the o The unmanaged LIPPER SHORT INVESTMENT o The Board of Trustees of AIM
U.S. dollar. GRADE FUNDS INDEX is an equally weighted Investment Funds, on behalf of AIM
representation of the 30 largest funds Enhanced Short Bond Fund, has approved
o The Fund may invest in lower quality that make up the Lipper Short Investment changing the fund's name to "AIM LIBOR
debt securities, commonly known as "junk Grade Debt category. These funds invest Alpha Fund," effective February 28,
bonds." Compared to higher quality debt primarily in investment grade debt 2007.
securities, junk bonds involve greater issues with dollar- weighted average
risk of default or price changes due to maturities of less than three years. o Effective January 1, 2007: The Fund
changes in credit quality of the issuer generally declares dividends monthly and
because they are generally unsecured and pays dividends, if any, monthly.
because they may be subordinated to
other creditors' claims. Credit ratings
of junk bonds do not necessarily reflect Continued on page 9
their actual market risk.
================================================================================ ========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND FUND NASDAQ SYMBOLS
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES
AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares EASBX
================================================================================ Class C Shares CESBX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class R Shares RESBX
AIMinvestments.com ========================================
2
AIM Enhanced Short Bond Fund
Dear Shareholders of The AIM Family of Funds
--Registered Trademark--:
We're pleased to provide you with this report, which
includes a discussion of how your Fund was managed during
the review period ended October 31, 2006, and what factors
affected its performance.
As we approach the end of 2006, it seems likely that
many investors may see the value of their investments
[TAYLOR increase this year. Global equity markets, collectively,
PHOTO] recorded double-digit gains for the year ended October 31,
2006, as did the U.S. stock market. Also, the investment
grade bond market in the United States rose for the same
Philip Taylor period.
While stock and bond markets generally enjoyed positive
year-to-date returns, their performance was affected by
short-term economic and geopolitical events. For example,
the U.S. stock market was weak in the second quarter of
2006 when it appeared that inflation might be rising. Only
after the U.S. Federal Reserve Board decided in August that
inflation was contained and that short-term interest rates
need not be increased--the first time it kept rates
unchanged in more than two years--did equities truly surge.
Short-term market fluctuations are a fact of life for
all investors. At AIM Investments --Registered Trademark--,
we believe that investors can do two things to deal with
short-term market fluctuations: maintain a long-term
investment horizon and maintain a diversified portfolio.
AIM Investments can help by offering a broad product line
that gives your financial advisor the necessary tools to
build a portfolio that's right for you regardless of market
conditions. AIM Investments offers a comprehensive range of
retail mutual funds, including domestic, global and
international equity funds, taxable and tax-exempt
fixed-income funds, and a variety of allocation
portfolios--with varied risk and return characteristics to
match your needs. We maintain this extensive set of product
solutions for one reason: We believe in the value of
comprehensive, diversified investment portfolios.
We've changed the look of our annual reports to reflect
that belief. In our marketing and now our shareholder
literature, we represent a fully diversified portfolio
graphically as an allocation pie chart and assign each
asset class a color--green for domestic equity, blue for
international, orange for sector and purple for fixed
income. A legend in the left column illustrates the
methodology. Your report cover now shows your Fund's asset
class color, plus the asset class and sub-asset class name
are shown in the upper-left corner. The reason for these
changes is to help you better understand where your Fund
fits into your overall portfolio.
AIM has a variety of investment solutions, and knowing
which ones are right for your portfolio is complex. That's
why we also believe in the value of a trusted financial
advisor who will work with you to create an investment plan
you can stick with for the long term. Your financial
advisor can help allocate your portfolio appropriately and
review your investments regularly to help ensure they
remain suitable as your financial situation changes. While
there are no guarantees with any investment program, a
long-term plan that's based on your financial goals, risk
tolerance and time horizon is more likely to keep you and
your investments on track.
OUR COMMITMENT TO YOU
In the short term, the one sure thing about markets is
their unpredictability. While past performance cannot
guarantee comparable future results, we believe that
staying invested for the long term with a thoughtful plan
offers the best opportunity for weathering that
unpredictability. We at AIM Investments remain committed to
building enduring solutions to help you achieve your
investment goals, and we're pleased you've placed your
trust in us.
Information about investing, the markets and your Fund
is always available on our Web site, AIMinvestments.com. If
you have questions about your individual account, we invite
you to contact one of our highly trained client services
representatives at 800-959-4246.
Sincerely,
/s/ PHILIP TAYLOR
Philip Taylor
President -- AIM Funds
CEO, AIM Investments
December 14, 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. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
3
AIM Enhanced Short Bond Fund
Dear Fellow AIM Fund Shareholders:
At our meeting at the end of June, your Board completed
[CROCKETT its comprehensive review* of each fund's advisory agreement
PHOTO] with A I M Advisors, Inc. (AIM) to make certain your
interests are being served in terms of fees, performance
and operations.
Looking ahead, your Board finds many reasons to be
positive about AIM's management and strategic direction.
Bruce L. Crockett Most importantly, AIM's investment management discipline
has paid off in terms of improved overall performance. We
are also pleased with AIM's efforts to seek more
cost-effective ways of delivering superior service.
In addition, AIM is realizing the benefits of belonging
to a leading independent global investment management
organization in its parent company, AMVESCAP PLC, which is
dedicated to helping people worldwide build their financial
security. AMVESCAP managed approximately $450 billion
globally as of October 31, 2006, operating under the AIM,
INVESCO, AIM Trimark, INVESCO PERPETUAL and Atlantic Trust
brands. These companies are home to an abundance of
investment talent that is gradually being integrated and
leveraged into centers of excellence, each focusing on a
given market segment or asset class. Over the next few
years, your Board will be meeting at these various centers
of excellence to learn about their progress and how they
may serve you through our goal of enhancing performance and
reducing costs.
The seven new AIM funds--which include Asian funds,
structured U.S. equity funds and specialized bond
funds--are an early example of the kind of opportunities
the AMVESCAP organization can provide AIM clients. More
information on these funds can be found on AIM's Web site.
Your Board is very pleased with the overall direction
and progress of the AIM Funds. We're working closely and
effectively with AIM's management to continue this
momentum. As always, your Board is eager to hear your views
on how we might better serve you. Please send your comments
in a letter addressed to me at AIM Investments, AIM
Investments Tower, 11 Greenway Plaza, Suite 100, Houston TX
77046.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board
December 14, 2006
*To learn more about all the factors we considered
before approving each fund's advisory agreement, go to the
"Products & Performance" tab at the AIM Web site
(AIMinvestments.com) and click on "Investment Advisory
Agreement Renewals." The approval of advisory agreement
information for your Fund is also included in this annual
report on pages 10-11.
4
AIM Enhanced Short Bond Fund
Management's discussion In constructing the Fund's portfolio,
of Fund performance we employ both top-down and bottom-up
analysis. Top-down analysis takes into
===================================================================================== account general economic and market
PERFORMANCE SUMMARY trends while bottom-up analysis involves
an evaluation of securities on an
For the period from the Fund's inception on March 31, 2006, through October individual basis. Our goal is to
31, 2006, AIM Enhanced Short Bond Fund, excluding applicable sales charges, outperform the Fund's style-specific
underperformed the Fund's broad market and style-specific indexes. Most of this index through an analysis of a variety
underperformance was the result of the Fund's defensive duration positioning, of alpha sources (specific factors
especially during the third quarter of 2006. In addition, the currency affecting the return on investments
management detracted incrementally from the Fund's total return because of long relative to a benchmark), including high
positions in the Japanese yen and the South African rand. yield, emerging market, country and
currency risks.
Your Fund's performance appears on pages 8 and 9.
We also will consider macroeconomic
FUND VS. INDEXES and sector level factors such as
Cumulative total returns, 3/31/06-10/31/06, excluding applicable sales charges. economic or political conditions,
If sales charges were included, returns would be lower. monetary policy and emerging market
trends. Factors we take into
consideration in selecting an individual
Class A Shares 1.82% security for the portfolio include cash
Class C Shares 1.67 flow coverage, revenue growth, stability
Class R Shares 1.67 of credit ratings and business margin
Lehman Brothers U.S. Aggregate Bond Index (Broad Market Index) 4.41 conditions.
U.S. Three-Month London Interbank Offered Rate (Style-Specific Index) 3.14
Lipper Short Investment Grade Funds Index (Peer Group Index) 3.14 We will consider selling a particular
security when there is a change in risk
SOURCE: LIPPER INC. factors relative to its potential
===================================================================================== return.
HOW WE INVEST MARKET CONDITIONS AND YOUR FUND
AIM Enhanced Short Bond Fund's objective structured securitized debt securities, Economic activity had slowed by the end
is to provide total return. The Fund such as asset-backed securities and both of the reporting period, the result of
seeks to meet this objective by residential and commercial two years of tightening by the U.S.
attempting to exceed the return of the mortgage-backed securities. In managing Federal Reserve Board (the Fed), record
U.S. Three-Month LIBOR. the portfolio, we may use synthetic and oil prices and a slowing housing market.
derivative instruments, such as swaps Gross domestic product (GDP), the
We invest in a diversified portfolio (including interest rate, currency, broadest measure of economic activity,
of domestic and foreign government and total return and credit default swaps), advanced at an annualized rate of 2.6%
corporate debt securities, including put and call options, futures contracts in the second quarter, down from the
securities of emerging markets. We may and forward currency contracts. exceptionally strong 5.6% annualized
also invest in growth
(continued)
=============================================================== ===============================================================
PORTFOLIO COMPOSITION TOP 10 FIXED-INCOME ISSUERS*
By industry 1. Poland Government Bond (Poland) 4.1%
Consumer Receivables 25.8% 2. Residential Asset Securities Corp. 3.3
Collateralized Mortgage Obligations 11.9 3. Countrywide Asset-Backed Ctfs. 3.1
Diversified Banks 4.6 4. Washington Mutual Master Note Trust 2.9
Investment Banking & Brokerage 4.2 5. Wells Fargo Mortgage Backed Securities Trust 2.8
Sovereign Debt 4.1 6. Credit Suisse (USA) Inc. 2.7
Regional Banks 3.9 7. ConocoPhillips Australia Funding Co. 2.4
Consumer Finance 3.8 8. SLM Corp. 2.3
Thrifts & Mortgage Finance 3.3 9. Structured Asset Securities Corp. 2.3
Other Industries, Each with Less than 3% of Total 10. ACE Securities Corp. 2.2
Net Assets 36.2
Money Market Funds Plus Other Assets Less Liabilities 2.2 Total Net Assets $52.22 million
The Fund's holdings are subject to change, and there is no Total Number of Holdings* 92
assurance that the Fund will continue to hold any particular
security.
*Excluding money market fund holdings.
=============================================================== ===============================================================
5
AIM Enhanced Short Bond Fund
rate recorded in the first quarter. asset-backed securities (ABS), as they Kenneth R. Bowling
Early estimates suggested that GDP appeared to be attractive from a Chartered Financial
slowed to an annualized rate of 2.2% for valuation perspective. In general, [BOWLING Analyst, portfolio
the third quarter. investment grade corporate bonds also PHOTO] manager, is a portfolio
benefited from continued stable economic manager of AIM Enhanced
On June 29, the Fed announced its and credit fundamentals, strong foreign Short Bond Fund. Mr.
17th consecutive interest rate increase demand and decreased volatility in the Bowling has been with the Fund's
and raised the federal funds target rate equity markets, particularly during the advisor's worldwide fixed income
by 25 basis points (0.25%) to 5.25%. second part of the reporting period. As division since 1993. Prior to assuming
However, signs of a cooling U.S. economy a result, the Fund's sizable positions his current position, he served as
prompted investors to conclude that the in these two segments of the bond market division's director of investment
need for further near-term interest rate were beneficial to performance. strategy. He earned a B.S. in mechanical
hikes was diminishing. In line with engineering and an M.S. in engineering
these expectations, the Fed kept its Changes in currency exchange rates from the University of Louisville.
target for the federal funds rate continued to represent an important
unchanged at 5.25% for two consecutive driver of the Fund's performance over
meetings in August and September. the past several months. The Fund was James F. Guenther
long the yen versus the U.S. dollar. [GUENTHER Chartered Financial
The rally in the bond market during This positioning was detrimental, as the PHOTO] Analyst, portfolio
the past few months was driven by economic growth in Japan showed signs of manager, is co-portfolio
evidence of a weakening economy and softening, and the timing and magnitude manager of AIM Enhanced
indications that inflation was well of any further rate hikes by the Bank of Short Bond Fund. Mr.
under control. The general upward trend Japan remained questionable. Generally, Guenther joined the Fund's advisor in
in bond yields, which had been evident an economic slowdown leads to a decrease 1992. Prior to assuming his current
for the first part of the year, came to in the interest rates, which generally duties, he worked at two investment
an end in late June. Both long-term and results in a fall in the exchange rate research firms. Mr. Guenther earned a
short-term yields dropped significantly of national currency. The Fund also B.S. in business administration from
by the end of this reporting period as maintained long positions in the South Western Michigan University and attended
the market participants saw inflation as African rand. The rand's movements the DePaul University of Law.
a lessening threat. against the U.S. dollar are often
influenced by the direction of gold and
In international markets, solid gains platinum due to South Africa's position Stephen M. Johnson
in most European markets were adversely as the world's largest producer of gold, Chartered Financial
affected by a stronger U.S. dollar platinum and diamonds. The Fund's [JOHNSON Analyst, portfolio
during the past few months. Emerging currency exposure to the South African PHOTO] manager, is co-portfolio
markets provided excellent results for rand detracted from performance as the manager of AIM Enhanced
the past five months, while Japan U.S. dollar continued to exhibit Short Bond Fund. Mr.
produced modestly negative returns. strength during the last several months. Johnson began his investment career in
1986 and joined the Fund's advisor in
We began this reporting period with a IN CLOSING 1991. He previously worked as a trader
bearish outlook for global fixed income at another investment firm and a
markets. Our analysis indicated that Thank you for your continued investment portfolio manager at a major bank. He
inflation-adjusted bond yields were too in AIM Enhanced Short Bond Fund. earned a B.S. in petroleum engineering
low, particularly on the longer maturity from the University of Kansas and a
end of the yield curve. Consequently, we THE VIEWS AND OPINIONS EXPRESSED IN M.B.A. from Rice University.
entered the period with a short fixed MANAGEMENT'S DISCUSSION OF FUND
income position from a duration PERFORMANCE ARE THOSE OF A I M ADVISORS,
perspective, reflecting our belief that INC. THESE VIEWS AND OPINIONS ARE J. Richard Robben
bond prices were overvalued. As the SUBJECT TO CHANGE AT ANY TIME BASED ON Chartered Financial
period progressed, yields dropped in FACTORS SUCH AS MARKET AND ECONOMIC [ROBBEN Analyst, senior portfolio
fixed income markets, sending bond CONDITIONS. THESE VIEWS AND OPINIONS MAY PHOTO] manager, is co-portfolio
prices higher. Thus, the Fund's short NOT BE RELIED UPON AS INVESTMENT ADVICE manager of AIM Enhanced
duration position had a negative impact OR RECOMMENDATIONS, OR AS AN OFFER FOR A Short Bond Fund. Mr.
on performance on an absolute basis PARTICULAR SECURITY. THE INFORMATION IS Robben has been with the Fund's
during the reporting period. NOT A COMPLETE ANALYSIS OF EVERY ASPECT advisor's worldwide fixed income
OF ANY MARKET, COUNTRY, INDUSTRY, division since 1996. He served as the
On a more positive note, the Fund's SECURITY OR THE FUND. STATEMENTS OF FACT division's director of information
spread management generally added value ARE FROM SOURCES CONSIDERED RELIABLE, technology before beginning his
throughout the period. Spread refers to BUT A I M ADVISORS, INC. MAKES NO investment career in 2002. He earned a
the difference in yield between bonds of REPRESENTATION OR WARRANTY AS TO THEIR B.S. in business administration from
similar maturities but differing credit COMPLETENESS OR ACCURACY. ALTHOUGH Bellarmine University. In addition to
qualities. HISTORICAL PERFORMANCE IS NO GUARANTEE various technology-related designations,
OF FUTURE RESULTS, THESE INSIGHTS MAY Mr. Robben has served on the board of
Throughout the reporting period, the HELP YOU UNDERSTAND OUR INVESTMENT the CFA Society of Louisville since
majority of our bond positions were held MANAGEMENT PHILOSOPHY. 2003.
in corporate and asset-backed securities
of both fixed rate and floating rate See important Fund and index FOR A PRESENTATION OF YOUR FUND'S
bonds. We favored collateralized disclosures on the inside front cover. PERFORMANCE, PLEASE SEE PAGES 8 AND 9.
securities, particularly the U.S.
6
AIM Enhanced Short Bond Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE estimate the expenses that you paid over The hypothetical account values and
the period. Simply divide your account expenses may not be used to estimate the
As a shareholder of the Fund, you incur value by $1,000 (for example, an $8,600 actual ending account balance or
two types of costs: (1) transaction account value divided by $1,000 = 8.6), expenses you paid for the period. You
costs, which may include sales charges then multiply the result by the number may use this information to compare the
(loads) on purchase payments or in the table under the heading entitled ongoing costs of investing in the Fund
contingent deferred sales charges on "Actual Expenses Paid During Period" to and other funds. To do so, compare this
redemptions, and redemption fees, if estimate the expenses you paid on your 5% hypothetical example with the 5%
any; and (2) ongoing costs, including account during this period. hypothetical examples that appear in the
management fees; distribution and/or shareholder reports of the other funds.
service (12b-1) fees; and other Fund HYPOTHETICAL EXAMPLE FOR COMPARISON
expenses. This example is intended to PURPOSES Please note that the expenses shown
help you understand your ongoing costs in the table are meant to highlight your
(in dollars) of investing in the Fund The table below also provides ongoing costs only and do not reflect
and to compare these costs with ongoing information about hypothetical account any transaction costs, such as sales
costs of investing in other mutual values and hypothetical expenses based charges (loads) on purchase payments,
funds. The example is based on an on the Fund's actual expense ratio and contingent deferred sales charges on
investment of $1,000 invested at the an assumed rate of return of 5% per year redemptions, and redemption fees, if
beginning of the period and held for the before expenses, which is not the Fund's any. Therefore, the hypothetical
entire period May 1, 2006, through actual return. The Fund's actual information is useful in comparing
October 31, 2006. cumulative total returns at net asset ongoing costs only, and will not help
value after expenses for the six months you determine the relative total costs
ACTUAL EXPENSES ended October 31, 2006, appear in the of owning different funds. In addition,
table "Cumulative Total Returns" on if these transaction costs were
The table below provides information page 9. included, your costs would have been
about actual account values and actual higher.
expenses. You may use the information in
this table, together with the amount you
invested, to
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
A $1,000.00 $1,011.90 $4.41 $1,020.82 $4.43 0.87%
C 1,000.00 1,009.70 5.67 1,019.56 5.70 1.12
R 1,000.00 1,009.70 5.67 1,019.56 5.70 1.12
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 six months ended October 31, 2006, appear in the table "Cumulative Total Returns" on page 9.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
7
AIM Enhanced Short Bond Fund
Your Fund's performance
RESULTS OF A $10,000 INVESTMENT
Fund and index data from 3/31/06
====================================================================================================================================
[MOUNTAIN CHART]
AIM ENHANCED AIM ENHANCED AIM ENHANCED LEHMAN BROTHERS U.S. THREE-MONTH LIPPER SHORT
SHORT BOND FUND SHORT BOND FUND SHORT BOND FUND U.S. AGGREGATE LONDON INTERBANK INVESTMENT GRADE
DATE -CLASS A SHARES -CLASS C SHARES -CLASS R SHARES BOND INDEX OFFERED RATE BOND FUNDS INDEX
3/31/06 $9750 $10000 $10000 $10000 $10000 $10000
4/06 9809 10069 10069 9982 10038 10031
5/06 9810 10058 10058 9971 10084 10047
6/06 9805 10060 10050 9992 10128 10063
7/06 9842 10086 10086 10127 10175 10138
8/06 9840 10092 10082 10283 10222 10212
9/06 9867 10108 10108 10373 10266 10268
10/06 9924 10167 10167 10441 10314 10314
====================================================================================================================================
SOURCE: LIPPER INC.
Past performance cannot guarantee management fees; performance of a market
comparable future results. index does not. Performance shown in the
chart and table(s) does not reflect
The data shown in the chart include deduction of taxes a shareholder would
reinvested distributions, applicable pay on Fund distributions or sale of
sales charges, Fund expenses and Fund shares. Performance of the indexes
management fees. Index results include does not reflect the effects of taxes.
reinvested dividends, but they do not
reflect sales charges. Performance of an
index of funds reflects fund expenses
and
8
AIM Enhanced Short Bond Fund
======================================== ======================================== ========================================
CUMULATIVE TOTAL RETURNS CUMULATIVE TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/06, including applicable As of 9/30/06, the most recent calendar 6 months ended 10/31/06, excluding
sales charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 1.19%
Inception (3/31/06) -0.76% CLASS A SHARES Class C Shares 0.97
Inception (3/31/06) -1.34% Class R Shares 0.97
CLASS C SHARES ========================================
Inception (3/31/06) 1.67% CLASS C SHARES
Inception (3/31/06) 1.10%
CLASS R SHARES
Inception (3/31/06) 1.67% CLASS R SHARES
Inception (3/31/06) 1.10%
======================================== ========================================
THE PERFORMANCE DATA QUOTED REPRESENT INVESTMENT RETURN AND PRINCIPAL VALUE REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
PAST PERFORMANCE AND CANNOT GUARANTEE WILL FLUCTUATE SO THAT YOU MAY HAVE A ON A TOTAL REDEMPTION OF RETIREMENT PLAN
COMPARABLE FUTURE RESULTS; CURRENT GAIN OR LOSS WHEN YOU SELL SHARES. ASSETS WITHIN THE FIRST YEAR.
PERFORMANCE MAY BE LOWER OR HIGHER.
PLEASE VISIT AIMinvestments.com FOR THE CLASS A SHARE PERFORMANCE REFLECTS THE PERFORMANCE OF THE FUND'S SHARE
MOST RECENT MONTH-END PERFORMANCE. THE MAXIMUM 2.50% SALES CHARGE. CLASS C CLASSES WILL DIFFER PRIMARILY DUE TO
PERFORMANCE FIGURES REFLECT REINVESTED SHARES DO NOT HAVE A FRONT-END SALES DIFFERENT SALES CHARGE STRUCTURES AND
DISTRIBUTIONS, CHANGES IN NET ASSET CHARGE OR A CDSC; THEREFORE, PERFORMANCE CLASS EXPENSES.
VALUE AND THE EFFECT OF THE MAXIMUM QUOTED IS AT NET ASSET VALUE. CLASS R
SALES CHARGE UNLESS OTHERWISE STATED. SHARES DO NOT HAVE A FRONT-END SALES HAD THE ADVISOR NOT WAIVED FEES
CHARGE; RETURNS SHOWN ARE AT NET ASSET AND/OR REIMBURSED EXPENSES, PERFORMANCE
VALUE AND DO NOT WOULD HAVE BEEN LOWER.
Continued from inside front cover
The Fund provides a complete list of its Copies of the Fund's Forms N-Q may be Client Services department at
holdings four times in each fiscal year, reviewed and copied at the SEC Public 800-959-4246 or on the AIM Web site,
at the quarter-ends. For the second and Reference Room in Washington, D.C. You AIMinvestments.com. On the home page,
fourth quarters, the lists appear in the can obtain information on the operation scroll down and click on AIM Funds Proxy
Fund's semiannual and annual reports to of the Public Reference Room, including Policy. The information is also
shareholders. For the first and third information about duplicating fee available on the SEC Web site, sec.gov.
quarters, the Fund files the lists with charges, by calling 202-942-8090 or
the Securities and Exchange Commission 800-732-0330,or by electronic request at Information regarding how the Fund voted
(SEC) on Form N-Q. The most recent list the following e-mail address: proxies related to its portfolio
of portfolio holdings is available at publicinfo@sec.gov. The SEC file numbers securities during the 12 months ended
AIMinvestments.com. From our home page, for the Fund are 811-05426 and June 30, 2006, is available at our Web
click on Products & Performance, then 033-19338. site. Go to AIMinvestments.com, access
Mutual Funds, then Fund Overview. Select the About Us tab, click on Required
your Fund from the drop-down menu and A description of the policies and Notices and then click on Proxy Voting
click on Complete Quarterly Holdings. procedures that the Fund uses to Activity. Next, select the Fund from the
Shareholders can also look up the Fund's determine how to vote proxies relating drop-down menu. The information is also
Forms N-Q on the SEC Web site at to portfolio securities is available available on the SEC Web site, sec.gov.
sec.gov. without charge, upon request, from our
9
AIM Enhanced Short Bond Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the "Board") of other investment personnel to ensure o Breakpoints and economies of scale.
AIM Investment Funds (the "Trust") that such individuals are competent and The Board reviewed the structure of the
oversees the management of AIM Enhanced able to carry out their responsibilities Fund's advisory fee under the Advisory
Short Bond Fund (the "Fund") and, as under the Advisory Agreement. Overall Agreement, noting that it contains two
required by law, determines whether to breakpoints. The Board reviewed the
approve the Fund's advisory agreement o Overall performance of AIM. Not level of the Fund's advisory fees, and
with A I M Advisors, Inc. ("AIM"). Based applicable because this is a new Fund. noted that such fees, as a percentage of
upon the recommendation of the However, the Board considered the overall the Fund's net assets, would decrease as
Investments Committee of the Board, at a performance of AIM in providing investment net assets increase because the Advisory
meeting held on February 1, 2006, the advisory and portfolio administrative Agreement includes breakpoints. The
Board, including all of the independent services to other mutual funds advised by Board noted that, because this is a new
trustees, approved the initial advisory AIM and concluded that such performance Fund and the way in which the advisory
agreement (the "Advisory Agreement") was satisfactory. fee breakpoints have been structured,
between the Fund and AIM for an initial the Fund has yet to benefit from the
period ending June 30, 2007. o Fees relative to those clients of AIM breakpoints. The Board concluded that
with comparable investment strategies. the Fund's fee levels under the Advisory
The Board considered the factors The Board reviewed the advisory fee rate Agreement therefore would reflect
discussed below in evaluating the for the Fund under the Advisory economies of scale at higher asset
fairness and reasonableness of the Agreement. The Board compared effective levels and that it was not necessary to
Advisory Agreement at the meeting on contractual advisory fee rates at a change the advisory fee breakpoints in
February 1, 2006 and as part of the common asset level and noted that this the Fund's advisory fee schedule.
Board's ongoing oversight of the Fund. rate was higher than the advisory fee
In their deliberations, the Board and rate for one mutual fund advised by the o Investments in affiliated money market
the independent trustees did not Advisor with investment strategies funds. The Board also took into account
identify any particular factor that was comparable to those of the Fund. The the fact that uninvested cash and cash
controlling, and each trustee attributed Board noted that AIM has agreed to limit collateral from securities lending
different weights to the various the Fund's total annual operating arrangements (collectively, "cash
factors. expenses, as discussed below. Based on balances") of the Fund may be invested
this review, the Board concluded that in money market funds advised by AIM
The discussion below serves as a the advisory fee rate under the Advisory pursuant to the terms of an SEC
summary of the material factors and the Agreement was fair and reasonable. exemptive order. The Board found that
conclusions with respect thereto that the Fund may realize certain benefits
formed the basis for the Board's o Fees relative to those of comparable upon investing cash balances in AIM
approval of the Advisory Agreement. funds with other advisors. The Board advised money market funds, including a
After consideration of all of the reviewed the advisory fee rate for the higher net return, increased liquidity,
factors below and based on its informed Fund under the Advisory Agreement. The increased diversification or decreased
business judgment, the Board determined Board compared effective contractual transaction costs. The Board also found
that the Advisory Agreement is in the advisory fee rates at a common asset that the Fund will not receive reduced
best interests of the Fund and its level and noted that the Fund's rate was services if it invests its cash balances
shareholders and that the compensation above the median rate of the funds in such money market funds. The Board
to AIM under the Advisory Agreement is advised by other advisors with noted that, to the extent the Fund
fair and reasonable and would have been investment strategies comparable to invests in affiliated money market
obtained through arm's length those of the Fund that the Board funds, AIM has voluntarily agreed to
negotiations. reviewed. The Board noted that AIM has waive a portion of the advisory fees it
agreed to limit the Fund's total annual receives from the Fund attributable to
o The nature and extent of the advisory operating expenses, as discussed below. such investment. The Board further
services to be provided by AIM. The The Board also considered the fact that determined that the proposed securities
Board reviewed the services to be AIM set the proposed advisory fees for lending program and related procedures
provided by AIM under the Advisory the Fund based upon the median effective with respect to the lending Fund is in
Agreement. Based on such review, the management fee rate (comprised of the best interests of the lending Fund
Board concluded that the range of advisory fees plus, in some cases, and its respective shareholders. The
services to be provided by AIM under the administrative fees) at various asset Board therefore concluded that the
Advisory Agreement was appropriate. The levels of competitor mutual funds with investment of cash collateral received
investment strategies comparable to in connection with the securities
o The quality of services to be provided those of the Fund. Based on this review, lending program in the money market
by AIM. The Board reviewed the credentials the Board concluded that the advisory funds according to the procedures is in
and experience of the officers and fee rate for the Fund under the Advisory the best interests of the lending Fund
employees of AIM who will provide Agreement was fair and reasonable. and its respective shareholders.
investment advisory services to the
Fund. In reviewing the qualifications of o Expense limitations and fee waivers. o Profitability of AIM and its
AIM to provide investment advisory The Board noted that AIM has affiliates. The Board reviewed
services, the Board reviewed the contractually agreed to waive fees information concerning the profitability
qualifications of AIM's investment and/or limit expenses of the Fund of AIM's (and its affiliates')
personnel and considered such issues as through June 30, 2007 in an amount investment advisory and other activities
AIM's portfolio and product review necessary to limit total annual and its financial condition. The Board
process, various back office support operating expenses to a specified considered the overall profitability of
functions provided by AIM and AIM's percentage of average daily net assets AIM. The Board noted that AIM's
equity and fixed income trading for each class of the Fund. The Board operations remain profitable, although
operations. Based on the review of these considered the contractual nature of increased expenses in recent years have
and other factors, the Board concluded this fee waiver/expense limitation and reduced AIM's profitability. Based on
that the quality of services to be noted that it remains in effect until the review of the profitability of AIM's
provided by AIM was appropriate. June 30, 2007. The Board considered the and its affiliates' investment advisory
effect this fee waiver/expense and other activities and its financial
o The performance of the Fund relative limitation would have on the Fund's condition, the Board concluded that the
to comparable funds. Not applicable estimated expenses and concluded that compensation to be paid by the Fund to
because this is a new Fund. the levels of fee waivers/expense AIM under its Advisory Agreement was not
limitations for the Fund were fair and excessive.
o The performance of the Fund relative reasonable.
to indices. Not applicable because this
is a new Fund.
o Meeting with the Fund's portfolio
managers and investment personnel. The
Board intends to meet periodically with
the Fund's portfolio managers and/or
(continued)
10
AIM Enhanced Short Bond Fund
o Benefits of soft dollars to AIM. The APPROVAL OF SUB-ADVISORY AGREEMENT o Overall performance of the
Board considered the benefits realized Sub-Advisor. Not applicable because this
by AIM as a result of brokerage The Board oversees the management of the is a new Fund. However, the Board
transactions executed through "soft Fund and, as required by law, determines considered the overall performance of
dollar" arrangements. Under these whether to approve the Fund's the Sub-Advisor in providing investment
arrangements, brokerage commissions paid sub-advisory agreement. Based upon the advisory services to other mutual funds
by the Fund and/or other funds advised recommendation of the Investments advised by AIM and concluded that such
by AIM are used to pay for research and Committee of the Board, at a meeting performance was satisfactory.
execution services. This research is held on February 1, 2006, the Board,
used by AIM in making investment including all of the independent o Fees relative to those clients of the
decisions for the Fund. The Board trustees, approved the sub-advisory Sub-Advisor with comparable investment
concluded that such arrangements were agreement (the "Sub-Advisory Agreement") strategies. The Board reviewed the
appropriate. between INVESCO Institutional (N.A.), sub-advisory fee rate for the Fund under
Inc. (the "Sub-Advisor") and AIM with the Sub-Advisory Agreement. The Board
o AIM's financial soundness in light of respect to the Fund for an initial compared effective contractual fee rates
the Fund's needs. The Board considered period ending June 30, 2007. at a common asset level and noted that
whether AIM is financially sound and has this rate was lower than the median
the resources necessary to perform its The Board considered the factors advisory fee rate for eight
obligations under the Advisory discussed below in evaluating the institutional/separately managed
Agreement, and concluded that AIM has fairness and reasonableness of the accounts advised by the Sub-Advisor with
the financial resources necessary to Sub-Advisory Agreement at the meeting on investment strategies comparable to
fulfill its obligations under the February 1, 2006 and as part of the those of the Fund. The Board noted that
Advisory Agreement. Board's ongoing oversight of the Fund. AIM has agreed to limit the Fund's total
In their deliberations, the Board and annual operating expenses, as discussed
o Historical relationship between the the independent trustees did not below. The Board also considered the
Fund and AIM. In determining whether to identify any particular factor that was services to be provided by the
approve the Advisory Agreement for the controlling, and each trustee attributed Sub-Advisor pursuant to the Sub-Advisory
Fund, the Board also considered the different weights to the various Agreement and the services to be
current relationship between AIM and the factors. provided by AIM pursuant to the Advisory
Trust, as well as the Board's knowledge Agreement, as well as the allocation of
of AIM's operations, and concluded that The discussion below serves as a fees between AIM and the Sub-Advisor
it was beneficial to maintain the discussion of the material factors and pursuant to the Sub-Advisory Agreement.
current relationship, in part, because the conclusions with respect thereto The Board noted that the sub-advisory
of such knowledge. The Board also that formed the basis for the Board's fees have no direct effect on the Fund
reviewed the general nature of the approval of the Sub-Advisory Agreement. or its shareholders, as they are paid by
non-investment advisory services After consideration of all of the AIM to the Sub-Advisor, and that AIM and
currently performed by AIM and its factors below and based on its informed the Sub-Advisor are affiliates. Based on
affiliates for the Trust, such as business judgment, the Board determined this review, the Board concluded that
administrative, transfer agency and that the Sub-Advisory Agreement is in the sub-advisory fee rate under the
distribution services, and the fees the best interests of the Fund and its Sub-Advisory Agreement was fair and
received by AIM and its affiliates for shareholders. reasonable.
performing such services. In addition to
reviewing such services, the trustees o The nature and extent of the advisory o Profitability of AIM and its
also considered the organizational services to be provided by the affiliates. The Board reviewed
structure employed by AIM and its Sub-Advisor. The Board reviewed the information concerning the profitability
affiliates to provide those services. services to be provided by the of AIM's (and its affiliates')
Based on the review of these and other Sub-Advisor under the Sub-Advisory investment advisory and other activities
factors, the Board concluded that AIM Agreement. Based on such review, the and its financial condition. The Board
and its affiliates were qualified to Board concluded that the range of considered the overall profitability of
provide non-investment advisory services services to be provided by the AIM. The Board noted that AIM's
to the Fund, including administrative, Sub-Advisor under the Sub-Advisory operations remain profitable, although
transfer agency and distribution Agreement was appropriate. increased expenses in recent years have
services. reduced AIM's profitability. Based on
o The quality of services to be provided the review of the profitability of AIM's
o Other factors and current trends. In by the Sub-Advisor. The Board reviewed and its affiliates' investment advisory
determining whether to approve the the credentials and experience of the and other activities and its financial
Advisory Agreement for the Fund, the officers and employees of the condition, the Board concluded that the
Board considered the fact that AIM, Sub-Advisor who will provide investment compensation to be paid by the Fund to
along with others in the mutual fund advisory services to the Fund. Based on AIM under its Advisory Agreement was not
industry, is subject to regulatory the review of these and other factors, excessive.
inquiries and litigation related to a the Board concluded that the quality of
wide range of issues. The Board also services to be provided by the o The Sub-Advisor's financial soundness
considered the governance and compliance Sub-Advisor was appropriate. in light of the Fund's needs. The Board
reforms being undertaken by AIM and its considered whether the Sub-Advisor is
affiliates, including maintaining an o The performance of the Fund relative financially sound and has the resources
internal controls committee and to comparable funds. Not applicable necessary to perform its obligations
retaining an independent compliance because this is a new Fund. under the Sub-Advisory Agreement, and
consultant, and the fact that AIM has concluded that the Sub-Advisor has the
undertaken to cause the Fund to operate o The performance of the Fund relative financial resources necessary to fulfill
in accordance with certain governance to indices. Not applicable because this its obligations under the Sub-Advisory
policies and practices. The Board is a new Fund. Agreement.
concluded that these actions indicated a
good faith effort on the part of AIM to o Meetings with the Fund's portfolio
adhere to the highest ethical standards, managers and investment personnel. The
and determined that the current Board intends to meet periodically with
regulatory and litigation environment to the Fund's portfolio managers and/or
which AIM is subject should not prevent other investment personnel to ensure
the Board from approving the Advisory that such individuals are competent and
Agreement for the Fund. able to carry out their responsibilities
under the Sub-Advisory Agreement.
11
Supplement to Annual Report dated 10/31/06
AIM Enhanced Short Bond Fund
===================================
Institutional Class Shares CUMULATIVE TOTAL RETURNS PLEASE NOTE THAT PAST PERFORMANCE IS NOT
For periods ended 10/31/06 INDICATIVE OF FUTURE RESULTS. MORE RECENT
The following information has been prepared RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
to provide Institutional Class shareholders Inception (3/31/06) 1.97% ALL RETURNS ASSUME REINVESTMENT OF
with a performance overview specific to 6 Months 1.22 DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND
their holdings. Institutional Class shares PRINCIPAL VALUE WILL FLUCTUATE SO YOUR
are offered exclusively to institutional =================================== SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
investors, including defined contribution LESS THAN THEIR ORIGINAL COST. SEE FULL
plans that meet certain criteria. CUMULATIVE TOTAL RETURNS REPORT FOR INFORMATION ON COMPARATIVE
For periods ended 9/30/06, most BENCHMARKS. PLEASE CONSULT YOUR FUND
recent calendar quarter-end PROSPECTUS FOR MORE INFORMATION. FOR THE MOST
CURRENT MONTH-END PERFORMANCE, PLEASE CALL
Inception (3/31/06) 1.35% 800-451-4246 OR VISIT AIMINVESTMENTS.COM.
6 Months 1.35
===================================
INSTITUTIONAL CLASS SHARES HAVE NO
SALES CHARGE; THEREFORE,
PERFORMANCE IS AT NET ASSET VALUE
(NAV). PERFORMANCE OF INSTITUTIONAL
CLASS SHARES WILL DIFFER FROM
PERFORMANCE OF OTHER SHARE CLASSES
PRIMARILY DUE TO DIFFERING SALES
CHARGES AND CLASS EXPENSES.
HAD THE ADVISOR NOT WAIVED
FEES AND/OR REIMBURSED EXPENSES,
PERFORMANCE WOULD HAVE BEEN LOWER.
==============================================
NASDAQ SYMBOL IAESX
==============================================
Over for information on your Fund's expenses.
====================================================================================
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.
====================================================================================
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted,
reproduced or shown to the public, nor used in written form as sales literature
for public use.
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE]
AIMINVESTMENTS.COM ESB-INS-1 A I M Distributors, Inc. --REGISTERED TRADEMARK-- --REGISTERED TRADEMARK--
Information about your Fund's expenses
Calculating your ongoing Fund expenses
Example divide your account value by $1,000 The hypothetical account values and
(for example, an $8,600 account expenses may not be used to estimate the
As a shareholder of the Fund, you incur value divided by $1,000 = 8.6), actual ending account balance or expenses you
ongoing costs, including management fees and then multiply the result by the paid for the period. You may use this
other Fund expenses. This example is intended number in the table under the information to compare the ongoing costs of
to help you understand your ongoing costs (in heading entitled "Actual Expenses investing in the Fund and other funds. To do
dollars) of investing in the Fund and to Paid During Period" to estimate the so, compare this 5% hypothetical example with
compare these costs with ongoing costs of expenses you paid on your account the 5% hypothetical examples that appear in
investing in other mutual funds. The example during this period. the shareholder reports of the other funds.
is based on an investment of $1,000 invested
at the beginning of the period and held for Hypothetical example for Please note that the expenses shown in
the entire period May 1, 2006, through October comparison purposes the table are meant to highlight your ongoing
31, 2006. costs only. Therefore, the hypothetical
The table below also provides information is useful in comparing ongoing
Actual expenses information about hypothetical costs only, and will not help you determine
account values and hypothetical the relative total costs of owning different
The table below provides information about expenses based on the Fund's actual funds.
actual account values and actual expenses. You expense ratio and an assumed rate
may use the information in this table, of return of 5% per year before
together with the amount you invested, to expenses, which is not the Fund's
estimate the expenses that you paid over the actual return. The Fund's actual
period. Simply cumulative total return after
expenses for the six months ended
October 31, 2006, appears in the
table on the front of this
supplement.
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
Institutional $1,000.00 $1,012.20 $3.14 $1,022.08 $3.16 0.62%
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 return after expenses for the
six months ended October 31, 2006, appears in the table on the front of this supplement.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMINVESTMENTS.COM ESB-INS-1 A I M Distributors, Inc.
AIM Enhanced Short Bond Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED BONDS & NOTES-52.65%
AUTO PARTS & EQUIPMENT-1.92%
Johnson Controls, Inc., Sr. Floating Rate
Notes, 5.60%, 01/17/08(a)(b) $1,000,000(c) $ 1,001,416
============================================================================
BROADCASTING & CABLE TV-2.40%
Intelsat Bermuda Ltd. (Bermuda), Sr. Gtd.
Notes, 9.25%, 06/15/16 (Acquired
09/12/06-10/12/06; Cost $249,094)(a)(d) 235,000 250,862
- ----------------------------------------------------------------------------
Viacom Inc., Sr. Unsec. Floating Rate Global
Notes, 5.74%, 06/16/09(a)(b) 1,000,000(c) 1,004,039
============================================================================
1,254,901
============================================================================
CONSUMER FINANCE-3.84%
American Express Centurion Bank, Floating
Rate Notes, 5.48%, 12/17/09(a)(b) 800,000 802,727
- ----------------------------------------------------------------------------
SLM Corp.-Series A, Floating Rate Medium Term
Notes, 5.59%, 07/25/08(a)(b) 1,200,000 1,203,345
============================================================================
2,006,072
============================================================================
DEPARTMENT STORES-0.95%
Dillard's, Inc., Notes, 7.13%, 08/01/18(a) 500,000 498,750
============================================================================
DIVERSIFIED BANKS-4.59%
ATF Bank (Kazakhstan), Sr. Notes, 9.00%,
05/11/16 (Acquired 10/26/06; Cost
$245,750)(a)(d) 250,000 246,480
- ----------------------------------------------------------------------------
HSBC Bank USA N.A.,
Sr. Floating Rate Global Notes, 5.53%,
06/10/09(a)(b) 750,000 750,651
- ----------------------------------------------------------------------------
Floating Rate Global Notes, 5.52%,
12/14/09(a)(b) 250,000 250,554
- ----------------------------------------------------------------------------
Wachovia Bank N.A., Sr. Floating Rate Notes,
5.46%, 12/02/10(a)(b) 450,000 450,605
- ----------------------------------------------------------------------------
Wells Fargo & Co.,
Floating Rate Global Notes, 5.49%,
09/15/09(a)(b) 200,000 200,446
- ----------------------------------------------------------------------------
Sr. Unsec. Floating Rate Global Notes,
5.45%, 03/23/10(a)(b) 500,000 500,545
============================================================================
2,399,281
============================================================================
DIVERSIFIED CAPITAL MARKETS-2.69%
Credit Suisse (USA) Inc.,
Floating Rate Global Notes, 5.61%,
08/15/10(a)(b) 700,000 701,996
- ----------------------------------------------------------------------------
Sr. Unsec. Floating Rate Global Notes,
5.58%, 03/02/11(a)(b) 700,000 701,495
============================================================================
1,403,491
============================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<Caption>
ELECTRICAL COMPONENTS & EQUIPMENT-1.82%
Avago Technologies Finance Pte/Avago
Technologies US/Avago Technologies Wireless
(Singapore), Sr. Sub Notes, 11.88%,
12/01/15 (Acquired 09/29/06; Cost
$445,000)(a)(d) $ 400,000 $ 442,000
- ----------------------------------------------------------------------------
NXP B.V./NXP Funding LLC (Netherlands), Sr.
Sec. Floating Rate Notes, 8.12%, 10/15/13
(Acquired 10/05/06; Cost $500,000)(a)(b)(d) 500,000 506,928
============================================================================
948,928
============================================================================
FOOD RETAIL-0.49%
Supervalu Inc., Sr. Medium Term Notes, 7.50%,
11/15/14(a) 250,000 255,000
============================================================================
HEALTH CARE FACILITIES-1.12%
Impress Holdings B.V. (Netherlands), Sr. Sec.
Floating Rate Bonds, 8.51%, 09/15/13
(Acquired 09/15/06; Cost $575,000)(a)(b)(d) 575,000 582,411
============================================================================
HOMEBUILDING-1.92%
Centex Corp.-Series E, Sr. Floating Rate
Medium Term Notes, 5.74%, 08/01/07(a)(b) 1,000,000 1,001,174
============================================================================
INTEGRATED OIL & GAS-2.40%
ConocoPhillips Australia Funding Co., Sr.
Unsec. Gtd. Floating Rate Notes, 5.47%,
04/09/09(a)(b) 1,250,000 1,251,570
============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.88%
BellSouth Corp., Sr. Unsec. Floating Rate
Notes, 5.53%, 11/15/07(a)(b) 1,000,000 1,001,450
- ----------------------------------------------------------------------------
Deutsche Telekom International Finance B.V.,
Gtd. Floating Rate Global Notes, 5.57%,
03/23/09(a)(b) 500,000 501,441
============================================================================
1,502,891
============================================================================
INVESTMENT BANKING & BROKERAGE-4.22%
Bear Stearns Cos., Inc. (The),
Sr. Unsec. Unsub. Floating Rate Medium Term
Global Notes, 5.61%, 01/31/11(a)(b) 250,000 250,727
- ----------------------------------------------------------------------------
Series B, Floating Rate Medium Term Notes,
5.63%, 02/08/08(a)(b) 500,000 500,808
- ----------------------------------------------------------------------------
Goldman Sachs Group Inc., Floating Rate
Global Notes, 5.66%, 06/28/10(a)(b) 400,000 402,294
- ----------------------------------------------------------------------------
Lehman Brothers Holdings Inc., Floating Rate
Medium Term Notes, 5.60%, 12/23/10(a)(b) 600,000 601,704
- ----------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Sr. Unsec.
Floating Rate Medium Term Notes, 5.47%,
01/30/09(a)(b) 450,000 450,486
============================================================================
2,206,019
============================================================================
</Table>
F-1
AIM Enhanced Short Bond Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
MOVIES & ENTERTAINMENT-0.47%
Corp. Interamericana de Entretenimiento, S.A.
de C.V. (Mexico), Sr. Unsec. Notes, 8.88%,
06/14/15 (Acquired 08/31/06; Cost
$244,625)(a)(d) $ 250,000 $ 245,000
============================================================================
MULTI-LINE INSURANCE-1.92%
American General Finance Corp.-Series I, Sr.
Floating Rate Medium Term Notes, 5.43%,
06/27/07(a)(b) 150,000 150,126
- ----------------------------------------------------------------------------
ASIF Global Financing, Floating Rate Notes,
5.51%, 05/03/07 (Acquired
06/21/06-07/06/06; Cost $850,280)(a)(b)(d) 850,000 850,360
============================================================================
1,000,486
============================================================================
MULTI-UTILITIES-0.44%
PSEG Energy Holdings LLC, Sr. Unsec. Global
Notes, 8.63%, 02/15/08(a) 224,000 232,512
============================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.48%
Whiting Petroleum Corp., Sr. Unsec. Gtd. Sub.
Global Notes, 7.25%, 05/01/12(a) 250,000 249,375
============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.82%
General Electric Co., Unsec. Floating Rate
Global Notes, 5.43%, 12/09/08(a)(b) 200,000 200,125
- ----------------------------------------------------------------------------
MBNA Corp.-Series F, Floating Rate
Medium Term Notes, 5.91%, 05/05/08(a)(b) 900,000 906,214
- ----------------------------------------------------------------------------
Residential Capital Corp., Sr. Global Notes,
6.50%, 04/17/13(a) 360,000 367,139
============================================================================
1,473,478
============================================================================
PROPERTY & CASUALTY INSURANCE-1.92%
Allstate Life Global Funding Trusts, Sec.
Floating Rate Medium Term Notes, 5.42%,
11/14/07(a)(b) 1,000,000 1,000,893
============================================================================
REGIONAL BANKS-3.88%
BB&T Corp., Floating Rate Notes, 5.46%,
06/04/07(a) 675,000(c) 675,706
- ----------------------------------------------------------------------------
KeyBank N.A., Sr. Floating Rate Notes, 5.52%,
08/08/07(a) 675,000 675,005
- ----------------------------------------------------------------------------
National City Bank, Floating Rate Notes,
5.42%, 01/10/08(a) 675,000 675,625
============================================================================
2,026,336
============================================================================
REINSURANCE-0.99%
Swiss Re Capital I LP, Gtd. Sub. Notes, 6.85%
(Acquired 10/17/06; Cost $516,620)(a)(d)(e) 500,000 517,385
============================================================================
SPECIALIZED FINANCE-1.92%
CIT Group, Inc., Sr. Floating Rate Global
Notes, 5.76%, 11/03/10(a)(b) 1,000,000 1,003,887
============================================================================
SPECIALIZED REIT'S-0.48%
Host Hotels & Resorts LP, Sr. Notes, 6.88%,
11/01/14 (Acquired 10/27/06; Cost
$248,113)(a)(d) 250,000 252,188
============================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<Caption>
THRIFTS & MORTGAGE FINANCE-3.36%
Countrywide Financial Corp.-Series B, Gtd.
Floating Rate Medium Term Notes, 5.61%,
03/24/09(a)(b) $1,000,000 $ 1,001,979
- ----------------------------------------------------------------------------
Washington Mutual Bank F.A., Floating Rate
Global Notes, 5.58%, 05/01/09(a)(b) 750,000 750,879
============================================================================
1,752,858
============================================================================
TRADING COMPANIES & DISTRIBUTORS-0.43%
Noble Group Ltd., Sr. Notes, 6.63%, 03/17/15
(Acquired 08/31/06; Cost $221,125)(a)(d) 250,000 224,780
============================================================================
WIRELESS TELECOMMUNICATION SERVICES-2.30%
Dobson Communications Corp., Sr. Global
Notes, 8.88%, 10/01/13(a) 200,000 200,250
- ----------------------------------------------------------------------------
Vodafone Group PLC (United Kingdom), Floating
Rate Global Notes, 5.73%, 06/15/11(a)(b) 1,000,000 1,001,379
============================================================================
1,201,629
============================================================================
Total U.S. Dollar Denominated Bonds &
Notes (Cost $27,442,350) 27,492,711
============================================================================
ASSET-BACKED SECURITIES-37.70%
ASSET-BACKED SECURITIES-CONSUMER
RECEIVABLES-25.78%
ACE Securities Corp.,
Series 2006-OP1, Class M1, Floating Rate
Pass Through Ctfs., 5.60%, 04/25/36(a)(b) 300,000 300,305
- ----------------------------------------------------------------------------
Series 2006-ASP3, Class M1, Floating Rate
Pass Through Ctfs., 5.60%, 06/25/36(a)(b) 821,000 821,831
- ----------------------------------------------------------------------------
Carrington Mortgage Loan Trust-Series
2006-RFC1, Class M1, Floating Rate Pass
Through Ctfs., 5.59%, 05/25/36(a)(b) 500,000 500,307
- ----------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.- Series
2006-WMC1, Class M2, Floating Rate Pass
Through Ctfs., 5.73%, 12/25/35(a)(b) 150,000 150,685
- ----------------------------------------------------------------------------
Countrywide Asset-Backed Ctfs.,
Series 2006-8, Class M1, Floating Rate Pass
Through Ctfs., 5.58%, 01/25/46(a)(b) 1,500,000 1,501,816
- ----------------------------------------------------------------------------
Series 2004-1, Class M2, Floating Rate Pass
Through Ctfs., 5.87%, 03/25/34(a)(b) 125,000 125,666
- ----------------------------------------------------------------------------
Fremont Home Loan Trust-Series 2006-2, Class
M1, Floating Rate Pass Through Ctfs.,
5.64%, 02/25/36(a)(b) 140,000 140,086
- ----------------------------------------------------------------------------
JP Morgan Mortgage Acquisition Corp.- Series
2006-NC1, Class M2, Floating Rate Pass
Through Ctfs., 5.66%, 04/25/36(a)(b) 150,000 150,147
- ----------------------------------------------------------------------------
Long Beach Mortgage Loan Trust-Series 2006-4,
Class M1, Floating Rate Pass Through Ctfs.,
5.62%, 05/25/36(a)(b) 500,000 500,497
- ----------------------------------------------------------------------------
Marriott Vacation Club Owner Trust-Series
2006-1A, Class A, Pass Through Ctfs.,
5.74%, 04/20/28 (Acquired 05/23/06 Cost
$815,348)(a)(d)(f) 815,360 827,354
- ----------------------------------------------------------------------------
</Table>
F-2
AIM Enhanced Short Bond Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
ASSET-BACKED SECURITIES-CONSUMER RECEIVABLES-(CONTINUED)
Morgan Stanley ABS Capital I,
Series 2006-NC4, Class B1, Floating Rate
Pass Through Ctfs., 6.17%, 06/25/36(a)(b) $ 500,000 $ 500,503
- ----------------------------------------------------------------------------
Series 2006-HE4, Class B1, Floating Rate
Pass Through Ctfs., 6.17%, 06/25/36(a)(b) 400,000 400,245
- ----------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc.-
Series 2006-AR1, Class M2, Floating Rate
Pass Through Ctfs., 5.67%, 03/25/37(a)(b) 150,000 150,092
- ----------------------------------------------------------------------------
Residential Asset Securities Corp.,
Series 2006-KS9, Class M1S, Floating Rate
Pass Through Ctfs., 5.57%, 11/25/36(b)(g) 1,000,000 1,000,000
- ----------------------------------------------------------------------------
Series 2006-EMX4, Class M1, Floating Rate
Pass Through Ctfs., 5.60%, 06/25/36(a)(b) 600,000 600,601
- ----------------------------------------------------------------------------
Series 2006-EMX3, Class M2, Floating Rate
Pass Through Ctfs., 5.67%, 04/25/36(a)(b) 100,000 100,208
- ----------------------------------------------------------------------------
SACO I Inc.-Series 2006-6, Class M1, Floating
Rate Pass Through Ctfs., 5.62%,
06/25/36(a)(b) 400,000 400,372
- ----------------------------------------------------------------------------
Saxon Asset Securities Trust-Series 2006-1,
Class M1, Floating Rate Pass Through Ctfs.,
5.63%, 03/25/36(a)(b) 500,000 500,467
- ----------------------------------------------------------------------------
Securitized Asset Backed Receivables LLC,
Trust- Series 2006-NC2, Class M1, Floating
Rate Pass Through Ctfs., 5.60%,
03/25/36(a)(b) 500,000 500,944
- ----------------------------------------------------------------------------
Soundview Home Equity Loan Trust- Series
2006-OPT5, Class M1, Floating Rate Pass
Through Ctfs., 5.58%, 07/25/36(a)(b) 750,000 750,682
- ----------------------------------------------------------------------------
Specialty Underwriting & Residential Finance,
Series 2005-BC1, Class A1A, Floating Rate
Pass Through Ctfs., 5.43%, 12/25/35(a)(b) 1,221 1,222
- ----------------------------------------------------------------------------
Series 2006-AB2, Class M1, Floating Rate
Pass Through Ctfs., 5.59%, 06/25/37(a)(b) 600,000 600,592
- ----------------------------------------------------------------------------
Structured Asset Securities Corp. Series
2006-BC2, Class M1, Floating Rate Pass
Through Ctfs., 5.63%, 09/25/36(a)(b) 1,200,000 1,201,249
- ----------------------------------------------------------------------------
Vanderbilt Mortgage Finance,
Series 2002-C, Class A2, Pass Through
Ctfs., 4.23%, 02/07/15(a) 29,864 29,770
- ----------------------------------------------------------------------------
Series 2002-C, Class A4, Pass Through
Ctfs., 6.57%, 08/07/24(a) 105,000 109,382
- ----------------------------------------------------------------------------
Vanderbilt Mortgage and Finance, Inc.- Series
2002-B, Class A4, Pass Through Ctfs.,
5.84%, 02/07/26(a) 80,000 81,026
- ----------------------------------------------------------------------------
Washington Mutual Master Note Trust- Series
2006-C2A, Class C2, Floating Rate Pass
Through Ctfs., 5.82%, 08/15/15 (Acquired
08/15/06; Cost 1,500,000)(a)(b)(d)(f) 1,500,000 1,515,413
============================================================================
13,461,462
============================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS-11.92%
Countrywide Alternative Loan Trust-Series
2006-OC4, Class M1, Floating Rate Pass
Through Ctfs., 5.61%, 05/25/36(a)(b) 350,000 349,240
- ----------------------------------------------------------------------------
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<Caption>
COLLATERALIZED MORTGAGE OBLIGATIONS-(CONTINUED)
Credit Suisse Mortgage Capital Ctfs.- Series
2006-TFLA, Class J, Floating Rate Pass
Through Ctfs., 6.12%, 04/15/21 (Acquired
04/25/06; Cost $250,000)(a)(b)(d) $ 250,000 $ 250,225
- ----------------------------------------------------------------------------
Fannie Mae Interest STRIPS-Series 367, Class
2, Pass Through Ctfs., 5.50%,
01/25/36(a)(h) 472,565 115,114
- ----------------------------------------------------------------------------
Fannie Mae REMIC-Series 2003-112, Class FA,
Floating Rate Pass Through Ctfs., 5.82%,
01/25/28(a)(b) 1,070,462 1,070,654
- ----------------------------------------------------------------------------
Freddie Mac REMIC-Series 2399, Class XF,
Floating Rate Pass Through Ctfs., 6.27%,
01/15/32(a)(b) 566,648 578,664
- ----------------------------------------------------------------------------
JP Morgan Chase Commercial Mortgage
Securities Corp.-Series 2005-FL1A, Class
A1, Floating Rate Pass Through Ctfs.,
5.43%, 02/15/19 (Acquired 05/31/06; Cost
$306,652)(a)(b)(d) 306,700 306,900
- ----------------------------------------------------------------------------
Lehman Brothers Floating Rate Commercial
Mortgage Trust-Series 2006-CCL, Class L,
Floating Rate Pass Through Ctfs., 7.27%,
01/15/21 (Acquired 03/31/06; Cost
$140,000)(a)(b)(d) 140,000 139,950
- ----------------------------------------------------------------------------
Morgan Stanley Capital I-Series 2006-IQ11,
Class A4, Pass Through Ctfs., 5.95%,
10/15/42(a)(b) 1,000,000 1,037,753
- ----------------------------------------------------------------------------
Structured Adjustable Rate Mortgage Loan
Trust- Series 2004-1, Class 3A1, Pass
Through Ctfs., 5.29%, 02/25/34(a)(b) 914,114 934,473
- ----------------------------------------------------------------------------
Wells Fargo Mortgage Backed Securities Trust,
Series 2004-I, Class 1A1, Pass Through
Ctfs., 3.38%, 07/25/34(a)(b) 36,641 36,778
- ----------------------------------------------------------------------------
Series 2004-S, Class A1, Floating Rate Pass
Through Ctfs., 3.54%, 09/25/34(a)(b) 1,449,528 1,402,895
============================================================================
6,222,646
============================================================================
Total Asset-Backed Securities (Cost
$19,587,910) 19,684,108
============================================================================
NON U.S. DOLLAR DENOMINATED BONDS &
NOTES-5.14%
FRANCE-0.63%
Belvedere S.A. (Distillers & Vintners), Sr.
Sec. Floating Rate Bonds, 6.47%, 05/15/13
(Acquired 05/23/06; Cost
$324,930)(a)(b)(d)(i) EUR 250,000 329,059
============================================================================
GREECE-0.44%
Antenna TV S.A. (Broadcasting & Cable TV),
Sr. Notes, 7.25%, 02/15/15 (Acquired
08/04/06; Cost $225,386)(a)(d)(i) EUR 200,000 232,296
============================================================================
POLAND-4.07%
Poland Government Bond (Sovereign Debt)-
Series DS1015, Bonds, 6.25%,
10/24/15(a)(i) PLN 6,000,000 2,122,533
============================================================================
Total Non U.S. Dollar Denominated Bonds &
Notes (Cost $2,588,791) 2,683,888
============================================================================
</Table>
F-3
AIM Enhanced Short Bond Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
U.S. MORTGAGE BACKED SECURITIES-1.81%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-1.81%
Federal National Mortgage Association,
Floating Rate Pass Through Ctfs., 4.76%,
11/01/32 (Cost $945,133)(a)(b) $ 941,898 $ 946,204
============================================================================
U.S. TREASURY SECURITIES-0.53%
U.S. TREASURY BILLS-0.53%
4.98%, 11/30/06(h) 165,000(j) 164,339
- ----------------------------------------------------------------------------
5.04%, 11/30/06(h) 40,000(j) 39,840
- ----------------------------------------------------------------------------
4.93%, 11/30/06(h) 75,000(j) 74,699
============================================================================
Total U.S. Treasury Securities (Cost
$278,878) 278,878
============================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<Caption>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------------
MONEY MARKET FUNDS-1.09%
Liquid Assets Portfolio-Institutional
Class(k) 283,701 $ 283,701
- ----------------------------------------------------------------------------
Premier Portfolio-Institutional Class(k) 283,701 283,701
============================================================================
Total Money Market Funds (Cost $567,402) 567,402
============================================================================
TOTAL INVESTMENTS-98.92% (Cost $51,410,464) 51,653,191
============================================================================
OTHER ASSETS LESS LIABILITIES-1.08% 563,278
============================================================================
NET ASSETS-100.00% $52,216,469
____________________________________________________________________________
============================================================================
</Table>
Investment Abbreviations:
<Table>
Ctfs. - Certificates
EUR - Euro
Gtd. - Guaranteed
PLN - Poland Zloty
REIT - Real Estate Investment Trust
REMIC - Real Estate Mortgage Investment Conduit
Sec. - Secured
Sr. - Senior
STRIPS - Separately Traded Registered Interest and Principal Security
Sub. - Subordinated
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 October 31, 2006
was $49,806,911, which represented 95.39% of the Fund's Net Assets. See Note
1A.
(b) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on October 31, 2006.
(c) All or a portion of the principal balance was pledged as collateral to cover
margin requirements for open credit default swap contracts. See Note 1L and
Note 9.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at October 31, 2006 was $7,719,591,
which represented 14.78% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(e) Perpetual bond with no specified maturity date.
(f) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The aggregate
value of these securities considered illiquid at October 31, 2006 was
$2,342,767, which represented 4.49% of the Fund's Net Assets.
(g) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at October
31, 2006 represented 1.92% of the Fund's Net Assets. See Note 1A.
(h) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(i) Foreign denominated security. Principal amount is denominated in currency
indicated.
(j) All or a portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 1K and Note 8.
(k) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM Enhanced Short Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $50,843,062) $51,085,789
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $567,402) 567,402
===========================================================
Total investments (cost $51,410,464) 51,653,191
===========================================================
Foreign currencies, at value (cost $665,060) 652,053
- -----------------------------------------------------------
Receivables for:
Fund shares sold 278,423
- -----------------------------------------------------------
Dividends and Interest 338,510
- -----------------------------------------------------------
Fund expenses absorbed 29,734
- -----------------------------------------------------------
Unrealized appreciation on credit default
swap transactions 2,867
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 1,188
- -----------------------------------------------------------
Other assets 49,279
===========================================================
Total assets 53,005,245
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 504,488
- -----------------------------------------------------------
Fund shares reacquired 88,256
- -----------------------------------------------------------
Dividends 25,907
- -----------------------------------------------------------
Foreign currency contracts 19,065
- -----------------------------------------------------------
Trustee deferred compensation and retirement
plans 1,188
- -----------------------------------------------------------
Variation margin 37,949
- -----------------------------------------------------------
Accrued distribution fees 14,756
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 972
- -----------------------------------------------------------
Accrued transfer agent fees 3,721
- -----------------------------------------------------------
Accrued operating expenses 92,474
===========================================================
Total liabilities 788,776
===========================================================
Net assets applicable to shares outstanding $52,216,469
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $52,495,594
- -----------------------------------------------------------
Undistributed net investment income 57,303
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies,
foreign currency contracts, futures
contracts and credit default swap
transactions (535,767)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies, foreign
currency contracts, futures contracts and
credit default swap transactions 199,339
===========================================================
$52,216,469
___________________________________________________________
===========================================================
NET ASSETS:
Class A $32,979,858
___________________________________________________________
===========================================================
Class C $17,652,566
___________________________________________________________
===========================================================
Class R $ 770,614
___________________________________________________________
===========================================================
Institutional Class $ 813,431
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 3,327,518
___________________________________________________________
===========================================================
Class C 1,780,498
___________________________________________________________
===========================================================
Class R 77,753
___________________________________________________________
===========================================================
Institutional Class 82,078
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 9.91
- -----------------------------------------------------------
Offering price per share
(Net asset value of $9.91 divided by
97.50%) $ 10.16
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 9.91
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 9.91
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 9.91
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
AIM Enhanced Short Bond Fund
STATEMENT OF OPERATIONS
For the period March 31, 2006 (date operations commenced) through October 31,
2006
<Table>
INVESTMENT INCOME:
Interest $1,089,893
- ------------------------------------------------------------------------
Dividends from affiliated money market funds 27,046
========================================================================
Total investment income 1,116,939
========================================================================
EXPENSES:
Advisory fees 94,052
- ------------------------------------------------------------------------
Administrative services fees 29,452
- ------------------------------------------------------------------------
Custodian fees 9,816
- ------------------------------------------------------------------------
Distribution fees:
Class A 31,057
- ------------------------------------------------------------------------
Class C 75,614
- ------------------------------------------------------------------------
Class R 2,250
- ------------------------------------------------------------------------
Transfer agent fees -- A, C and R 13,780
- ------------------------------------------------------------------------
Transfer agent fees -- Institutional 15
- ------------------------------------------------------------------------
Trustees' and officer's fees and benefits 8,332
- ------------------------------------------------------------------------
Registration and filing fees 48,865
- ------------------------------------------------------------------------
Professional services fees 69,618
- ------------------------------------------------------------------------
Other 19,970
========================================================================
Total expenses 402,821
========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (206,524)
========================================================================
Net expenses 196,297
========================================================================
Net investment income 920,642
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES CONTRACTS, FOREIGN
CURRENCY CONTRACTS AND CREDIT DEFAULT SWAP AGREEMENTS:
Net realized gain (loss) from:
Investment securities 73,539
- ------------------------------------------------------------------------
Foreign currencies (23,962)
- ------------------------------------------------------------------------
Foreign currency contracts (9,096)
- ------------------------------------------------------------------------
Futures contracts (561,683)
- ------------------------------------------------------------------------
Credit default swap agreements (12,855)
========================================================================
(534,057)
========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 242,727
- ------------------------------------------------------------------------
Foreign currencies (12,937)
- ------------------------------------------------------------------------
Foreign currency contracts (19,065)
- ------------------------------------------------------------------------
Futures contracts (14,253)
- ------------------------------------------------------------------------
Credit default swap agreements 2,867
========================================================================
199,339
========================================================================
Net gain (loss) from investment securities, foreign
currencies, futures contracts, foreign currency contracts
and credit default swap agreements (334,718)
========================================================================
Net increase in net assets resulting from operations $ 585,924
________________________________________________________________________
========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
AIM Enhanced Short Bond Fund
STATEMENT OF CHANGES IN NET ASSETS
For the period March 31, 2006 (date operations commenced) through October 31,
2006
<Table>
<Caption>
2006
- -------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 920,642
- -------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, foreign currency contracts, futures
contracts and credit default swap transactions (534,057)
- -------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, foreign currency
contracts, futures contracts and credit default swap
transactions 199,339
=========================================================================
Net increase in net assets resulting from operations 585,924
=========================================================================
Distributions to shareholders from net investment income:
Class A (549,765)
- -------------------------------------------------------------------------
Class C (313,343)
- -------------------------------------------------------------------------
Class R (19,482)
- -------------------------------------------------------------------------
Institutional Class (22,539)
=========================================================================
Decrease in net assets resulting from distributions (905,129)
=========================================================================
Share transactions-net:
Class A 33,155,600
- -------------------------------------------------------------------------
Class C 17,781,875
- -------------------------------------------------------------------------
Class R 777,650
- -------------------------------------------------------------------------
Institutional Class 820,549
=========================================================================
Net increase in net assets resulting from share
transactions 52,535,674
=========================================================================
Net increase in net assets 52,216,469
=========================================================================
NET ASSETS:
Beginning of period --
=========================================================================
End of period (including undistributed net investment
income of $57,303) $52,216,469
_________________________________________________________________________
=========================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Enhanced Short Bond Fund (the "Fund") is a series portfolio of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware statutory
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of nine separate series portfolios, each authorized to issue an unlimited number
of shares of beneficial interest. The Fund currently offers multiple classes of
shares. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class. The assets, liabilities and
operations of each portfolio are accounted for separately. Information presented
in these financial statements pertains only to the Fund. The Fund commenced
operations on March 31, 2006.
The Fund's investment objective is to provide total return.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. 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").
F-7
AIM Enhanced Short Bond Fund
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.
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. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. 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.
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.
The Fund allocates realized and unrealized capital gains and losses to a
class based on the relative net assets of each class. The Fund allocates
income to a class based on the relative value of the settled shares of each
class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the 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 treat 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 to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
F-8
AIM Enhanced Short Bond Fund
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- 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.
H. INDEMNIFICATIONS -- 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.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
J. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
K. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts.
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. Risks may exceed
amounts recognized in the Statement of Assets and Liabilities.
L. SWAP AGREEMENTS -- The Fund may enter into various swap transactions,
including interest rate, index, currency exchange rate and credit default
swap contracts ("CDS") for investment purposes or to manage interest rate,
currency or credit risk.
Interest rate, index, and currency exchange rate swap agreements are
two-party contracts entered into primarily to exchange the returns (or
differentials in rates of returns) earned or realized on particular
predetermined investments or instruments. The gross returns to be exchanged
or "swapped" between the parties are calculated with respect to a notional
amount, i.e., the return on or increase in value of a particular dollar
amount invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing a particular index.
A CDS is an agreement between two parties ("Counterparties") to exchange
the credit risk of an issuer. A buyer of a CDS is said to buy protection by
paying a fixed payment over the life of the agreement to the seller of the
CDS. If a defined credit event occurs (such as payment default or
bankruptcy), the Fund as a protection buyer would cease paying its fixed
payment, the Fund would deliver the corresponding bonds, or other similar
bonds issued by the same reference entity to the seller, and the seller
would pay the full notional value, or the "par value", of the referenced
obligation to the Fund. A seller of a CDS is said to sell protection and
thus would receive the fixed payment stream. If a credit event occurs, the
Fund as a protection seller would cease to receive the fixed payment
stream, the Fund would pay the buyer the full notional value of the
referenced obligation, and the Fund would receive the corresponding bonds
or similar bonds issued by the same reference entity. If no credit event
occurs, the Fund receives the fixed payment over the life of the agreement.
As the seller, the Fund would effectively add leverage to its portfolio
because, in addition to its total net assets, the Fund would be subject to
investment exposure on the notional amount of the CDS. Because the CDS is a
bilateral agreement between Counterparties, the transaction can
alternatively be settled by a cash payment in the case of a credit event.
F-9
AIM Enhanced Short Bond Fund
Changes in the value of swap agreements are recognized as unrealized
gains (losses) in the Statement of Operations by "marking to market" on a
daily basis to reflect the value of the swap agreement at the end of each
trading day. The Fund accrues for the fixed payments on swap agreements on
a daily basis with the net amount accrued recorded as a component of
realized gain (loss) on the Statement of Operations. A liquidation payment
received or made at the termination of a swap agreement is recorded as
realized gain (loss) on the Statement of Operations. The Fund segregates
liquid securities having a value at least equal to the amount of the
potential obligation of a Fund under any swap transaction. Entering into
these agreements involves, to varying degrees, lack of liquidity and
elements of credit, market, and counterparty risk in excess of amounts
recognized on the Statement of Assets and Liabilities.
M. 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 advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $1 billion 0.45%
- --------------------------------------------------------------------
Next $4 billion 0.425%
- --------------------------------------------------------------------
Over $5 billion 0.40%
___________________________________________________________________
====================================================================
</Table>
Under the terms of a master sub-advisory agreement between AIM and INVESCO
Institutional (N.A.), Inc. ("INVESCO"), AIM pays INVESCO 40% of the amount of
AIM's compensation on sub-advised assets.
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class C, Class R and
Institutional Class shares to 0.85%, 1.10%(after distribution fee waivers),
1.10% and 0.60% of average daily net assets, respectively, through at least June
30, 2007. In determining the advisor's obligation to waive advisory fees and/or
reimburse expenses, the following expenses are not taken into account, and could
cause the net annual operating expenses to exceed the numbers reflected above:
(i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv)
extraordinary items; (v) expenses related to a merger or reorganization, as
approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has
incurred but did not actually pay because of an expense offset arrangement.
Currently, the only expense offset arrangements from which the Fund may benefit
are in the form of credits that the Fund receives from banks where the Fund or
its transfer agent has deposit accounts in which it holds uninvested cash. In
addition, the Fund may also benefit from a one time credit to be used to offset
future custodian expenses. These credits are used to pay certain expenses
incurred by the Fund.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in
the amount of 25% of the advisory fee AIM receives from the affiliated money
market funds on investments by the Fund in such affiliated money market funds.
Voluntary fee waivers or reimbursements may be modified or discontinued at any
time upon consultation with the Board of Trustees without further notice to
investors.
For the period March 31, 2006 (date operations commenced) to October 31,
2006, AIM waived fees of $94,051 and reimbursed fund level expenses of $58,476
and reimbursed class level expenses of $7,787, $4,740, $282 and $15 for Class A,
Class C, Class R and Institutional Class shares, respectively.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. These expenses along with the related expense
reimbursement are included in the Statement of Operations. For the period March
31, 2006 (date operations commenced) to October 31, 2006, AMVESCAP did not
reimburse any expenses.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the period
March 31, 2006 (date operations commenced) to October 31, 2006, AIM was paid
$29,452.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AISI for certain expenses
incurred by AISI in the course of providing such services. AISI may make
payments to intermediaries that provide omnibus account services, sub-accounting
services and/or networking services. All fees payable by AISI to intermediaries
that provide omnibus account services or sub-accounting are charged back to the
Fund, subject to certain limitations approved by the Trust's Board of Trustees.
For the period March 31, 2006 (date operations commenced) to October 31, 2006,
the Fund paid AISI $13,780 for Class A, Class C and Class R share classes and
$15 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class C,
Class R and Institutional Class shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,
Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the
Plans, pays ADI compensation at the annual rate of 0.25% of the Fund's average
daily net assets of Class A shares, 1.00% of the average daily net assets of
Class C shares and 0.50% of the average daily net assets of Class R shares. Of
the Rule 12b-1 payments, up to 0.25% of the average daily net assets of the
Class A, Class C or Class R shares may be paid to furnish continuing personal
shareholder services to customers who purchase and own shares of such classes.
Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. National Association of Securities Dealers ("NASD")
Rules impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Effective March 31,
2006, ADI has contractually agreed to waive
F-10
AIM Enhanced Short Bond Fund
0.50% of the Rule 12b-1 plan fees on Class C shares through June 30, 2007.
Pursuant to the Plans, for the period March 31, 2006 (date operations commenced)
to October 31, 2006, the Class A, Class C and Class R shares paid $31,057,
$37,807 and $2,250, respectively after ADI waived Class C shares fees of
$37,807.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the period
March 31, 2006 (date operations commenced) to October 31, 2006, ADI advised the
Fund that it retained $9,569 in front-end sales commissions from the sale of
Class A shares and $1,204, $349 and $0 from Class A, Class C and Class R shares,
respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the period March 31, 2006 (date operations commenced) to October 31, 2006.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 03/31/06 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $11,205,808 $(10,922,107) $ -- $283,701 $13,515 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class -- 11,205,808 (10,922,107) -- 283,701 13,531 --
==================================================================================================================================
Total
Investments
in
Affiliates $ -- $22,411,616 $(21,844,214) $ -- $567,402 $27,046 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the period
March 31, 2006 (date operations commenced) to October 31, 2006, the Fund
received credits from these arrangements, which resulted in the reduction of the
Fund's total expenses of $3,366.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the period March 31, 2006 (date operations commenced) to October 31,
2006, the Fund paid legal fees of $574 for services rendered by Kramer, Levin,
Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that
firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the period March 31, 2006 (date operations commenced) to October 31,
2006, the Fund did not borrow or lend under the interfund lending facility or
borrow under the uncommitted unsecured revolving credit facility.
F-11
AIM Enhanced Short Bond Fund
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank 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 contractually agreed upon rate.
NOTE 7--FOREIGN CURRENCY CONTRACTS
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO UNREALIZED
SETTLEMENT ---------------------------------- VALUE APPRECIATION
DATE DELIVER RECEIVE 10/31/06 (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
11/27/06 PLN 5,926,290 USD 1,939,231 $1,958,296 $(19,065)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
<Table>
Currency Abbreviations:
PLN - Poland Zloty
USD - U.S. Dollar
</Table>
NOTE 8--FUTURES CONTRACTS
On October 31, 2006, $280,000 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/ VALUE APPRECIATION
CONTRACT CONTRACTS COMMITMENT 10/31/06 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
Euro-Bund 14 Dec-06/Short $(2,105,314) $ 10,252
- --------------------------------------------------------------------------------------------------------------------------
Euro FX Currency 4 Dec-06/Short (639,800) 2,563
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 18 Dec-06/Short (1,900,125) (15,508)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 35 Dec-06/Short (3,787,656) (11,560)
==========================================================================================================================
$(8,432,895) $(14,253)
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
NOTE 9--CREDIT DEFAULT SWAP AGREEMENTS
On October 31, 2006, $2,275,000 principal amount of corporate obligations were
pledged as collateral to cover margin requirements for open sell credit default
swap contracts.
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD-END
- ---------------------------------------------------------------------------------------------------------------------------------
NOTIONAL UNREALIZED
BUY/SELL PAY/RECEIVE EXPIRATION AMOUNT APPRECIATION
COUNTERPARTY REFERENCE ENTITY PROTECTION FIXED RATE DATE (000) (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers, Inc. ALLTEL Corp. Buy 0.43% 12/20/2011 $500 $ 1,349
- ---------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers, Inc. CenturyTel, Inc. Buy 0.69% 12/20/2011 $500 1,115
- ---------------------------------------------------------------------------------------------------------------------------------
Liberty Media
Lehman Brothers, Inc. LLC Buy 1.60% 12/20/2011 $500 1,735
- ---------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers, Inc. Embarq Corp. Sell 0.77% 12/20/2011 $500 (1,332)
=================================================================================================================================
$ 2,867
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
F-12
AIM Enhanced Short Bond Fund
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the period March 31, 2006 (date
operations commenced) to October 31, 2006 was as follows:
<Table>
<Caption>
2006
- ------------------------------------------------------------------------
Distributions paid from ordinary income $905,129
________________________________________________________________________
========================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- ---------------------------------------------------------------------------
Undistributed ordinary income $ 42,114
- ---------------------------------------------------------------------------
Unrealized appreciation -- investments 240,042
- ---------------------------------------------------------------------------
Temporary book/tax differences (1,009)
- ---------------------------------------------------------------------------
Capital loss carryforward (560,272)
- ---------------------------------------------------------------------------
Shares of beneficial interest 52,495,594
===========================================================================
Total net assets $52,216,469
___________________________________________________________________________
===========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to the tax
recognition of unrealized gains and losses on certain futures contracts. The
tax-basis net unrealized appreciation on investments includes appreciation
(depreciation) on foreign currencies of $(12,937) and foreign futures contracts
of $10,252.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation,
foreign currency contracts and credit default swap transactions.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund has a capital loss carryforward as of October 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
October 31, 2014 $560,272
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the period March 31, 2006 (date operations commenced) to October
31, 2006 was $87,760,456 and $37,233,131, respectively. During the same period,
purchases and sales of U.S. Treasury obligations were $2,087,352 and $2,088,178.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $259,493
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (16,766)
==============================================================================
Net unrealized appreciation of investment securities $242,727
______________________________________________________________________________
==============================================================================
Investments have the same cost for tax and financial statement purposes.
</Table>
F-13
AIM Enhanced Short Bond Fund
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of costs incurred during
the startup period of the Fund, paydowns on mortgage backed securities, credit
default swaps, foreign currency and futures contracts transactions, on October
31, 2006, undistributed net investment income was increased by $41,790,
undistributed net realized gain (loss) was decreased by $1,710 and shares of
beneficial interest decreased by $40,080. This reclassification had no effect on
the net assets of the Fund.
NOTE 13--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A, Class C,
Class R and Institutional Class. Class A shares are sold with a front-end sales
charge unless certain waiver criteria are met. Class C, Class R shares and
Institutional Class shares are sold at net asset value. Under certain
circumstances, Class A shares and Class R shares are subject to CDSC.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------
FOR THE PERIOD
MARCH 31, 2006
(DATE OPERATIONS
COMMENCED) THROUGH
OCTOBER 31, 2006(a)
--------------------------
SHARES AMOUNT
- ----------------------------------------------------------------------------------------
Sold:
Class A 4,287,199 $ 42,676,674
- ----------------------------------------------------------------------------------------
Class C 2,840,515 28,308,929
- ----------------------------------------------------------------------------------------
Class R 75,793 758,168
- ----------------------------------------------------------------------------------------
Institutional Class 79,811 798,010
========================================================================================
Issued as reinvestment of dividends:
Class A 48,420 480,236
- ----------------------------------------------------------------------------------------
Class C 25,321 251,240
- ----------------------------------------------------------------------------------------
Class R 1,960 19,482
- ----------------------------------------------------------------------------------------
Institutional Class 2,267 22,539
========================================================================================
Reacquired:
Class A (1,008,101) (10,001,310)
- ----------------------------------------------------------------------------------------
Class C (1,085,338) (10,778,294)
========================================================================================
5,267,847 $ 52,535,674
________________________________________________________________________________________
========================================================================================
</Table>
(a) There are four entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate they own 41% of the
outstanding shares of the Fund. ADI has an agreement with these entities to
sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to
these entities, which are considered to be related to the Fund, for
providing services to the Fund, AIM and/or AIM affiliates including but not
limited to services such as securities brokerage, distribution, third party
record keeping and account servicing. The Trust has no knowledge as to
whether all or any portion of the shares owned of record by these entities
are also owned beneficially.
NOTE 14--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
F-14
AIM Enhanced Short Bond Fund
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
INSTITUTIONAL
CLASS A CLASS C CLASS R CLASS
---------------- ---------------- ---------------- ----------------
MARCH 31, 2006 MARCH 31, 2006 MARCH 31, 2006 MARCH 31, 2006
(DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS
COMMENCED) TO COMMENCED) TO COMMENCED) TO COMMENCED) TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2006 2006 2006 2006
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00 $ 10.00 $10.00 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.26 0.25 0.25 0.28
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.08) (0.09) (0.09) (0.09)
=================================================================================================================================
Total from investment operations 0.18 0.16 0.16 0.19
=================================================================================================================================
Less dividends from net investment income (0.27) (0.25) (0.25) (0.28)
=================================================================================================================================
Net asset value, end of period $ 9.91 $ 9.91 $ 9.91 $ 9.91
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.82% 1.67% 1.67% 1.97%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,980 $17,653 $ 771 $ 813
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements(c) 0.87% 1.12% 1.12% 0.61%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements(c) 1.66% 2.41% 1.91% 1.34%
=================================================================================================================================
Ratio of net investment income to average net
assets(c) 4.49% 4.24% 4.24% 4.75%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 134% 134% 134% 134%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges, if any, and is
not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$21,089,996, $12,836,741, $764,137 and $791,158 for Class A, Class C,
Class R and Institutional Class shares, respectively.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 16--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 (Order No. 05-1318). The
WVASC makes findings of fact that AIM and ADI entered into certain arrangements
permitting market timing of the AIM Funds and failed to disclose these
arrangements in the prospectuses for such Funds, 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, including restitution to affected investors, disgorgement of fees,
reimbursement of investigatory, administrative and legal costs and an
"administrative assessment," to be determined by the Commissioner. Initial
research indicates that these damages could be limited or capped by statute.
F-15
AIM Enhanced Short Bond Fund
NOTE 16--LEGAL PROCEEDINGS--(CONTINUED)
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions (all the claims in
this category of lawsuits were dismissed with prejudice by the court on
September 29, 2006, except for the Section 36(b) claim which was dismissed
with leave to amend to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
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 and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-16
AIM Enhanced Short Bond Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Enhanced Short Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Enhanced Short Bond Fund (one
of the funds constituting AIM Investment Funds, hereafter referred to as the
"Fund") at October 31, 2006, and the results of its operations, the changes in
its net assets and the financial highlights for the period March 31, 2006 (date
operations commenced) through October 31, 2006, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian and brokers, provides a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 20, 2006
Houston, Texas
F-17
AIM Enhanced Short Bond Fund
TAX DISCLOSURES
REQUIRED FEDERAL INCOME TAX INFORMATION
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2006, 0% is eligible for the dividends received deduction for
corporations.
For its tax year ended October 31, 2006, the Fund designates 0%, or the
maximum amount allowable of its dividend distributions as qualified dividend
income. Your actual amount of qualified dividend income for the calendar year
will be reported in your Form 1099-DIV. You should consult your tax advisor
regarding treatment of the amounts.
REQUIRED STATE INCOME TAX INFORMATION
Of the ordinary dividends paid, 0.60% was derived from U.S. Treasury
Obligations.
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS
For its tax year ended October 31, 2006, the Fund designates 35.80%, or the
maximum amount allowable, of its dividend distributions as qualified interest
income exempt from U.S. income tax for non-resident alien shareholders. Your
actual amount of qualified interest income for the calendar year will be
reported in your Form 1042-S mailing. You should consult your tax advisor
regarding treatment of the amounts.
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended April 30, 2006, July 31, 2006 and October 31, 2006 are,
98.82%, 98.60% and 99.64%, respectively.
F-18
AIM Enhanced Short Bond Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm) and
Trustee and Vice Chair of The AIM Family
of Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
- -------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, A I M Management Group Inc.,
Principal AIM Mutual Fund Dealer Inc. (registered
Executive Officer broker dealer), AIM Funds Management
Inc. (registered investment advisor) and
1371 Preferred Inc. (holding company);
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Capital Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, AVZ Callco Inc. (holding
company); AMVESCAP Inc. (holding
company) and AIM Canada Holdings Inc.
(holding company); Director and Chief
Executive Officer, AIM Trimark Corporate
Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund
company) and AIM Trimark Canada Fund
Inc. (corporate mutual fund company);
Trustee, President and Principal
Executive Officer of The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
Powershares Capital Management LLC
Formerly: President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer,
AIM Funds Management Inc.; President,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and Director,
Trimark Trust (federally regulated
Canadian Trust Company)
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder
Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); CompuDyne Corporation
(provider of products and services to
the public security market); and
Homeowners of America Holding
Corporation (property casualty company)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and Director of various
affiliated Volvo companies; and
Director, Magellan Insurance Company
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired Director, Mainstay VP Series
Trustee Formerly: Partner, Deloitte & Touche Funds, Inc. (21 portfolios)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
F-19
TRUSTEES AND OFFICERS--(CONTINUED)
AIM Enhanced Short Bond Fund
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc. and A I M
Advisors, Inc.; Director, Vice President
and Secretary, INVESCO Distributors,
Inc.; Vice President and Secretary,
A I M Capital Management, Inc., AIM
Investment Services, Inc., and Fund
Management Company; Senior Vice
President and Secretary, A I M
Distributors, Inc.; Director, INVESCO
Funds Group Inc.; Senior Vice President,
Chief Legal Officer and Secretary of The
AIM Family of Funds--Registered
Trademark--; and Manager, Powershares
Capital Management LLC
Formerly: Chief Operating Officer,
Senior Vice President, General Counsel,
and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice
President and Secretary, PBHG Funds (an
investment company); Vice President and
Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel
and Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- ------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, AMVESCAP N/A
Vice President PLC; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- ------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Senior Vice President and General N/A
Vice President Counsel, AMVESCAP PLC; Director, INVESCO
Funds Group, Inc.; and Vice President of
The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Vice President and
General Counsel, Fund Management
Company; Director, Senior Vice
President, Secretary and General
Counsel, A I M Management Group Inc. and
A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Senior Vice President, A I M
Distributors, Inc.; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Chief
Executive Officer and President, INVESCO
Funds Group, Inc.; and Senior Vice
President, and General Counsel, Liberty
Financial Companies, Inc. and Senior
Vice President and General Counsel
Liberty Funds Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.; and Vice President,
Financial Officer and Treasurer and Principal Officer of The
Treasurer AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc. and Vice President
of The AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, Senior Vice
President and Senior Investment Officer,
A I M Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); and
President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust Only)
Formerly: Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- ------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc., Fund Management
Company and The AIM Family of
Funds--Registered Trademark--
Formerly: Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Global Head of Product
Development, AIG-Global Investment
Group, Inc.; Chief Compliance Officer
and Deputy General Counsel,
AIG-SunAmerica Asset Management; and
Chief Compliance Officer, Chief
Operating Officer and Deputy General
Counsel, American General Investment
Management
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers INVESCO Institutional
Suite 100 11 Greenway Plaza Inc. LLP (N.A.), Inc.
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street One Midtown Plaza
Houston, TX 77046-1173 Suite 100 Suite 2900 1360 Peachtree Street,
Houston, TX 77046-1173 Houston, TX 77002-5678 N.E.
Atlanta, GA 30309
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 225 Franklin Street
Floor 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Philadelphia, PA 19103-7599 Americas
New York, NY 10036-2714
</Table>
F-20
[eDelivery
GO PAPERLESS
AIMinvestments.com/edelivery
Graphic]
REGISTER FOR eDELIVERY
eDelivery is the process of receiving your fund and account If used after January 20, 2007, this report must be
information via e-mail. Once your quarterly statements, tax accompanied by a Fund Performance & Commentary or by an AIM
forms, fund reports, and prospectuses are available, we will Quarterly Performance Review for the most recent
send you an e-mail notification containing links to these quarter-end.
documents. For security purposes, you will need to log in to
your account to view your statements and tax forms. Mutual funds distributed by A I M Distributors, Inc.
WHY SIGN UP? A I M Management Group Inc. has provided leadership in the
investment management industry since 1976. AIM Investment
Register for eDelivery to: Services, Inc. is the transfer agent for the products and
services represented by AIM Investments. AIM is a subsidiary
o reduce the amount of paper you receive. of AMVESCAP PLC, one of the world's largest independent
financial services companies with $450 billion in assets
o gain access to your documents faster by not waiting for under management as of October 31, 2006.
the mail.
o view your documents online anytime at your convenience.
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND
o save the documents to your personal computer or print EXPENSES CAREFULLY. FOR THIS AND OTHER INFORMATION ABOUT AIM
them out for your records. FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AND
READ IT CAREFULLY BEFORE INVESTING.
HOW DO I SIGN UP?
It's easy. Just follow these simple steps:
1. Log in to your account.
2. Click on the "Service Center" tab.
3. Select "Register for eDelivery" and complete the consent
process.
This AIM service is provided by AIM Investment Services, Inc. AIMinvestments.com ESB-AR-1 A I M Distributors, Inc.
[YOUR GOALS. OUR SOLUTIONS.]--Registered Trademark--
- --------------------------------------------------------------------------------
Mutual Retirement Annuities College Separately Offshore Cash
Funds Products Savings Managed Products Management [AIM INVESTMENTS LOGO APPEARS HERE]
Plans Accounts --Registered Trademark--
- --------------------------------------------------------------------------------
SECTOR EQUITY AIM GLOBAL HEALTH CARE FUND
Sectors
Annual Report to Shareholders o October 31, 2006
Table of Contents
Supplemental Information ......... 2
Letters to Shareholders .......... 3
Performance Summary .............. 5
Management Discussion ............ 5
Fund Expenses .................... 7
Long-term Fund Performance ....... 8
Approval of Advisory Agreement ... 10
Schedule of Investments........... F-1
Financial Statements ............. F-4
Notes to Financial Statements .... F-7
Financial Highlights ............. F-15
Auditor's Report ................. F-19 [COVER GLOBE IMAGE]
Tax Disclosures .................. F-20
Trustees and Officers ............ F-21
[AIM INVESTMENT SOLUTIONS]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[DOMESTIC [INTERNATIONAL/ [SECTOR
EQUITY] GLOBAL EQUITY] EQUITY]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[FIXED [ALLOCATION [DIVERSIFIED
INCOME] SOLUTIONS] PORTFOLIOS]
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM Global Health Care Fund
AIM GLOBAL HEALTH CARE FUND SEEKS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2006, and is based on total net assets.
ABOUT SHARE CLASSES Fund will have favorable IPO investment o A direct investment cannot be made in
opportunities. an index. Unless otherwise indicated,
o Class B shares are not available as an index results include reinvested
investment for retirement plans o The value of the Fund's shares is dividends, and they do not reflect sales
maintained pursuant to Section 401 of particularly vulnerable to factors charges. Performance of an index of
the Internal Revenue Code, including affecting the health care industry, such funds reflects fund expenses;
401(k) plans, money purchase pension as substantial government regulation. performance of a market index does not.
plans and profit sharing plans. Plans Government regulation may affect the
that had existing accounts invested in demand for products and services offered OTHER INFORMATION
Class B shares prior to September 30, by health care companies. Also, the
2003, will continue to be allowed to products and services offered by health o Industry classifications used in this
make additional purchases. care companies may be subject to rapid report are generally according to the
obsolescence caused by scientific Global Industry Classification Standard,
o Investor Class shares are closed to advances and technological innovations. which was developed by and is the
most investors. For more information on These factors can cause the Fund's exclusive property and a service mark of
who may continue to invest in Investor shares to rise and fall more than the Morgan Stanley Capital International
Class shares, please see the prospectus. value of shares of a fund that invests Inc. and Standard & Poor's.
more broadly.
PRINCIPAL RISKS OF INVESTING IN THE FUND o The returns shown in management's
ABOUT INDEXES USED IN THIS REPORT discussion of Fund performance are based
o Foreign securities have additional on net asset values calculated for
risks, including exchange rate changes, o The unmanaged MSCI WORLD shareholder transactions. Generally
political and economic upheaval, the INDEX--service mark-- is a group of accepted accounting principles require
relative lack of information about these global securities tracked by Morgan adjustments to be made to the net assets
companies, relatively low market Stanley Capital International. of the Fund at period end for financial
liquidity and the potential lack of reporting purposes, and as such, the net
strict financial and accounting controls o The MSCI WORLD HEALTH CARE INDEX, a asset values for shareholder
and standards. subset of the MSCI World Index, includes transactions and the returns based on
health care securities from developed those net asset values may differ from
o Investing in emerging markets involves countries. The unmanaged MSCI World the net asset values and returns
greater risks than investing in more Index tracks the performance of reported in the Financial Highlights.
established markets. Risks for emerging approximately 50 countries covered by
markets include risks relating to the Morgan Stanley Capital International The Fund provides a complete list of its
relatively smaller size and lesser that are considered developed markets. holdings four times in each fiscal year,
liquidity of these markets, high at the quarter-ends. For the second and
inflation rates, adverse political o The unmanaged LIPPER HEALTH/ fourth quarters, the lists appear in the
developments and lack of timely BIOTECHNOLOGY FUNDS INDEX represents an Fund's semiannual and annual reports to
information. average of the 30 largest health and shareholders. For the first and third
biotechnology funds tracked by Lipper quarters, the Fund files the lists with
o Prices of equity securities change in Inc., an independent mutual fund the Securities and Exchange Commission
response to many factors including the performance monitor. (SEC) on Form N-Q. The most recent list
historical and prospective earnings of of portfolio holdings is available at
the issuer, the value of its assets, o The unmanaged STANDARD & POOR'S AIMinvestments.com. From our home page,
general economic conditions, interest COMPOSITE INDEX OF 500 STOCKS (the S&P click on Products & Performance, then
rates, investor perceptions and market 500--Registered Trademark-- Index) is an Mutual Funds, then Fund Overview. Select
liquidity. index of common stocks frequently used your Fund from the drop-down menu and
as a general measure of U.S. stock click on Complete Quarterly Holdings.
o The prices of initial public offering market performance. Shareholders can also look up the Fund's
(IPO) securities may go up and down more Forms N-Q on the SEC Web site at
than prices of equity securities of o The Fund is not managed to track the sec.gov. Copies of the Fund's Forms N-Q
companies with longer trading histories. performance of any particular index, may be reviewed and copied at the SEC
In addition, companies offering including the indexes defined here, and Public Reference Room in Washington,
securities in IPOs may have less consequently, the performance of the D.C. You can obtain information on the
experienced management or limited Fund may deviate significantly from the operation of the Public Reference Room,
operating histories. There can be no performance of the indexes. including information about duplicating
assurance that the fee charges, by calling 202-942-8090 or
800-732-0330, or by electronic request
at the following e-mail address:
publicinfo@sec.gov.
Continued on page 9
================================================================================ ========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND FUND NASDAQ SYMBOLS
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES
AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares GGHCX
========================================================================= Class B Shares GTHBX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class C Shares GTHCX
AIMinvestments.com Investor Class Shares GTHIX
========================================
2
AIM Global Health Care Fund
Dear Shareholders of The AIM Family of Funds
--Registered Trademark--:
We're pleased to provide you with this report, which
includes a discussion of how your Fund was managed during
the review period ended October 31, 2006, and what factors
affected its performance.
As we approach the end of 2006, it seems likely that
[TAYLOR many investors may see the value of their investments
PHOTO] increase this year. Global equity markets, collectively,
recorded double-digit gains for the year ended October 31,
2006, as did the U.S. stock market. Also, the investment
grade bond market in the United States rose for the same
period.
While stock and bond markets generally enjoyed positive
year-to-date returns, their performance was affected by
short-term economic and geopolitical events. For example,
Philip Taylor the U.S. stock market was weak in the second quarter of
2006 when it appeared that inflation might be rising. Only
after the U.S. Federal Reserve Board decided in August that
inflation was contained and that short-term interest rates
need not be increased--the first time it kept rates
unchanged in more than two years--did equities truly surge.
Short-term market fluctuations are a fact of life for
all investors. At AIM Investments--Registered Trademark--,
we believe that investors can do two things to deal with
short-term market fluctuations: maintain a long-term
investment horizon and maintain a diversified portfolio.
AIM Investments can help by offering a broad product line
that gives your financial advisor the necessary tools to
build a portfolio that's right for you regardless of market
conditions. AIM Investments offers a comprehensive range of
retail mutual funds, including domestic, global and
international equity funds, taxable and tax-exempt
fixed-income funds, and a variety of allocation
portfolios--with varied risk and return characteristics to
match your needs. We maintain this extensive set of product
solutions for one reason: We believe in the value of
comprehensive, diversified investment portfolios.
We've changed the look of our annual reports to reflect
that belief. In our marketing and now our shareholder
literature, we represent a fully diversified portfolio
graphically as an allocation pie chart and assign each
asset class a color--green for domestic equity, blue for
international, orange for sector and purple for fixed
income. A legend in the left column illustrates the
methodology. Your report cover now shows your Fund's asset
class color, plus the asset class and sub-asset class name
are shown in the upper-left corner. The reason for these
changes is to help you better understand where your Fund
fits into your overall portfolio.
AIM has a variety of investment solutions, and knowing
which ones are right for your portfolio is complex. That's
why we also believe in the value of a trusted financial
advisor who will work with you to create an investment plan
you can stick with for the long term. Your financial
advisor can help allocate your portfolio appropriately and
review your investments regularly to help ensure they
remain suitable as your financial situation changes. While
there are no guarantees with any investment program, a
long-term plan that's based on your financial goals, risk
tolerance and time horizon is more likely to keep you and
your investments on track.
OUR COMMITMENT TO YOU
In the short term, the one sure thing about markets is
their unpredictability. While past performance cannot
guarantee comparable future results, we believe that
staying invested for the long term with a thoughtful plan
offers the best opportunity for weathering that
unpredictability. We at AIM Investments remain committed to
building enduring solutions to help you achieve your
investment goals, and we're pleased you've placed your
trust in us.
Information about investing, the markets and your Fund
is always available on our Web site, AIMinvestments.com. If
you have questions about your individual account, we invite
you to contact one of our highly trained client services
representatives at 800-959-4246.
Sincerely,
/s/ PHILIP TAYLOR
Philip Taylor
President -- AIM Funds
CEO, AIM Investments
December 14, 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. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
3
AIM Global Health Care Fund
Dear Fellow AIM Fund Shareholders:
At our meeting at the end of June, your Board completed its
comprehensive review* of each fund's advisory agreement
with A I M Advisors, Inc. (AIM) to make certain your
interests are being served in terms of fees, performance
and operations.
Looking ahead, your Board finds many reasons to be
[CROCKETT positive about AIM's management and strategic direction.
PHOTO] Most importantly, AIM's investment management discipline
has paid off in terms of improved overall performance. We
are also pleased with AIM's efforts to seek more
cost-effective ways of delivering superior service.
In addition, AIM is realizing the benefits of belonging
to a leading independent global investment management
Bruce L. Crockett organization in its parent company, AMVESCAP PLC, which is
dedicated to helping people worldwide build their financial
security. AMVESCAP managed approximately $450 billion
globally as of October 31, 2006, operating under the AIM,
INVESCO, AIM Trimark, INVESCO PERPETUAL and Atlantic Trust
brands. These companies are home to an abundance of
investment talent that is gradually being integrated and
leveraged into centers of excellence, each focusing on a
given market segment or asset class. Over the next few
years, your Board will be meeting at these various centers
of excellence to learn about their progress and how they
may serve you through our goal of enhancing performance and
reducing costs.
The seven new AIM funds--which include Asian funds,
structured U.S. equity funds and specialized bond
funds--are an early example of the kind of opportunities
the AMVESCAP organization can provide AIM clients. More
information on these funds can be found on AIM's Web site.
Your Board is very pleased with the overall direction
and progress of the AIM Funds. We're working closely and
effectively with AIM's management to continue this
momentum. As always, your Board is eager to hear your views
on how we might better serve you. Please send your comments
in a letter addressed to me at AIM Investments, AIM
Investments Tower, 11 Greenway Plaza, Suite 100, Houston TX
77046.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board
December 14, 2006
*To learn more about all the factors we considered before
approving each fund's advisory agreement, go to the
"Products & Performance" tab at the AIM Web site
(AIMinvestments.com) and click on "Investment Advisory
Agreement Renewals." The approval of advisory agreement
information for your Fund is also included in this annual
report on pages 10-11.
4
AIM Global Health Care Fund
Management's discussion o Diversifying across industries.
of Fund performance
o Monitoring political trends that could
====================================================================================== negatively affect a specific industry.
PERFORMANCE SUMMARY
We may sell a holding when:
The fiscal year ended October 31, 2006, was a mixed year for health care stocks.
The Fund underperformed the S&P 500 Index for the fiscal year due to the strong o We identify a more attractive
returns in the broad market over the period. While the Fund performed largely in investment opportunity.
line with its peer group, our strategy caused us to underperform the MSCI World
Health Care Index due primarily to an underweight position in large-cap o We see a deterioration of a company's
pharmaceutical stocks. It is important to know that the benchmark is over 60% fundamentals.
weighted in pharmaceuticals while the Fund is more diversified.
o A company fails to capitalize on a
Your Fund's long-term performance appears on pages 8 and 9. market opportunity.
FUND VS. INDEXES o A change in management occurs.
Total returns, 10/31/05-10/31/06, excluding applicable sales charges. If sales
charges were included, returns would be lower. o A stock's price target has been met.
Class A Shares 8.31% MARKET CONDITIONS AND YOUR FUND
Class B Shares 7.52
Class C Shares 7.51 The economy has enjoyed several years of
Investor Shares 8.35 economic growth fueled by a low interest
MSCI World Index (Broad Market Index) 21.32 rate environment, a strong real estate
MSCI World Health Care Index (Style-Specific Index) 13.53 market and resilient consumer spending.
Lipper Health/Biotechnology Funds Index (Peer Group Index) 8.71 However, in the past year, we have begun
to see a moderation of economic growth
SOURCE: LIPPER INC. as the U.S. Federal Reserve Board (the
====================================================================================== Fed) raised short-term interest rates 17
times since June 2004 before pausing at
HOW WE INVEST services. We look for companies that are 5.25%. Although the current level of
financially healthy and, in our opinion, interest rates is low by historical
We seek health care stocks of all market likely to sustain their profitability. standards, a five-fold increase over a
capitalizations from around the world We assess the long-term commercial two-year period can potentially affect
that we believe are attractively priced potential of each company's current and the economy.
and have the potential to benefit from prospective products, especially
long-term earnings and cash flow growth. products that fill otherwise unfilled Gross domestic product, a measure of
market segments. economic growth, has slowed to 2.2% in
We typically invest in four broad the third quarter of 2006 compared to
segments of the health care sector: We seek to manage risk by generally: the average from the fourth quarter of
pharmaceuticals, biotechnology, medical 2002 to the first quarter 2006 of 3.6%.
technology and health o Limiting the size of investment in a Additionally, inflation, as measured by
single position. the consumer price index, was at an
annualized rate of 3.4% for September
2006, which is in line with the
inflation rate for
(continued)
======================================== ======================================== =========================================
PORTFOLIO COMPOSITION TOP FIVE COUNTRIES* TOP 10 EQUITY HOLDINGS*
By industry 1. United States 76.6% 1. Roche Holding A.G. (Switzerland) 5.6%
Pharmaceuticals 35.8% 2. Switzerland 9.7 2. Novartis A.G.-ADR (Switzerland) 4.1
Biotechnology 22.0 3. France 3.5 3. Johnson & Johnson 4.0
Health Care Equipment 12.6 4. United Kingdom 2.1 4. Pfizer Inc. 3.5
Health Care Services 7.2 5. Japan 2.0 5. Amgen Inc. 3.4
Managed Health Care 7.2 6. Genzyme Corp. 3.0
Life Sciences Tools & Services 6.1 Total Net Assets $1.46 billion 7. Gilead Sciences, Inc. 3.0
Other Industries, Each Less Than 8. Medco Health Solutions, Inc. 2.7
2.0% of Portfolio 5.9 Total Number of Holdings* 97 9. Wyeth 2.5
Money Market Funds Plus 10. UnitedHealth Group Inc. 2.0
Other Assets Less Liabilities 3.2
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
======================================== ======================================== =========================================
5
AIM Global Health Care Fund
2005. Despite a moderating economic position in MEDTRONIC, a company that Derek M. Taner
environment, the labor force has develops and manufactures therapeutic Chartered Financial
remained intact with the unemployment medical devices for chronic diseases, as [TANER Analyst, portfolio
rate at 4.4% as of October 31, 2006. we saw fundamentals in implantable PHOTO] manager, is manager
Overall, we believed the economic cardiac defibrillator growth of AIM Global Health
outlook remained positive although deteriorate. Care Fund. Mr. Taner
growth has slowed to a more subdued began his investment career in 1993 with
level than what we have seen in the past We maintained our foreign exposure another employer, where he worked as a
several years. with moderate weightings in Japan, fixed income analyst, assistant
France, Germany, UK and Switzerland. We portfolio manager and manager of a
Large-cap pharmaceuticals was the reduced our Japanese holdings due to health care fund. Mr. Taner joined AIM
best performing sector for the fiscal profit-taking and increased our position in 2005. He earned a bachelor of science
year. Sentiment has improved after four in U.S. equities as we identified degree in accounting and an M.B.A. from
years of underperformance due to attractive buying opportunities in the the Hass School of Business at the
improving growth rates driven by cost region. University of California at Berkeley.
restructurings, less patent expirations
and improving product pipelines. ROCHE At the close of the fiscal year, Assisted by the Global Health Care Team
HOLDING, a Swiss drug company with very economic indicators showed that the
few expiring patents, experienced strong economy had slowed, which tended to
sales of its cancer drug, Avastin. The favor defensive growth sectors such as
company remained our top performing health care. Historically, the health
stock due to its significant ownership care sector has performed well in an
of GENENTECH, the biotech company that environment of decelerating earnings
developed Avastin. The company continued growth for the broader market. Moreover,
to perform well and showed positive health care was one of the better
profit margin improvement. performing sectors in the past two
quarters when the yield curve has been
SHIRE PLC, a specialty pharmaceutical completely inverted. This is the
company focused in areas of central environment at the close of the fiscal
nervous system, gastrointestinal and year. We continued to balance growth
human genetic therapies, contributed to prospects with valuation to determine
Fund performance for the fiscal year. the optimal portfolio structure.
The stock rose due to the patent
settlement for its largest product, IN CLOSING
Adderall XR. Furthermore, the company
has a solid pipeline with new products We would like to thank any new
in process for FDA approval. shareholders who joined the Fund during
the period and thank existing
UNITEDHEALTH, a U.S. health care shareholders for their continued
insurer, detracted from performance for commitment to AIM Global Health Care
the fiscal year. The stock was trimmed Fund.
due largely to uncertainty surrounding
the options scandal at the company. THE VIEWS AND OPINIONS EXPRESSED IN
Important to note is that the company MANAGEMENT'S DISCUSSION OF FUND
remains a leader in the managed care PERFORMANCE ARE THOSE OF A I M ADVISORS,
area with solid assets and sound INC. THESE VIEWS AND OPINIONS ARE
fundamentals. SUBJECT TO CHANGE AT ANY TIME BASED ON
FACTORS SUCH AS MARKET AND ECONOMIC
MERGE TECHNOLOGIES, a health care CONDITIONS. THESE VIEWS AND OPINIONS MAY
software and IT services company, also NOT BE RELIED UPON AS INVESTMENT ADVICE
detracted from performance for the OR RECOMMENDATIONS, OR AS AN OFFER FOR A
period. The company allegedly PARTICULAR SECURITY. THE INFORMATION IS
misrepresented prior financial NOT A COMPLETE ANALYSIS OF EVERY ASPECT
performance resulting in the replacement OF ANY MARKET, COUNTRY, INDUSTRY,
of the entire senior management team. We SECURITY OR THE FUND. STATEMENTS OF FACT
sold the position as a result of these ARE FROM SOURCES CONSIDERED RELIABLE,
events. BUT A I M ADVISORS, INC. MAKES NO
REPRESENTATION OR WARRANTY AS TO THEIR
During the fiscal year, we trimmed COMPLETENESS OR ACCURACY. ALTHOUGH
MEDCO HEALTH SOLUTIONS, the largest HISTORICAL PERFORMANCE IS NO GUARANTEE
pharmacy-benefit manager, as the stock OF FUTURE RESULTS, THESE INSIGHTS MAY
appreciated from the purchase price, and HELP YOU UNDERSTAND OUR INVESTMENT
we invested in new attractive MANAGEMENT PHILOSOPHY.
opportunities. We also sold our
See important fund and index
disclosures on the inside front cover.
FOR A PRESENTATION OF YOUR FUND'S
LONG-TERM PERFORMANCE, PLEASE SEE
PAGES 8 AND 9.
6
AIM Global Health Care Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE estimate the expenses that you paid over The hypothetical account values and
the period. Simply divide your account expenses may not be used to estimate the
As a shareholder of the Fund, you incur value by $1,000 (for example, an $8,600 actual ending account balance or
two types of costs: (1) transaction account value divided by $1,000 = 8.6), expenses you paid for the period. You
costs, which may include sales charges then multiply the result by the number may use this information to compare the
(loads) on purchase payments or in the table under the heading entitled ongoing costs of investing in the fund
contingent deferred sales charges on "Actual Expenses Paid During Period" to and other Funds. To do so, compare this
redemptions, and redemption fees, if estimate the expenses you paid on your 5% hypothetical example with the 5%
any; and (2) ongoing costs, including account during this period. hypothetical examples that appear in the
management fees; distribution and/or shareholder reports of the other funds.
service (12b-1) fees; and other Fund HYPOTHETICAL EXAMPLE FOR
expenses. This example is intended to COMPARISON PURPOSES Please note that the expenses shown
help you understand your ongoing costs in the table are meant to highlight your
(in dollars) of investing in the Fund The table below also provides ongoing costs only and do not reflect
and to compare these costs with ongoing information about hypothetical account any transaction costs, such as sales
costs of investing in other mutual values and hypothetical expenses based charges (loads) on purchase payments,
funds. The example is based on an on the Fund's actual expense ratio and contingent deferred sales charges on
investment of $1,000 invested at the an assumed rate of return of 5% per year redemptions, and redemption fees, if
beginning of the period and held for the before expenses, which is not the Fund's any. Therefore, the hypothetical
entire period May 1, 2006, through actual return. The Fund's actual information is useful in comparing
October 31, 2006. cumulative total returns at net asset ongoing costs only, and will not help
value after expenses for the six months you determine the relative total costs
ACTUAL EXPENSES ended October 31, 2006, appear in the of owning different funds. In addition,
table "Cumulative Total Returns" on page if these transaction costs were
The table below provides information 9. included, your costs would have been
about actual account values and actual higher.
expenses. You may use the information in
this table, together with the amount you
invested, to
====================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
A $1,000.00 $1,024.60 $6.28 $1,019.00 $6.26 1.23%
B 1,000.00 1,020.70 10.08 1,015.22 10.06 1.98
C 1,000.00 1,020.70 10.08 1,015.22 10.06 1.98
Investor 1,000.00 1,024.90 6.28 1,019.00 6.26 1.23
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 six months ended October 31, 2006, appear in the table "Cumulative Total Returns" on page 9.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
7
AIM Global Health Care Fund
Your Fund's long-term performance
RESULTS OF A $10,000 INVESTMENT
Index data from 7/31/89, Fund data from 8/7/89
===============================================================================
[MOUNTAIN CHART]
DATE AIM GLOBAL HEALTH FUND MSCI WORLD
-CLASS A SHARES INDEX
7/31/89 $10000
8/89 $9533 9756
9/89 9574 10028
10/89 9780 9692
11/89 10120 10076
12/89 10286 10397
1/90 9822 9909
2/90 9830 9481
3/90 10103 8906
4/90 10103 8775
5/90 11197 9696
6/90 11495 9624
7/90 11520 9709
8/90 10758 8797
9/90 10326 7867
10/90 10633 8598
11/90 11354 8454
12/90 11635 8628
1/91 12409 8940
2/91 13438 9765
3/91 14212 9474
4/91 13924 9545
5/91 14621 9759
6/91 13941 9153
7/91 14927 9582
8/91 15301 9549
9/91 15455 9797
10/91 16399 9952
11/91 15779 9516
12/91 18375 10205
1/92 18134 10013
2/92 17379 9838
3/92 16215 9371
4/92 15197 9499
5/92 15557 9874
6/92 14949 9540
7/92 15557 9561
8/92 15171 9790
9/92 14828 9697
10/92 14940 9432
11/92 15881 9597
12/92 15889 9672
1/93 15323 9701
2/93 13337 9928
3/93 13525 10501
4/93 13610 10985
5/93 14423 11235
6/93 14466 11138
7/93 14081 11364
8/93 14184 11883
9/93 14749 11660
10/93 15289 11979
11/93 15443 11298
12/93 16302 11848
1/94 17410 12627
2/94 16714 12461
3/94 15622 11921
4/94 15588 12287
5/94 15527 12315
6/94 14695 12278
7/94 15314 12509
8/94 16894 12883
9/94 16885 12542
10/94 16835 12895
11/94 16422 12333
12/94 16350 12450
1/95 16877 12260
2/95 17201 12436
3/95 17754 13032
4/95 17311 13483
5/95 17247 13596
6/95 17524 13588
7/95 18625 14265
8/95 18977 13944
9/95 19891 14347
10/95 20168 14118
11/95 21241 14606
12/95 22394 15029
1/96 23541 15298
2/96 24235 15388
3/96 24708 15641
4/96 24898 16006
5/96 25319 16016
6/96 24129 16094
7/96 21931 15522
8/96 23731 15697
9/96 25490 16309
10/96 24837 16419
11/96 24996 17336
12/96 27736 17055
1/97 28670 17258
2/97 28865 17453
3/97 25448 17104
4/97 24069 17660
5/97 28319 18747
6/97 28639 19679
7/97 29117 20582
8/97 29493 19202
9/97 32628 20242
10/97 31887 19173
11/97 31068 19509
12/97 29949 19744
1/98 29527 20291
2/98 32016 21660
3/98 32061 22571
4/98 32574 22788
5/98 32063 22499
6/98 32893 23030
7/98 32729 22990
8/98 27404 19920
9/98 29168 20269
10/98 30391 22098
11/98 32412 23409
12/98 35474 24549
1/99 36652 25083
2/99 35476 24412
3/99 38612 25425
4/99 37782 26424
5/99 36875 25455
6/99 38276 26638
7/99 38322 26555
8/99 37479 26504
9/99 35110 26243
10/99 36195 27604
11/99 38157 28377
12/99 37428 30670
1/00 38128 28910
2/00 39726 28985
3/00 39610 30985
4/00 39179 29671
5/00 40609 28916
6/00 44219 29886
7/00 45134 29041
8/00 47296 29983
9/00 50559 28385
10/00 50125 27906
11/00 53122 26208
12/00 56920 26628
1/01 54581 27141
2/01 57425 24844
3/01 52021 23208
4/01 54325 24919
5/01 54847 24594
6/01 59992 23820
7/01 59416 23502
8/01 58768 22371
9/01 56488 20396
10/01 55578 20786
11/01 58402 22012
12/01 59611 22148
1/02 58007 21475
2/02 55118 21286
3/02 58282 22267
4/02 57641 21469
5/02 57238 21504
6/02 53260 20196
7/02 51358 18492
8/02 51060 18523
9/02 48834 16484
10/02 47936 17699
11/02 47936 18650
12/02 46095 17744
1/03 45348 17203
2/03 43144 16902
3/03 43550 16846
4/03 45091 18339
5/03 48406 19383
6/03 49945 19716
7/03 49815 20115
8/03 48874 20547
9/03 50926 20670
10/03 51527 21895
11/03 53130 22226
12/03 55977 23618
1/04 57819 23997
2/04 58311 24399
3/04 57646 24237
4/04 56896 23741
5/04 56276 23939
6/04 57070 24449
7/04 55592 23651
8/04 56320 23755
9/04 56038 24204
10/04 56425 24796
11/04 57001 26099
12/04 61105 27095
1/05 58819 26485
2/05 58819 27324
3/05 57302 26796
4/05 58201 26210
5/05 59680 26676
6/05 60127 26907
7/05 63272 27846
8/05 64430 28056
9/05 65139 28785
10/05 63686 28087
11/05 65272 29022
12/05 66427 29665
1/06 69031 30990
2/06 70198 30944
3/06 69797 31624
4/06 67327 32585
5/06 64903 31472
6/06 64572 31462
7/06 65540 31659
8/06 67854 32480
9/06 68098 32868
10/06 68899 34074
===============================================================================
SOURCE: LIPPER INC.
Past performance cannot guarantee chart and table(s) does not reflect during the early years shown in the
comparable future results. deduction of taxes a shareholder would chart. The vertical axis, the one that
pay on Fund distributions or sale of indicates the dollar value of an
The data shown in the chart include Fund shares. Performance of the indexes investment, is constructed with each
reinvested distributions, applicable does not reflect the effects of taxes. segment representing a percent change in
sales charges, Fund expenses and the value of the investment. In this
management fees. Index results include This chart, which is a logarithmic chart, each segment represents a
reinvested dividends, but they do not chart, presents the fluctuations in the doubling, or 100% change, in the value
reflect sales charges. Performance of an value of the Fund and its indexes. We of the investment. In other words, the
index of funds reflects fund expenses believe that a logarithmic chart is more space between $10,000 and $20,000 is the
and management fees; performance of a effective than other types of charts in same size as the space between $20,000
market index does not. Performance shown illustrating changes in value and $40,000, and so on.
in the
8
AIM Global Health Care Fund
======================================== ======================================== ========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/06, including applicable As of 9/30/06, the most recent calendar 6 months ended 10/31/06, excluding
sales charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 2.46%
Inception (8/7/89) 11.85% CLASS A SHARES Class B Shares 2.07
10 Years 10.12 Inception (8/7/89) 11.83% Class C Shares 2.07
5 Years 3.24 10 Years 9.70 Investor Class Shares 2.49
1 Year 2.37 5 Years 2.64 ========================================
1 Year -1.20
CLASS B SHARES
Inception (4/1/93) 12.51% CLASS B SHARES
10 Years 10.31 Inception (4/1/93) 12.49%
5 Years 3.46 10 Years 9.87
1 Year 2.52 5 Years 2.86
1 Year -1.25
CLASS C SHARES
Inception (3/1/99) 8.50% CLASS C SHARES
5 Years 3.81 Inception (3/1/99) 8.43%
1 Year 6.51 5 Years 3.21
1 Year 2.75
INVESTOR CLASS SHARES
10 Years 10.75% Investor Class Shares
5 Years 4.42 10 Years 10.32%
1 Year 8.35 5 Years 3.80
1 Year 4.51
======================================== =======================================
INVESTOR CLASS SHARES' INCEPTION DATE IS CANNOT GUARANTEE COMPARABLE FUTURE PERFORMANCE REFLECTS THE APPLICABLE
JULY 15, 2005. RETURNS SINCE THAT DATE RESULTS; CURRENT PERFORMANCE MAY BE CONTINGENT DEFERRED SALES CHARGE (CDSC)
ARE HISTORICAL RETURNS. ALL OTHER LOWER OR HIGHER. PLEASE VISIT FOR THE PERIOD INVOLVED. THE CDSC ON
RETURNS ARE BLENDED RETURNS OF AIMinvestments.com FOR THE MOST RECENT CLASS B SHARES DECLINES FROM 5%
HISTORICAL INVESTOR CLASS SHARE MONTH-END PERFORMANCE. PERFORMANCE BEGINNING AT THE TIME OF PURCHASE TO 0%
PERFORMANCE AND RESTATED CLASS A SHARE FIGURES REFLECT REINVESTED AT THE BEGINNING OF THE SEVENTH YEAR.
PERFORMANCE (FOR PERIODS PRIOR TO THE DISTRIBUTIONS, CHANGES IN NET ASSET THE CDSC ON CLASS C SHARES IS 1% FOR THE
INCEPTION DATE OF INVESTOR CLASS SHARES) VALUE AND THE EFFECT OF THE MAXIMUM FIRST YEAR AFTER PURCHASE. INVESTOR
AT NET ASSET VALUE, WHICH RESTATED SALES CHARGE UNLESS OTHERWISE STATED. CLASS SHARES DO NOT HAVE A FRONT-END
PERFORMANCE WILL REFLECT THE RULE 12b-1 INVESTMENT RETURN AND PRINCIPAL VALUE SALES CHARGE OR A CDSC; THEREFORE,
FEES APPLICABLE TO CLASS A SHARES FOR WILL FLUCTUATE SO THAT YOU MAY HAVE A PERFORMANCE IS AT NET ASSET VALUE.
THE PERIOD USING BLENDED RETURNS. CLASS GAIN OR LOSS WHEN YOU SELL SHARES.
A SHARES' INCEPTION DATE IS AUGUST 7, THE PERFORMANCE OF THE FUND'S SHARE
1989. CLASS A SHARE PERFORMANCE REFLECTS CLASSES WILL DIFFER PRIMARILY DUE TO
THE MAXIMUM 5.50% SALES CHARGE, AND DIFFERENT SALES CHARGE STRUCTURES AND
THE PERFORMANCE DATA QUOTED CLASS B AND CLASS C SHARE CLASS EXPENSES.
REPRESENT PAST PERFORMANCE AND
Continued from inside front cover
The SEC file numbers for the Fund are On the home page, scroll down and click click on Proxy Voting Activity. Next,
811-05426 and 033-19338. on AIM Funds Proxy Policy. The select the Fund from the drop-down menu.
information is also available on the SEC The information is also available on the
A description of the policies and Web site, sec.gov. SEC Web site, sec.gov.
procedures that the Fund uses to
determine how to vote proxies relating Information regarding how the Fund voted
to portfolio securities is available proxies related to its portfolio
without charge, upon request, from our securities during the 12 months ended
Client Services department at June 30, 2006, is available at our Web
800-959-4246 or on the AIM Web site, site. Go to AIMinvestments.com, access
AIMinvestments.com. the About Us tab, click on Required
Notices and then
9
AIM Global Health Care Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees of AIM Investment services to be provided by AIM under the whether to continue the Advisory
Funds (the "Board") oversees the Advisory Agreement was appropriate and Agreement for the Fund, the Board
management of AIM Global Health Care that AIM currently is providing services concluded that no changes should be made
Fund (the "Fund") and, as required by in accordance with the terms of the to the Fund and that it was not
law, determines annually whether to Advisory Agreement. necessary to change the Fund's portfolio
approve the continuance of the Fund's management team at this time. Although
advisory agreement with A I M Advisors, o The quality of services to be provided the independent written evaluation of
Inc. ("AIM"). Based upon the by AIM. The Board reviewed the the Fund's Senior Officer (discussed
recommendation of the Investments credentials and experience of the below) only considered Fund performance
Committee of the Board, at a meeting officers and employees of AIM who will through the most recent calendar year,
held on June 27, 2006, the Board, provide investment advisory services to the Board also reviewed more recent Fund
including all of the independent the Fund. In reviewing the performance, which did not change their
trustees, approved the continuance of qualifications of AIM to provide conclusions.
the advisory agreement (the "Advisory investment advisory services, the Board
Agreement") between the Fund and AIM for considered such issues as AIM's o Meeting with the Fund's portfolio
another year, effective July 1, 2006. portfolio and product review process, managers and investment personnel. With
various back office support functions respect to the Fund, the Board is
The Board considered the factors provided by AIM and AIM's equity and meeting periodically with such Fund's
discussed below in evaluating the fixed income trading operations. Based portfolio managers and/or other
fairness and reasonableness of the on the review of these and other investment personnel and believes that
Advisory Agreement at the meeting on factors, the Board concluded that the such individuals are competent and able
June 27, 2006 and as part of the Board's quality of services to be provided by to continue to carry out their
ongoing oversight of the Fund. In their AIM was appropriate and that AIM responsibilities under the Advisory
deliberations, the Board and the currently is providing satisfactory Agreement.
independent trustees did not identify services in accordance with the terms of
any particular factor that was the Advisory Agreement. o Overall performance of AIM. The Board
controlling, and each trustee attributed considered the overall performance of
different weights to the various o The performance of the Fund relative AIM in providing investment advisory and
factors. to comparable funds. The Board reviewed portfolio administrative services to the
the performance of the Fund during the Fund and concluded that such performance
One responsibility of the independent past one, three and five calendar years was satisfactory.
Senior Officer of the Fund is to manage against the performance of funds advised
the process by which the Fund's proposed by other advisors with investment o Fees relative to those clients of AIM
management fees are negotiated to ensure strategies comparable to those of the with comparable investment strategies.
that they are negotiated in a manner Fund. The Board noted that the Fund's The Board reviewed the effective
which is at arms' length and reasonable. performance was below the median advisory fee rate (before waivers) for
To that end, the Senior Officer must performance of such comparable funds for the Fund under the Advisory Agreement.
either supervise a competitive bidding the one and three year periods and above The Board noted that this rate was (i)
process or prepare an independent such median performance for the five below the effective advisory fee rate
written evaluation. The Senior Officer year period. The Board noted that AIM (before waivers) for a mutual fund
has recommended an independent written has recently made changes to the Fund's advised by AIM with investment
evaluation in lieu of a competitive portfolio management team, which need strategies comparable to those of the
bidding process and, upon the direction more time to be evaluated before a Fund; (ii) above the effective
of the Board, has prepared such an conclusion can be made that the changes sub-advisory fee rates for four offshore
independent written evaluation. Such have addressed the Fund's funds advised and sub-advised by AIM
written evaluation also considered under-performance. Based on this review affiliates with investment strategies
certain of the factors discussed below. and after taking account of all of the comparable to those of the Fund,
In addition, as discussed below, the other factors that the Board considered although the total advisory fees for two
Senior Officer made a recommendation to in determining whether to continue the such offshore funds were comparable to
the Board in connection with such Advisory Agreement for the Fund, the or above those for the Fund; and (iii)
written evaluation. Board concluded that no changes should comparable to the effective sub-advisory
be made to the Fund and that it was not fee rates for two variable insurance
The discussion below serves as a necessary to change the Fund's portfolio funds sub-advised by an AIM affiliate
summary of the Senior Officer's management team at this time. Although and offered to insurance company
independent written evaluation and the independent written evaluation of separate accounts with investment
recommendation to the Board in the Fund's Senior Officer (discussed strategies comparable to those of the
connection therewith, as well as a below) only considered Fund performance Fund, although the total advisory fees
discussion of the material factors and through the most recent calendar year, for such variable insurance funds were
the conclusions with respect thereto the Board also reviewed more recent Fund comparable to those for the Fund. The
that formed the basis for the Board's performance, which did not change their Board noted that AIM has agreed to waive
approval of the Advisory Agreement. conclusions. advisory fees of the Fund and to limit
After consideration of all of the the Fund's total annual operating
factors below and based on its informed o The performance of the Fund relative expenses, as discussed below. Based on
business judgment, the Board determined to indices. The Board reviewed the this review, the Board concluded that
that the Advisory Agreement is in the performance of the Fund during the past the advisory fee rate for the Fund under
best interests of the Fund and its one, three and five calendar years the Advisory Agreement was fair and
shareholders and that the compensation against the performance of the Lipper reasonable.
to AIM under the Advisory Agreement is Health/Biotech Fund Index. The Board
fair and reasonable and would have been noted that the Fund's performance was o Fees relative to those of comparable
obtained through arm's length below the performance of such Index for funds with other advisors. The Board
negotiations. the one and three year periods and above reviewed the advisory fee rate for the
such Index for the five year period. The Fund under the Advisory Agreement. The
Unless otherwise stated, information Board noted that AIM has recently made Board compared effective contractual
presented below is as of June 27, 2006 changes to the Fund's portfolio advisory fee rates at a common asset
and does not reflect any changes that management team, which need more time to level at the end of the past calendar
may have occurred since June 27, 2006, be evaluated before a conclusion can be year and noted that the Fund's rate was
including but not limited to changes to made that the changes have addressed the below the median rate of the funds
the Fund's performance, advisory fees, Fund's under-performance. Based on this advised by other advisors with
expense limitations and/or fee waivers. review and after taking account of all investment strategies comparable to
of the other factors that the Board those of the Fund that the Board
o The nature and extent of the advisory considered in determining reviewed. The Board noted that AIM has
services to be provided by AIM. The agreed to waive advisory fees of the
Board reviewed the services to be Fund and to limit
provided by AIM under the Advisory
Agreement. Based on such review, the
Board concluded that the range of (continued)
10
AIM Global Health Care Fund
the Fund's total annual operating higher net return, increased liquidity, advised by AIM are used to pay for
expenses, as discussed below. Based on increased diversification or decreased research and execution services. This
this review, the Board concluded that transaction costs. The Board also found research may be used by AIM in making
the advisory fee rate for the Fund under that the Fund will not receive reduced investment decisions for the Fund. The
the Advisory Agreement was fair and services if it invests its cash balances Board concluded that such arrangements
reasonable. in such money market funds. The Board were appropriate.
noted that, to the extent the Fund
o Expense limitations and fee waivers. invests uninvested cash in affiliated o AIM's financial soundness in light of
The Board noted that AIM has money market funds, AIM has voluntarily the Fund's needs. The Board considered
contractually agreed to waive advisory agreed to waive a portion of the whether AIM is financially sound and has
fees of the Fund through December 31, advisory fees it receives from the Fund the resources necessary to perform its
2009 to the extent necessary so that the attributable to such investment. The obligations under the Advisory
advisory fees payable by the Fund do not Board further determined that the Agreement, and concluded that AIM has
exceed a specified maximum advisory fee proposed securities lending program and the financial resources necessary to
rate, which maximum rate includes related procedures with respect to the fulfill its obligations under the
breakpoints and is based on net asset lending Fund is in the best interests of Advisory Agreement.
levels. The Board considered the the lending Fund and its respective
contractual nature of this fee waiver shareholders. The Board therefore o Historical relationship between the
and noted that it remains in effect concluded that the investment of cash Fund and AIM. In determining whether to
until December 31, 2009. The Board noted collateral received in connection with continue the Advisory Agreement for the
that AIM has voluntarily agreed to waive the securities lending program in the Fund, the Board also considered the
fees and/or limit expenses of the Fund money market funds according to the prior relationship between AIM and the
in an amount necessary to limit total procedures is in the best interests of Fund, as well as the Board's knowledge
annual operating expenses to a specified the lending Fund and its respective of AIM's operations, and concluded that
percentage of average daily net assets shareholders. it was beneficial to maintain the
for each class of the Fund. The Board current relationship, in part, because
considered the voluntary nature of this o Independent written evaluation and of such knowledge. The Board also
fee waiver/expense limitation and noted recommendations of the Fund's Senior reviewed the general nature of the
that it can be terminated at any time by Officer. The Board noted that, upon non-investment advisory services
AIM without further notice to investors. their direction, the Senior Officer of currently performed by AIM and its
The Board considered the effect these the Fund, who is independent of AIM and affiliates, such as administrative,
fee waivers/expense limitations would AIM's affiliates, had prepared an transfer agency and distribution
have on the Fund's estimated expenses independent written evaluation in order services, and the fees received by AIM
and concluded that the levels of fee to assist the Board in determining the and its affiliates for performing such
waivers/expense limitations for the Fund reasonableness of the proposed services. In addition to reviewing such
were fair and reasonable. management fees of the AIM Funds, services, the trustees also considered
including the Fund. The Board noted that the organizational structure employed by
o Breakpoints and economies of scale. the Senior Officer's written evaluation AIM and its affiliates to provide those
The Board reviewed the structure of the had been relied upon by the Board in services. Based on the review of these
Fund's advisory fee under the Advisory this regard in lieu of a competitive and other factors, the Board concluded
Agreement, noting that it includes six bidding process. In determining whether that AIM and its affiliates were
breakpoints. The Board reviewed the to continue the Advisory Agreement for qualified to continue to provide
level of the Fund's advisory fees, and the Fund, the Board considered the non-investment advisory services to the
noted that such fees, as a percentage of Senior Officer's written evaluation and Fund, including administrative, transfer
the Fund's net assets, have decreased as the recommendation made by the Senior agency and distribution services, and
net assets increased because the Officer to the Board that the Board that AIM and its affiliates currently
Advisory Agreement includes breakpoints. consider whether the advisory fee are providing satisfactory
The Board noted that, due to the Fund's waivers for certain equity AIM Funds, non-investment advisory services.
asset levels at the end of the past including the Fund, should be
calendar year and the way in which the simplified. The Board concluded that it o Other factors and current trends. The
advisory fee breakpoints have been would be advisable to consider this Board considered the steps that AIM and
structured, the Fund has yet to fully issue and reach a decision prior to the its affiliates have taken over the last
benefit from the breakpoints. The Board expiration date of such advisory fee several years, and continue to take, in
noted that AIM has contractually agreed waivers. order to improve the quality and
to waive advisory fees of the Fund efficiency of the services they provide
through December 31, 2009 to the extent o Profitability of AIM and its to the Funds in the areas of investment
necessary so that the advisory fees affiliates. The Board reviewed performance, product line
payable by the Fund do not exceed a information concerning the profitability diversification, distribution, fund
specified maximum advisory fee rate, of AIM's (and its affiliates') operations, shareholder services and
which maximum rate includes breakpoints investment advisory and other activities compliance. The Board concluded that
and is based on net asset levels. The and its financial condition. The Board these steps taken by AIM have improved,
Board concluded that the Fund's fee considered the overall profitability of and are likely to continue to improve,
levels under the Advisory Agreement AIM, as well as the profitability of AIM the quality and efficiency of the
therefore reflect economies of scale and in connection with managing the Fund. services AIM and its affiliates provide
that it was not necessary to change the The Board noted that AIM's operations to the Fund in each of these areas, and
advisory fee breakpoints in the Fund's remain profitable, although increased support the Board's approval of the
advisory fee schedule. expenses in recent years have reduced continuance of the Advisory Agreement
AIM's profitability. Based on the review for the Fund.
o Investments in affiliated money market of the profitability of AIM's and its
funds. The Board also took into account affiliates' investment advisory and
the fact that uninvested cash and cash other activities and its financial
collateral from securities lending condition, the Board concluded that the
arrangements, if any (collectively, compensation to be paid by the Fund to
"cash balances") of the Fund may be AIM under its Advisory Agreement was not
invested in money market funds advised excessive.
by AIM pursuant to the terms of an SEC
exemptive order. The Board found that o Benefits of soft dollars to AIM. The
the Fund may realize certain benefits Board considered the benefits realized
upon investing cash balances in AIM by AIM as a result of brokerage
advised money market funds, including a transactions executed through "soft
dollar" arrangements. Under these
arrangements, brokerage commissions paid
by the Fund and/or other funds
11
AIM Global Health Care Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-76.53%
BIOTECHNOLOGY-21.41%
Altus Pharmaceuticals Inc.(a) 158,074 $ 2,605,059
- ------------------------------------------------------------------------------
Amgen Inc.(a) 646,300 49,060,633
- ------------------------------------------------------------------------------
Arena Pharmaceuticals, Inc.(a) 249,846 3,810,151
- ------------------------------------------------------------------------------
Array BioPharma Inc.(a) 444,107 4,361,131
- ------------------------------------------------------------------------------
Biogen Idec Inc.(a) 500,886 23,842,173
- ------------------------------------------------------------------------------
BioMarin Pharmaceutical Inc.(a) 229,102 3,672,505
- ------------------------------------------------------------------------------
Celgene Corp.(a) 159,114 8,503,052
- ------------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc.(a) 326,221 7,264,942
- ------------------------------------------------------------------------------
Genentech, Inc.(a) 181,740 15,138,942
- ------------------------------------------------------------------------------
Genzyme Corp.(a) 658,462 44,452,770
- ------------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 637,543 43,926,713
- ------------------------------------------------------------------------------
Human Genome Sciences, Inc.(a) 704,412 9,403,900
- ------------------------------------------------------------------------------
InterMune, Inc.(a)(b) 174,945 3,866,284
- ------------------------------------------------------------------------------
Keryx Biopharmaceuticals, Inc.(a) 257,414 3,614,092
- ------------------------------------------------------------------------------
Mannkind Corp.(a)(b) 179,040 3,625,560
- ------------------------------------------------------------------------------
Medarex, Inc.(a) 413,074 5,336,916
- ------------------------------------------------------------------------------
MedImmune, Inc.(a) 68,819 2,204,961
- ------------------------------------------------------------------------------
Myogen, Inc.(a) 231,276 12,095,735
- ------------------------------------------------------------------------------
Myriad Genetics, Inc.(a) 144,240 3,878,614
- ------------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(a) 91,975 3,520,803
- ------------------------------------------------------------------------------
Panacos Pharmaceuticals Inc.(a) 596,617 4,092,793
- ------------------------------------------------------------------------------
PDL BioPharma Inc.(a) 617,936 13,056,988
- ------------------------------------------------------------------------------
Theravance, Inc.(a) 138,521 4,357,871
- ------------------------------------------------------------------------------
United Therapeutics Corp.(a)(b) 284,214 17,010,208
- ------------------------------------------------------------------------------
Vertex Pharmaceuticals Inc.(a) 324,099 13,158,419
- ------------------------------------------------------------------------------
ZymoGenetics, Inc.(a) 417,753 6,704,936
==============================================================================
312,566,151
==============================================================================
DRUG RETAIL-0.82%
CVS Corp. 379,329 11,903,344
==============================================================================
HEALTH CARE DISTRIBUTORS-0.88%
PSS World Medical, Inc.(a) 641,296 12,902,876
==============================================================================
HEALTH CARE EQUIPMENT-12.57%
Baxter International Inc. 350,840 16,128,115
- ------------------------------------------------------------------------------
Biomet, Inc. 310,117 11,734,827
- ------------------------------------------------------------------------------
Cytyc Corp.(a) 1,014,716 26,808,797
- ------------------------------------------------------------------------------
Dexcom Inc.(a) 760,328 6,690,886
- ------------------------------------------------------------------------------
Hospira, Inc.(a) 390,556 14,196,711
- ------------------------------------------------------------------------------
Mentor Corp. 462,067 21,624,735
- ------------------------------------------------------------------------------
NxStage Medical, Inc.(a)(b) 796,891 5,841,211
- ------------------------------------------------------------------------------
Respironics, Inc.(a) 524,200 18,514,744
- ------------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 298,343 10,248,082
- ------------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------------
<Caption>
HEALTH CARE EQUIPMENT-(CONTINUED)
Thoratec Corp.(a) 575,245 $ 9,060,109
- ------------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 238,400 13,078,624
- ------------------------------------------------------------------------------
Wright Medical Group, Inc.(a) 437,018 10,798,715
- ------------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 261,079 18,800,299
==============================================================================
183,525,855
==============================================================================
HEALTH CARE SERVICES-7.25%
DaVita, Inc.(a) 452,957 25,197,998
- ------------------------------------------------------------------------------
Express Scripts, Inc.(a) 210,314 13,401,208
- ------------------------------------------------------------------------------
HMS Holdings Corp.(a)(c) 697,959 9,589,957
- ------------------------------------------------------------------------------
Medco Health Solutions, Inc.(a) 748,199 40,028,646
- ------------------------------------------------------------------------------
Omnicare, Inc. 168,405 6,379,181
- ------------------------------------------------------------------------------
Quest Diagnostics Inc. 225,904 11,236,465
==============================================================================
105,833,455
==============================================================================
HEALTH CARE SUPPLIES-0.62%
Cooper Cos., Inc. (The) 157,601 9,082,546
==============================================================================
HEALTH CARE TECHNOLOGY-1.09%
Eclipsys Corp.(a) 506,262 10,727,692
- ------------------------------------------------------------------------------
TriZetto Group, Inc. (The)(a) 301,083 5,145,508
==============================================================================
15,873,200
==============================================================================
INDUSTRIAL CONGLOMERATES-1.78%
Tyco International Ltd. 884,484 26,030,364
==============================================================================
LIFE & HEALTH INSURANCE-0.69%
Universal American Financial Corp.(a) 543,805 10,109,335
==============================================================================
LIFE SCIENCES TOOLS & SERVICES-5.45%
Charles River Laboratories International,
Inc.(a) 344,138 14,770,403
- ------------------------------------------------------------------------------
Dionex Corp.(a) 148,481 8,077,367
- ------------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 102,816 8,803,106
- ------------------------------------------------------------------------------
Invitrogen Corp.(a) 208,884 12,117,361
- ------------------------------------------------------------------------------
Millipore Corp.(a) 15,710 1,013,766
- ------------------------------------------------------------------------------
Molecular Devices Corp.(a) 115,595 2,328,083
- ------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 580,980 18,388,017
- ------------------------------------------------------------------------------
Thermo Electron Corp.(a) 203,382 8,718,986
- ------------------------------------------------------------------------------
Varian Inc.(a) 113,006 5,298,851
==============================================================================
79,515,940
==============================================================================
MANAGED HEALTH CARE-7.20%
Aetna Inc. 358,216 14,765,663
- ------------------------------------------------------------------------------
Aveta, Inc. (Acquired 12/21/05; Cost
$9,929,723)(a)(d)(e) 735,535 12,504,095
- ------------------------------------------------------------------------------
Coventry Health Care, Inc.(a) 283,083 13,290,747
- ------------------------------------------------------------------------------
Health Net Inc.(a) 507,105 21,049,929
- ------------------------------------------------------------------------------
</Table>
F-1
AIM Global Health Care Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
MANAGED HEALTH CARE-(CONTINUED)
UnitedHealth Group Inc. 600,974 $ 29,315,512
- ------------------------------------------------------------------------------
WellPoint Inc.(a) 186,942 14,267,413
==============================================================================
105,193,359
==============================================================================
PHARMACEUTICALS-16.77%
Allergan, Inc. 209,604 24,209,262
- ------------------------------------------------------------------------------
Cadence Pharmaceuticals, Inc.(a) 372,454 3,575,558
- ------------------------------------------------------------------------------
Cypress Bioscience, Inc.(a) 512,317 4,037,058
- ------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings Inc.(a) 234,947 6,705,387
- ------------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 324,707 15,891,161
- ------------------------------------------------------------------------------
Johnson & Johnson 862,645 58,142,273
- ------------------------------------------------------------------------------
Lilly (Eli) and Co. 251,500 14,086,515
- ------------------------------------------------------------------------------
Medicines Co. (The)(a) 211,805 5,498,458
- ------------------------------------------------------------------------------
Pfizer Inc. 1,892,645 50,438,989
- ------------------------------------------------------------------------------
POZEN Inc.(a)(b) 248,481 4,132,239
- ------------------------------------------------------------------------------
Sepracor Inc.(a) 147,297 7,624,093
- ------------------------------------------------------------------------------
Warner Chilcott Ltd.-Class A(a) 716,017 9,451,424
- ------------------------------------------------------------------------------
Wyeth 706,922 36,074,230
- ------------------------------------------------------------------------------
Xenoport Inc.(a) 210,400 5,064,328
==============================================================================
244,930,975
==============================================================================
Total Domestic Common Stocks (Cost
$945,118,511) 1,117,467,400
==============================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-20.28%
AUSTRALIA-0.24%
CSL Ltd. (Biotechnology)(f) 82,064 3,560,173
==============================================================================
CANADA-1.05%
Cardiome Pharma Corp. (Pharmaceuticals)(a) 529,099 6,089,930
- ------------------------------------------------------------------------------
MDS Inc. (Life Sciences Tools & Services) 520,200 9,174,276
==============================================================================
15,264,206
==============================================================================
FRANCE-3.53%
Ipsen S.A. (Pharmaceuticals) (Acquired
12/06/05; Cost $15,863,951)(d)(f) 606,049 25,008,627
- ------------------------------------------------------------------------------
Sanofi-Aventis (Pharmaceuticals)(f) 313,000 26,585,039
==============================================================================
51,593,666
==============================================================================
GERMANY-1.27%
Merck KGaA (Pharmaceuticals) 175,391 18,490,861
==============================================================================
JAPAN-2.02%
Eisai Co., Ltd. (Pharmaceuticals)(f) 328,500 16,773,207
- ------------------------------------------------------------------------------
Shionogi & Co., Ltd. (Pharmaceuticals)(b)(f) 636,850 12,735,627
==============================================================================
29,508,834
==============================================================================
SPAIN-0.34%
Grifols S.A. (Biotechnology) (Acquired
05/16/06 Cost $2,701,233)(a)(d)(f) 480,110 5,018,549
==============================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------------
<Caption>
SWITZERLAND-9.70%
Novartis A.G.-ADR (Pharmaceuticals) 978,109 $ 59,400,560
- ------------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals)(f) 470,758 82,269,351
==============================================================================
141,669,911
==============================================================================
UNITED KINGDOM-2.13%
AstraZeneca PLC-ADR (Pharmaceuticals) 221,602 13,008,037
- ------------------------------------------------------------------------------
Shire PLC-ADR (Pharmaceuticals) 328,714 18,029,963
==============================================================================
31,038,000
==============================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $202,608,969) 296,144,200
==============================================================================
PREFERRED STOCKS-0.02%
BIOTECHNOLOGY-0.01%
Athersys Inc.-Series F, Conv. Pfd. (Acquired
04/17/00; Cost $5,000,000)(a)(d)(e)(g)(h) 416,667 235,293
- ------------------------------------------------------------------------------
Ingenex, Inc.-Series B, Pfd. (Acquired
09/27/94; Cost $600,000)(a)(d)(e)(g)(h) 103,055 0
==============================================================================
235,293
==============================================================================
PHARMACEUTICALS-0.01%
BioImagene, Inc.-Series B-2, Pfd. (Acquired
05/24/01; Cost $1,350,000)(a)(d)(e)(g)(h) 93,867 94,336
==============================================================================
Total Preferred Stocks (Cost $6,950,000) 329,629
==============================================================================
MONEY MARKET FUNDS-1.43%
Liquid Assets Portfolio-Institutional
Class(i) 10,405,502 10,405,502
- ------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(i) 10,405,502 10,405,502
==============================================================================
Total Money Market Funds (Cost
$20,811,004) 20,811,004
==============================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities loaned)-98.26% (Cost
$1,175,488,484) 1,434,752,233
==============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.10%
Liquid Assets Portfolio-Institutional
Class(i)(j) 8,025,662 8,025,662
- ------------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(i)(j) 8,025,662 8,025,662
==============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $16,051,324) 16,051,324
==============================================================================
TOTAL INVESTMENTS-99.36% (Cost
$1,191,539,808) 1,450,803,557
==============================================================================
OTHER ASSETS LESS LIABILITIES-0.64% 9,296,489
==============================================================================
NET ASSETS-100.00% $1,460,100,046
______________________________________________________________________________
==============================================================================
</Table>
F-2
AIM Global Health Care Fund
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security was out on loan at October 31, 2006.
(c) Affiliated company. The Investment Company Act of 1940 defines affiliates as
those issuances in which a fund holds 5% or more of the outstanding voting
securities. The Fund has not owned enough of the outstanding voting
securities of the issuer to have control (as defined in the Investment
Company Act of 1940) of that issuer. The value of this security as of
October 31, 2006 represented 0.66% of the Fund's Net Assets. See Note 3.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at October 31, 2006 was $42,860,900,
which represented 2.94% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(e) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The aggregate
value of these securities considered illiquid at October 31, 2006 was
$12,833,724, which represented 0.88% of the Fund's Net Assets.
(f) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2006 was $171,950,573,
which represented 11.78% of the Fund's Net Assets. See Note 1A.
(g) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at October 31, 2006 was $329,629, which represented 0.02% of the
Fund's Net Assets. See Note 1A.
(h) Security is considered venture capital.
(i) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(j) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
AIM Global Health Care Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $1,152,860,973)* $1,404,351,272
- ------------------------------------------------------------
Investments in affiliates, at value (cost
$38,678,835) 46,452,285
============================================================
Total investments (cost $1,191,539,808) 1,450,803,557
============================================================
Foreign currencies, at value (cost $518) 519
- ------------------------------------------------------------
Cash 1,715,290
- ------------------------------------------------------------
Receivables for:
Investments sold 43,073,141
- ------------------------------------------------------------
Fund shares sold 619,096
- ------------------------------------------------------------
Dividends 502,534
- ------------------------------------------------------------
Foreign currency contracts outstanding 4,275,400
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 210,751
- ------------------------------------------------------------
Other assets 27,508
============================================================
Total assets 1,501,227,796
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 14,974,969
- ------------------------------------------------------------
Fund shares reacquired 8,472,978
- ------------------------------------------------------------
Trustee deferred compensation and
retirement plans 301,787
- ------------------------------------------------------------
Collateral upon return of securities
loaned 16,051,324
- ------------------------------------------------------------
Accrued distribution fees 430,296
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 2,875
- ------------------------------------------------------------
Accrued transfer agent fees 741,052
- ------------------------------------------------------------
Accrued operating expenses 152,469
============================================================
Total liabilities 41,127,750
============================================================
Net assets applicable to shares outstanding $1,460,100,046
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,072,248,155
- ------------------------------------------------------------
Undistributed net investment income (loss) (196,077)
- ------------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies
and foreign currency contracts 124,513,802
- ------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and foreign
currency contracts 263,534,166
============================================================
$1,460,100,046
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 539,665,871
____________________________________________________________
============================================================
Class B $ 138,788,067
____________________________________________________________
============================================================
Class C $ 42,463,134
____________________________________________________________
============================================================
Investor Class $ 739,182,974
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 17,251,688
____________________________________________________________
============================================================
Class B 4,945,582
____________________________________________________________
============================================================
Class C 1,512,116
____________________________________________________________
============================================================
Investor Class 23,626,537
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 31.28
- ------------------------------------------------------------
Offering price per share
(Net asset value of $31.28 divided by
94.50%) $ 33.10
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 28.06
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 28.08
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 31.29
____________________________________________________________
============================================================
</Table>
* At October 31, 2006, securities with an aggregate value of $15,424,594 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM Global Health Care Fund
STATEMENT OF OPERATIONS
For the year ended October 31, 2006
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $745,126) $ 9,396,462
- --------------------------------------------------------------------------
Dividends from affiliates (includes securities lending
income of $296,727) 2,166,871
==========================================================================
Total investment income 11,563,333
==========================================================================
EXPENSES:
Advisory fees 9,503,577
- --------------------------------------------------------------------------
Administrative services fees 379,812
- --------------------------------------------------------------------------
Custodian fees 204,615
- --------------------------------------------------------------------------
Distribution fees:
Class A 1,393,021
- --------------------------------------------------------------------------
Class B 1,487,420
- --------------------------------------------------------------------------
Class C 452,253
- --------------------------------------------------------------------------
Investor Class 1,964,596
- --------------------------------------------------------------------------
Transfer agent fees 4,268,998
- --------------------------------------------------------------------------
Trustees' and officer's fees and benefits 43,786
- --------------------------------------------------------------------------
Other 524,759
==========================================================================
Total expenses 20,222,837
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (104,815)
==========================================================================
Net expenses 20,118,022
==========================================================================
Net investment income (loss) (8,554,689)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FOREIGN CURRENCY CONTRACTS
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (includes net gains from securities
sold to affiliates of $4,075,862) 143,887,046
- --------------------------------------------------------------------------
Foreign currencies 15,550
- --------------------------------------------------------------------------
Foreign currency contracts (4,356,776)
==========================================================================
139,545,820
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (9,650,044)
- --------------------------------------------------------------------------
Foreign currencies 68,353
- --------------------------------------------------------------------------
Foreign currency contracts (9,570)
- --------------------------------------------------------------------------
Option contracts written (175,192)
==========================================================================
(9,766,453)
==========================================================================
Net gain from investment securities, foreign currencies,
foreign currency contracts and option contracts 129,779,367
==========================================================================
Net increase in net assets resulting from operations $121,224,678
__________________________________________________________________________
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
AIM Global Health Care Fund
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2006 and 2005
<Table>
<Caption>
2006 2005
- ----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (8,554,689) $ (7,152,220)
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, foreign currency contracts and option
contracts 139,545,820 50,260,671
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, foreign
currency contracts and option contracts (9,766,453) 67,462,270
==============================================================================================
Net increase in net assets resulting from operations 121,224,678 110,570,721
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (17,233,165) --
- ----------------------------------------------------------------------------------------------
Class B (5,229,262) --
- ----------------------------------------------------------------------------------------------
Class C (1,560,543) --
- ----------------------------------------------------------------------------------------------
Investor Class (24,873,030) --
==============================================================================================
Decrease in net assets resulting from distributions (48,896,000) --
==============================================================================================
Share transactions-net:
Class A (40,904,171) (62,648,022)
- ----------------------------------------------------------------------------------------------
Class B (20,671,331) (32,952,102)
- ----------------------------------------------------------------------------------------------
Class C (4,768,512) (2,314,428)
- ----------------------------------------------------------------------------------------------
Investor Class (107,480,024) 787,288,620
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (173,824,038) 689,374,068
==============================================================================================
Net increase (decrease) in net assets (101,495,360) 799,944,789
==============================================================================================
NET ASSETS:
Beginning of year 1,561,595,406 761,650,617
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(196,077) and $(201,937), respectively) $1,460,100,046 $1,561,595,406
______________________________________________________________________________________________
==============================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
AIM Global Health Care Fund
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Health Care Fund (the "Fund") is a series portfolio of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of nine
separate series portfolios, each authorized to issue an unlimited number of
shares of beneficial interest. The Fund currently consists of multiple classes
of shares. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. 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.
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. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. 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.
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.
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
F-7
AIM Global Health Care Fund
gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to treat 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 to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- 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.
H. INDEMNIFICATIONS -- 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.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
J. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
K. COVERED CALL OPTIONS -- The Fund may write call options.. A call option
gives the purchaser of such option the right to buy, and the writer (the
Fund) the obligation to sell, the underlying security at the stated
exercise price during the option period. Written call options are recorded
as a liability in the Statement of Assets and Liabilities. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. If a written call option expires on the
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or a loss if the closing purchase
transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. If a written
option is exercised, the Fund realizes a gain or a loss from the sale of
the underlying security and the proceeds of the sale are increased by the
premium originally received.
F-8
AIM Global Health Care Fund
Realized gains and losses on these contracts are included in the Statement
of Operations. A risk in writing a call option is that the Fund gives up
the opportunity for profit if the market price of the security increases
and the option is exercised. Risks may exceed amounts recognized in the
Statement of Assets and Liabilities.
L. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $350 million 0.75%
- --------------------------------------------------------------------
Next $350 million 0.65%
- --------------------------------------------------------------------
Next $1.3 billion 0.55%
- --------------------------------------------------------------------
Next $2 billion 0.45%
- --------------------------------------------------------------------
Next $2 billion 0.40%
- --------------------------------------------------------------------
Next $2 billion 0.375%
- --------------------------------------------------------------------
Over $8 billion 0.35%
___________________________________________________________________
====================================================================
</Table>
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount
of 25% of the advisory fee AIM receives from the affiliated money market funds
on investments by the Fund in such affiliated money market funds (excluding
investments made in affiliated money market funds with cash collateral from
securities loaned by the fund). Voluntary fee waivers or reimbursements may be
modified or discontinued at any time upon consultation with the Board of
Trustees without further notice to investors.
For the year ended October 31, 2006, AIM waived advisory fees of $10,004.
At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP")
agreed to reimburse expenses incurred by the Fund in connection with market
timing matters in the AIM Funds, which may include legal, audit, shareholder
reporting, communications and trustee expenses. These expenses along with the
related expense reimbursement are included in the Statement of Operations. For
the year ended October 31, 2006, AMVESCAP reimbursed expenses of the Fund in the
amount of $3,570.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2006, AIM was paid $379,812.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AIS") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AIS for certain expenses
incurred by AIS in the course of providing such services. AIS may make payments
to intermediaries that provide omnibus account services, sub-accounting services
and/or networking services. All fees payable by AIS to intermediaries that
provide omnibus account services or sub-accounting are charged back to the Fund,
subject to certain limitations approved by the Trust's Board of Trustees. For
the year ended October 31, 2006, the Fund paid AIS $4,268,998.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C and Investor Class shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,
Class B, Class C and Investor Class shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays ADI compensation at the annual rate of 0.25% of the
Fund's average daily net assets of Class A shares, 1.00% of the average daily
net assets of Class B and Class C shares and 0.25% of the average daily net
assets of Investor Class shares. Of the Rule 12b-1 payments, up to 0.25% of the
average daily net assets of the Class A, Class B, Class C or Investor Class
shares may be paid to furnish continuing personal shareholder services to
customers who purchase and own shares of such classes. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge.
National Association of Securities Dealers ("NASD") Rules impose a cap on the
total sales charges, including asset-based sales charges that may be paid by any
class of shares of the Fund. Pursuant to the Plans, for the year ended October
31, 2006, the Class A, Class B, Class C and Investor Class shares paid
$1,393,021, $1,487,420, $452,253 and $1,964,596, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2006, ADI advised the Fund that it retained $92,711 in
front-end sales commissions from the sale of Class A shares and $805, $84,731
and $4,671 from Class A, Class B and Class C shares, respectively, for CDSC
imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
F-9
AIM Global Health Care Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant procedures approved by the Board of Trustees, to
invest daily available cash balances and cash collateral from securities lending
transactions in affiliated money market funds. The Fund and the money market
funds below have the same investment advisor and therefore, are considered to be
affiliated. The tables below show the transactions in and earnings from
investments in affiliated money market funds for the year ended October 31,
2006.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES AT PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/05 COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $14,651,082 $342,077,818 $(346,323,398) $ -- $10,405,502 $ 934,143 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-
Institutional
Class -- 104,576,664 (94,171,162) -- 10,405,502 462,977 --
- -----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 14,651,082 255,091,953 (269,743,035) -- -- 473,024 --
===================================================================================================================================
Subtotal $29,302,164 $701,746,435 $(710,237,595) $ -- $20,811,004 $1,870,144 $ --
===================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES AT PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/05 COST FROM SALES (DEPRECIATION) 10/31/06 INCOME* GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 87,949,707 $247,470,825 $(327,394,870) $ -- $ 8,025,662 $147,940 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 87,949,707 247,470,825 (327,394,870) -- 8,025,662 148,787 --
==================================================================================================================================
Subtotal $175,899,414 $494,941,650 $(654,789,740) $ -- $16,051,324 $296,727 $ --
==================================================================================================================================
</Table>
* Net of compensation to counterparties.
INVESTMENTS IN OTHER AFFILIATES:
The Investment Company Act of 1940 defines affiliates as those issuances in
which a fund holds 5% or more of the outstanding voting securities. The Fund has
not owned enough of the outstanding voting securities of the issuer to have
control (as defined in the Investment Company Act of 1940) of that issuer. The
following is a summary of the transactions with affiliates for the year ended
October 31, 2006
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
HMS Holdings
Corp. (cost
$1,816,507) $ 13,492,400 $ -- $ (11,367,799) $700,948 $ 9,589,957 $ -- $6,764,408
===================================================================================================================================
Total
Investments
in
Affiliates $218,693,978 $1,196,688,085 $(1,376,395,134) $700,948 $46,452,285 $2,166,871 $6,764,408
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended October 31, 2006, the Fund
engaged in securities sales of $16,074,256, which resulted in net realized gains
of $4,075,862, and securities purchases of $6,568,204.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the year
ended October 31, 2006, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $91,241.
F-10
AIM Global Health Care Fund
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2006, the Fund paid legal fees of $8,907
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the year ended October 31, 2006, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank 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 contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At October 31, 2006, securities with an aggregate value of $15,424,594 were
on loan to brokers. The loans were secured by cash collateral of $16,051,324
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended October 31, 2006, the Fund received dividends on cash
collateral investments of $296,727 for securities lending transactions, which
are net of compensation to counterparties.
F-11
AIM Global Health Care Fund
NOTE 9--FOREIGN CURRENCY CONTRACTS
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT -------------------------------------- VALUE UNREALIZED
DATE DELIVER RECEIVE 10/31/06 APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------------------
11/08/06 GBP 15,520,000 USD 29,610,590 $ 29,607,353 $ 3,237
- ---------------------------------------------------------------------------------------------------------------------------------
11/08/06 EUR 53,250,000 USD 68,879,203 67,996,949 882,254
- ---------------------------------------------------------------------------------------------------------------------------------
11/08/06 CHF 177,000,000 USD 145,747,530 142,392,079 3,355,451
=================================================================================================================================
Total open foreign currency contracts $4,240,942
=================================================================================================================================
</Table>
<Table>
<Caption>
CLOSED FOREIGN CURRENCY CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO
-------------------------------------- VALUE REALIZED
CLOSED DATE DELIVER RECEIVE 10/31/06 GAIN
- ---------------------------------------------------------------------------------------------------------------------------------
08/15/06 USD 3,563,258 EUR 2,750,000 $ 3,528,800 $ 34,458
=================================================================================================================================
Total foreign currency contracts $4,275,400
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
<Table>
CHF - Swiss Franc
EUR - Euro
GBP - British Pound Sterling
USD - U.S. Dollar
</Table>
NOTE 10--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
TRANSACTIONS DURING THE PERIOD
- ------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ------------------------------------------------------------------------------------
Beginning of period 600 $ 199,192
- ------------------------------------------------------------------------------------
Exercised (600) (199,192)
====================================================================================
End of period -- $ --
____________________________________________________________________________________
====================================================================================
</Table>
NOTE 11--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years October 31, 2006 and
2005 was as follows:
<Table>
<Caption>
2006 2005
- -----------------------------------------------------------------------------------
Distributions paid from long-term capital gain $48,896,000 $ --
___________________________________________________________________________________
===================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- ------------------------------------------------------------------------------
Undistributed long-term gain $ 138,569,904
- ------------------------------------------------------------------------------
Unrealized appreciation -- investments 249,478,064
- ------------------------------------------------------------------------------
Temporary book/tax differences (196,077)
- ------------------------------------------------------------------------------
Shares of beneficial interest 1,072,248,155
==============================================================================
Total net assets $1,460,100,046
______________________________________________________________________________
==============================================================================
</Table>
F-12
AIM Global Health Care Fund
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales and the tax deferral of losses on certain option contracts. The
tax-basis unrealized appreciation on investments amount includes appreciation on
foreign currencies of $29,475.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
The Fund does not have a capital loss carryforward as of October 31, 2006.
NOTE 12--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2006 was $1,245,371,171 and
$1,465,816,975, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $269,852,086
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (20,403,497)
==============================================================================
Net unrealized appreciation of investment securities $249,448,589
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $1,201,354,968.
</Table>
NOTE 13--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, merger expenses and net operating losses, on October 31, 2006,
undistributed net investment income (loss) was increased by $8,560,549,
undistributed net realized gain was decreased by $15,550 and shares of
beneficial interest decreased by $8,544,999. This reclassification had no effect
on the net assets of the Fund.
F-13
AIM Global Health Care Fund
NOTE 14--SHARE INFORMATION
The Fund currently consists of four different classes of shares: Class A, Class
B, Class C and Investor Class. Investor Class shares of the Fund are offered
only to certain grandfathered investors.
Class A shares are sold with a front-end sales charge unless certain waiver
criteria are met. Class B shares and Class C shares are sold with CDSC. Investor
Class shares are sold at net asset value. Under certain circumstances, Class A
shares are subject to CDSC. Generally, Class B shares will automatically convert
to Class A shares on or about the month-end which is at least eight years after
the date of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
2006(A) 2005
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,953,021 $ 59,888,031 1,946,091 $ 55,019,351
- ------------------------------------------------------------------------------------------------------------------------
Class B 450,233 12,430,712 537,747 13,820,503
- ------------------------------------------------------------------------------------------------------------------------
Class C 343,417 9,538,681 555,603 14,168,389
- ------------------------------------------------------------------------------------------------------------------------
Investor Class 1,056,376 32,328,843 369,060 11,047,153
========================================================================================================================
Issued as reinvestment of dividends:
Class A 537,542 16,276,764 -- --
- ------------------------------------------------------------------------------------------------------------------------
Class B 181,425 4,961,982 -- --
- ------------------------------------------------------------------------------------------------------------------------
Class C 53,848 1,473,808 -- --
- ------------------------------------------------------------------------------------------------------------------------
Investor Class 799,951 24,230,526 -- --
========================================================================================================================
Issued in connection with acquisitions:(b)
Class A -- -- 368,152 10,701,977
- ------------------------------------------------------------------------------------------------------------------------
Class B -- -- 117,495 3,103,206
- ------------------------------------------------------------------------------------------------------------------------
Class C -- -- 168,018 4,441,104
- ------------------------------------------------------------------------------------------------------------------------
Investor Class -- -- 28,635,830 832,396,790
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 211,052 6,451,381 385,626 10,779,491
- ------------------------------------------------------------------------------------------------------------------------
Class B (234,284) (6,451,381) (423,694) (10,779,491)
========================================================================================================================
Reacquired:
Class A (4,082,361) (123,520,347) (4,928,710) (139,148,841)
- ------------------------------------------------------------------------------------------------------------------------
Class B (1,148,199) (31,612,644) (1,531,933) (39,096,320)
- ------------------------------------------------------------------------------------------------------------------------
Class C (572,962) (15,781,001) (814,778) (20,923,921)
- ------------------------------------------------------------------------------------------------------------------------
Investor Class (5,353,563) (164,039,393) (1,881,117) (56,155,323)
========================================================================================================================
(5,804,504) $(173,824,038) 23,503,390 $ 689,374,068
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There is one entity that is record owner of more than 5% of the
outstanding shares of the Fund and it owns 9% 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
owned beneficially.
(b) As of the opening of business on July 18, 2005, the Fund acquired all
the net assets of AIM Health Sciences Fund pursuant to a plan of
reorganization approved by the Trustees of the Fund on March 22, 2005
and by the shareholders of AIM Health Sciences Fund on June 28, 2005.
The acquisition was accomplished by a tax free exchange of 29,289,495
shares of the Fund for 16,440,625 shares of AIM Health Sciences Fund
shares outstanding as of the close of business on July 15, 2005. Each
class of shares of AIM Health Sciences Fund was exchanged for the like
class of shares of the Fund based on the relative net asset value of AIM
Health Sciences Fund to the net asset value of the Fund on the close of
business, July 15, 2005. AIM Health Sciences Fund's net assets as of the
close of business on July 15, 2005 of $850,643,077, including
$80,900,111 of unrealized appreciation, were combined with the net
assets of the Fund immediately before the acquisition of $752,218,175.
The combined aggregate net assets of the Fund subsequent to the
reorganization were $1,602,861,252.
NOTE 15--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
F-14
AIM Global Health Care Fund
NOTE 16--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.77 $ 26.38 $ 24.09 $ 22.41 $ 29.93
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15) (0.18)(a) (0.17)(a) (0.13) (0.29)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.59 3.57 2.46 1.81 (3.17)
=======================================================================================================================
Total from investment operations 2.44 3.39 2.29 1.68 (3.46)
=======================================================================================================================
Less distributions from net realized
gains (0.93) -- -- -- (4.06)
=======================================================================================================================
Net asset value, end of period $ 31.28 $ 29.77 $ 26.38 $ 24.09 $ 22.41
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 8.31% 12.85% 9.51% 7.50% (13.76)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $539,666 $554,679 $550,319 $536,746 $533,216
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.22%(c) 1.48% 1.89% 1.94% 1.86%
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.22%(c) 1.60% 1.91% 1.94% 1.86%
=======================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.46)%(c) (0.64)% (0.63)% (0.56)% (1.10)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 83% 92% 64% 99% 153%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $557,208,445.
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.99 $ 24.08 $ 22.09 $ 20.66 $ 28.03
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.36 3.24 2.26 1.66 (2.93)
=======================================================================================================================
Total from investment operations 2.00 2.91 1.99 1.43 (3.31)
=======================================================================================================================
Less distributions from net realized
gains (0.93) -- -- -- (4.06)
=======================================================================================================================
Net asset value, end of period $ 28.06 $ 26.99 $ 24.08 $ 22.09 $ 20.66
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 7.52% 12.08% 9.01% 6.92% (14.21)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $138,788 $153,766 $168,468 $179,646 $187,793
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36%
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36%
=======================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 83% 92% 64% 99% 153%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $148,741,953.
F-15
AIM Global Health Care Fund
NOTE 16--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.01 $ 24.09 $ 22.11 $ 20.67 $ 28.03
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a)
- ------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.36 3.25 2.25 1.67 (2.92)
==================================================================================================================
Total from investment operations 2.00 2.92 1.98 1.44 (3.30)
==================================================================================================================
Less distributions from net realized
gains (0.93) -- -- -- (4.06)
==================================================================================================================
Net asset value, end of period $ 28.08 $ 27.01 $ 24.09 $ 22.11 $ 20.67
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 7.51% 12.12% 8.95% 6.97% (14.18)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $42,463 $45,591 $42,863 $43,482 $46,759
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36%
- ------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36%
==================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)%
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate 83% 92% 64% 99% 153%
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $45,225,318.
<Table>
<Caption>
INVESTOR CLASS
-------------------------------
JULY 15, 2005
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2006 2005
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.77 $ 28.95
- ---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15) (0.04)(a)
- ---------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.60 0.86
=============================================================================================
Total from investment operations 2.45 0.82
=============================================================================================
Less distributions from net realized gains (0.93) --
=============================================================================================
Net asset value, end of period $ 31.29 $ 29.77
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 8.35% 2.83%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $739,183 $807,560
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets 1.22%(c) 1.25%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (0.46)%(c) (0.41)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 83% 92%
_____________________________________________________________________________________________
=============================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $785,838,302.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-16
AIM Global Health Care Fund
NOTE 17--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 (Order No. 05-1318). The WVASC makes
findings of fact that AIM and ADI entered into certain arrangements permitting
market timing of the AIM Funds and failed to disclose these arrangements in the
prospectuses for such Funds, 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, including
restitution to affected investors, disgorgement of fees, reimbursement of
investigatory, administrative and legal costs and an "administrative
assessment," to be determined by the Commissioner. Initial research indicates
that these damages could be limited or capped by statute.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions (all the claims in
this category of lawsuits were dismissed with prejudice by the court on
September 29, 2006, except for the Section 36(b) claim which was dismissed
with leave to amend to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are
F-17
AIM Global Health Care Fund
NOTE 17--LEGAL PROCEEDINGS--(CONTINUED)
providing full cooperation with respect to these inquiries. Regulatory actions
and/or additional civil lawsuits related to these or other issues may be filed
against the AIM Funds, IFG, AIM and/or related entities and individuals in the
future.
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 and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-18
AIM Global Health Care Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Global Health Care Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Global Health Care Fund (one of
the funds constituting AIM Investment Funds, hereafter referred to as the
"Fund") at October 31, 2006, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 20, 2006
Houston, Texas
F-19
AIM Global Health Care Fund
TAX DISCLOSURES
REQUIRED FEDERAL INCOME TAX INFORMATION
The Fund distributed long-term capital gains of $48,896,000 for the Fund's tax
year ended October 31, 2006.
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2006, April 30, 2006, July 31, 2006 and
October 31, 2006 are 24.60%, 22.26%, 23.85% and 21.89%, respectively.
F-20
AIM Global Health Care Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm) and
Trustee and Vice Chair of The AIM Family
of Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
- -------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, A I M Management Group Inc.,
Principal AIM Mutual Fund Dealer Inc. (registered
Executive Officer broker dealer), AIM Funds Management
Inc. (registered investment advisor) and
1371 Preferred Inc. (holding company);
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Capital Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, AVZ Callco Inc. (holding
company); AMVESCAP Inc. (holding
company) and AIM Canada Holdings Inc.
(holding company); Director and Chief
Executive Officer, AIM Trimark Corporate
Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund
company) and AIM Trimark Canada Fund
Inc. (corporate mutual fund company);
Trustee, President and Principal
Executive Officer of The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
Powershares Capital Management LLC
Formerly: President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer,
AIM Funds Management Inc.; President,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and Director,
Trimark Trust (federally regulated
Canadian Trust Company)
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder
Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); CompuDyne Corporation
(provider of products and services to
the public security market); and
Homeowners of America Holding
Corporation (property casualty company)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and Director of various
affiliated Volvo companies; and
Director, Magellan Insurance Company
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired Director, Mainstay VP Series
Trustee Formerly: Partner, Deloitte & Touche Funds, Inc. (21 portfolios)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
F-21
TRUSTEES AND OFFICERS--(CONTINUED)
AIM Global Health Care Fund
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc. and A I M
Advisors, Inc.; Director, Vice President
and Secretary, INVESCO Distributors,
Inc.; Vice President and Secretary,
A I M Capital Management, Inc., AIM
Investment Services, Inc., and Fund
Management Company; Senior Vice
President and Secretary, A I M
Distributors, Inc.; Director, INVESCO
Funds Group Inc.; Senior Vice President,
Chief Legal Officer and Secretary of The
AIM Family of Funds--Registered
Trademark--; and Manager, Powershares
Capital Management LLC
Formerly: Chief Operating Officer,
Senior Vice President, General Counsel,
and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice
President and Secretary, PBHG Funds (an
investment company); Vice President and
Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel
and Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- ------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, AMVESCAP N/A
Vice President PLC; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- ------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Senior Vice President and General
Vice President Counsel, AMVESCAP PLC; Director, INVESCO
Funds Group, Inc.; and Vice President of
The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Vice President and N/A
General Counsel, Fund Management
Company; Director, Senior Vice
President, Secretary and General
Counsel, A I M Management Group Inc. and
A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Senior Vice President, A I M
Distributors, Inc.; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Chief
Executive Officer and President, INVESCO
Funds Group, Inc.; and Senior Vice
President, and General Counsel, Liberty
Financial Companies, Inc. and Senior
Vice President and General Counsel
Liberty Funds Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.; and Vice President,
Financial Officer and Treasurer and Principal Officer of The
Treasurer AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc. and Vice President
of The AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, Senior Vice
President and Senior Investment Officer,
A I M Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); and
President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust Only)
Formerly: Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- ------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc., Fund Management
Company and The AIM Family of
Funds--Registered Trademark--
Formerly: Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Global Head of Product
Development, AIG-Global Investment
Group, Inc.; Chief Compliance Officer
and Deputy General Counsel,
AIG-SunAmerica Asset Management; and
Chief Compliance Officer, Chief
Operating Officer and Deputy General
Counsel, American General Investment
Management
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers
Suite 100 11 Greenway Plaza Inc. LLP
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 225 Franklin Street
Floor 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Philadelphia, PA 19103-7599 Americas
New York, NY 10036-2714
</Table>
F-22
[eDelivery
GO PAPERLESS
AIMinvestments.com/edelivery
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REGISTER FOR eDELIVERY
eDelivery is the process of receiving your fund and account If used after January 20, 2007, this report must be
information via e-mail. Once your quarterly statements, tax accompanied by a Fund Performance & Commentary or by an AIM
forms, fund reports, and prospectuses are available, we will send Quarterly Performance Review for the most recent
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For security purposes, you will need to log in to your account to
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WHY SIGN UP? A I M Management Group Inc. has provided leadership in the
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Register for eDelivery to: Services, Inc. is the transfer agent for the products and
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o reduce the amount of paper you receive. of AMVESCAP PLC, one of the world's largest independent
financial services companies with $450 billion in assets
o gain access to your documents faster by not waiting for the under management as of October 31, 2006.
mail.
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES
o view your documents online anytime at your convenience. AND EXPENSES CAREFULLY. FOR THIS AND OTHER INFORMATION
ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL
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This AIM service is provided by AIM Investment Services, Inc. AIMinvestments.com GHC-AR-1 A I M Distributors, Inc.
[YOUR GOALS. OUR SOLUTIONS.]--Registered Trademark--
- ------------------------------------------------------------------------------
Mutual Retirement Annuities College Separately Offshore Cash
Funds Products Savings Managed Products Management
Plans Accounts [AIM INVESTMENTS LOGO APPEARS HERE]
- ------------------------------------------------------------------------------ --Registered Trademark--
FIXED INCOME AIM International Bond
Fund
Intermediate-Term Taxable
Investment Grade
Annual Report to Shareholders o October 31, 2006
Table of Contents
Supplemental Information............ 2
Letters to Shareholders............. 3
Performance Summary................. 5
Management Discussion............... 5
Fund Expenses....................... 7
Long-term Fund Performance.......... 8
Approval of Advisory Agreement...... 10
Schedule of Investments............. F-1
Financial Statements................ F-3
Notes to Financial Statements....... F-6
Financial Highlights................ F-13
Auditor's Report.................... F-15
Tax Disclosures..................... F-16 [COVER GLOBE IMAGE]
Trustees and Officers............... F-17
[AIM INVESTMENT SOLUTIONS]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[DOMESTIC [INTERNATIONAL/ [SECTOR
EQUITY] GLOBAL EQUITY] EQUITY]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[FIXED [ALLOCATION [DIVERSIFIED
INCOME] SOLUTIONS] PORTFOLIOS]
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM International Bond Fund
AIM INTERNATIONAL BOND FUND SEEKS TO PROVIDE TOTAL RETURN.
o Unless otherwise stated, information presented in this report is as of October 31, 2006, and is based on total net assets.
ABOUT SHARE CLASSES to other creditors' claims. Credit o A direct investment cannot be made in
ratings of junk bonds do not necessarily an index. Unless otherwise indicated,
o Class B shares are not available as an reflect their actual market risk. index results include reinvested
investment for retirement plans dividends, and they do not reflect sales
maintained pursuant to Section 401 of o The prices of and the income generated charges. Performance of an index of
the Internal Revenue Code, including by securities held by the Fund may funds reflects fund expenses;
401(k) plans, money purchase pension decline in response to certain factors, performance of a market index does not.
plans and profit sharing plans, except including some directly involving the
for plans that have existing accounts companies and governments whose OTHER INFORMATION
invested in Class B shares. securities are owned by the Fund. These
factors include general economic and o The returns shown in management's
PRINCIPAL RISKS OF INVESTING IN market conditions, regional or global discussion of Fund performance are based
THE FUND economic instability and currency and on net asset values calculated for
interest rate fluctuations. shareholder transactions. Generally
o Foreign securities have additional accepted accounting principles require
risks, including exchange rate changes, o The Fund may invest in mortgage and adjustments to be made to the net assets
political and economic upheaval, the asset-backed securities. These securities of the Fund at period end for financial
relative lack of information about these are subject to prepayment or call risk, reporting purposes, and as such, the net
companies, relatively low market which is the risk that payments from asset values for shareholder
liquidity and the potential lack of borrowers may be received earlier or transactions and the returns based on
strict financial and accounting controls later than expected due to changes in those net asset values may differ from
and standards. the rate at which the underlying loans the net asset values and returns
are prepaid. reported in the Financial Highlights.
o The Fund may invest in debt securities
such as notes and bonds that carry ABOUT INDEXES USED IN THIS REPORT o Industry classifications used in this
interest rate risk and credit risk. report are generally according to the
o The unmanaged LEHMAN BROTHERS GLOBAL Global Industry Classification Standard,
o The Fund may use enhanced investment AGGREGATE EX U.S. INDEX provides a which was developed by and is the
techniques such as leveraging and broad-based measure of the global exclusive property and a service mark of
derivatives. Leveraging entails special investment-grade fixed income markets. Morgan Stanley Capital International
risks such as magnifying changes in the The components of this index are the Inc. and Standard & Poor's.
value of the portfolio's securities. Pan-European Aggregate and the
Derivatives are subject to counter party Asia-Pacific Aggregate indexes. This o The Board of Trustees of AIM
risk--the risk that the other party will index also includes Euro-Yen corporate Investment Funds, on behalf of AIM
not complete the transaction with the bonds, Canadian government, agency and International Bond Fund, has approved
Fund. corporate securities. It is compiled by changing the Fund's name to "AIM
Lehman Brothers, a global investment International Total Return Fund,"
o There is no guarantee that the bank. effective February 28, 2007.
investment techniques and risk analyses
used by the Fund's managers will produce o The unmanaged LIPPER INTERNATIONAL o Effective January 1, 2007: The fund
the desired results. INCOME FUNDS INDEX represents an average generally declares dividends quarterly
of the performance of the 10 largest and pays dividends, if any, quarterly.
o The Fund is subject to international income funds tracked by
currency/exchange rate risk since it may Lipper Inc., an independent mutual fund The Fund provides a complete list of its
buy or sell currencies other than the performance monitor. holdings four times in each fiscal year,
U.S. dollar. at the quarter-ends. For the second and
o The Fund is not managed to track the fourth quarters, the lists appear in the
o The Fund may invest in lower quality performance of any particular index, Fund's semiannual and annual reports to
debt securities, commonly known as "junk including the indexes defined here, and shareholders. For the first and third
bonds." Compared to higher quality debt consequently, the performance of the quarters, the Fund files the lists with
securities, junk bonds involve greater Fund may deviate significantly from the the Securities and Exchange Commission
risk of default or price changes due to performance of the indexes. (SEC) on Form N-Q. The most recent list
changes in credit quality of the issuer, of portfolio holdings is available at
because they are generally unsecured and AIMinvestments.com. From our home page,
because they may be subordinated click on Products & Performance, then
Mutual Funds, then Fund
Continued on page 9
==========================================
FUND NASDAQ SYMBOLS
======================================================================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND Class A Shares AUBAX
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES Class B Shares AUBBX
AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class C Shares AUBCX
====================================================================================== ==========================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIMinvestments.com
2
AIM International Bond Fund
Dear Shareholders of The AIM Family of Funds
--Registered Trademark-- :
We're pleased to provide you with this report, which
includes a discussion of how your Fund was managed during
the review period ended October 31, 2006, and what factors
affected its performance.
[TAYLOR As we approach the end of 2006, it seems likely that
PHOTO] many investors may see the value of their investments
increase this year. Global equity markets, collectively,
recorded double-digit gains for the year ended October 31,
2006, as did the U.S. stock market. Also, the investment
grade bond market in the United States rose for the same
period.
While stock and bond markets generally enjoyed positive
year-to-date returns, their performance was affected by
short-term economic and geopolitical events. For example,
Philip Taylor the U.S. stock market was weak in the second quarter of
2006 when it appeared that inflation might be rising. Only
after the U.S. Federal Reserve Board decided in August that
inflation was contained and that short-term interest rates
need not be increased--the first time it kept rates
unchanged in more than two years--did equities truly surge.
Short-term market fluctuations are a fact of life for
all investors. At AIM Investments--Registered Trademark-- ,
we believe that investors can do two things to deal with
short-term market fluctuations: maintain a long-term
investment horizon and maintain a diversified portfolio.
AIM Investments can help by offering a broad product line
that gives your financial advisor the necessary tools to
build a portfolio that's right for you regardless of market
conditions. AIM Investments offers a comprehensive range of
retail mutual funds, including domestic, global and
international equity funds, taxable and tax-exempt
fixed-income funds, and a variety of allocation
portfolios--with varied risk and return characteristics to
match your needs. We maintain this extensive set of product
solutions for one reason: We believe in the value of
comprehensive, diversified investment portfolios.
We've changed the look of our annual reports to reflect
that belief. In our marketing and now our shareholder
literature, we represent a fully diversified portfolio
graphically as an allocation pie chart and assign each
asset class a color--green for domestic equity, blue for
international, orange for sector and purple for fixed
income. A legend in the left column illustrates the
methodology. Your report cover now shows your Fund's asset
class color, plus the asset class and sub-asset class name
are shown in the upper-left corner. The reason for these
changes is to help you better understand where your Fund
fits into your overall portfolio.
AIM has a variety of investment solutions, and knowing
which ones are right for your portfolio is complex. That's
why we also believe in the value of a trusted financial
advisor who will work with you to create an investment plan
you can stick with for the long term. Your financial
advisor can help allocate your portfolio appropriately and
review your investments regularly to help ensure they
remain suitable as your financial situation changes. While
there are no guarantees with any investment program, a long
-term plan that's based on your financial goals, risk
tolerance and time horizon is more likely to keep you and
your investments on track.
OUR COMMITMENT TO YOU
In the short term, the one sure thing about markets is
their unpredictability. While past performance cannot
guarantee comparable future results, we believe that
staying invested for the long term with a thoughtful plan
offers the best opportunity for weathering that
unpredictability. We at AIM Investments remain committed to
building enduring solutions to help you achieve your
investment goals, and we're pleased you've placed your
trust in us.
Information about investing, the markets and your Fund
is always available on our Web site, AIMinvestments.com. If
you have questions about your individual account, we invite
you to contact one of our highly trained client services
representatives at 800-959-4246.
Sincerely,
/S/ PHILIP TAYLOR
Philip Taylor
President - AIM Funds
CEO, AIM Investments
December 14, 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. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
3
AIM International Bond Fund
Dear Fellow AIM Fund Shareholders:
At our meeting at the end of June, your Board completed its
comprehensive review* of each fund's advisory agreement
with A I M Advisors, Inc. (AIM) to make certain your
interests are being served in terms of fees, performance
and operations.
Looking ahead, your Board finds many reasons to be
positive about AIM's management and strategic direction.
[CROCKETT Most importantly, AIM's investment management discipline
PHOTO] has paid off in terms of improved overall performance. We
are also pleased with AIM's efforts to seek more
cost-effective ways of delivering superior service.
In addition, AIM is realizing the benefits of belonging
to a leading independent global investment management
Bruce L. Crockett organization in its parent company, AMVESCAP PLC, which is
dedicated to helping people worldwide build their financial
security. AMVESCAP managed approximately $450 billion
globally as of October 31, 2006, operating under the AIM,
INVESCO, AIM Trimark, INVESCO PERPETUAL and Atlantic Trust
brands. These companies are home to an abundance of
investment talent that is gradually being integrated and
leveraged into centers of excellence, each focusing on a
given market segment or asset class. Over the next few
years, your Board will be meeting at these various centers
of excellence to learn about their progress and how they
may serve you through our goal of enhancing performance and
reducing costs.
The seven new AIM funds--which include Asian funds,
structured U.S. equity funds and specialized bond
funds--are an early example of the kind of opportunities
the AMVESCAP organization can provide AIM clients. More
information on these funds can be found on AIM's Web site.
Your Board is very pleased with the overall direction
and progress of the AIM Funds. We're working closely and
effectively with AIM's management to continue this
momentum. As always, your Board is eager to hear your views
on how we might better serve you. Please send your comments
in a letter addressed to me at AIM Investments, AIM
Investments Tower, 11 Greenway Plaza, Suite 100, Houston TX
77046.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board
December 14, 2006
*To learn more about all the factors we considered before
approving each fund's advisory agreement, go to the
"Products & Performance" tab at the AIM Web site
(AIMinvestments.com) and click on "Investment Advisory
Agreement Renewals." The approval of advisory agreement
information for your Fund is also included in this annual
report on pages 10-11.
4
AIM International Bond Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The Fund seeks to outperform its
benchmark through implementation of
strategies associated with a variety of
====================================================================================== alpha sources (specific factors
affecting the return in investments
PERFORMANCE SUMMARY relative to an index), including high
yield, emerging market, country and
For the period from the Fund's inception on March 31, 2006, through October 31, currency risk.
2006, AIM International Bond Fund, excluding applicable sales charges, slightly
underperformed the Lehman Brothers Global Aggregate ex U.S. Index (unhedged). In constructing the portfolio, we
The majority of this underperformance came from the Fund's defensive duration consider macroeconomic and sector level
positioning, especially during the third quarter of 2006, when longer maturity factors such as economic or political
European and Japanese bonds outperformed significantly shorter maturity bonds. conditions, monetary policy and emerging
market trends. Factors we take into
Your Fund's performance appears on pages 8 and 9. consideration in selecting an individual
security for the portfolio include cash
FUND VS. INDEXES flow coverage, revenue growth, stability
of credit ratings and business margin
Cumulative total returns, 3/31/06-10/31/06, excluding applicable sales charges. conditions.
If sales charges were included, returns would be lower.
We will consider selling a particular
Class A Shares 6.14% security when the risk factors relative
Class B Shares 5.55 to its potential return materially
Class C Shares 5.65 change.
Lehman Brothers Global Aggregate ex U.S. Index (unhedged)
(Broad Market and Style-specific Index) 6.39 MARKET CONDITIONS AND YOUR FUND
Lipper International Income Funds Index (Peer Group Index) 4.33
Economic activity in the United States
SOURCE: LIPPER INC., LEHMAN BROTHERS INC. slowed down as a result of two-year
tightening by the U.S. Federal Reserve
====================================================================================== Board (the Fed), record nominal oil
prices and a slowing housing market.
HOW WE INVEST instruments, such as swaps (including U.S. gross domestic product (GDP), the
interest rate, currency, and credit broadest measure of the U.S. economic
Our goal is to provide total return. The default swaps), put and call options, activity, advanced at an annualized rate
Fund seeks to meet this objective by futures and forward currency contracts. of 2.6% in the second quarter of 2006,
attempting to exceed the return of the down from the exceptionally strong 5.6%
Lehman Brothers Global Aggregate ex U.S. The Fund uses the Lehman Brothers annualized growth rate recorded in the
Index (unhedged). Global Aggregate ex U.S. Index (unhedged) first quarter. The economic growth
as a guide in structuring and selecting continued to slow in the third quarter,
We invest in a diversified portfolio its investments by applying top-down with GDP growing at an annualized rate
of foreign government and corporate debt and bottom-up analysis in portfolio of 2.2%, the weakest pace in three
securities. We may also invest in construction. Top-down analysis takes years.
structured securitized debt securities, into account general economic and market
including asset-backed securities and trends while bottom-up analysis involves The economy in Japan maintained its
both residential and commercial evaluation of securities on an moderate expansion as a result of strong
mortgage-backed securities. In managing individual basis. corporate activity and growth of
the portfolio, we may use synthetic and exports. Japan's GDP
derivative
(continued)
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 ISSUERS*
By security type 1. Germany 24.1% 1. Bundesobligation (Germany) 7.2%
2. United States of America 11.3 2. Bundesrepublik Deutschland
Non-U.S. Dollar Denominated 3. Luxembourg 7.3 (Germany) 7.1
Bonds & Notes 87.7% 4. Poland 6.6 3. Poland Government (Poland) 6.5
U.S. Government Agency 5. Spain 5.2 4. Rabobank Nederland
Securities 4.5 (Netherlands) 4.6
U.S. Dollar Denominated Total Net Assets $26.99 million 5. Caixa d'Estalvis de Catalunya
Bonds & Notes 1.9 (Spain) 4.5
Money Market Funds and U.S. Total Number of Holdings 41 6. Federal National Mortgage
Treasury Securities Plus Other Association (United States of
Assets Less Liabilities 5.9 America) 4.5
7. European Investment Bank
(Luxembourg) 4.5
8. Depfa ACS Bank (Ireland) 4.4
9. Landwirtschaftliche
Rentenbank (Germany) 4.4
10. China Government (China) 4.2
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
5
AIM International Bond Fund
grew at annualized rate of 1.0% in the Fund's performance over the past several WARRANTY AS TO THEIR COMPLETENESS OR
second quarter of 2006, a slightly months. During the first half of the ACCURACY. ALTHOUGH HISTORICAL
faster rate than its initial estimate of reporting period, many of the world's PERFORMANCE IS NO GUARANTEE OF FUTURE
0.8%. The economic fundamentals in the fixed income markets posted mixed RESULTS, THESE INSIGHTS MAY HELP YOU
euro area have improved significantly results. However, the weaker U.S. dollar UNDERSTAND OUR INVESTMENT MANAGEMENT
since the beginning of this year. The helped to improve returns for U.S. PHILOSOPHY.
release of second quarter GDP data investors as the record-setting U.S.
showed 0.9% quarter-over-quarter growth, trade and budget deficit weighed on the See important Fund and index
outpacing the United States, and the dollar. During the second part of the disclosures on the inside front cover.
fastest growth since 2000. reporting period, the euro and yen
depreciated relative to the U.S. dollar. Simon Chennell
On June 29, the Fed announced its Our strategic overweight in the euro in
17th consecutive interest rate increase July and August and then a move to an Portfolio manager, is co-portfolio
and raised the federal funds target rate underweight position in September manager of AIM International Bond Fund.
by 25 basis points (0.25%) to 5.25%. benefited the Fund, but the Fund's Mr. Chennell began his investment career
However, signs of a cooling U.S. economy currency position in the yen and Swiss in 1994 and joined the Fund's advisor in
prompted investors to conclude that the franc detracted from currency-related 1996. After working in the institutional
need for further interest rate hikes was returns for U.S. investors. client service area, he moved to the
diminishing. In line with these fixed-income fund management group in
expectations, the Fed kept its target An improving interest rate outlook 1999. Since 2001, he has focused on
for the federal funds rate unchanged at and increased tolerance for risk were credit analysis, specializing in
5.25% for two consecutive meetings in reflected in the relatively stronger telecommunications, media, technology,
August and September. returns of emerging markets debt. A basic resources and service market
number of so-called "third-world" issuers.
The Fed was not alone, as the nations have adopted policies helping to
European Central Bank (ECB) has raised bring down their previously soaring Mark Dowding
its interest rate for the 12-nation euro rates of inflation. Many positive
zone five times since last December, developments have resulted, particularly Portfolio manager, is co-portfolio
bringing it to 3.5% by the end of the in eastern Europe, as countries of this manager of AIM International Bond Fund.
reporting period. In addition, the Bank region have reformed their financial As director of the advisor's U.K. and
of Japan also changed course, first systems to qualify for inclusion in the Global Fixed Income group, he is
ending the Quantitative Easing Policy, European Union. Specifically, in this responsible for managing multi-currency
and then in July, raising rates 0.25% region the Fund maintained its exposure global fixed-income portfolios for
from zero for the first time in six in Polish bonds, as we observed the retail and institutional clients. Mr.
years. Polish economy growing rapidly over the Dowding joined the Fund's advisor in
past few years. 2000; prior to that, he served as a
Global bonds were weaker through the senior fixed-income fund manager at
second quarter of 2006 as growth and The global high yield bond market has another investment firm. He earned a
inflation expectations rose and the been one of the best performing sectors B.S. in economics from the University of
market anticipated continued Fed rate so far this year. The returns of the Warwick.
hikes. However, this situation reversed global high yield sector were driven by
early in July with bonds performing its large exposure to the U.S. high Russel Matthews
strongly through August and September as yield market. As we maintained our
economists and analysts began to take underweight positions in higher yielding Portfolio manager, is co-portfolio
note of the steep declines in house credits and emerging markets bonds, manager of AIM International Bond Fund.
prices, and language from the Fed seemed these strategies had a neutral impact on Prior to joining the Fund's advisor in
to indicate U.S. base rates would not performance. 2000, Mr. Matthews worked at another
rise much further. asset management firm. He earned a B.A.
IN CLOSING in economics and journalism from Rhodes
With regard to our duration University, South Africa, and a
management strategy, the Fund was Thank you for sharing our long-term postgraduate diploma in management from
positioned defensively through most of investment horizon and for your The University of Cape Town.
the period as we believed that continued investment in AIM
inflation-adjusted yields in Europe and International Bond Fund. Lindsay Missen
Japan were too low and set to rise. The
Fund's short duration strategy put it at THE VIEWS AND OPINIONS EXPRESSED IN Portfolio manager, is co-portfolio
a structural disadvantage in the third MANAGEMENT'S DISCUSSION OF FUND manager of AIM International Bond Fund.
quarter of 2006, and overall had a PERFORMANCE ARE THOSE OF A I M ADVISORS, He specializes in the construction of
slightly negative impact on performance. INC. THESE VIEWS AND OPINIONS ARE global fixed-income portfolios. Prior to
SUBJECT TO CHANGE AT ANY TIME BASED ON joining the Fund's advisor in 1994, Mr.
On a more positive note, overweight FACTORS SUCH AS MARKET AND ECONOMIC Missen worked at a bank and an asset
positions in longer maturity bonds in CONDITIONS. THESE VIEWS AND OPINIONS MAY management firm in New Zealand. He
Japan and Europe contributed positively NOT BE RELIED UPON AS INVESTMENT ADVICE earned a bachelor of management studies
to the Fund's relative performance. OR RECOMMENDATIONS, OR AS AN OFFER FOR A degree from Waikato University in New
PARTICULAR SECURITY. THE INFORMATION IS Zealand.
Changes in currency exchange rates NOT A COMPLETE ANALYSIS OF EVERY ASPECT
continued to represent a significant OF ANY MARKET, COUNTRY, INDUSTRY,
driver of the SECURITY OR THE FUND. STATEMENTS OF FACT
ARE FROM SOURCES CONSIDERED RELIABLE,
BUT A I M ADVISORS, INC. MAKES NO For a presentation of your Fund's
REPRESENTATION OR performance, please see pages 8 and 9.
6
4
AIM International Bond Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE together with the amount you invested, The hypothetical account values and
to estimate the expenses that you paid expenses may not be used to estimate the
As a shareholder of the Fund, you incur over the period. Simply divide your actual ending account balance or
two types of costs: (1) transaction account value by $1,000 (for example, an expenses you paid for the period. You
costs, which may include sales charges $8,600 account value divided by $1,000 = may use this information to compare the
(loads) on purchase payments or 8.6), then multiply the result by the ongoing costs of investing in the Fund
contingent deferred sales charges on number in the table under the heading and other funds. To do so, compare this
redemptions, and redemption fees, if entitled "Actual Expenses Paid During 5% hypothetical example with the 5%
any; and (2) ongoing costs, including Period" to estimate the expenses you hypothetical examples that appear in the
management fees; distribution and/or paid on your account during this period. shareholder reports of the other funds.
service (12b-1) fees; and other Fund
expenses. This example is intended to HYPOTHETICAL EXAMPLE FOR Please note that the expenses shown
help you understand your ongoing costs COMPARISON PURPOSES in the table are meant to highlight your
(in dollars) of investing in the Fund ongoing costs only and do not reflect
and to compare these costs with ongoing The table below also provides any transaction costs, such as sales
costs of investing in other mutual information about hypothetical account charges (loads) on purchase payments,
funds. The example is based on an values and hypothetical expenses based contingent deferred sales charges on
investment of $1,000 invested at the on the Fund's actual expense ratio and redemptions, and redemption fees, if
beginning of the period and held for the an assumed rate of return of 5% per year any. Therefore, the hypothetical
entire period May 1, 2006, through before expenses, which is not the Fund's information is useful in comparing
October 31, 2006. actual return. The Fund's actual ongoing costs only, and will not help
cumulative total returns at net asset you determine the relative total costs
ACTUAL EXPENSES value after expenses for the six months of owning different funds. In addition,
ended October 31, 2006, appear in the if these transaction costs were
The table below provides information table "Cumulative Total Returns" on page included, your costs would have been
about actual account values and actual 9. higher.
expenses. You may use the information in
this table,
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
A $1,000.00 $1,019.90 $5.85 $1,019.41 $5.85 1.15%
B 1,000.00 1,014.80 9.65 1,015.63 9.65 1.90
C 1,000.00 1,015.80 9.65 1,015.63 9.65 1.90
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through
October 31, 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 six months ended October 31, 2006, appear in the far-right table "Cumulative
Total Returns" on page 9.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
7
AIM International Bond Fund
YOUR FUND'S PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
Fund and index data from 3/31/06
====================================================================================================================================
[MOUNTAIN CHART]
AIM INTERNATIONAL AIM INTERNATIONAL AIM INTERNATIONAL LEHMAN BROTHERS LIPPER INTERNATIONAL
BOND FUND BOND FUND BOND FUND GLOBAL AGGREGATE INCOME FUNDS
DATE -CLASS A SHARES -CLASS B SHARES -CLASS C SHARES EX-U.S. INDEX INDEX
3/31/06 $ 9525 $10000 $10000 $10000 $10000
4/06 9913 10400 10400 10324 10192
5/06 10064 10542 10542 10547 10262
6/06 9954 10419 10419 10400 10203
7/06 10024 10487 10487 10480 10263
8/06 10095 10555 10555 10577 10355
9/06 10013 10462 10462 10517 10304
10/06 10109 10055 10465 10639 10433
====================================================================================================================================
SOURCE: LIPPER INC.
Past performance cannot guarantee include reinvested dividends, but they
comparable future results. do not reflect sales charges.
Performance of an index of funds
The data shown in the chart include reflects fund expenses and management
reinvested distributions, applicable fees; performance of a market index does
sales charges, Fund expenses and not. Performance shown in the chart and
management fees. Results for Class B table(s) does not reflect deduction of
shares are calculated as if a taxes a shareholder would pay on Fund
hypothetical shareholder had liquidated distributions or sale of Fund shares.
his entire investment in the Fund at the Performance of the indexes does not
close of the reporting period and paid reflect the effects of taxes.
the applicable contingent deferred sales
charges. Index results
</Table>
8
========================================== ========================================== ==========================================
CUMULATIVE TOTAL RETURNS CUMULATIVE TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/06, including applicable As of 9/30/06, the most recent calendar 6 months ended 10/31/06, excluding
sales charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES CLASS A SHARES Class A Shares 1.99%
Inception (3/31/06) 1.09% Inception (3/31/06) 0.12% Class B Shares 1.48
Class C Shares 1.58
CLASS B SHARES CLASS B SHARES
Inception (3/31/06) 0.55% Inception (3/31/06) -0.37%
CLASS C SHARES CLASS C SHARES
Inception (3/31/06) 4.65% Inception (3/31/06) 3.63%
========================================== ========================================== ==========================================
THE PERFORMANCE DATA QUOTED REPRESENT THAT YOU MAY HAVE A GAIN OR LOSS WHEN THE PERFORMANCE OF THE FUND'S SHARE
PAST PERFORMANCE AND CANNOT GUARANTEE YOU SELL SHARES. CLASSES WILL DIFFER PRIMARILY DUE TO
COMPARABLE FUTURE RESULTS; CURRENT DIFFERENT SALES CHARGE STRUCTURES AND
PERFORMANCE MAY BE LOWER OR HIGHER. CLASS A SHARE PERFORMANCE REFLECTS CLASS EXPENSES.
PLEASE VISIT AIMINVESTMENTS.COM FOR THE THE MAXIMUM 4.75% SALES CHARGE, AND
MOST RECENT MONTH-END PERFORMANCE. CLASS B AND CLASS C SHARE PERFORMANCE HAD THE ADVISOR NOT WAIVED FEES
PERFORMANCE FIGURES REFLECT REINVESTED REFLECTS THE APPLICABLE CONTINGENT AND/OR REIMBURSED EXPENSES, PERFORMANCE
DISTRIBUTIONS, CHANGES IN NET ASSET DEFERRED SALES CHARGE (CDSC) FOR THE WOULD HAVE BEEN LOWER.
VALUE AND THE EFFECT OF THE MAXIMUM PERIOD INVOLVED. THE CDSC ON CLASS B
SALES CHARGE UNLESS OTHERWISE STATED. SHARES DECLINES FROM 5% BEGINNING AT THE A REDEMPTION FEE OF 2% WILL BE
INVESTMENT RETURN AND PRINCIPAL VALUE TIME OF PURCHASE TO 0% AT THE BEGINNING IMPOSED ON CERTAIN REDEMPTIONS OR
WILL FLUCTUATE SO OF THE SEVENTH YEAR. THE CDSC ON CLASS C EXCHANGES OUT OF THE FUND WITHIN 30 DAYS
SHARES IS 1% FOR THE FIRST YEAR AFTER OF PURCHASE. EXCEPTIONS TO THE
PURCHASE. REDEMPTION FEE ARE LISTED IN THE FUND'S
PROSPECTUS.
Continued from inside front cover
Overview. Select your Fund from the tronic request at the following e-mail AIM Funds Proxy Policy. The information
drop-down menu and click on Complete address: publicinfo@sec.gov. The SEC is also available on the SEC Web site,
Quarterly Holdings. Shareholders can file numbers for the Fund are 811-05426 sec.gov.
also look up the Fund's Forms N-Q on the and 033-19338.
SEC Web site at sec.gov. Copies of the Information regarding how the Fund voted
Fund's Forms N-Q may be reviewed and A description of the policies proxies related to its portfolio
copied at the SEC Public Reference Room and procedures that the Fund uses to securities during the 12 months ended
in Washington, D.C. You can obtain determine how to vote proxies relating June 30, 2006, is available at our Web
information on the operation of the to portfolio securities is available site. Go to AIMinvestments.com, access
Public Reference Room, including without charge, upon request, from our the About Us tab, click on Required
information about duplicating fee Client Services department at Notices and then click on Proxy Voting
charges, by calling 202-942-8090 or 800-959-4246 or on the AIM Web site, Activity. Next, select the Fund from the
800-732-0330, or by elec- AIMinvestments.com. On the home page, drop-down menu. The information is also
scroll down and click on available on the SEC Web site, sec.gov.
9
AIM International Bond Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the "Board") of other investment personnel to ensure to benefit from the breakpoints. The
AIM Investment Funds (the "Trust") that such individuals are competent and Board concluded that the Fund's fee
oversees the management of AIM able to carry out their responsibilities levels under the Advisory Agreement
International Bond Fund (the "Fund") under the Advisory Agreement. therefore would reflect economies of
and, as required by law, determines scale at higher asset levels and that it
whether to approve the Fund's advisory o Overall performance of AIM. Not was not necessary to change the advisory
agreement with A I M Advisors, Inc. applicable because this is a new Fund. fee breakpoints in the Fund's advisory
("AIM"). Based upon the recommendation However, the Board considered the fee schedule.
of the Investments Committee of the overall performance of AIM in providing
Board, at a meeting held on February 1, investment advisory and portfolio o Investments in affiliated money market
2006, the Board, including all of the administrative services to other mutual funds. The Board also took into account
independent trustees, approved the funds advised by AIM and concluded that the fact that uninvested cash and cash
initial advisory agreement (the such performance was satisfactory. collateral from securities lending
"Advisory Agreement") between the Fund arrangements (collectively, "cash
and AIM for an initial period ending o Fees relative to those clients of AIM balances") of the Fund may be invested
June 30, 2007. with comparable investment strategies. in money market funds advised by AIM
The Board noted that AIM does not serve pursuant to the terms of an SEC
The Board considered the factors as an advisor to other mutual funds or exemptive order. The Board found that
discussed below in evaluating the other clients with investment strategies the Fund may realize certain benefits
fairness and reasonableness of the comparable to those of the Fund. upon investing cash balances in AIM
Advisory Agreement at the meeting on advised money market funds, including a
February 1, 2006 and as part of the o Fees relative to those of comparable higher net return, increased liquidity,
Board's ongoing oversight of the Fund. funds with other advisors. The Board increased diversification or decreased
In their deliberations, the Board and reviewed the advisory fee rate for the transaction costs. The Board also found
the independent trustees did not Fund under the Advisory Agreement. The that the Fund will not receive reduced
identify any particular factor that was Board compared effective contractual services if it invests its cash balances
controlling, and each trustee attributed advisory fee rates at a common asset in such money market funds. The Board
different weights to the various level and noted that the Fund's rate was noted that, to the extent the Fund
factors. above the median rate of the funds invests in affiliated money market
advised by other advisors with funds, AIM has voluntarily agreed to
The discussion below serves as a investment strategies comparable to waive a portion of the advisory fees it
summary of the material factors and the those of the Fund that the Board receives from the Fund attributable to
conclusions with respect thereto that reviewed. The Board noted that AIM has such investment. The Board further
formed the basis for the Board's agreed to limit the Fund's total annual determined that the proposed securities
approval of the Advisory Agreement. operating expenses, as discussed below. lending program and related procedures
After consideration of all of the The Board also considered the fact that with respect to the lending Fund is in
factors below and based on its informed AIM set the proposed advisory fees for the best interests of the lending Fund
business judgment, the Board determined the Fund based upon the median effective and its respective shareholders. The
that the Advisory Agreement is in the management fee rate (comprised of Board therefore concluded that the
best interests of the Fund and its advisory fees plus, in some cases, investment of cash collateral received
shareholders and that the compensation administrative fees) at various asset in connection with the securities
to AIM under the Advisory Agreement is levels of competitor mutual funds with lending program in the money market
fair and reasonable and would have been investment strategies comparable to funds according to the procedures is in
obtained through arm's length those of the Fund. Based on this review, the best interests of the lending Fund
negotiations. the Board concluded that the advisory and its respective shareholders.
fee rate for the Fund under the Advisory
o The nature and extent of the advisory Agreement was fair and reasonable. o Profitability of AIM and its
services to be provided by AIM. The affiliates. The Board reviewed
Board reviewed the services to be o Expense limitations and fee waivers. information concerning the profitability
provided by AIM under the Advisory The Board noted that AIM has of AIM's (and its affiliates')
Agreement. Based on such review, the contractually agreed to waive fees investment advisory and other activities
Board concluded that the range of and/or limit expenses of the Fund and its financial condition. The Board
services to be provided by AIM under the through June 30, 2007 in an amount considered the overall profitability of
Advisory Agreement was appropriate. necessary to limit total annual AIM. The Board noted that AIM's
operating expenses to a specified operations remain profitable, although
o The quality of services to be provided percentage of average daily net assets increased expenses in recent years have
by AIM. The Board reviewed the for each class of the Fund. The Board reduced AIM's profitability. Based on
credentials and experience of the considered the contractual nature of the review of the profitability of AIM's
officers and employees of AIM who will this fee waiver/expense limitation and and its affiliates' investment advisory
provide investment advisory services to noted that it remains in effect until and other activities and its financial
the Fund. In reviewing the June 30, 2007. The Board considered the condition, the Board concluded that the
qualifications of AIM to provide effect this fee waiver/expense compensation to be paid by the Fund to
investment advisory services, the Board limitation would have on the Fund's AIM under its Advisory Agreement was not
reviewed the qualifications of AIM's estimated expenses and concluded that excessive.
investment personnel and considered such the levels of fee waivers/expense
issues as AIM's portfolio and product limitations for the Fund were fair and o Benefits of soft dollars to AIM. The
review process, various back office reasonable. Board considered the benefits realized
support functions provided by AIM and by AIM as a result of brokerage
AIM's equity and fixed income trading o Breakpoints and economies of scale. transactions executed through "soft
operations. Based on the review of these The Board reviewed the structure of the dollar" arrangements. Under these
and other factors, the Board concluded Fund's advisory fee under the Advisory arrangements, brokerage commissions paid
that the quality of services to be Agreement, noting that it contains six by the Fund and/or other funds advised
provided by AIM was appropriate. breakpoints. The Board reviewed the by AIM are used to pay for research and
level of the Fund's advisory fees, and execution services. This research is
o The performance of the Fund relative noted that such fees, as a percentage of used by AIM in making investment
to comparable funds. Not applicable the Fund's net assets, would decrease as decisions for the Fund. The Board
because this is a new Fund. net assets increase because the Advisory concluded that such arrangements were
Agreement includes breakpoints. The appropriate.
o The performance of the Fund relative Board noted that, because this is a new
to indices. Not applicable because this Fund and the way in which the advisory o AIM's financial soundness in light of
is a new Fund. fee breakpoints have been structured, the Fund's needs. The Board considered
the Fund has yet whether AIM is financially sound and has
o Meeting with the Fund's portfolio the resources necessary to per-
managers and investment personnel. The
Board intends to meet periodically with
the Fund's portfolio managers and/or
(continued)
10
AIM International Bond Fund
form its obligations under the Advisory The Board considered the factors Advisor pursuant to the Sub-Advisory
Agreement, and concluded that AIM has discussed below in evaluating the Agreement and the services to be
the financial resources necessary to fairness and reasonableness of the provided by AIM pursuant to the Advisory
fulfill its obligations under the Sub-Advisory Agreement at the meeting on Agreement, as well as the allocation of
Advisory Agreement. February 1, 2006 and as part of the fees between AIM and the Sub-Advisor
Board's ongoing oversight of the Fund. pursuant to the Sub-Advisory Agreement.
o Historical relationship between the In their deliberations, the Board and The Board noted that the sub-advisory
Fund and AIM. In determining whether to the independent trustees did not fees have no direct effect on the Fund
approve the Advisory Agreement for the identify any particular factor that was or its shareholders, as they are paid by
Fund, the Board also considered the controlling, and each trustee attributed AIM to the Sub-Advisor, and that AIM
current relationship between AIM and the different weights to the various and the Sub-Advisor are affiliates.
Trust, as well as the Board's knowledge factors. Based on this review, the Board
of AIM's operations, and concluded that concluded that the sub-advisory fee rate
it was beneficial to maintain the The discussion below serves as a under the Sub-Advisory Agreement was
current relationship, in part, because discussion of the material factors and fair and reasonable.
of such knowledge. The Board also the conclusions with respect thereto
reviewed the general nature of the that formed the basis for the Board's o Profitability of AIM and its
non-investment advisory services approval of the Sub-Advisory Agreement. affiliates. The Board reviewed
currently performed by AIM and its After consideration of all of the information concerning the profitability
affiliates for the Trust, such as factors below and based on its informed of AIM's (and its affiliates')
administrative, transfer agency and business judgment, the Board determined investment advisory and other activities
distribution services, and the fees that the Sub-Advisory Agreement is in and its financial condition. The Board
received by AIM and its affiliates for the best interests of the Fund and its considered the overall profitability of
performing such services. In addition to shareholders. AIM. The Board noted that AIM's
reviewing such services, the trustees operations remain profitable, although
also considered the organizational o The nature and extent of the advisory increased expenses in recent years have
structure employed by AIM and its services to be provided by the reduced AIM's profitability. Based on
affiliates to provide those services. Sub-Advisor. The Board reviewed the the review of the profitability of AIM's
Based on the review of these and other services to be provided by the and its affiliates' investment advisory
factors, the Board concluded that AIM Sub-Advisor under the Sub-Advisory and other activities and its financial
and its affiliates were qualified to Agreement. Based on such review, the condition, the Board concluded that the
provide non-investment advisory services Board concluded that the range of compensation to be paid by the Fund to
to the Fund, including administrative, services to be provided by the AIM under its Advisory Agreement was not
transfer agency and distribution Sub-Advisor under the Sub-Advisory excessive.
services. Agreement was appropriate.
o The Sub-Advisor's financial soundness
o Other factors and current trends. In o The quality of services to be provided in light of the Fund's needs. The Board
determining whether to approve the by the Sub-Advisor. The Board reviewed considered whether the Sub-Advisor is
Advisory Agreement for the Fund, the the credentials and experience of the financially sound and has the resources
Board considered the fact that AIM, officers and employees of the necessary to perform its obligations
along with others in the mutual fund Sub-Advisor who will provide investment under the Sub-Advisory Agreement, and
industry, is subject to regulatory advisory services to the Fund. Based on concluded that the Sub-Advisor has the
inquiries and litigation related to a the review of these and other factors, financial resources necessary to fulfill
wide range of issues. The Board also the Board concluded that the quality of its obligations under the Sub-Advisory
considered the governance and compliance services to be provided by the Agreement.
reforms being undertaken by AIM and its Sub-Advisor was appropriate.
affiliates, including maintaining an
internal controls committee and o The performance of the Fund relative
retaining an independent compliance to comparable funds. Not applicable
consultant, and the fact that AIM has because this is a new Fund.
undertaken to cause the Fund to operate
in accordance with certain governance o The performance of the Fund relative
policies and practices. The Board to indices. Not applicable because this
concluded that these actions indicated a is a new Fund.
good faith effort on the part of AIM to
adhere to the highest ethical standards, o Meetings with the Fund's portfolio
and determined that the current managers and investment personnel. The
regulatory and litigation environment to Board intends to meet periodically with
which AIM is subject should not prevent the Fund's portfolio managers and/or
the Board from approving the Advisory other investment personnel to ensure
Agreement for the Fund. that such individuals are competent and
able to carry out their responsibilities
APPROVAL OF SUB-ADVISORY AGREEMENT under the Sub-Advisory Agreement.
The Board oversees the management of the o Overall performance of the
Fund and, as required by law, determines Sub-Advisor. Not applicable because this
whether to approve the Fund's is a new Fund.
sub-advisory agreement. Based upon the
recommendation of the Investments o Fees relative to those clients of the
Committee of the Board, at a meeting Sub-Advisor with comparable investment
held on February 1, 2006, the Board, strategies. The Board reviewed the
including all of the independent sub-advisory fee rate for the Fund under
trustees, approved the sub-advisory the Sub-Advisory Agreement. The Board
agreement (the "Sub-Advisory compared effective contractual fee rates
Agreement") between INVESCO Asset at a common asset level and noted that
Management Limited (the "Sub-Advisor") this rate was higher than the advisory
and AIM with respect to the Fund for an fee rate for one
initial period ending June 30, 2007. institutional/separately managed account
advised by the Sub-Advisor with
investment strategies comparable to
those of the Fund. The Board noted that
AIM has agreed to limit the Fund's total
annual operating expenses, as discussed
below. The Board also considered the
services to be provided by the Sub-
11
Supplement to Annual Report dated 10/31/06
AIM International Bond Fund
===================================
Institutional Class Shares CUMULATIVE TOTAL RETURNS PLEASE NOTE THAT PAST PERFORMANCE IS NOT
For periods ended 10/31/06 INDICATIVE OF FUTURE RESULTS. MORE RECENT
The following information has been prepared to RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
provide Institutional Class shareholders with Inception (3/31/06) 6.27% ALL RETURNS ASSUME REINVESTMENT OF
a performance overview specific to their 6 Months 2.10 DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND
holdings. Institutional Class shares are PRINCIPAL VALUE WILL FLUCTUATE SO YOUR
offered exclusively to institutional =================================== SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
investors, including defined contribution LESS THAN THEIR ORIGINAL COST. SEE FULL
plans that meet certain criteria. CUMULATIVE TOTAL RETURNS REPORT FOR INFORMATION ON COMPARATIVE
For periods ended 9/30/06, most BENCHMARKS. PLEASE CONSULT YOUR FUND
recent calendar quarter-end PROSPECTUS FOR MORE INFORMATION. FOR THE MOST
CURRENT MONTH-END PERFORMANCE, PLEASE CALL
Inception (3/31/06) 5.15% 800-451-4246 OR VISIT AIMINVESTMENTS.COM.
6 Months 5.15
===================================
INSTITUTIONAL CLASS SHARES HAVE NO
SALES CHARGE; THEREFORE,
PERFORMANCE IS AT NET ASSET VALUE
(NAV). PERFORMANCE OF INSTITUTIONAL
CLASS SHARES WILL DIFFER FROM
PERFORMANCE OF OTHER SHARE CLASSES
PRIMARILY DUE TO DIFFERING SALES
CHARGES AND CLASS EXPENSES.
A REDEMPTION FEE OF 2% WILL BE
IMPOSED ON CERTAIN REDEMPTIONS OR
EXCHANGES OUT OF THE FUND WITHIN 30
DAYS OF PURCHASE. EXCEPTIONS TO THE
REDEMPTION FEE ARE LISTED IN THE
FUND'S PROSPECTUS.
HAD THE ADVISOR NOT WAIVED
FEES AND/OR REIMBURSED EXPENSES,
PERFORMANCE WOULD HAVE BEEN LOWER.
==============================================
NASDAQ SYMBOL AUBIX
==============================================
Over for information on your Fund's expenses.
================================================================================
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.
================================================================================
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted,
reproduced or shown to the public, nor used in written form as sales literature
for public use.
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE]
AIMINVESTMENTS.COM IBO-INS-1 A I M Distributors, Inc. --REGISTERED TRADEMARK-- --REGISTERED TRADEMARK--
Information about your Fund's expenses
Calculating your ongoing Fund expenses
Example divide your account value by $1,000 The hypothetical account values and
(for example, an $8,600 account expenses may not be used to estimate the
As a shareholder of the Fund, you incur value divided by $1,000 = 8.6), actual ending account balance or expenses you
ongoing costs, including management fees and then multiply the result by the paid for the period. You may use this
other Fund expenses. This example is intended number in the table under the information to compare the ongoing costs of
to help you understand your ongoing costs (in heading entitled "Actual Expenses investing in the Fund and other funds. To do
dollars) of investing in the Fund and to Paid During Period" to estimate the so, compare this 5% hypothetical example with
compare these costs with ongoing costs of expenses you paid on your account the 5% hypothetical examples that appear in
investing in other mutual funds. The example during this period. the shareholder reports of the other funds.
is based on an investment of $1,000 invested
at the beginning of the period and held for Hypothetical example for comparison Please note that the expenses shown in
the entire period May 1, 2006, through October purposes the table are meant to highlight your ongoing
31, 2006. costs only. Therefore, the hypothetical
The table below also provides information is useful in comparing ongoing
Actual expenses information about hypothetical costs only, and will not help you determine
account values and hypothetical the relative total costs of owning different
The table below provides information about expenses based on the Fund's actual funds.
actual account values and actual expenses. You expense ratio and an assumed rate
may use the information in this table, of return of 5% per year before
together with the amount you invested, to expenses, which is not the Fund's
estimate the expenses that you paid over the actual return. The Fund's actual
period. Simply cumulative total return after
expenses for the six months ended
October 31, 2006, appears in the
table on the front of this
supplement.
====================================================================================================================================
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
Institutional $1,000.00 $1,021.00 $4.53 $1,020.72 $4.53 0.89%
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 return after expenses for the
six months ended October 31, 2006, appears in the table on the front of this supplement.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMINVESTMENTS.COM IBO-INS-1 A I M Distributors, Inc.
AIM International Bond Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------
NON U.S. DOLLAR DENOMINATED BONDS &
NOTES-87.71%(A)
AUSTRALIA-2.93%
New South Wales Treasury Corp. (Sovereign
Debt)-Series 08RG, Euro Gtd. Bonds, 8.00%,
03/01/08(b) AUD 1,000,000 $ 790,620
=========================================================================
BELGIUM-4.13%
Belgium Government (Sovereign Debt)-Series
36, Euro Bonds, 5.00%, 09/28/11(b) EUR 825,000 1,114,064
=========================================================================
BRAZIL-0.90%
Brazilian Government (Sovereign Debt), Sr.
Unsec. Unsub. Euro Bonds, 9.50%,
01/24/11(b) EUR 160,000 242,466
=========================================================================
CANADA-3.53%
Canada Housing Trust No. 1 (Sovereign Debt)-
Series SEPT, Gtd. Global Notes, 4.60%,
09/15/11(b) CAD 600,000 547,412
- -------------------------------------------------------------------------
Canadian Government (Sovereign Debt),
Canadian Bonds, 5.75%, 06/01/33(b) CAD 360,000 406,752
=========================================================================
954,164
=========================================================================
CHINA-4.22%
China Government (Sovereign Debt), Unsec.
Euro Bonds, 4.25%, 10/28/14(b) EUR 880,000 1,139,586
=========================================================================
FINLAND-2.41%
Finland Government (Sovereign Debt), Sr.
Unsec. Unsub. Euro Bonds, 5.00%,
07/04/07(b) EUR 505,000 649,896
=========================================================================
FRANCE-1.04%
France Government (Sovereign Debt), Euro
Bonds,
4.00%, 04/25/55(b) EUR 40,000 52,934
- -------------------------------------------------------------------------
6.50%, 04/25/11(b) EUR 160,000 227,615
=========================================================================
280,549
=========================================================================
GERMANY-24.12%
Bundesobligation (Sovereign Debt),
-Series 139, Euro Bonds,
4.00%, 02/16/07(b) EUR 1,200,000 1,533,527
- -------------------------------------------------------------------------
-Series 147, Euro Bonds,
2.50%, 10/08/10(b) EUR 325,000 397,526
- -------------------------------------------------------------------------
Bundesrepublik Deutschland (Sovereign Debt)-
Series 05, Euro Bonds,
4.00%, 01/04/37(b) EUR 1,460,000 1,917,927
- -------------------------------------------------------------------------
Kreditanstalt fuer Wiederaufbau (Diversified
Banks), Sr. Unsec. Gtd. Unsub. Global
Notes, 2.05%, 02/16/26(b) JPY 50,000,000 417,506
- -------------------------------------------------------------------------
Landwirtschaftliche Rentenbank (Diversified
Banks), Unsec. Gtd. Unsub. Medium Term Euro
Notes, 1.38%, 04/25/13(b) JPY 138,000,000 1,176,420
- -------------------------------------------------------------------------
NRW Bank (Diversified Banks)-Series 124, Gtd.
Unsub. Medium Term Euro Notes, 0.05%,
03/20/07(b) JPY 125,000,000 1,067,653
=========================================================================
6,510,559
=========================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------
<Caption>
GREECE-0.89%
Hellenic Republic Government (Sovereign
Debt), Sr. Unsec. Unsub. Euro Bonds, 4.50%,
09/20/37(b) EUR 180,000 $ 240,077
=========================================================================
IRELAND-5.14%
Depfa ACS Bank (Diversified Banks), Sec.
Medium Term Euro Notes, 1.65%,
12/20/16(b) JPY 140,000,000 1,182,717
- -------------------------------------------------------------------------
Ireland Government (Sovereign Debt), Euro
Deb., 4.60%, 04/18/16(b) EUR 150,000 204,333
=========================================================================
1,387,050
=========================================================================
ITALY-1.26%
Buoni Poliennali Del Tesoro (Sovereign Debt),
Euro Bonds, 2.75%, 06/15/10(b) EUR 275,000 339,545
=========================================================================
JAPAN-3.13%
Development Bank of Japan (Sovereign Debt)-
Series INTL, Gtd. Global Bonds, 2.30%,
03/19/26(b) JPY 90,000,000 767,252
- -------------------------------------------------------------------------
Sumitomo Mitsui Banking Corp. (Diversified
Banks), Sub. Second Tier Euro Notes, 4.38%,
10/27/14(b) EUR 60,000 77,058
=========================================================================
844,310
=========================================================================
LUXEMBOURG-7.33%
European Investment Bank (Diversified Banks),
Euro Bonds,
5.63%, 06/07/32(b) GBP 455,000 1,040,387
- -------------------------------------------------------------------------
Global Notes,
3.13%, 10/15/15(b) EUR 135,000 163,708
- -------------------------------------------------------------------------
Fiat Finance & Trade Ltd. S.A. (Automobile
Manufacturers), Sr. Unsec. Gtd. Unsub. Euro
Notes, 6.63%, 02/15/13(b) EUR 195,000 264,133
- -------------------------------------------------------------------------
Gaz Capital for Gazprom (Integrated Oil &
Gas)- REGS-Series 3, Sr. Sec. Euro Notes,
5.88%, 06/01/15 (Acquired
04/12/06-08/28/06; Cost $509,622)(b)(c) EUR 380,000 511,795
=========================================================================
1,980,023
=========================================================================
MEXICO-0.50%
Mexico Government (Sovereign Debt), Global
Notes, 5.38%, 06/10/13(b) EUR 100,000 136,186
=========================================================================
NETHERLANDS-4.59%
Rabobank Nederland-Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A. (Diversified
Banks)-Series 1355 Tranche 2, Medium Term
Euro Notes, 0.20%, 06/20/08(b) JPY 146,000,000 1,238,142
=========================================================================
NORWAY-1.88%
Norway Government (Sovereign Debt), Bonds,
6.75%, 01/15/07(b) NOK 3,300,000 507,991
=========================================================================
POLAND-6.55%
Poland Government (Sovereign Debt)- Series
DS1015, Bonds, 6.25%, 10/24/15(b) PLN 5,000,000 1,768,778
=========================================================================
</Table>
F-1
AIM International Bond Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------
PORTUGAL-0.57%
Obrigacoes do Tesouro (Sovereign Debt), Euro
Bonds, 4.10%, 04/15/37(b) EUR 120,000 $ 153,915
=========================================================================
SPAIN-5.21%
Caixa d'Estalvis de Catalunya (Diversified
Capital Markets), Sec. Mortgage-Backed Euro
Notes, 3.50%, 03/07/16(b) EUR 1,000,000 1,226,216
- -------------------------------------------------------------------------
Spain Government (Sovereign Debt), Euro
Bonds, 4.25%, 10/31/07(b) EUR 140,000 179,620
=========================================================================
1,405,836
=========================================================================
UNITED KINGDOM-2.64%
DaimlerChrysler UK Holding PLC (Automobile
Manufacturers)-Series 147, Unsec. Gtd.
Unsub. Medium Term Euro Notes,
5.13%, 02/04/08(b) GBP 50,000 94,530
- -------------------------------------------------------------------------
United Kingdom Treasury (Sovereign Debt),
Bonds,
4.25%, 09/07/11(b) GBP 290,000 541,333
- -------------------------------------------------------------------------
4.50%, 03/07/07(b) GBP 40,000 76,160
=========================================================================
712,023
=========================================================================
UNITED STATES OF AMERICA-4.74%
General Electric Capital Corp. (Other
Diversified Financial Services), Sr. Unsec.
Unsub. Medium Term Euro Notes, 4.50%,
12/15/08(b) GBP 550,000 1,033,351
- -------------------------------------------------------------------------
Pemex Project Funding Master Trust (Other
Diversified Financial Services)-REGS,
Unsec. Gtd. Unsub. Euro Bonds, 6.63%,
04/04/10 (Acquired 04/12/06-08/25/06; Cost
$244,068)(b)(c) EUR 180,000 246,101
=========================================================================
1,279,452
=========================================================================
Total Non U.S. Dollar Denominated Bonds &
Notes (Cost $23,294,819) 23,675,232
=========================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------
<Caption>
U.S. GOVERNMENT AGENCY SECURITY-4.51%(A)
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-4.51%
Unsec. Global Notes 1.75%, 03/26/08(b)
(Cost $1,211,793) JPY 140,000,000 $ 1,216,284
=========================================================================
U.S. DOLLAR DENOMINATED BONDS & NOTES-1.85%
CONSTRUCTION & ENGINEERING-1.09%
Ranhill Labuan Ltd. (Malaysia)-REGS, Gtd.
Euro Notes, 12.50%, 10/26/11 (Acquired
10/18/06; Cost $300,000)(b)(c) $ 300,000 295,125
=========================================================================
DIVERSIFIED BANKS-0.76%
ICICI Bank Ltd. (India)-REGS, Unsec. First
Tier Unsub. Euro Bonds, 7.25% (Acquired
08/17/06; Cost $198,649)(c)(d) 200,000 205,279
=========================================================================
Total U.S. Dollar Denominated Bonds &
Notes (Cost $498,649) 500,404
=========================================================================
U.S. TREASURY SECURITY-0.22%
U.S. TREASURY BILLS-0.22%
5.03%, 01/25/07(b)(e) (Cost $59,287) 60,000(f) 59,305
=========================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-3.19%
Liquid Assets Portfolio-Institutional
Class(g) 429,948 429,948
- -------------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 429,948 429,948
=========================================================================
Total Money Market Funds (Cost $859,896) 859,896
=========================================================================
TOTAL INVESTMENTS-97.48% (Cost $25,924,444) 26,311,121
=========================================================================
OTHER ASSETS LESS LIABILITIES-2.52% 680,293
=========================================================================
NET ASSETS-100.00% $26,991,414
_________________________________________________________________________
=========================================================================
</Table>
Investment Abbreviations:
<Table>
AUD - Australian Dollar
CAD - Canadian Dollar
Deb. - Debentures
EUR - Euro
GBP - British Pound
Gtd. - Guaranteed
JPY - Japanese Yen
NOK - Norwegian Krona
PLN - Poland Zloty
REGS - Regulation S
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
Notes to Schedule of Investments:
(a) Foreign denominated security. Principal amount is denominated in currency
indicated.
(b) In accordance with the procedures established by the Board of Trustees,
security fair valued based on an evaluated quote provided by an independent
pricing service. The aggregate value of these securities at October 31, 2006
was $25,245,946, which represented 93.53% of the Fund's Net Assets. See Note
1A.
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at October 31, 2006 was $1,258,300,
which represented 4.66% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(d) Perpetual bond with no specified maturity date.
(e) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(f) All or a portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 1L and Note 8.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-2
AIM International Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $25,064,548) $25,451,225
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $859,896) 859,896
===========================================================
Total investments (cost $25,924,444) 26,311,121
===========================================================
Foreign currencies, at value (cost $97,654) 99,517
- -----------------------------------------------------------
Receivables for:
Investments sold 1,057,491
- -----------------------------------------------------------
Fund shares sold 105,862
- -----------------------------------------------------------
Dividends and Interest 377,867
- -----------------------------------------------------------
Fund expenses absorbed 9,644
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 1,167
- -----------------------------------------------------------
Other assets 101,651
===========================================================
Total assets 28,064,320
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 865,747
- -----------------------------------------------------------
Fund shares reacquired 3,285
- -----------------------------------------------------------
Foreign currency contracts 105,932
- -----------------------------------------------------------
Trustee deferred compensation and retirement
plans 1,167
- -----------------------------------------------------------
Variation margin 26,522
- -----------------------------------------------------------
Accrued distribution fees 4,346
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,125
- -----------------------------------------------------------
Accrued transfer agent fees 1,512
- -----------------------------------------------------------
Accrued operating expenses 63,270
===========================================================
Total liabilities 1,072,906
===========================================================
Net assets applicable to shares outstanding $26,991,414
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $26,711,529
- -----------------------------------------------------------
Undistributed net investment income (31,889)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies,
foreign currency contracts and futures
contracts (6,158)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies, foreign
currency contracts and futures contracts 317,932
===========================================================
$26,991,414
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 3,340,968
___________________________________________________________
===========================================================
Class B $ 2,024,623
___________________________________________________________
===========================================================
Class C $ 2,382,955
___________________________________________________________
===========================================================
Institutional Class $19,242,868
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 320,076
___________________________________________________________
===========================================================
Class B 194,219
___________________________________________________________
===========================================================
Class C 228,551
___________________________________________________________
===========================================================
Institutional Class 1,843,734
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.44
- -----------------------------------------------------------
Offering price per share
(Net asset value of $10.44 divided by
95.25%) $ 10.96
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.42
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.43
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.44
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
AIM International Bond Fund
STATEMENT OF OPERATIONS
For the period March 31, 2006 (date operations commenced) to October 31, 2006
<Table>
INVESTMENT INCOME:
Interest $ 226,438
- -----------------------------------------------------------------------
Dividends from affiliated money market funds 2,570
=======================================================================
Total investment income 229,008
=======================================================================
EXPENSES:
Advisory fees 45,089
- -----------------------------------------------------------------------
Administrative services fees 29,452
- -----------------------------------------------------------------------
Custodian fees 15,906
- -----------------------------------------------------------------------
Distribution fees:
Class A 3,158
- -----------------------------------------------------------------------
Class B 8,766
- -----------------------------------------------------------------------
Class C 8,312
- -----------------------------------------------------------------------
Transfer agent fees -- A, B and C 5,268
- -----------------------------------------------------------------------
Transfer agent fees -- Institutional 358
- -----------------------------------------------------------------------
Trustees' and officer's fees and benefits 8,352
- -----------------------------------------------------------------------
Registration and filing fees 53,343
- -----------------------------------------------------------------------
Reports to shareholders 15,067
- -----------------------------------------------------------------------
Professional services fees 68,972
- -----------------------------------------------------------------------
Other 6,168
=======================================================================
Total expenses 268,211
=======================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (188,804)
=======================================================================
Net expenses 79,407
=======================================================================
Net investment income 149,601
=======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FOREIGN CURRENCY CONTRACTS
AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 10,917
- -----------------------------------------------------------------------
Foreign currencies (29,818)
- -----------------------------------------------------------------------
Foreign currency contracts (114,390)
- -----------------------------------------------------------------------
Futures contracts (17,010)
=======================================================================
(150,301)
=======================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 386,678
- -----------------------------------------------------------------------
Foreign currencies 10,406
- -----------------------------------------------------------------------
Foreign currency contracts (81,013)
- -----------------------------------------------------------------------
Futures contracts 1,861
=======================================================================
317,932
=======================================================================
Net gain from investment securities, foreign currencies,
foreign currency contracts and futures contracts 167,631
=======================================================================
Net increase in net assets resulting from operations $ 317,232
_______________________________________________________________________
=======================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM International Bond Fund
STATEMENT OF CHANGES IN NET ASSETS
For the period March 31, 2006 (date operations commenced) to October 31, 2006
<Table>
OPERATIONS:
Net investment income $ 149,601
- ---------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, foreign currency contracts and
futures contracts (150,301)
- ---------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, foreign currency
contracts and futures contracts 317,932
===========================================================================
Net increase in net assets resulting from operations 317,232
===========================================================================
Distributions to shareholders from net investment income:
Class A (13,407)
- ---------------------------------------------------------------------------
Class B (7,399)
- ---------------------------------------------------------------------------
Class C (6,483)
- ---------------------------------------------------------------------------
Institutional Class (35,342)
===========================================================================
Total distributions from net investment income (62,631)
===========================================================================
Return of Capital:
Class A (22,597)
- ---------------------------------------------------------------------------
Class B (12,469)
- ---------------------------------------------------------------------------
Class C (10,926)
- ---------------------------------------------------------------------------
Institutional Class (59,566)
===========================================================================
Total return of capital (105,558)
===========================================================================
Decrease in net assets resulting from distributions (168,189)
===========================================================================
Share transactions-net:
Class A 3,304,813
- ---------------------------------------------------------------------------
Class B 1,984,421
- ---------------------------------------------------------------------------
Class C 2,359,106
- ---------------------------------------------------------------------------
Institutional Class 19,194,031
===========================================================================
Net increase in net assets resulting from share
transactions 26,842,371
===========================================================================
Net increase in net assets 26,991,414
===========================================================================
NET ASSETS:
Beginning of period --
===========================================================================
End of period (including undistributed net investment
income of $(31,889)) $26,991,414
___________________________________________________________________________
===========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
AIM International Bond Fund
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM International Bond Fund (the "Fund") is a series portfolio of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of nine
separate series portfolios, each authorized to issue an unlimited number of
shares of beneficial interest. The Fund currently offers multiple classes of
shares. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class. The assets, liabilities and
operations of each portfolio are accounted for separately. Information presented
in these financial statements pertains only to the Fund. The Fund commenced
operations on March 31, 2006.
The Fund's investment objective is to provide total return.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. 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.
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. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. 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.
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,
F-6
AIM International Bond Fund
accordingly, they reduce the Fund's total returns. These transaction costs
are not considered operating expenses and are not reflected in net
investment income reported in the Statement of Operations and Statement of
Changes in Net Assets, or the net investment income per share and ratios of
expenses and net investment income reported in the Financial Highlights,
nor are they limited by any expense limitation arrangements between the
Fund and the advisor.
The Fund allocates realized and unrealized capital gains and losses to a
class based on the relative net assets of each class. The Fund allocates
income to a class based on the relative value of the settled shares of each
class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the 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 treat 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 to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- 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.
H. INDEMNIFICATIONS -- 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.
I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is recorded as an
increase in shareholder capital and is allocated among the share classes
based on the relative net assets of each class.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
K. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F-7
AIM International Bond Fund
L. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts.
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. Risks may exceed
amounts recognized in the Statement of Assets and Liabilities.
M. 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 advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.65%
- --------------------------------------------------------------------
Next $250 million 0.59%
- --------------------------------------------------------------------
Next $500 million 0.565%
- --------------------------------------------------------------------
Next $1.5 billion 0.54%
- --------------------------------------------------------------------
Next $2.5 billion 0.515%
- --------------------------------------------------------------------
Next $5 billion 0.49%
- --------------------------------------------------------------------
Over $10 billion 0.465%
___________________________________________________________________
====================================================================
</Table>
Under the terms of a master sub-advisory agreement between AIM and INVESCO
Asset Management Limited ("INVESCO"), AIM pays INVESCO 40% of the amount of
AIM's compensation on sub-advised assets.
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C and
Institutional Class shares to 1.10%, 1.85%, 1.85% and 0.85% of average daily net
assets, respectively, through at least June 30, 2007. In determining the
advisor's obligation to waive advisory fees and/or reimburse expenses, the
following expenses are not taken into account, and could cause the net annual
operating expenses to exceed the numbers reflected above: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v)
expenses related to a merger or reorganization, as approved by the Fund's Board
of Trustees; and (vi) expenses that the Fund has incurred but did not actually
pay because of an expense offset arrangement. Currently, in addition to the
expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more
fully below, the expense offset arrangements from which the Fund may benefit are
in the form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash. In
addition, the Fund may also benefit from a one time credit to be used to offset
future custodian expenses. These credits are used to pay certain expenses
incurred by the Fund.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in
the amount of 25% of the advisory fee AIM receives from the affiliated money
market funds on investments by the Fund in such affiliated money market funds.
Voluntary fee waivers or reimbursements may be modified or discontinued at any
time upon consultation with the Board of Trustees without further notice to
investors.
For the period March 31, 2006 (date operations commenced) to October 31,
2006, AIM waived advisory fees of $45,089 and reimbursed fund level expenses of
$135,843 and reimbursed class level expenses of $2,120, $1,471, $1,395 and $358
for Class A, Class B, Class C and Institutional Class shares, respectively.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. These expenses along with the related expense
reimbursement are included in the Statement of Operations. For the period March
31, 2006 (date operations commenced) to October 31, 2006, AMVESCAP did not
reimburse any expenses.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the period
March 31, 2006 (date operations commenced) to October 31, 2006, AIM was paid
$29,452.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AIS") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AIS for certain expenses
incurred by AIS in the course of providing such services. AIS may make payments
to intermediaries that provide omnibus account services, sub-accounting services
and/or networking services. All fees payable by AIS to intermediaries that
provide omnibus account services or sub-accounting are charged back to the Fund,
subject to certain limitations approved by the
F-8
AIM International Bond Fund
Trust's Board of Trustees. For the period March 31, 2006 (date operations
commenced) to October 31, 2006, the Fund paid AIS $5,268 for Class A, Class B
and Class C share classes and $358 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C and Institutional Class shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,
Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the
Plans, pays ADI compensation at the annual rate of 0.25% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and Class C shares. Of the Rule 12b-1 payments, up to 0.25% of the
average daily net assets of the Class A, Class B or Class C shares may be paid
to furnish continuing personal shareholder services to customers who purchase
and own shares of such classes. Any amounts not paid as a service fee under the
Plans would constitute an asset-based sales charge. National Association of
Securities Dealers ("NASD") Rules impose a cap on the total sales charges,
including asset-based sales charges, that may be paid by any class of shares of
the Fund. Pursuant to the Plans, for the period March 31, 2006 (date operations
commenced) to October 31, 2006, the Class A, Class B and Class C shares paid
$3,158, $8,766 and $8,312, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the period
March 31, 2006 (date operations commenced) to October 31, 2006, ADI advised the
Fund that it retained $3,234 in front-end sales commissions from the sale of
Class A shares and $0, $80 and $49 from Class A, Class B and Class C shares,
respectively, for CDSC imposed upon redemptions by shareholders .
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the period March 31, 2006 (date operations commenced) to October 31, 2006.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 03/31/06 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ -- $2,030,847 $(1,600,899) $ -- $429,948 $1,286 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-
Institutional
Class -- 2,030,847 (1,600,899) -- 429,948 1,284 --
==================================================================================================================================
Total
Investments
in
Affiliates $ -- $4,061,694 $(3,201,798) $ -- $859,896 $2,570 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the period
March 31, 2006 (date operations commenced) to October 31, 2006, the Fund
received credits from these arrangements, which resulted in the reduction of the
Fund's total expenses of $2,528.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the period March 31, 2006 (date operations commenced) to October 31,
2006, the Fund paid legal fees of $571 for services rendered by Kramer, Levin,
Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that
firm is a Trustee of the Trust.
F-9
AIM International Bond Fund
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the period March 31, 2006 (date operations commenced) to October 31,
2006, the Fund did not borrow or lend under the interfund lending facility or
borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank 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 contractually agreed upon rate.
NOTE 7--FOREIGN CURRENCY CONTRACTS
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT ------------------------------------ VALUE UNREALIZED
DATE DELIVER RECEIVE 10/31/06 APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------------------
01/11/07 USD 1,275,400 EUR 1,000,000 $1,281,085 $ 5,685
- ---------------------------------------------------------------------------------------------------------------------------------
01/11/07 USD 2,680,461 EUR 2,100,000 2,690,279 9,818
- ---------------------------------------------------------------------------------------------------------------------------------
01/11/07 USD 822,478 NOK 5,430,000 833,867 11,389
=================================================================================================================================
$ 26,892
=================================================================================================================================
</Table>
<Table>
<Caption>
CONTRACT TO UNREALIZED
SETTLEMENT ------------------------------------ VALUE APPRECIATION
DATE DELIVER RECEIVE 10/31/06 (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
01/11/07 EUR 650,000 USD 822,289 $ 832,705 $ (10,416)
- ---------------------------------------------------------------------------------------------------------------------------------
01/11/07 EUR 1,100,000 USD 1,383,602 1,409,194 (25,592)
- ---------------------------------------------------------------------------------------------------------------------------------
01/11/07 EUR 2,100,000 USD 2,669,625 2,690,279 (20,654)
- ---------------------------------------------------------------------------------------------------------------------------------
01/11/07 GBP 200,000 USD 377,008 381,713 (4,705)
- ---------------------------------------------------------------------------------------------------------------------------------
01/11/07 NOK 5,430,000 EUR 814,272 825,644 (8,223)
- ---------------------------------------------------------------------------------------------------------------------------------
01/11/07 PLN 5,200,000 USD 1,682,739 1,721,054 (38,315)
=================================================================================================================================
$(107,905)
=================================================================================================================================
Total open foreign currency contracts $ (81,013)
=================================================================================================================================
</Table>
<Table>
<Caption>
CLOSED FOREIGN CURRENCY CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO REALIZED
CLOSED ------------------------------------ VALUE GAIN
DATE DELIVER RECEIVE 10/31/06 (LOSS)
- ---------------------------------------------------------------------------------------------------------------------------------
10/04/06 JPY 168,000,000 USD 1,420,629 $1,441,813 $ (21,184)
- ---------------------------------------------------------------------------------------------------------------------------------
10/05/06 USD 667,622 CAD 750,000 667,004 (618)
- ---------------------------------------------------------------------------------------------------------------------------------
10/11/06 SGD 1,620,000 USD 1,024,150 1,027,267 (3,117)
=================================================================================================================================
Total closed foreign currency contracts $ (24,919)
=================================================================================================================================
Total foreign currency contracts $(105,932)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
Currency Abbreviations:
<Table>
CAD - Canadian Dollar
EUR - Euro
GBP - British Pound Sterling
JPY - Japanese Yen
NOK - Norwegian Krona
PLN - Poland Zloty
SGD - Singapore Dollar
USD - U.S. Dollar
</Table>
F-10
AIM International Bond Fund
NOTE 8--FUTURES CONTRACTS
On October 31, 2006, $60,000 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
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF MONTH/ VALUE UNREALIZED
CONTRACT CONTRACTS COMMITMENT 10/31/06 APPRECIATION
- ------------------------------------------------------------------------------------------------------------------------
Euro-Bund 18 Dec-06/Short $(2,706,832) $1,861
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the period March 31, 2006 (date
operations commenced) to October 31, 2006 is as follows:
<Table>
<Caption>
2006
- ------------------------------------------------------------------------
Distributions paid from ordinary income $ 62,631
- ------------------------------------------------------------------------
Return of Capital 105,558
========================================================================
Total $168,189
________________________________________________________________________
========================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- ---------------------------------------------------------------------------
Unrealized appreciation-investments $ 366,175
- ---------------------------------------------------------------------------
Temporary book/tax differences (991)
- ---------------------------------------------------------------------------
Capital loss carryover (85,299)
- ---------------------------------------------------------------------------
Shares of beneficial interest 26,711,529
===========================================================================
Total net assets $26,991,414
___________________________________________________________________________
===========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales. The tax-basis unrealized appreciation on investments amount includes
appreciation on foreign currencies of $10,406 and appreciation on futures
contracts of $1,861.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund has a capital loss carryforward as of October 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
October 31, 2014 $85,299
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
long-term U.S. Treasury obligations and money market funds, if any) purchased
and sold by the Fund during the period March 31, 2006 (date operations
commenced) to October 31, 2006 was $47,751,059 and $19,844,645, respectively.
During the same period, purchases and sales of long-term U.S. Treasury
obligations were $3,718,253 and $6,606,505.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $393,968
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (40,060)
==============================================================================
Net unrealized appreciation of investment securities $353,908
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $25,957,213.
</Table>
F-11
AIM International Bond Fund
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of return of capital,
foreign currency transactions and organizational expenses, on October 31, 2006,
undistributed net investment income was decreased by $13,301, undistributed net
realized gain (loss) was increased by $144,143 and shares of beneficial interest
decreased by $130,842. This reclassification had no effect on the net assets of
the Fund.
NOTE 12--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A, Class B,
Class C and Institutional Class. Class A shares are sold with a front-end sales
charge unless certain waiver criteria are met. Class B shares and Class C shares
are sold with CDSC. Institutional Class shares are sold at net asset value.
Under certain circumstances, Class A shares are subject to CDSC. Generally,
Class B shares will automatically convert to Class A shares on or about the
month-end which is at least eight years after the date of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------
MARCH 31, 2006
(DATE OPERATIONS
COMMENCED) TO
OCTOBER 31, 2006(a)
------------------------
SHARES AMOUNT
- --------------------------------------------------------------------------------------
Sold:
Class A 346,070 $ 3,571,637
- --------------------------------------------------------------------------------------
Class B 203,124 2,076,016
- --------------------------------------------------------------------------------------
Class C 246,060 2,538,618
- --------------------------------------------------------------------------------------
Institutional Class 1,922,095 20,007,020
======================================================================================
Issued as reinvestment of dividends:
Class A 3,217 33,479
- --------------------------------------------------------------------------------------
Class B 1,720 17,883
- --------------------------------------------------------------------------------------
Class C 1,645 17,088
- --------------------------------------------------------------------------------------
Institutional Class 9,160 94,908
======================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,511 15,725
- --------------------------------------------------------------------------------------
Class B (1,512) (15,725)
======================================================================================
Reacquired:(b)
Class A (30,722) (316,028)
- --------------------------------------------------------------------------------------
Class B (9,113) (93,753)
- --------------------------------------------------------------------------------------
Class C (19,154) (196,600)
- --------------------------------------------------------------------------------------
Institutional Class (87,521) (907,897)
======================================================================================
2,586,580 $26,842,371
______________________________________________________________________________________
======================================================================================
</Table>
(a) 9% of the outstanding shares of the Fund are owned by AIM and 71% are
owned by affiliated mutual funds. Affiliated mutual funds are other
mutual funds that are also advised by AIM.
(b) Amount is net of redemption fees of $876, $594, $433 and $894 for Class
A, Class B, Class C and Institutional Class shares, respectively for the
period March 31, 2006 (date operations commenced) to October 31, 2006.
NOTE 13--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
F-12
AIM International Bond Fund
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A CLASS B CLASS C INSTITUTIONAL CLASS
---------------- ---------------- ---------------- -------------------
MARCH 31, 2006 MARCH 31, 2006 MARCH 31, 2006 MARCH 31, 2006
(DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS
COMMENCED) TO COMMENCED) TO COMMENCED) TO COMMENCED) TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2006 2006 2006 2006
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.00 $10.00 $10.00 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.13 0.09 0.09 0.15
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 0.48 0.46 0.47 0.48
=================================================================================================================================
Total from investment operations 0.61 0.55 0.56 0.63
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.06) (0.05) (0.05) (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Return of capital (0.11) (0.08) (0.08) (0.12)
=================================================================================================================================
Total distributions (0.17) (0.13) (0.13) (0.19)
=================================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00
=================================================================================================================================
Net asset value, end of period $10.44 $10.42 $10.43 $ 10.44
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 6.14% 5.55% 5.65% 6.27%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,341 $2,025 $2,383 $19,243
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements(c) 1.14% 1.89% 1.89% 0.89%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements(c) 3.92% 4.67% 4.67% 3.50%
=================================================================================================================================
Ratio of net investment income to average net
assets(c) 2.20% 1.45% 1.45% 2.45%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 231% 231% 231% 231%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges, if any, and is
not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$2,144,506, $1,488,123, $1,411,000, and $6,732,801 for Class A, Class B,
Class C and Institutional Class shares, respectively.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 (Order No. 05-1318). The WVASC makes
findings of fact that AIM and ADI entered into certain arrangements permitting
market timing of the AIM Funds and failed to disclose these arrangements in the
prospectuses for such Funds, and conclusions of law to the
F-13
AIM International Bond Fund
NOTE 15--LEGAL PROCEEDINGS--(CONTINUED)
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, including restitution to affected investors, disgorgement of fees,
reimbursement of investigatory, administrative and legal costs and an
"administrative assessment," to be determined by the Commissioner. Initial
research indicates that these damages could be limited or capped by statute.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions (all the claims in
this category of lawsuits were dismissed with prejudice by the court on
September 29, 2006, except for the Section 36(b) claim which was dismissed
with leave to amend to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
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 and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-14
AIM International Bond Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM International Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM International Bond Fund (one of
the funds constituting AIM Investment Funds, hereafter referred to as the
"Fund") at October 31, 2006, and the results of its operations, the changes in
its net assets and the financial highlights for the period March 31, 2006 (date
operations commenced) through October 31, 2006, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian, provides a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
December 20, 2006
Houston, Texas
F-15
AIM International Bond Fund
TAX DISCLOSURES
REQUIRED STATE INCOME TAX INFORMATION
Of the ordinary dividends paid, 4.24% was derived from U.S. Treasury
Obligations.
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS
For its tax year ended October 31, 2006, the Fund designates 2.03%, or the
maximum amount allowable, of its dividend distributions as qualified interest
income exempt from U.S. income tax for non-resident alien shareholders. Your
actual amount of qualified interest income for the calendar year will be
reported in your Form 1042-S mailing. You should consult your tax advisor
regarding treatment of the amounts.
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended April 30, 2006, July 31, 2006 and October 31, 2006 are
98.99%, 100% and 99.76%, respectively.
DISTRIBUTION NOTICE
For the fiscal year ended October 31, 2006, the Fund paid aggregate
distributions of $0.1726 (Class A); $0.1337 (Class B & C) and $0.1853
(Institutional Class).
Of the Fund's distributions for its fiscal year ended October 31, 2006,
$0.0639 (Class A); $0.0495 (Class B & C) and $0.0686 (Institutional Class) per
share represents net investment income, and $0.1087 (Class A); $0.0842 (Class B
& C) and $0.1167 (Institutional Class) per share represents return of capital.
Please note that this information is being provided to satisfy certain notice
requirements under the Investment Company Act of 1940. Because each
shareholder's tax status is unique, shareholders should consult their tax
advisor regarding this distribution notice.
F-16
AIM International Bond Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm) and
Trustee and Vice Chair of The AIM Family
of Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
- -------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, A I M Management Group Inc.,
Principal AIM Mutual Fund Dealer Inc. (registered
Executive Officer broker dealer), AIM Funds Management
Inc. (registered investment advisor) and
1371 Preferred Inc. (holding company);
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Capital Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, AVZ Callco Inc. (holding
company); AMVESCAP Inc. (holding
company) and AIM Canada Holdings Inc.
(holding company); Director and Chief
Executive Officer, AIM Trimark Corporate
Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund
company) and AIM Trimark Canada Fund
Inc. (corporate mutual fund company);
Trustee, President and Principal
Executive Officer of The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
Powershares Capital Management LLC
Formerly: President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer,
AIM Funds Management Inc.; President,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and Director,
Trimark Trust (federally regulated
Canadian Trust Company)
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder
Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); CompuDyne Corporation
(provider of products and services to
the public security market); and
Homeowners of America Holding
Corporation (property casualty company)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and Director of various
affiliated Volvo companies; and
Director, Magellan Insurance Company
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired Director, Mainstay VP Series
Trustee Formerly: Partner, Deloitte & Touche Funds, Inc. (21 portfolios)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
F-17
TRUSTEES AND OFFICERS--(CONTINUED)
AIM International Bond Fund
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc. and A I M
Advisors, Inc.; Director, Vice President
and Secretary, INVESCO Distributors,
Inc.; Vice President and Secretary,
A I M Capital Management, Inc., AIM
Investment Services, Inc., and Fund
Management Company; Senior Vice
President and Secretary, A I M
Distributors, Inc.; Director, INVESCO
Funds Group Inc.; Senior Vice President,
Chief Legal Officer and Secretary of The
AIM Family of Funds--Registered
Trademark--; and Manager, Powershares
Capital Management LLC
Formerly: Chief Operating Officer,
Senior Vice President, General Counsel,
and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice
President and Secretary, PBHG Funds (an
investment company); Vice President and
Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel
and Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- ------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, AMVESCAP N/A
Vice President PLC; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- ------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Senior Vice President and General
Vice President Counsel, AMVESCAP PLC; Director, INVESCO
Funds Group, Inc.; and Vice President of
The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Vice President and N/A
General Counsel, Fund Management
Company; Director, Senior Vice
President, Secretary and General
Counsel, A I M Management Group Inc. and
A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Senior Vice President, A I M
Distributors, Inc.; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Chief
Executive Officer and President, INVESCO
Funds Group, Inc.; and Senior Vice
President, and General Counsel, Liberty
Financial Companies, Inc. and Senior
Vice President and General Counsel
Liberty Funds Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.; and Vice President,
Financial Officer and Treasurer and Principal Officer of The
Treasurer AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc. and Vice President
of The AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, Senior Vice
President and Senior Investment Officer,
A I M Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); and
President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust Only)
Formerly: Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- ------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc., Fund Management
Company and The AIM Family of
Funds--Registered Trademark--
Formerly: Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Global Head of Product
Development, AIG-Global Investment
Group, Inc.; Chief Compliance Officer
and Deputy General Counsel,
AIG-SunAmerica Asset Management; and
Chief Compliance Officer, Chief
Operating Officer and Deputy General
Counsel, American General Investment
Management
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers INVESCO Asset
Suite 100 11 Greenway Plaza Inc. LLP Management Limited
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Houston, TX 77046-1173 Suite 100 Suite 2900 London EC2A 1AG
Houston, TX 77046-1173 Houston, TX 77002-5678 United Kingdom
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 225 Franklin Street
Floor 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Philadelphia, PA 19103-7599 Americas
New York, NY 10036-2714
</Table>
F-18
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INTERNATIONAL/ AIM Japan Fund
GLOBAL EQUITY
Annual Report to Shareholders o October 31, 2006
International/Global Blend
Table of Contents
Supplemental Information ........ 2
Letters to Shareholders ......... 3
Performance Summary ............. 5
Management Discussion ........... 5
Fund Expenses ................... 7
Long-term Fund Performance ...... 8
Approval of Advisory Agreement... 10
Schedule of Investments ......... F-1
Financial Statements ............ F-3
Notes to Financial Statements.... F-5
Financial Highlights ............ F-l1
Auditor's Report ................ F-13 [COVER GLOBE IMAGE]
Tax Disclosures ................. F-14
Trustees and Officers ........... F-15
[AIM INVESTMENT SOLUTIONS]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[DOMESTIC [INTERNATIONAL/ [SECTOR
EQUITY] GLOBAL EQUITY] EQUITY]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[FIXED [ALLOCATION [DIVERSIFIED
INCOME] SOLUTIONS] PORTFOLIOS]
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM Japan Fund
AIM JAPAN FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2006, and is based on total net assets.
ABOUT SHARE CLASSES o The prices of and the income generated principles require adjustments to be made
by securities held by the Fund may to the net assets of the Fund at period
o Class B shares are not available as an decline in response to certain factors, end for financial reporting purposes, and
investment for retirement plans including some directly involving the as such, the net asset values for
maintained pursuant to Section 401 of the companies and governments whose shareholder transactions and the returns
Internal Revenue Code, including 401(k) securities are owned by the Fund. These based on those net asset values may
plans, money purchase pension plans and factors include general economic and differ from the net asset values and
profit sharing plans, except for plans market conditions, regional or global returns reported in the Financial
that have existing accounts invested in economic instability and currency and Highlights.
Class B shares. interest rate fluctuations.
o Industry classifications used in this
PRINCIPAL RISKS OF INVESTING IN THE FUND ABOUT INDEXES USED IN THIS REPORT report are generally according to the
Global Industry Classification Standard,
o Foreign securities have additional o The unmanaged MSCI EUROPE, AUSTRALASIA which was developed by and is the
risks, including exchange rate changes, AND THE FAR EAST INDEX (the MSCI EAFE exclusive property and a service mark of
political and economic upheaval, the --Registered Trademark--) is a group of Morgan Stanley Capital International Inc.
relative lack of information about these foreign securities tracked by Morgan and Standard & Poor's.
companies, relatively low market Stanley Capital International.
liquidity and the potential lack of The Fund provides a complete list of its
strict financial and accounting controls o The unmanaged TOKYO STOCK EXCHANGE holdings four times in each fiscal year,
and standards. PRICE INDEX (TOPIX) is a capitalization- at the quarter-ends. For the second and
weighted index of first section stocks fourth quarters, the lists appear in the
o Prices of equity securities change in (larger companies) listed on the Tokyo Fund's semiannual and annual reports to
response to many factors including the Stock Exchange. shareholders. For the first and third
historical and prospective earnings of quarters, the Fund flies the lists with
the issuer, the value of its assets, o The unmanaged LIPPER JAPAN FUNDS INDEX the Securities and Exchange Commission
general economic conditions, interest is an equally weighted representation of (SEC) on Form N-Q. The most recent list
rates, investor perceptions and market the 10 largest funds within the Lipper of portfolio holdings is available at
liquidity. Japan Funds category. These funds AIMinvestments.com. From our home page,
concentrate their investments in equity click on Products & Performance, then
o There is no guarantee that the securities of Japanese companies. Mutual Funds, then Fund Overview. Select
investment techniques and risk analyses your Fund from the drop-down menu and
used by the Fund's managers will produce o The Fund is not managed to track the click on Complete Quarterly Holdings.
the desired results. performance of any particular index, Shareholders can also look up the Fund's
including the indexes defined here, and Forms N-Q on the SEC Web site at sec.gov.
o The Fund is subject to currency/ consequently, the performance of the Fund Copies of the Fund's Forms N-Q may be
exchange rate risk since it may buy or may deviate significantly from the reviewed and copied at the SEC Public
sell currencies other than the U.S. performance of the index. Reference Room in Washington, D.C. You
dollar. can obtain information on the operation
o A direct investment cannot be made in of the Public Reference Room, including
o The prices of initial public offering an index. Unless otherwise indicated, information about duplicating fee
(IPO) securities may go up and down more index results include reinvested charges, by calling 202-942-8090 or
than prices of equity securities of dividends, and they do not reflect sales 800-732-0330, or by electronic request at
companies with longer trading histories. charges. Performance of an index of funds the following e-mail address:
In addition, companies offering reflects fund expenses; performance of a publicinfo@sec.gov. The SEC file numbers
securities in IPOs may have less market index does not. for the Fund are 811-05426 and 033-19338.
experienced management or limited
operating histories. There can be no OTHER INFORMATION A description of the policies and
assurance that the Fund will have procedures that the Fund uses to
favorable IPO investment opportunities. o The returns shown in the management's determine how to vote proxies relating to
discussion of Fund performance are based portfolio securities is available without
o Investing in a single-country mutual on net asset values calculated for charge, upon request, from our Client
fund involves greater risks than shareholder transactions. Generally Services department at 800-959-4246 or on
investing in a more diversified fund due accepted accounting the AIM Web site, AIMinvestments.com. On
to lack of exposure to other countries. the home page, scroll down and click on
AIM Funds Proxy Policy. The information
is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted
proxies related to its portfolio
securities during the 12 months ended
June 30, 2006, is available at our Web
site. Go to AIMinvestments.com, access
the About Us tab, click on Required
Notices and then click on Proxy Voting
Activity. Next, select the Fund from the
drop-down menu. The information is also
available on the SEC Web site, sec.gov.
====================================================================================== =========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares AJFAX
====================================================================================== Class B Shares AJFBX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class C Shares AJFCX
AIMinvestments.com =========================================
</Table>
2
AIM Japan Fund
Dear Shareholders of The AIM Family of Funds
--Registered Trademark--:
We're pleased to provide you with this report, which
includes a discussion of how your Fund was managed during
the review period ended October 31, 2006, and what factors
affected its performance.
[TAYLOR As we approach the end of 2006, it seems likely that many
PHOTO] investors may see the value of their investments increase
this year. Global equity markets, collectively, recorded
double-digit gains for the year ended October 31, 2006, as
did the U.S. stock market. Also, the investment grade bond
market in the United States rose for the same period.
While stock and bond markets generally enjoyed positive
Phillip Taylor year-to-date returns, their performance was affected by
short-term economic and geopolitical events. For example,
the U.S. stock market was weak in the second quarter of
Philip Taylor 2006 when it appeared that inflation might be
rising. Only after the U.S. Federal Reserve Board decided in
August that inflation was contained and that short-term
interest rates need not be increased--the first time it kept
rates unchanged in more than two years--did equities truly
surge.
Short-term market fluctuations are a fact of life for all
investors. At AIM Investments--Registered Trademark--, we
believe that investors can do two things to deal with
short-term market fluctuations: maintain a long-term
investment horizon and maintain a diversified portfolio. AIM
Investments can help by offering a broad product line that
gives your financial advisor the necessary tools to build a
portfolio that's right for you regardless of market
conditions. AIM Investments offers a comprehensive range of
retail mutual funds, including domestic, global and
international equity funds, taxable and tax-exempt
fixed-income funds, and a variety of allocation
portfolios-with varied risk and return characteristics to
match your needs. We maintain this extensive set of product
solutions for one reason: We believe in the value of
comprehensive, diversified investment portfolios.
We've changed the look of our annual reports to reflect
that belief. In our marketing and now our shareholder
literature, we represent a fully diversified portfolio
graphically as an allocation pie chart and assign each asset
class a color--green for domestic equity, blue for
international, orange for sector and purple for fixed
income. A legend in the left column illustrates the
methodology. Your report cover now shows your Fund's asset
class color, plus the asset class and sub-asset class name
are shown in the upper-left corner. The reason for these
changes is to help you better understand where your Fund
fits into your overall portfolio.
AIM has a variety of investment solutions, and knowing
which ones are right for your portfolio is complex. That's
why we also believe in the value of a trusted financial
advisor who will work with you to create an investment plan
you can stick with for the long term. Your financial advisor
can help allocate your portfolio appropriately and review
your investments regularly to help ensure they remain
suitable as your financial situation changes. While there
are no guarantees with any investment program, a long-term
plan that's based on your financial goals, risk tolerance
and time horizon is more likely to keep you and your
investments on track.
OUR COMMITMENT TO YOU
In the short term, the one sure thing about markets is
their unpredictability. While past performance cannot
guarantee comparable future results, we believe that staying
invested for the long term with a thoughtful plan offers the
best opportunity for weathering that unpredictability. We at
AIM Investments remain committed to building enduring
solutions to help you achieve your investment goals, and
we're pleased you've placed your trust in us.
Information about investing, the markets and your Fund is
always available on our Web site, AIMinvestments.com. If you
have questions about your individual account, we invite you
to contact one of our highly trained client services
representatives at 800-959-4246.
Sincerely,
/s/ PHILIP TAYLOR
Philip Taylor
President -- AIM Funds
CEO, AIM Investments
December 14, 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. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
3
AIM Japan Fund
Dear Fellow AIM Fund Shareholders:
At our meeting at the end of June, your Board completed its
comprehensive review* of each fund's advisory agreement with
A I M Advisors, Inc. (AIM) to make certain your interests
are being served in terms of fees, performance and
operations.
[CROCKETT Looking ahead, your Board finds many reasons to be
PHOTO] positive about AIM's management and strategic direction.
Most importantly, AIM's investment management discipline has
paid off in terms of improved overall performance. We are
also pleased with AIM's efforts to seek more cost-effective
ways of delivering superior service.
In addition, AIM is realizing the benefits of belonging
to a leading independent global investment management
BRUCE L. CROCKETT organization in its parent company, AMVESCAP PLC, which is
dedicated to helping people worldwide build their financial
security. AMVESCAP managed approximately $450 billion
globally as of October 31, 2006, operating under the AIM,
INVESCO, AIM Trimark, INVESCO PERPETUAL and Atlantic Trust
brands. These companies are home to an abundance of
investment talent that is gradually being integrated and
leveraged into centers of excellence, each focusing on a
given market segment or asset class. Over the next few
years, your Board will be meeting at these various centers
of excellence to learn about their progress and how they may
serve you through our goal of enhancing performance and
reducing costs.
The seven new AIM funds--which include Asian funds,
structured U.S. equity funds and specialized bond funds--are
an early example of the kind of opportunities the AMVESCAP
organization can provide AIM clients. More information on
these funds can be found on AIM's Web site.
Your Board is very pleased with the overall direction and
progress of the AIM Funds. We're working closely and
effectively with AIM's management to continue this momentum.
As always, your Board is eager to hear your views on how we
might better serve you. Please send your comments in a
letter addressed to me at AIM Investments, AIM Investments
Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board
December 14, 2006
*To learn more about all the factors we considered before
approving each fund's advisory agreement, go to the
"Products & Performance" tab at the AIM Web site
(AIMinvestments.com) and click on "Investment Advisory
Agreement Renewals." The approval of advisory agreement
information for your Fund is also included in this annual
report on pages 10-11.
4
AIM Japan Fund
<Table>
Management's discussion
of Fund performance
======================================================================================= research is reflected in our proprietary
stock evaluation system. We score a
PERFORMANCE SUMMARY company relative to five select research
factors and compare the company score to
From inception on March 31, 2006, through October 31, 2006, Class A shares of AIM its specific sector average. With this
Japan Fund, excluding sales charges, returned -11.70%. The Fund's performance unique evaluation system, we are able to
lagged both our broad market index and our style-specific index, or benchmark. account for earnings growth and
valuation/quality measures.
We attribute the Fund's underperformance versus the style-specific index to our
pro-cyclical investment policy which is driven by our bottom-up stock selection We believe disciplined sell decisions
process. Specifically, the Fund was underweight in two areas that outperformed the are a key determinant of successful
index during the period, namely defensive stocks such as pharmaceuticals, food and investing. We consider selling a security
electric power and ultra large-cap stocks. Positive contributors to performance for several reasons, including:
included selected holdings in information technology, materials and financials.
o A stock reaches its target price.
Your Fund's performance appears on pages 8 and 9.
o A company's fundamentals deteriorate.
FUND VS. INDEXES
Cumulative total returns, 3/31/06-10/31/06, excluding applicable sales charges. If o A more attractive opportunity is
sales charges were included, returns would be lower. identified.
Class A Shares -11.70% MARKET CONDITIONS AND YOUR FUND
Class B Shares -12.10
Class C Shares -12.10 Since the beginning of the yeal; the
MSCI EAFE Index (Broad Market Index) 8.73 Japanese equity market has been in a
Tokyo Stock Exchange Price Index (Style-Specific Index) -5.78 consolidation phase after a remarkably
Lipper Japan Funds Index (Peer Group Index) -9.90 strong rally in 2005. The consolidation
period has taken longer than expected as
SOURCE: LIPPER INC., BLOOMBERG L.P. the market suffered from the overall
mid-year weakness in the world equity
======================================================================================= markets. We believe the reasons for this
market volatility included 1) concern
HOW WE INVEST When selecting stocks for the Fund we about the direction of the U.S. economy,
focus on companies with positive earnings 2) tensions in the Middle East and 3)
We believe markets can often be growth and attractive valuations. very conservative earnings projections by
inefficient--meaning that investors many Japanese companies reported at the
frequently ignore information about Our team-managed investment process is beginning of this fiscal year. In August,
companies, particularly if those companies driven by bottom-up stock selection. the market rebounded sharply, supported
are in industries or sectors that happen Company research is conducted across by the recovery in global equity markets
to be out of favor. We believe that such sectors with each Fund manager performing and healthy corporate earnings
information is not always fully discounted many company visits each year. The result announcements in the second quarter. The
even after the market has recognized it. of company market again weakened in September on a
mixture of negative incentives.
(continued)
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES TOP 10 EQUITY HOLDINGS
By sector 1. Diversified Banks 10.2% 1. Tokyu Land Corp. 4.4%
2. Automobile Manufacturers 8.4 2. Mitsubishi UFJ Financial
3. Construction & Farm Machinery & Group, Inc. 4.3
[PIE CHART] Heavy Trucks 8.0 3. Mitsui Engineering &
4. Semiconductors 7.4 Shipbuilding Co., Ltd. 3.5
5. Real Estate Management & 4. Sumco Corp. 3.4
Information Technology 18.5% Development 7.1 5. Elpida Memory, Inc. 3.1
Materials 11.1% 6. Yamaha Motor Co., Ltd. 3.0
Health Care 2.1% 7. Mizuho Financial Group, Inc. 3.0
Other Assets Less Liabilities 0.3% 8. Komatsu Ltd. 3.0
Consumer Discretionary 25.6% Total Net Assets $7.17 million 9. Toyota Motor Corp. 3.0
Industrials 23.7% 10. Sumitomo Mitsui Financial
Financials 18.7% Total Number of Holdings 59 Group, Inc. 2.9
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
========================================== ========================================== ==========================================
</Table>
5
AIM Japan Fund
<Table>
Since the Funds inception on March 31, The current economic expansion in Japan Kiyohide Nagata
2006, its performance lagged both its looked increasingly sustainable and is
broad market and style-specific indexes. now about to match the nation's longest Chartered Financial
Despite the market consolidation, we did economic growth cycle, 1965-1970. The [NAGATA Analyst, head of Japan
not make a major shift throughout the current economic expansion has been PHOTO] Large Equity with INVESCO
period. Instead we maintained a supported by domestic demand such as Asset Management (Japan)
pro-cyclical bias based on our bottom-up capital investment and consumer spending. Limited, is portfolio
stock selection process and a strong We believed the Japanese equity market manager of AIM Japan Fund. He joined
fundamental view of the market. This is could benefit from solid and sustainable INVESCO in 2003. Mr. Nagata is a
the main reason for the Fund's relative economic growth as well as from the fact Chartered Member of the Security Analysts
underperformance versus its that many companies have benefited from Association of Japan.
style-specific index. years of restructuring and are now
positioned for potential long-term
In terms of specific stocks, UFJ NICOS growth.
and OMC Card detracted from Fund Yasuhiro Shimbayashi
performance during the period. UFJ NICOS, IN CLOSING
a part of Mitsubishi UFJ Financial Group, Senior fund manager with
is the largest consumer credit card We believe that long-term investors have [SHIMBAYASHI INVESCO Asset Management
company in Japan. OMC Card also provides the potential to benefit from secular PHOTO] (Japan) Limited, is
consumer credit card services with a economic growth in Japan. But the portfolio manager of AIM
superior credit administration system. Japanese market, like all markets, is Japan Fund. Mr.
News that Japan's Financial Services subject to short-term volatility. In Shimbayashi joined INVESCO in 2004. He is
Agency is considering lower interest rate recent months, the Japanese equity market a Chartered Member of the Security
ceilings on consumer loans hurt a host of may have shifted from recovery to Analysts Association of Japan.
consumer finance stocks, including these expansion. We believe we have built a
two Fund holdings. In contrast, the Fund strong portfolio with the potential to
benefited from its overweight position in benefit from this shift. We continue to
real estate stocks. TOKYU LAND performed invest in stocks of companies with the Tomomitsu Yanaba
particularly strongly. The Fund also potential to provide attractive growth.
benefited from positive stock selection We look forward to reporting to you on Fund manager with INVESCO
among semiconductor stocks, including our progress in this effort in the next [YANABA Asset Management (Japan)
SUMCO CORP. annual report. Until then, thank you for PHOTO] Limited, is portfolio
your participation in AIM Japan Fund. manager of AIM Japan Fund.
Since inception, we have constructed a He joined INVESCO in 2004.
portfolio that reflects our pro-cyclical THE VIEWS AND OPINIONS EXPRESSED IN Mr. Yanaba is a Chartered Member of the
view of the Japanese economy. As we MANAGEMENT'S DISCUSSION OF FUND Securities Analysts Association of Japan.
manage the Fund with a medium- to PERFORMANCE ARE THOSE OF A I M ADVISORS,
long-term horizon, we look beyond INC. THESE VIEWS AND OPINIONS ARE SUBJECT
short-term fluctuations in the economy TO CHANGE AT ANY TIME BASED ON FACTORS
and the market. SUCH AS MARKET AND ECONOMIC CONDITIONS. Tomoyuki Shioya
THESE VIEWS AND OPINIONS MAY NOT BE
For the Fund's portfolio, we RELIED UPON AS INVESTMENT ADVICE OR Fund manager with INVESCO
particularly focused on companies that RECOMMENDATIONS, OR AS AN OFFER FOR A [SHIOYA Asset Management (Japan)
could benefit from: PARTICULAR SECURITY. THE INFORMATION IS PHOTO] Limited, is portfolio
NOT A COMPLETE ANALYSIS OF EVERY ASPECT manager of AIM Japan Fund.
o A recovery in domestic capital spending OF ANY MARKET, COUNTRY, INDUSTRY, He joined INVESCO in 2005.
and consumption. SECURITY OR THE FUND. STATEMENTS OF FACT Mr. Shioya earned a BA. in economics from
ARE FROM SOURCES CONSIDERED RELIABLE, BUT Waseda University. He is a Chartered
o The potential end of deflation in A I M ADVISORS, INC. MAKES NO Member of the Securities Analysts
Japan. REPRESENTATION OR WARRANTY AS TO THEIR Association of Japan.
COMPLETENESS OR ACCURACY. ALTHOUGH
o Strong economic growth in Asia. HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP
o Global growth opportunities resulting YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
from competitive advantages. PHILOSOPHY.
SEE important Fund and index disclosures
on the inside front cover.
</Table>
6
AIM Japan Fund
<Table>
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE together with the amount you invested, to The hypothetical account values and
estimate the expenses that you paid over expenses may not be used to estimate the
As a shareholder of the Fund, you incur the period. Simply divide your account actual ending account balance or expenses
two types of costs: (1) transaction value by $1,000 (for example, an $8,600 you paid for the period. You may use this
costs, which may include sales charges account value divided by $1,000 = 8.6), information to compare the ongoing costs'
(loads) on purchase payments or then multiply the result by the number in of investing in the Fund and other funds.
contingent deferred sales charges on the table under the heading entitled To do so, compare this 5% hypothetical
redemptions, and redemption fees, if any; "Actual Expenses Paid During Period" to example with the 5% hypothetical examples
and (2) ongoing costs, including estimate the expenses you paid on your that appear in the shareholder reports of
management fees; distribution and/or account during this period. the other funds.
service (12b-1) fees; and other Fund
expenses. This example is intended to HYPOTHETICAL EXAMPLE FOR COMPARISON Please note that the expenses shown in
help you understand your ongoing costs PURPOSES the table are meant to highlight your
(in dollars) of investing in the Fund and ongoing costs only and do not reflect any
to compare these costs with ongoing costs The table below also provides information transaction costs, such as sales charges
of investing in other mutual funds. The about hypothetical account values and (loads) on purchase payments, contingent
example is based on an investment of hypothetical expenses based on the Fund's deferred sales charges on redemptions,
$1,000 invested at the beginning of the actual expense ratio and an assumed rate and redemption fees, if any Therefore,
period and held for the entire period May of return of 5% per year before expenses, the hypothetical information is useful in
1, 2006, through October 31, 2006. which is not the Fund's actual return. comparing ongoing costs only, and will
The Fund's actual cumulative total not help you determine the relative total
ACTUAL EXPENSES returns at net asset value after expenses costs of owning different funds. In
for the six months ended October 31, addition, if these transaction costs were
The table below provides information 2006, appear in the far right table included, your costs would have been
about actual account values and actual "Cumulative Total Returns" on page 9. higher.
expenses. You may use the information in
this table,
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
A $1,000.00 $886.50 $ 8.46 $1,016.23 $ 9.05 1.78%
B 1,000.00 883.40 12.01 1,012.45 12.83 2.53
C 1,000.00 882.50 12.00 1,012.45 12.83 2.53
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 six months ended October 31, 2006, appear in the far right table "Cumulative Total Returns" on page 9.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
</Table>
7
AIM Japan Fund
<Table>
Your Fund's Performance
RESULTS OF A $10,000 INVESTMENT
Fund and index data from 3/31/06
============================================================================================================================
[MOUNTAIN CHART]
AIM JAPAN FUND AIM JAPAN FUND AIM JAPAN FUND MSCI EAFE TOKYO STOCK EXCHANGE LIPPER JAPAN
DATE -CLASS A SHARES -CLASS B SHARES -CLASS C SHARES INDEX PRICE INDEX FUNDS INDEX
3/31/06 $9450 $10000 $10000 $10000 $10000 $10000
4/06 9412 9950 9960 10478 10254 10095
5/06 8836 9340 9340 10071 9560 9317
6/06 8562 9040 9041 10070 9426 9109
7/06 8222 8680 8681 10170 9325 8759
8/06 8402 8860 8851 10449 9468 8947
9/06 8335 8780 8781 10465 9280 8901
10/06 8346 8351 8702 10873 9422 9010
============================================================================================================================
SOURCE: LIPPER INC.
Past performance cannot guarantee investment in the Fund at the close of not. Performance shown in the chart and
comparable future results. the reporting period and paid the table(s) does not reflect deduction of
applicable contingent deferred sales taxes a shareholder would pay on Fund
The data shown in the chart include charges. Index results include reinvested distributions or sale of Fund shares.
reinvested distributions, applicable dividends, but they do not reflect sales Performance of the indexes does not
sales charges, Fund expenses and charges. Performance of an index of funds reflect the effects of taxes.
management fees. Results for Class B reflects fund expenses and management
shares are calculated as if a fees; performance of a market index does
hypothetical shareholder had liquidated
his entire
</Table>
8
AIM Japan Fund
========================================= ========================================= =========================================
CUMULATIVE TOTAL RETURNS CUMULATIVE TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/06, including applicable As of 9/30/06, the most recent calendar 6 months ended 10/31/06, excluding
sales charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares -11.35%
Inception (3/31/06) -16.54% CLASS A SHARES Class B Shares -11.66
Inception (3/31/06) -16.64% Class C Shares -11.75
CLASS B SHARES
Inception (3/31/06) -16.50% CLASS B SHARES =========================================
Inception (3/31/06) -16.59%
CLASS C SHARES
Inception (3/31/06) -12.98% CLASS C SHARES
Inception (3/31/06) -13.08%
========================================= =========================================
THE PERFORMANCE DATA QUOTED REPRESENT CLASS A SHARE PERFORMANCE REFLECTS THE A REDEMPTION FEE OF 2% WILL BE IMPOSED
PAST PERFORMANCE AND CANNOT GUARANTEE MAXIMUM 5.50% SALES CHARGE, AND CLASS B ON CERTAIN REDEMPTIONS OR EXCHANGES OUT
COMPARABLE FUTURE RESULTS; CURRENT AND CLASS C SHARE PERFORMANCE REFLECTS OF THE FUND WITHIN 30 DAYS OF PURCHASE.
PERFORMANCE MAY BE LOWER OR HIGHER. THE APPLICABLE CONTINGENT DEFERRED SALES EXCEPTIONS TO THE REDEMPTION FEE ARE
PLEASE VISIT AIMINVESTMENTS.COM FOR THE CHARGE (CDSC) FOR THE PERIOD INVOLVED. LISTED IN THE FUND'S PROSPECTUS.
MOST RECENT MONTH-END PERFORMANCE. THE CDSC ON CLASS B SHARES DECLINES FROM
PERFORMANCE FIGURES REFLECT REINVESTED 5% BEGINNING AT THE TIME OF PURCHASE TO HAD THE ADVISOR NOT WAIVED FEES AND/OR
DISTRIBUTIONS, CHANGES IN NET ASSET VALUE 0% AT THE BEGINNING OF THE SEVENTH YEAR. REIMBURSED EXPENSES, PERFORMANCE WOULD
AND THE EFFECT OF THE MAXIMUM SALES THE CDSC ON CLASS C SHARES IS 1% FOR THE HAVE BEEN LOWER.
CHARGE UNLESS OTHERWISE STATED. FIRST YEAR AFTER PURCHASE.
INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT YOU MAY HAVE A THE PERFORMANCE OF THE FUND'S SHARE
GAIN OR LOSS WHEN YOU SELL SHARES. CLASSES WILL DIFFER PRIMARILY DUE TO
DIFFERENT SALES CHARGE STRUCTURES AND
CLASS EXPENSES.
9
AIM Japan Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the "Board") of viduals are competent and able to carry net assets increase because the Advisory
AIM Investment Funds (the "Trust") out their responsibilities under the Agreement includes breakpoints. The Board
oversees the management of AIM Japan Fund Advisory Agreement. noted that, because this is a new Fund
(the "Fund") and, as required by law, and the way in which the advisory fee
determines whether to approve the Fund's o Overall performance of AIM. Not breakpoints have been structured, the
advisory agreement with A I M Advisors, applicable because this is a new Fund. Fund has yet to benefit from the
Inc. ("AIM"). Based upon the However, the Board considered the overall breakpoints. The Board concluded that the
recommendation of the Investments performance of AIM in providing Fund's fee levels under the Advisory
Committee of the Board, at a meeting held investment advisory and portfolio Agreement therefore would reflect
on February 1, 2006, the Board, including administrative services to other mutual economies of scale at higher asset levels
all of the independent trustees, approved funds advised by AIM and concluded that and that it was not necessary to change
the initial advisory agreement (the such performance was satisfactory. the advisory fee breakpoints in the
"Advisory Agreement") between the Fund Fund's advisory fee schedule.
and AIM for an initial period ending June o Fees relative to those clients of AIM
30, 2007. with comparable investment strategies. o Investments in affiliated money market
The Board noted that AIM does not serve funds. The Board also took into account
The Board considered the factors as an advisor to other mutual funds or the fact that uninvested cash and cash
discussed below in evaluating the other clients with investment strategies collateral from securities lending
fairness and reasonableness of the comparable to those of the Fund. arrangements (collectively, "cash
Advisory Agreement at the meeting on balances") of the Fund may be invested in
February 1, 2006 and as part of the o Fees relative to those of comparable money market funds advised by AIM
Board's ongoing oversight of the Fund. In funds with other advisors. The Board pursuant to the terms of an SEC exemptive
their deliberations, the Board and the reviewed the advisory fee rate for the order. The Board found that the Fund may
independent trustees did not identify any Fund under the Advisory Agreement. The realize certain benefits upon investing
particular factor that was controlling, Board compared effective contractual cash balances in AIM advised money market
and each trustee attributed different advisory fee rates at a common asset funds, including a higher net return,
weights to the various factors. level and noted that the Fund's rate was increased liquidity, increased
above the median rate of the funds diversification or decreased transaction
The discussion below serves as a advised by other advisors with investment costs. The Board also found that the Fund
summary of the material factors and the strategies comparable to those of the will not receive reduced services if it
conclusions with respect thereto that Fund that the Board reviewed. The Board invests its cash balances in such money
formed the basis for the Board's approval noted that AIM has agreed to limit the market funds. The Board noted that, to
of the Advisory Agreement. After Fund's total annual operating expenses, the extent the Fund invests in affiliated
consideration of all of the factors below as discussed below. The Board also money market funds, AIM has voluntarily
and based on its informed business considered the fact that AIM set the agreed to waive a portion of the advisory
judgment, the Board determined that the proposed advisory fees for the Fund based fees it receives from the Fund
Advisory Agreement is in the best upon the median effective management fee attributable to such investment. The
interests of the Fund and its rate (comprised of advisory fees plus, in Board further determined that the
shareholders and that the compensation to some cases, administrative fees) at proposed securities lending program and
AIM under the Advisory Agreement is fair various asset levels of competitor mutual related procedures with respect to the
and reasonable and would have been funds with investment strategies lending Fund is in the best interests of
obtained through arm's length comparable to those of the Fund. In the lending Fund and its respective
negotiations. addition, the Board noted that the shareholders. The Board therefore
proposed advisory fees for the Fund are concluded that the investment of cash
o The nature and extent of the advisory equal to the uniform fee schedule that collateral received in connection with
services to be provided by AIM. The Board applies to other mutual funds advised by the securities lending program in the
reviewed the services to be provided by AIM with investment strategies comparable money market funds according to the
AIM under the Advisory Agreement. Based to those of the Fund, which uniform fee procedures is in the best interests of
on such review, the Board concluded that schedule includes breakpoints and is the lending Fund and its respective
the range of services to be provided by based on net asset levels. Based on this shareholders.
AIM under the Advisory Agreement was review, the Board concluded that the
appropriate. advisory fee rate for the Fund under the o Profitability of AIM and its
Advisory Agreement was fair and affiliates. The Board reviewed
o The quality of services to be provided reasonable. information concerning the profitability
by AIM. The Board reviewed the of AIM's (and its affiliates') investment
credentials and experience of the o Expense limitations and fee waivers. advisory and other activities and its
officers and employees of AIM who will The Board noted that AIM has financial condition. The Board considered
provide investment advisory services to contractually agreed to waive fees and/or the overall profitability of AIM. The
the Fund. In reviewing the qualifications limit expenses of the Fund through June Board noted that AIM's operations remain
of AIM to provide investment advisory 30, 2007 in an amount necessary to limit profitable, although increased expenses
services, the Board reviewed the total annual operating expenses to a in recent years have reduced AIM's
qualifications of AIM's investment specified percentage of average daily net profitability. Based on the review of the
personnel and considered such issues as assets for each class of the Fund. The profitability of AIM's and its
AIM's portfolio and product review Board considered the contractual nature affiliates' investment advisory and other
process, various back office support of this fee waiver/expense limitation and activities and its financial condition,
functions provided by AIM and AIM's noted that it remains in effect until the Board concluded that the compensation
equity and fixed income trading June 30, 2007. The Board considered the to be paid by the Fund to AIM under its
operations. Based on the review of these effect this fee waiver/expense limitation Advisory Agreement was not excessive.
and other factors, the Board concluded would have on the Fund's estimated
that the quality of services to be expenses and concluded that the levels of o Benefits of soft dollars to AIM. The
provided by AIM was appropriate. fee waivers/expense limitations for the Board considered the benefits realized by
Fund were fair and reasonable. AIM as a result of brokerage transactions
o The performance of the Fund relative to executed through "soft dollar"
comparable funds. Not applicable because o Breakpoints and economies of scale. The arrangements. Under these arrangements,
this is a new Fund. Board reviewed the structure of the brokerage commissions paid by the Fund
Fund's advisory fee under the Advisory and/or other funds advised by AIM are
o The performance of the Fund relative to Agreement, noting that it contains seven used to pay for research and execution
indices. Not applicable because this is a breakpoints. The Board reviewed the level services. This research is used by AIM in
new Fund. of the Fund's advisory fees, and noted making investment decisions for the Fund.
that such fees, as a percentage of the The Board concluded that such
o Meeting with the Fund's portfolio Fund's net assets, would decrease as arrangements were appropriate.
managers and investment personnel. The
Board intends to meet periodically with (continued)
the Fund's portfolio managers and/or
other investment personnel to ensure that
such indi-
10
AIM Japan Fund
o AIM's financial soundness in light of The Board considered the factors for which the Sub-Advisor serves as
the Fund's needs. The Board considered discussed below in evaluating the sub-advisor with investment strategies
whether AIM is financially sound and has fairness and reasonableness of the comparable to those of the Fund; (iii)
the resources necessary to perform its Sub-Advisory Agreement at the meeting on was lower than the median sub-advisory
obligations under the Advisory Agreement, February 1, 2006 and as part of the fee rate for five unaffiliated accounts
and concluded that AIM has the financial Board's ongoing oversight of the Fund. In for which the Sub-Advisor serves as
resources necessary to fulfill its their deliberations, the Board and the sub-advisor with investment strategies
obligations under the Advisory Agreement. independent trustees did not identify any comparable to those of the Fund; and (iv)
particular factor that was controlling, was lower than the median advisory fee
o Historical relationship between the and each trustee attributed different rate for four institutional/separately
Fund and AIM. In determining whether to weights to the various factors. managed accounts advised by the
approve the Advisory Agreement for the Sub-Advisor with investment strategies
Fund, the Board also considered the The discussion below serves as a comparable to those of the Fund. The
current relationship between AIM and the discussion of the material factors and Board noted that AIM has agreed to limit
Trust, as well as the Board's knowledge the conclusions with respect thereto that the Fund's total annual operating
of AIM's operations, and concluded that formed the basis for the Board's approval expenses, as discussed below. The Board
it was beneficial to maintain the current of the Sub-Advisory Agreement. After also considered the services to be
relationship, in part, because of such consideration of all of the factors below provided by the Sub-Advisor pursuant to
knowledge. The Board also reviewed the and based on its informed business the Sub-Advisory Agreement and the
general nature of the non-investment judgment, the Board determined that the services to be provided by AIM pursuant
advisory services currently performed by Sub-Advisory Agreement is in the best to the Advisory Agreement, as well as the
AIM and its affiliates for the Trust, interests of the Fund and its allocation of fees between AIM and the
such as administrative, transfer agency shareholders. Sub-Advisor pursuant to the Sub-Advisory
and distribution services, and the fees Agreement. The Board noted that the
received by AIM and its affiliates for o The nature and extent of the advisory sub-advisory fees have no direct effect
performing such services. In addition to services to be provided by the on the Fund or its shareholders, as they
reviewing such services, the trustees Sub-Advisor. The Board reviewed the are paid by AIM to the Sub-Advisor, and
also considered the organizational services to be provided by the that AIM and the Sub-Advisor are
structure employed by AIM and its Sub-Advisor under the Sub-Advisory affiliates. Based on this review, the
affiliates to provide those services. Agreement. Based on such review, the Board concluded that the sub-advisory fee
Based on the review of these and other Board concluded that the range of rate under the Sub-Advisory Agreement was
factors, the Board concluded that AIM and services to be provided by the fair and reasonable.
its affiliates were qualified to provide Sub-Advisor under the Sub-Advisory
non-investment advisory services to the Agreement was appropriate. o Profitability of AIM and its
Fund, including administrative, transfer affiliates. The Board reviewed
agency and distribution services. o The quality of services to be provided information concerning the profitability
by the Sub-Advisor. The Board reviewed of AIM's (and its affiliates') investment
o Other factors and current trends. In the credentials and experience of the advisory and other activities and its
determining whether to approve the officers and employees of the Sub-Advisor financial condition. The Board considered
Advisory Agreement for the Fund, the who will provide investment advisory the overall profitability of AIM. The
Board considered the fact that AIM, along services to the Fund. Based on the review Board noted that AIM's operations remain
with others in the mutual fund industry, of these and other factors, the Board profitable, although increased expenses
is subject to regulatory inquiries and concluded that the quality of services to in recent years have reduced AIM's
litigation related to a wide range of be provided by the Sub-Advisor was profitability. Based on the review of the
issues. The Board also considered the appropriate. profitability of AIM's and its
governance and compliance reforms being affiliates' investment advisory and other
undertaken by AIM and its affiliates, o The performance of the Fund relative to activities and its financial condition,
including maintaining an internal comparable funds. Not applicable because the Board concluded that the compensation
controls committee and retaining an this is a new Fund. However, the Board to be paid by the Fund to AIM under its
independent compliance consultant, and reviewed the performance of other Advisory Agreement was not excessive.
the fact that AIM has undertaken to cause accounts advised or sub-advised by the
the Fund to operate in accordance with Sub-Advisor with investment strategies o The Sub-Advisor's financial soundness
certain governance policies and comparable to those of the Fund. in light of the Fund's needs. The Board
practices. The Board concluded that these considered whether the Sub-Advisor is
actions indicated a good faith effort on o The performance of the Fund relative to financially sound and has the resources
the part of AIM to adhere to the highest indices. Not applicable because this is a necessary to perform its obligations
ethical standards, and determined that new Fund. under the Sub-Advisory Agreement, and
the current regulatory and litigation concluded that the Sub-Advisor has the
environment to which AIM is subject o Meetings with the Fund's portfolio financial resources necessary to fulfill
should not prevent the Board from managers and investment personnel. The its obligations under the Sub-Advisory
approving the Advisory Agreement for the Board intends to meet periodically with Agreement.
Fund. the Fund's portfolio managers and/or
other investment personnel to ensure that
APPROVAL OF SUB-ADVISORY AGREEMENT such individuals are competent and able
to carry out their responsibilities under
The Board oversees the management of the the Sub-Advisory Agreement.
Fund and, as required by law, determines
whether to approve the Fund's o Overall performance of the Sub-Advisor.
sub-advisory agreement. Based upon the Not applicable because this is a new
recommendation of the Investments Fund.
Committee of the Board, at a meeting held
on February 1, 2006, the Board, including o Fees relative to those clients of the
all of the independent trustees, approved Sub-Advisor with comparable investment
the sub-advisory agreement (the strategies. The Board reviewed the
"Sub-Advisory Agreement") between INVESCO sub-advisory fee rate for the Fund under
Asset Management (Japan) Limited (the the Sub-Advisory Agreement. The Board
"Sub-Advisor") and AIM with respect to compared effective contractual fee rates
the Fund for an initial period ending at a common asset level and noted that
June 30, 2007. this rate (i) was lower than the all-in
advisory fee rates for four affiliated
offshore funds advised by the Sub-Advisor
with investment strategies comparable to
those of the Fund; (ii) was lower than
the sub-advisory fee rates for four
affiliated offshore funds
11
Supplement to Annual Report dated 10/31/06
AIM Japan Fund
===================================
Institutional Class Shares CUMULATIVE TOTAL RETURNS PLEASE NOTE THAT PAST PERFORMANCE IS NOT
For periods ended 10/31/06 INDICATIVE OF FUTURE RESULTS. MORE RECENT
The following information has been prepared to RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
provide Institutional Class shareholders with Inception (3/31/06) -11.50% ALL RETURNS ASSUME REINVESTMENT OF
a performance overview specific to their 6 Months -11.14 DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND
holdings. Institutional Class shares are =================================== PRINCIPAL VALUE WILL FLUCTUATE SO YOUR
offered exclusively to institutional SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
investors, including defined contribution CUMULATIVE TOTAL RETURNS LESS THAN THEIR ORIGINAL COST. SEE FULL
plans that meet certain criteria. For periods ended 9/30/06,most REPORT FOR INFORMATION ON COMPARATIVE
recent calendar quarter-end BENCHMARKS. PLEASE CONSULT YOUR FUND
PROSPECTUS FOR MORE INFORMATION. FOR THE MOST
Inception (3/31/06) -11.70% CURRENT MONTH-END PERFORMANCE, PLEASE CALL
6 Months -11.70 800-451-4246 OR VISIT AIMINVESTMENTS.COM.
===================================
INSTITUTIONAL CLASS SHARES HAVE NO
SALES CHARGE; THEREFORE,
PERFORMANCE IS AT NET ASSET VALUE
(NAV). PERFORMANCE OF INSTITUTIONAL
CLASS SHARES WILL DIFFER FROM
PERFORMANCE OF OTHER SHARE CLASS-
ES PRIMARILY DUE TO DIFFERING SALES
CHARGES AND CLASS EXPENSES.
A REDEMPTION FEE OF 2% WILL BE
IMPOSED ON CERTAIN REDEMPTIONS OR
EXCHANGES OUT OF THE FUND WITHIN 30
DAYS OF PURCHASE. EXCEPTIONS TO THE
REDEMPTION FEE ARE LISTED IN THE
FUND'S PROSPECTUS.
HAD THE ADVISOR NOT WAIVED
FEES AND/OR REIMBURSED EXPENSES,
PER- FORMANCE WOULD HAVE BEEN
LOWER.
==============================================
NASDAQ SYMBOL AJFIX
==============================================
Over for information on your Fund's expenses.
================================================================================
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.
================================================================================
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted,
reproduced or shown to the public,nor used in written form as sales literature
for public use.
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE]
AIMINVESTMENTS.COM JAP-INS-1 A I M Distributors, Inc. --REGISTERED TRADEMARK-- --REGISTERED TRADEMARK--
Information about your Fund's expenses
Calculating your ongoing Fund expenses
Example divide your account value by $1,000 The hypothetical account values and
(for example, an $8,600 account expenses may not be used to estimate the
As a shareholder of the Fund, you incur ongo- value divided by $1,000 = 8.6), actual ending account balance or expenses you
ing costs, including management fees and other then multiply the result by the paid for the period. You may use this
Fund expenses. This example is intended to number in the table under the information to compare the ongoing costs of
help you understand your ongoing costs (in heading entitled "Actual Expenses investing in the Fund and other funds. To do
dollars) of investing in the Fund and to com- Paid During Period" to estimate so, compare this 5% hypothetical example with
pare these costs with ongoing costs of the expenses you paid on your the 5% hypothetical examples that appear in
investing in other mutual funds. The example account during this period. the shareholder reports of the other funds.
is based on an investment of $1,000 invested
at the beginning of the period and held for Hypothetical example for comparison Please note that the expenses shown in
the entire period May 1, 2006, through October purposes the table are meant to highlight your ongoing
31, 2006. costs only. Therefore, the hypothetical
The table below also provides information is useful in comparing ongoing
Actual expenses information about hypothetical costs only, and will not help you determine
account values and hypothetical the relative total costs of owning different
The table below provides information about expenses based on the Fund's actual funds.
actual account values and actual expenses. You expense ratio and an assumed rate
may use the information in this table, of return of 5% per year before
together with the amount you invested, to expenses, which is not the Fund's
estimate the expenses that you paid over the actual return. The Fund's actual
period. Simply cumulative total return after
expenses for the six months ended
October 31, 2006, appears in the
table on the front of this
supplement.
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
Institutional $1,000.00 $888.60 $7.24 $1,017.54 $7.73 1.52%
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 return after expenses for the
six months ended October 31, 2006, appears in the table on the front of this supplement.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
====================================================================================================================================
AIMINVESTMENTS.COM JAP-INS-1 A I M Distributors,Inc.
AIM Japan Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------
FOREIGN STOCKS (JAPAN)-99.69%
AUTO PARTS & EQUIPMENT-3.18%
NHK Spring Co., Ltd. 14,000 $ 154,776
- ------------------------------------------------------------------
NOK Corp.(a) 2,800 73,053
==================================================================
227,829
==================================================================
AUTOMOBILE MANUFACTURERS-8.38%
Honda Motor Co., Ltd.(a) 3,500 123,709
- ------------------------------------------------------------------
Isuzu Motors Ltd.(a) 39,000 134,266
- ------------------------------------------------------------------
Suzuki Motor Corp.(a) 4,600 130,516
- ------------------------------------------------------------------
Toyota Motor Corp.(a) 3,600 212,486
==================================================================
600,977
==================================================================
COMMODITY CHEMICALS-2.30%
Toray Industries, Inc.(a) 23,000 164,844
==================================================================
COMPUTER & ELECTRONICS RETAIL-2.06%
Yamada Denki Co., Ltd.(a) 1,500 148,112
==================================================================
COMPUTER HARDWARE-1.06%
Toshiba Corp.(a) 12,000 75,856
==================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-8.04%
Iseki & Co., Ltd.(a) 13,000 38,642
- ------------------------------------------------------------------
Komatsu Ltd.(a) 12,100 216,363
- ------------------------------------------------------------------
Kubota Corp.(a) 8,000 69,467
- ------------------------------------------------------------------
Mitsui Engineering & Shipbuilding Co.,
Ltd.(a) 68,000 251,834
==================================================================
576,306
==================================================================
CONSUMER ELECTRONICS-2.62%
Casio Computer Co., Ltd.(a) 5,000 100,599
- ------------------------------------------------------------------
Funai Electric Co., Ltd.(a) 1,000 87,188
==================================================================
187,787
==================================================================
CONSUMER FINANCE-1.49%
ORIX Corp. 380 107,057
==================================================================
DEPARTMENT STORES-1.22%
Daiei, Inc. (The)(b) 4,650 87,270
==================================================================
DIVERSIFIED BANKS-10.17%
Mitsubishi UFJ Financial Group, Inc.(a) 24 304,670
- ------------------------------------------------------------------
Mizuho Financial Group, Inc.(a) 28 217,239
- ------------------------------------------------------------------
Sumitomo Mitsui Financial Group, Inc.(a) 19 207,522
==================================================================
729,431
==================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------
DIVERSIFIED CHEMICALS-3.93%
Mitsubishi Gas Chemical Co., Inc. 19,000 $ 180,974
- ------------------------------------------------------------------
Nissan Chemical Industries, Ltd.(a) 4,000 51,107
- ------------------------------------------------------------------
Sumitomo Chemical Co., Ltd.(a) 7,000 49,669
==================================================================
281,750
==================================================================
DIVERSIFIED METALS & MINING-2.65%
Sumitomo Titanium Corp.(a) 1,000 117,663
- ------------------------------------------------------------------
Toho Titanium Co., Ltd.(a) 1,300 72,596
==================================================================
190,259
==================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.82%
Fujikura Ltd.(a) 11,000 116,917
- ------------------------------------------------------------------
Furukawa Electric Co., Ltd. (The)(a) 12,000 85,033
==================================================================
201,950
==================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-4.04%
IBIDEN Co., Ltd.(a) 2,100 109,390
- ------------------------------------------------------------------
Murata Manufacturing Co., Ltd.(a) 2,600 180,620
==================================================================
290,010
==================================================================
HEALTH CARE EQUIPMENT-1.34%
Sysmex Corp.(a) 2,400 96,205
==================================================================
HOMEBUILDING-1.80%
Haseko Corp.(a)(b) 37,500 128,751
==================================================================
HOTELS, RESORTS & CRUISE LINES-0.58%
Kinki Nippon Tourist Co., Ltd.(a) 13,000 41,952
==================================================================
HOUSEHOLD APPLIANCES-0.99%
Hitachi Koki Co., Ltd.(a) 5,000 71,166
==================================================================
INDUSTRIAL GASES-0.49%
Taiyo Nippon Sanso Corp.(a) 4,000 35,005
==================================================================
INDUSTRIAL MACHINERY-3.75%
JTEKT Corp. 3,500 72,869
- ------------------------------------------------------------------
Kawasaki Heavy Industries, Ltd.(a) 16,000 58,691
- ------------------------------------------------------------------
Nabtesco Corp.(a) 6,000 71,600
- ------------------------------------------------------------------
THK Co., Ltd.(a) 2,600 65,686
==================================================================
268,846
==================================================================
IT CONSULTING & OTHER SERVICES-1.73%
Nomura Research Institute, Ltd.(a) 400 58,347
- ------------------------------------------------------------------
Otsuka Corp.(a) 600 65,828
==================================================================
124,175
==================================================================
</Table>
F-1
AIM Japan Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------
MARINE-2.31%
Mitsui O.S.K. Lines, Ltd.(a) 20,000 $ 165,998
==================================================================
MOTORCYCLE MANUFACTURERS-3.04%
Yamaha Motor Co., Ltd.(a) 8,000 217,768
==================================================================
OFFICE ELECTRONICS-2.21%
Canon Inc.(a) 1,600 85,113
- ------------------------------------------------------------------
Konica Minolta Holdings, Inc. 5,500 73,267
==================================================================
158,380
==================================================================
PHARMACEUTICALS-0.71%
Takeda Pharmaceutical Co. Ltd.(a) 800 51,228
==================================================================
RAILROADS-1.27%
East Japan Railway Co.(a) 13 90,887
==================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-7.08%
Sumitomo Realty & Development Co., Ltd.(a) 3,000 98,917
- ------------------------------------------------------------------
Tokyu Land Corp.(a) 33,000 317,471
- ------------------------------------------------------------------
Tokyu Livable, Inc. 1,100 91,513
==================================================================
507,901
==================================================================
SEMICONDUCTOR EQUIPMENT-2.06%
Disco Corp.(a) 2,500 147,461
==================================================================
SEMICONDUCTORS-7.41%
Elpida Memory, Inc.(a)(b) 4,700 219,218
- ------------------------------------------------------------------
Komatsu Electronic Metals Co., Ltd.(a) 1,800 71,558
- ------------------------------------------------------------------
Sumco Corp.(a) 3,400 240,376
==================================================================
531,152
==================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------
STEEL-1.71%
Chubu Steel Plate Co., Ltd.(a) 2,900 $ 28,639
- ------------------------------------------------------------------
Kobe Steel, Ltd.(a) 31,000 94,312
==================================================================
122,951
==================================================================
TIRES & RUBBER-1.74%
Sumitomo Rubber Industries, Ltd.(a) 10,900 124,455
==================================================================
TRADING COMPANIES & DISTRIBUTORS-5.51%
Mitsubishi Corp.(a) 6,900 132,401
- ------------------------------------------------------------------
Sojiz Corp.(a)(b) 26,300 86,750
- ------------------------------------------------------------------
Toyota Tsusho Corp.(a) 6,000 175,689
==================================================================
394,840
==================================================================
Total Foreign Stocks (Japan) (Cost
$7,300,179) 7,148,559
==================================================================
TOTAL INVESTMENTS-99.69% (Cost $7,300,179) 7,148,559
==================================================================
OTHER ASSETS LESS LIABILITIES-0.31% 21,876
==================================================================
NET ASSETS-100.00% $7,170,435
__________________________________________________________________
==================================================================
</Table>
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2006 was $6,380,833,
which represented 88.99% of the Fund's Net Assets. See Note 1A.
(b) Non-income producing security.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-2
AIM Japan Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $7,300,179) $7,148,559
- -----------------------------------------------------------
Cash 26,002
- -----------------------------------------------------------
Receivables for:
Investments sold 103,408
- -----------------------------------------------------------
Fund shares sold 33,828
- -----------------------------------------------------------
Dividends 16,837
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 1,166
- -----------------------------------------------------------
Other assets 37,920
===========================================================
Total assets 7,367,720
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 146,285
- -----------------------------------------------------------
Trustee deferred compensation and retirement
plans 1,166
- -----------------------------------------------------------
Accrued distribution fees 2,737
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 882
- -----------------------------------------------------------
Accrued operating expenses 46,215
===========================================================
Total liabilities 197,285
===========================================================
Net assets applicable to shares outstanding $7,170,435
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $7,874,994
- -----------------------------------------------------------
Undistributed net investment income (loss) (3,514)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currencies (548,693)
- -----------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities and foreign currencies (152,352)
===========================================================
$7,170,435
___________________________________________________________
===========================================================
NET ASSETS:
Class A $4,417,372
___________________________________________________________
===========================================================
Class B $1,004,846
___________________________________________________________
===========================================================
Class C $1,084,680
___________________________________________________________
===========================================================
Institutional Class $ 663,537
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 500,054
___________________________________________________________
===========================================================
Class B 114,274
___________________________________________________________
===========================================================
Class C 123,382
___________________________________________________________
===========================================================
Institutional Class 75,001
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 8.83
- -----------------------------------------------------------
Offering price per share
(Net asset value of $8.83 divided by
94.50%) $ 9.34
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 8.79
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 8.79
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 8.85
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
AIM Japan Fund
STATEMENT OF OPERATIONS
For the period March 31, 2006 (Date operations commenced) through October 31,
2006
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $1,470) $ 19,531
- -----------------------------------------------------------------------
Interest 10,365
=======================================================================
Total investment income 29,896
=======================================================================
EXPENSES:
Advisory fees 33,833
- -----------------------------------------------------------------------
Administrative services fees 29,452
- -----------------------------------------------------------------------
Custodian fees 26,860
- -----------------------------------------------------------------------
Distribution fees:
Class A 5,117
- -----------------------------------------------------------------------
Class B 5,727
- -----------------------------------------------------------------------
Class C 5,981
- -----------------------------------------------------------------------
Transfer agent fees -- A, B and C 9,799
- -----------------------------------------------------------------------
Transfer agent fees -- Institutional 11
- -----------------------------------------------------------------------
Trustees' and officer's fees and benefits 8,096
- -----------------------------------------------------------------------
Professional services fees 68,973
- -----------------------------------------------------------------------
Other 64,580
=======================================================================
Total expenses 258,429
=======================================================================
Less: Fees waived, expenses reimbursed and expense
offset arrangements (189,125)
=======================================================================
Net expenses 69,304
=======================================================================
Net investment income (loss) (39,408)
=======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment securities (548,693)
- -----------------------------------------------------------------------
Foreign currencies (6,898)
=======================================================================
(555,591)
=======================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (151,620)
- -----------------------------------------------------------------------
Foreign currencies (732)
=======================================================================
(152,352)
=======================================================================
Net gain (loss) from investment securities and foreign
currencies (707,943)
=======================================================================
Net increase (decrease) in net assets resulting from
operations $(747,351)
_______________________________________________________________________
=======================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM Japan Fund
STATEMENT OF CHANGES IN NET ASSETS
For the period March 31, 2006 (Date operations commenced) through October 31,
2006
<Table>
<Caption>
2006
- --------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (39,408)
- --------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (555,591)
- --------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (152,352)
==========================================================================
Net increase (decrease) in net assets resulting from
operations (747,351)
==========================================================================
Share transactions-net:
Class A 4,821,438
- --------------------------------------------------------------------------
Class B 1,138,695
- --------------------------------------------------------------------------
Class C 1,206,888
- --------------------------------------------------------------------------
Institutional Class 750,765
==========================================================================
Net increase in net assets resulting from share
transactions 7,917,786
==========================================================================
Net increase in net assets 7,170,435
==========================================================================
NET ASSETS:
Beginning of period --
==========================================================================
End of period (including undistributed net investment
income (loss) of $(3,514)) $7,170,435
__________________________________________________________________________
==========================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Japan Fund (the "Fund") is a series portfolio of AIM Investment Funds (the
"Trust"). The Trust is organized as a Delaware statutory trust and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of nine separate series
portfolios, each authorized to issue an unlimited number of shares of beneficial
interest. The Fund currently offers multiple classes of shares. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund commenced operations on
March 31, 2006.
The Fund's investment objective is long-term growth of capital.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. 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.
F-5
AIM Japan Fund
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. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. 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.
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.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to treat 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 to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- 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.
H. INDEMNIFICATIONS -- 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
F-6
AIM Japan Fund
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.
I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is recorded as an
increase in shareholder capital and is allocated among the share classes
based on the relative net assets of each class.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
K. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.935%
- --------------------------------------------------------------------
Next $250 million 0.91%
- --------------------------------------------------------------------
Next $500 million 0.885%
- --------------------------------------------------------------------
Next $1.5 billion 0.86%
- --------------------------------------------------------------------
Next $2.5 billion 0.835%
- --------------------------------------------------------------------
Next $2.5 billion 0.81%
- --------------------------------------------------------------------
Next $2.5 billion 0.785%
- --------------------------------------------------------------------
Over $10 billion 0.76%
___________________________________________________________________
====================================================================
</Table>
Under the terms of a master sub-advisory agreement between AIM and INVESCO
Asset Management (Japan) Limited ("INVESCO"), AIM pays INVESCO 40% of the amount
of AIM's compensation on sub-advised assets.
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C and
Institutional Class shares to 1.70%, 2.45%, 2.45% and 1.45% of average daily net
assets, respectively, through at least June 30, 2007. In determining the
advisor's obligation to waive advisory fees and/or reimburse expenses, the
following expenses are not taken into account, and could cause the net annual
operating expenses to exceed the numbers reflected above: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v)
expenses related to a merger or reorganization, as approved by the Fund's Board
of Trustees; and (vi) expenses that the Fund has incurred but did not actually
pay because of an expense offset arrangement. Currently, in addition to the
expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more
fully below, the expense offset arrangements from which the Fund may benefit are
in the form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash. In
addition, the fund may also benefit from a one time credit to be used to offset
future custodian expenses. Those credits are used to pay certain expenses
incurred by the Fund.
For the period March 31, 2006 (date operations commenced) to October 31,
2006, AIM waived advisory fees of $33,833 and reimbursed class level expenses of
$87,051, $24,356, $25,436 and $15,859 for Class A, Class B, Class C and
Institutional Class shares, respectively.
F-7
AIM Japan Fund
At the request of the Trustees of the Trust, AMVESCAP PLC agreed to
reimburse expenses incurred by the Fund in connection with market timing matters
in the AIM Funds, which may include legal, audit, shareholder reporting,
communications and trustee expenses. For the period March 31, 2006 (date
operations commenced) to October 31, 2006, AMVESCAP did not reimburse any
expenses.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the period
March 31, 2006 (date operations commenced) to October 31, 2006, AIM was paid
$29,452.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency
and shareholder services to the Fund and to reimburse AISI for certain expenses
incurred by AISI in the course of providing such services. AISI may make
payments to intermediaries that provide omnibus account services, sub-accounting
services and/or networking services. All fees payable by AISI to intermediaries
that provide omnibus account services or sub-accounting are charged back to the
Fund, subject to certain limitations approved by the Trust's Board of Trustees.
For the period March 31, 2006 (date operations commenced) to October 31, 2006,
the Fund paid AISI $9,799 for Class A, Class B and Class C share classes and $11
for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C and Institutional Class shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,
Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the
Plans, pays ADI compensation at the annual rate of 0.25% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and Class C shares. Of the Rule 12b-1 payments, up to 0.25% of the
average daily net assets of the Class A, Class B or Class C shares may be paid
to furnish continuing personal shareholder services to customers who purchase
and own shares of such classes. Any amounts not paid as a service fee under the
Plans would constitute an asset-based sales charge. National Association of
Securities Dealers ("NASD") Rules impose a cap on the total sales charges,
including asset-based sales charges that may be paid by any class of shares of
the Fund. Pursuant to the Plans, for the period March 31, 2006 (date operations
commenced) to October 31, 2006, the Class A, Class B and Class C shares paid
$5,117, $5,727 and $5,981, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the period
March 31, 2006 (date operations commenced) to October 31, 2006, ADI advised the
Fund that it retained $8,250 in front-end sales commissions from the sale of
Class A shares and $0, $777 and $52 from Class A, Class B and Class C shares,
respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the period
March 31, 2006 (date operations commenced) to October 31, 2006, the Fund
received credits from these arrangements, which resulted in the reduction of the
Fund's total expenses of $2,590.
NOTE 4--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the period March 31, 2006 (date operations commenced) to October 31,
2006, the Fund paid legal fees of $572 for services rendered by Kramer, Levin,
Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that
firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission
("SEC"), the Fund may participate in an interfund lending facility that AIM has
established for temporary borrowings by the AIM Funds. An interfund loan will be
made under this facility only if the loan rate (an average of the rate available
on bank loans and the rate available on investments in overnight repurchase
agreements) is favorable to both the lending fund and the borrowing fund. A loan
will be secured by collateral if the Fund's aggregate borrowings from all
sources exceeds 10% of the Fund's total assets. To the extent that the loan is
required to be secured by collateral, the collateral is marked to market daily
to ensure that the market value is at least 102% of the outstanding principal
value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are
F-8
AIM Japan Fund
parties to the credit facility can borrow on a first come, first served basis.
Principal on each loan outstanding shall bear interest at the bid rate quoted by
SSB at the time of the request for the loan.
During the period March 31, 2006 (date operations commenced) to October 31,
2006, the Fund did not borrow or lend under the interfund lending facility or
borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank 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 contractually agreed upon rate.
NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
There were no ordinary income or long term capital gain distributions paid
during the period March 31, 2006 (date operations commence) to October 31, 2006.
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- --------------------------------------------------------------------------
Unrealized appreciation (depreciation) -- investments $ (187,473)
- --------------------------------------------------------------------------
Temporary book/tax differences (989)
- --------------------------------------------------------------------------
Capital loss carryforward (516,097)
- --------------------------------------------------------------------------
Shares of beneficial interest 7,874,994
==========================================================================
Total net assets $7,170,435
__________________________________________________________________________
==========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales and the treatment of passive foreign investment companies. The
tax-basis unrealized appreciation (depreciation) on investments amount includes
appreciation (depreciation) on foreign currencies of $732.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund has a capital loss carryforward as of October 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
October 31, 2014 $516,097
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the period March 31, 2006 (date operations commenced) to October
31, 2006 was $9,977,921 and $2,129,049, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 288,377
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (475,118)
===============================================================================
Net unrealized appreciation (depreciation) of investment
securities $(186,741)
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $7,335,300.
</Table>
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, net operating losses and costs incurred during the startup period
of the Fund, on October 31, 2006, undistributed net investment income (loss) was
increased by $35,894, undistributed net realized gain (loss) was increased by
$6,898 and shares of beneficial interest decreased by $42,792. This
reclassification had no effect on the net assets of the Fund.
F-9
AIM Japan Fund
NOTE 9--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A, Class B,
Class C and Institutional Class. Class A shares are sold with a front-end sales
charge unless certain waiver criteria are met. Class B shares and Class C shares
are sold with CDSC. Institutional Class shares are sold at net asset value.
Under certain circumstances, Class A shares are subject to CDSC. Generally,
Class B shares will automatically convert to Class A shares on or about the
month-end which is at least eight years after the date of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------
MARCH 31, 2006
(DATE OPERATIONS
COMMENCED)
TO OCTOBER 31,
2006(a)
-----------------------
SHARES AMOUNT
- -------------------------------------------------------------------------------------
Sold:
Class A 651,753 $ 6,144,792
- -------------------------------------------------------------------------------------
Class B 139,384 1,354,677
- -------------------------------------------------------------------------------------
Class C 146,443 1,407,660
- -------------------------------------------------------------------------------------
Institutional Class 75,001 750,010
=====================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,806 15,881
- -------------------------------------------------------------------------------------
Class B (1,813) (15,881)
=====================================================================================
Reacquired:(b)
Class A (153,505) (1,339,235)
- -------------------------------------------------------------------------------------
Class B (23,297) (200,101)
- -------------------------------------------------------------------------------------
Class C (23,061) (200,772)
- -------------------------------------------------------------------------------------
Institutional Class -- 755
=====================================================================================
812,711 $ 7,917,786
_____________________________________________________________________________________
=====================================================================================
</Table>
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and it owns 6% 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, 37% of the shares outstanding are owned by AIM.
(b) Amount is net of redemption fees of $3,818, $1,090, $1,146 and $755 for
Class A, Class B, Class C and Institutional Class shares, respectively,
for the period March 31, 2006 (date operations commenced) to October 31,
2006.
NOTE 10--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
F-10
AIM Japan Fund
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A CLASS B CLASS C INSTITUTIONAL CLASS
---------------- ---------------- ---------------- -------------------
MARCH 31, 2006 MARCH 31, 2006 MARCH 31, 2006 MARCH 31, 2006
(DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS
COMMENCED) COMMENCED) COMMENCED) COMMENCED)
THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2006 2006 2006 2006
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.08) (0.08) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (1.14) (1.14) (1.14) (1.13)
=================================================================================================================================
Total from investment operations (1.18) (1.22) (1.22) (1.16)
=================================================================================================================================
Redemption fees added to shares of beneficial
interest 0.01 0.01 0.01 0.01
=================================================================================================================================
Net asset value, end of period $ 8.83 $ 8.79 $ 8.79 $ 8.85
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) (11.70)% (12.10)% (12.10)% (11.50)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,417 $ 1,005 $ 1,085 $ 664
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements(b) 1.77% 2.52% 2.52% 1.52%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements(b) 6.96% 7.71% 7.71% 6.41%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets(b) (0.87)% (1.62)% (1.62)% (0.62)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(c) 37% 37% 37% 37%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</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 (a) 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
$3,474,968, $972,282, $1,015,361 and $680,461 for Class A, Class B,
Class C and Institutional Class shares, respectively.
(c) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 (Order No. 05-1318). The WVASC makes
findings of fact that AIM and ADI entered into certain arrangements permitting
market timing of the AIM Funds and failed to disclose these arrangements in the
prospectuses for such Funds, 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, including
restitution to affected investors, disgorgement of fees, reimbursement of
investigatory, administrative and legal costs and an "administrative
assessment," to be determined by the Commissioner. Initial research indicates
that these damages could be limited or capped by statute.
F-11
AIM Japan Fund
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions (all the claims in
this category of lawsuits were dismissed with prejudice by the court on
September 29, 2006, except for the Section 36(b) claim which was dismissed
with leave to amend to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
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 and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-12
AIM Japan Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Japan Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Japan Fund (one of the funds
constituting AIM Investment Funds, hereafter referred to as the "Fund") at
October 31, 2006, and the results of its operations, the changes in its net
assets and the financial highlights for the period March 31, 2006 (date
operations commenced) through October 31, 2006, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian, provides a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
December 20, 2006
Houston, Texas
F-13
AIM Japan Fund
TAX DISCLOSURES
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended April 30, 2006, July 31, 2006 and October 31, 2006, are
97.52%, 100% and 99.53%, respectively.
F-14
AIM Japan Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm) and
Trustee and Vice Chair of The AIM Family
of Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
- -------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, A I M Management Group Inc.,
Principal AIM Mutual Fund Dealer Inc. (registered
Executive Officer broker dealer), AIM Funds Management
Inc. (registered investment advisor) and
1371 Preferred Inc. (holding company);
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Capital Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, AVZ Callco Inc. (holding
company); AMVESCAP Inc. (holding
company) and AIM Canada Holdings Inc.
(holding company); Director and Chief
Executive Officer, AIM Trimark Corporate
Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund
company) and AIM Trimark Canada Fund
Inc. (corporate mutual fund company);
Trustee, President and Principal
Executive Officer of The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
Powershares Capital Management LLC
Formerly: President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer,
AIM Funds Management Inc.; President,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and Director,
Trimark Trust (federally regulated
Canadian Trust Company)
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder
Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); CompuDyne Corporation
(provider of products and services to
the public security market); and
Homeowners of America Holding
Corporation (property casualty company)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and Director of various
affiliated Volvo companies; and
Director, Magellan Insurance Company
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired Director, Mainstay VP Series
Trustee Formerly: Partner, Deloitte & Touche Funds, Inc. (21 portfolios)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
F-15
TRUSTEES AND OFFICERS--(CONTINUED)
AIM Japan Fund
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc. and A I M
Advisors, Inc.; Director, Vice President
and Secretary, INVESCO Distributors,
Inc.; Vice President and Secretary,
A I M Capital Management, Inc., AIM
Investment Services, Inc., and Fund
Management Company; Senior Vice
President and Secretary, A I M
Distributors, Inc.; Director, INVESCO
Funds Group Inc.; Senior Vice President,
Chief Legal Officer and Secretary of The
AIM Family of Funds--Registered
Trademark--; and Manager, Powershares
Capital Management LLC
Formerly: Chief Operating Officer,
Senior Vice President, General Counsel,
and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice
President and Secretary, PBHG Funds (an
investment company); Vice President and
Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel
and Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- ------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, AMVESCAP N/A
Vice President PLC; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- ------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Senior Vice President and General
Vice President Counsel, AMVESCAP PLC; Director, INVESCO
Funds Group, Inc.; and Vice President of
The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Vice President and N/A
General Counsel, Fund Management
Company; Director, Senior Vice
President, Secretary and General
Counsel, A I M Management Group Inc. and
A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Senior Vice President, A I M
Distributors, Inc.; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Chief
Executive Officer and President, INVESCO
Funds Group, Inc.; and Senior Vice
President, and General Counsel, Liberty
Financial Companies, Inc. and Senior
Vice President and General Counsel
Liberty Funds Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.; and Vice President,
Financial Officer and Treasurer and Principal Officer of The
Treasurer AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc. and Vice President
of The AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, Senior Vice
President and Senior Investment Officer,
A I M Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); and
President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust Only)
Formerly: Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- ------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc., Fund Management
Company and The AIM Family of
Funds--Registered Trademark--
Formerly: Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Global Head of Product
Development, AIG-Global Investment
Group, Inc.; Chief Compliance Officer
and Deputy General Counsel,
AIG-SunAmerica Asset Management; and
Chief Compliance Officer, Chief
Operating Officer and Deputy General
Counsel, American General Investment
Management
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers INVESCO Asset
Suite 100 11 Greenway Plaza Inc. LLP Management (Japan)
Houston, TX Suite 100 11 Greenway Plaza 1201 Louisiana Street Limited
77046-1173 Houston, TX 77046-1173 Suite 100 Suite 2900 Shiroyama Trust Tower
Houston, TX 77046-1173 Houston, TX 77002-5678 25th Floor
3-1 Toranomon 4-Chrome
Chiyoda-Ku
Minato-Ku, Tokyo
105-6025
Japan
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, Kramer, Levin, Naftalis Services, Inc. Trust Company
LLP & Frankel LLP P.O. Box 4739 225 Franklin Street
1735 Market Street, 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
51st Floor Americas
Philadelphia, PA New York, NY 10036-2714
19103-7599
</Table>
F-16
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Mutual Retirement Annuities College Separately Offshore Cash
Funds Products Savings Managed Products Management
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[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
DOMESTIC EQUITY AIM TRIMARK ENDEAVOR FUND
Mid-Cap Blend Annual Report to Shareholders o October 31, 2006
Table of Contents
Supplemental Information ......... 2
Letters to Shareholders .......... 3
Performance Summary .............. 5
Management Discussion ............ 5
Fund Expenses .................... 7
Long-term Fund Performance ....... 8
Approval of Advisory Agreement ... 10
Schedule of Investments .......... F-1
Financial Statements ............. F-2
Notes to Financial Statements .... F-5
Financial Highlights ............. F-11
Auditor's Report ................. F-15 [COVER GLOBE IMAGE]
Tax Disclosures .................. F-16
Trustees and Officers ............ F-17
[AIM INVESTMENT SOLUTIONS]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[DOMESTIC [INTERNATIONAL/ [SECTOR
EQUITY] GLOBAL EQUITY] EQUITY]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[FIXED [ALLOCATION [DIVERSIFIED
INCOME] SOLUTIONS] PORTFOLIOS]
[AIM INVESTMENTS LOGO APPEARS HERE]
-- Registered Trademark --
AIM Trimark Endeavor Fund
AIM TRIMARK ENDEAVOR FUND SEEKS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2006, and is based on total net assets.
ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT o Industry classifications used in this
report are generally according to the
o Class B shares are not available as an o The unmanaged LIPPER MID-CAP Global Industry Classification Standard,
investment for retirement plans --Registered Trademark-- CORE FUNDS which was developed by and is the
maintained pursuant to Section 401 of INDEX represents an average of the exclusive property and a service mark of
the Internal Revenue Code, including performance of the 30 largest Morgan Stanley Capital International
401(k) plans, money purchase pension mid-capitalization core funds tracked by Inc. and Standard & Poor's.
plans and profit sharing plans, except Lipper Inc., an independent mutual fund
for plans that have existing accounts performance monitor. The Fund provides a complete list of its
invested in Class B shares. holdings four times in each fiscal year,
o The unmanaged RUSSELL MIDCAP at the quarter-ends. For the second and
o Class R shares are available only to --Registered Trademark-- INDEX fourth quarters, the lists appear in the
certain retirement plans. Please see the represents the performance of the stocks Fund's semiannual and annual reports to
prospectus for more information. of domestic mid-capitalization companies. shareholders. For the first and third
quarters, the Fund files the lists with
PRINCIPAL RISKS OF INVESTING IN THE FUND o The unmanaged STANDARD & POOR'S the Securities and Exchange Commission
COMPOSITE INDEX OF 500 STOCKS (the S&P (SEC) on Form N-Q. The most recent list
o Foreign securities have additional 500--Registered Trademark-- Index) is an of portfolio holdings is available at
risks, including exchange rate changes, index of common stocks frequently used AIMinvestments.com. From our home page,
political and economic upheaval, the as a general measure of U.S. stock click on Products & Performance, then
relative lack of information about these market performance. Mutual Funds, then Fund Overview. Select
companies, relatively low market your Fund from the drop-down menu and
liquidity and the potential lack of o The Fund is not managed to track the click on Complete Quarterly Holdings.
strict financial and accounting controls performance of any particular index, Shareholders can also look up the Fund's
and standards. including the indexes defined here, and Forms N-Q on the SEC Web site at
consequently, the performance of the sec.gov. Copies of the Fund's Forms N-Q
o Prices of equity securities change in Fund may deviate significantly from the may be reviewed and copied at the SEC
response to many factors including the performance of the index. Public Reference Room in Washington,
historical and prospective earnings of D.C. You can obtain information on the
the issuer, the value of its assets, o A direct investment cannot be made in operation of the Public Reference Room,
general economic conditions, interest an index. Unless otherwise indicated, including information about duplicating
rates, investor perceptions and market index results include reinvested fee charges, by calling 202-942-8090 or
liquidity. dividends, and they do not reflect sales 800-732-0330, or by electronic request
charges. Performance of an index of at the following e-mail address:
o The value of convertible securities in funds reflects fund expenses; publicinfo@sec.gov. The SEC file numbers
which the Fund invests may be affected performance of a market index does not. for the Fund are 811-05426 and
by market interest rates, the risk that 033-19338.
the issuer may default on interest or OTHER INFORMATION
principal payments and the value of the A description of the policies and
underlying common stock into which these o The returns shown in the management's procedures that the Fund uses to
securities may be converted. discussion of Fund performance are based determine how to vote proxies relating
on net asset values calculated for to portfolio securities is available
o Because a large percentage of the shareholder transactions. Generally without charge, upon request, from our
Fund's assets may be invested in a accepted accounting principles require Client Services department at
limited number of securities, a change adjustments to be made to the net assets 800-959-4246 or on the AIM Web site,
in the value of these securities could of the Fund at period end for financial AIMinvestments.com. On the home page,
significantly affect the value of your reporting purposes, and as such, the net scroll down and click on AIM Funds Proxy
investment in the Fund. asset values for shareholder Policy. The information is also
transactions and the returns based on available on the SEC Web site, sec.gov.
those net asset values may differ from
the net asset values and returns Information regarding how the Fund voted
reported in the Financial Highlights. proxies related to its portfolio
securities during the 12 months ended
June 30, 2006, is available at our Web
site. Go to AIMinvestments.com, access
the About Us tab, click on Required
Notices and then click on Proxy Voting
Activity. Next, select the Fund from the
drop-down menu. The information is also
available on the SEC Web site, sec.gov.
==========================================
FUND NASDAQ SYMBOLS
=================================================================================== Class A Shares ATDAX
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND Class B Shares ATDBX
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES Class C Shares ATDCX
AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class R Shares ATDRX
=================================================================================== ==========================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIMinvestments.com
2
AIM Trimark Endeavor Fund
Dear Shareholders of The AIM Family of Funds
--Registered Trademark--:
We're pleased to provide you with this report, which
includes a discussion of how your Fund was managed during
the review period ended October 31, 2006, and what factors
affected its performance.
[TAYLOR As we approach the end of 2006, it seems likely that many
PHOTO] investors may see the value of their investments increase
this year. Global equity markets, collectively, recorded
double-digit gains for the year ended October 31, 2006, as
did the U.S. stock market. Also, the investment grade bond
market in the United States rose for the same period.
While stock and bond markets generally enjoyed positive
year-to-date returns, their performance was affected by
short-term economic and geopolitical events. For example,
the U.S. stock market was weak in the second quarter of 2006
when it appeared that inflation might be rising. Only after
the U.S. Federal Reserve Board decided in August that
Philip Taylor inflation was contained and that short-term interest rates
need not be increased--the first time it kept rates
unchanged in more than two years--did equities truly surge.
Short-term market fluctuations are a fact of life for all
investors. At AIM Investments--Registered Trademark--, we
believe that investors can do two things to deal with
short-term market fluctuations: maintain a long-term
investment horizon and maintain a diversified portfolio. AIM
Investments can help by offering a broad product line that
gives your financial advisor the necessary tools to build a
portfolio that's right for you regardless of market
conditions. AIM Investments offers a comprehensive range of
retail mutual funds, including domestic, global and
international equity funds, taxable and tax-exempt
fixed-income funds, and a variety of allocation
portfolios--with varied risk and return characteristics to
match your needs. We maintain this extensive set of product
solutions for one reason: We believe in the value of
comprehensive, diversified investment portfolios.
We've changed the look of our annual reports to reflect
that belief. In our marketing and now our shareholder
literature, we represent a fully diversified portfolio
graphically as an allocation pie chart and assign each asset
class a color--green for domestic equity, blue for
international, orange for sector and purple for fixed
income. A legend in the left column illustrates the
methodology. Your report cover now shows your Fund's asset
class color, plus the asset class and sub-asset class name
are shown in the upper-left corner. The reason for these
changes is to help you better understand where your Fund
fits into your overall portfolio.
AIM has a variety of investment solutions, and knowing
which ones are right for your portfolio is complex. That's
why we also believe in the value of a trusted financial
advisor who will work with you to create an investment plan
you can stick with for the long term. Your financial advisor
can help allocate your portfolio appropriately and review
your investments regularly to help ensure they remain
suitable as your financial situation changes. While there
are no guarantees with any investment program, a long-term
plan that's based on your financial goals, risk tolerance
and time horizon is more likely to keep you and your
investments on track.
OUR COMMITMENT TO YOU
In the short term, the one sure thing about markets is their
unpredictability. While past performance cannot guarantee
comparable future results, we believe that staying invested
for the long term with a thoughtful plan offers the best
opportunity for weathering that unpredictability. We at AIM
Investments remain committed to building enduring solutions
to help you achieve your investment goals, and we're pleased
you've placed your trust in us.
Information about investing, the markets and your Fund is
always available on our Web site, AIMinvestments.com. If you
have questions about your individual account, we invite you
to contact one of our highly trained client services
representatives at 800-959-4246.
Sincerely,
/s/ PHILIP TAYLOR
Philip Taylor
President -- AIM Funds
CEO, AIM Investments
December 14, 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. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
3
AIM Trimark Endeavor Fund
Dear Fellow AIM Fund Shareholders:
At our meeting at the end of June, your Board completed its
comprehensive review* of each fund's advisory agreement with
A I M Advisors, Inc. (AIM) to make certain your interests
are being served in terms of fees, performance and
operations.
[CROCKETT Looking ahead, your Board finds many reasons to be
PHOTO] positive about AIM's management and strategic direction.
Most importantly, AIM's investment management discipline has
paid off in terms of improved overall performance. We are
also pleased with AIM's efforts to seek more cost-effective
ways of delivering superior service.
In addition, AIM is realizing the benefits of belonging
Bruce L. Crockett to a leading independent global investment management
organization in its parent company, AMVESCAP PLC, which is
dedicated to helping people worldwide build their financial
security. AMVESCAP managed approximately $450 billion
globally as of October 31, 2006, operating under the AIM,
INVESCO, AIM Trimark, INVESCO PERPETUAL and Atlantic Trust
brands. These companies are home to an abundance of
investment talent that is gradually being integrated and
leveraged into centers of excellence, each focusing on a
given market segment or asset class. Over the next few
years, your Board will be meeting at these various centers
of excellence to learn about their progress and how they may
serve you through our goal of enhancing performance and
reducing costs.
The seven new AIM funds--which include Asian funds,
structured U.S. equity funds and specialized bond funds--are
an early example of the kind of opportunities the AMVESCAP
organization can provide AIM clients. More information on
these funds can be found on AIM's Web site.
Your Board is very pleased with the overall direction and
progress of the AIM Funds. We're working closely and
effectively with AIM's management to continue this momentum.
As always, your Board is eager to hear your views on how we
might better serve you. Please send your comments in a
letter addressed to me at AIM Investments, AIM Investments
Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board
December 14, 2006
*To learn more about all the factors we considered before
approving each fund's advisory agreement, go to the
"Products & Performance" tab at the AIM Web site
(AIMinvestments.com) and click on "Investment Advisory
Agreement Renewals." The approval of advisory agreement
information for your Fund is also included in this annual
report on pages 10-11.
4
AIM Trimark Endeavor Fund
Management's discussion o Sustainable competitive advantages.
of Fund performance
o Strong growth prospects.
=====================================================================================
PERFORMANCE SUMMARY o High barriers to entry.
For the fiscal year ended October 31, 2006, all share classes of AIM Trimark o Honest and capable management teams.
Endeavor Fund, at net asset value, posted double-digit gains--outperforming the
Fund's broad market, style-specific and peer group index, as shown below. Also central to the Trimark
discipline is our adherence to an
Your Fund's outperformance was driven largely by above-market returns from investment horizon of three to five
select investments in the consumer discretionary and industrials sectors. While years. We use this long-term approach
all sectors contributed positively to the Fund's absolute return, primary because we believe good business
detractors from performance were selected investments in the information strategies usually take that amount of
technology and industrials sectors. time to implement and to produce strong
earnings growth. We also use a
Your Fund's long-term performance appears on pages 8 and 9. concentrated portfolio approach,
constructing a portfolio of about 25 to
FUND VS. INDEXES 50 stocks. We believe this allows each
Total returns, 10/31/05-10/31/06, excluding applicable sales charges. If sales investment opportunity to materially
charges were included, returns would be lower. impact Fund performance.
Class A Shares 25.26% While deliberate efforts are made to
Class B Shares 24.31 manage risk through industry
Class C Shares 24.31 diversification, our primary method of
Class R Shares 25.04 attempting to manage risk is to purchase
S&P 500 Index (Broad Market Index) 16.33 businesses that are trading below their
Russell Midcap Index (Style-Specific Index) 17.41 estimated intrinsic value.
Lipper Mid-Cap Core Funds Index (Peer Group Index) 15.42
Holdings are considered for sale if:
SOURCE: LIPPER INC.
===================================================================================== o A more attractive investment
opportunity exists.
HOW WE INVEST teams. We then seek to purchase
businesses whose stock prices are below o Full value of the investment is deemed
We view ourselves as business people what we have calculated to be the true to have been realized.
buying businesses, and we consider the value of the company based on its future
purchase of a stock as an ownership cash flows, management performance and Holdings are also considered for sale
interest in a business. We strive to business fundamentals. if the original thesis for buying the
develop a proprietary view of a business company changes due to a fundamental
through in-depth, fundamental research In conducting a comprehensive negative change in management strategy
that includes careful financial analysis of a company, we strive to or a fundamental negative change in the
statement analysis and meetings with identify primarily U.S. stocks which competitive environment.
company management have:
MARKET CONDITIONS AND YOUR FUND
Equity markets posted healthy gains
during the fiscal year as favorable
economic data and solid corporate
profits overshadowed housing market
(continued)
======================================== ======================================== ========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Health Care Equipment 14.2% 1. Tempur-Pedic International
2. Apparel, Accessories Inc. 5.6%
[PIE CHART] & Luxury Goods 7.0 2. Liz Claiborne, Inc. 5.0
3. Home Furnishings 5.6 3. Zimmer Holdings, Inc. 4.9
Financials 7.8% 4. Restaurants 5.0 4. Kinetic Concepts, Inc. 4.9
Information Technology 4.4% 5. Insurance Brokers 4.7 5. Arthur J. Gallagher & Co. 4.7
Consumer Staples 4.2% 6. Plantronics, Inc. 4.4
Materials 1.8% Total Net Assets $105.58 million 7. Con-Way Inc. 4.4
Money Market Funds Plus 8. WellPoint Inc. 4.4
Other Assets Less Total Number of Holdings* 28 9. Ross Stores, Inc. 4.3
Liabilities 10.9% 10. Polaris Industries Inc. 3.9
Consumer Discretionary 32.0%
Health Care 21.0%
Industrials 17.9%
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
======================================== ======================================== ========================================
5
AIM Trimark Endeavor Fund
concerns and volatility and investor Combined with an outstanding management THE VIEWS AND OPINIONS EXPRESSED IN
uncertainty regarding interest rates and team and attractive valuation, this MANAGEMENT'S DISCUSSION OF FUND
oil prices. The telecommunication company possesses many of the attributes PERFORMANCE ARE THOSE OF A I M ADVISORS,
services and materials sectors led the we look for in a business. INC. THESE VIEWS AND OPINIONS ARE
markets for the fiscal year, while SUBJECT TO CHANGE AT ANY TIME BASED ON
information technology and health care Manpower is a world leader in the FACTORS SUCH AS MARKET AND ECONOMIC
stocks generally trailed. employment services industry. The CONDITIONS. THESE VIEWS AND OPINIONS MAY
company benefited from the expansion of NOT BE RELIED UPON AS INVESTMENT ADVICE
Our investment approach focuses on several historically tight labor markets OR RECOMMENDATIONS, OR AS AN OFFER FOR A
individual businesses rather than market during the period. PARTICULAR SECURITY. THE INFORMATION IS
sectors. Therefore, your Fund shares NOT A COMPLETE ANALYSIS OF EVERY ASPECT
little in common with sector weightings While few Fund holdings declined OF ANY MARKET, COUNTRY, INDUSTRY,
of the Fund's indexes. However, if we during the fiscal year, the Fund's SECURITY OR THE FUND. STATEMENTS OF FACT
were to broadly categorize businesses largest detractors from performance were ARE FROM SOURCES CONSIDERED RELIABLE,
with which we had the most success communications headset provider BUT A I M ADVISORS, INC. MAKES NO
during the fiscal year, select PLANTRONICS and trucking company REPRESENTATION OR WARRANTY AS TO THEIR
investments in the consumer CON-WAY. COMPLETENESS OR ACCURACY. ALTHOUGH
discretionary and industrials sectors HISTORICAL PERFORMANCE IS NO GUARANTEE
aided Fund performance relative to the The price of Plantronics' stock OF FUTURE RESULTS, THESE INSIGHTS MAY
Russell Midcap Index. Our underweight declined sharply because of HELP YOU UNDERSTAND OUR INVESTMENT
position in financials stocks slightly disappointing second-quarter earnings. MANAGEMENT PHILOSOPHY.
HINDERED Fund performance relative to Plantronics is a dominant player in the
the index. Our cash position also office headset market, which is growing See important Fund and index
detracted from relative performance substantially as people transition to disclosures on the inside front cover.
during the year. wireless headsets in the office.
However, a recent expansion into the Geoff MacDonald
We have typically invested retail mobile market proved to be [MACDONALD Chartered Financial
approximately 20%-25% of your Fund's difficult and manufacturing-capacity PHOTO] Analyst, portfolio
assets in foreign companies, and we challenges resulted in a failure to manager, is lead
attempt to partially limit our exposure deliver on large orders from major manager of AIM
to currency fluctuations by using retail vendors. We believe that Trimark Endeavor Fund. Mr. MacDonald
currency hedges. A currency hedge is the Plantronics' management has made joined AIM Trimark Investments in 1998.
purchase or sale of a foreign currency sensible moves to deal with these Prior to that, he worked as an
with respect to portfolio security problems, and the company continues to investment analyst and portfolio manager
positions denominated or quoted in that reinvest a high percentage of sales into at another investment firm. He earned a
currency. Over the long-term, this research and development. B.B.A. from Bishop's University and an
technique has allowed us to lock in M.B.A. from the University of Windsor.
current exchange rates so the returns of Con-Way's stock declined due to
our foreign stocks are representative of investor concern that a Jeff Hyrich
their local currency returns. While our slower-than-expected retail season may [HYRICH Chartered Financial
foreign holdings performed well, our hurt the trucking industry this year. PHOTO] Analyst, portfolio
euro currency hedge detracted from the Near the close of the fiscal year, both manager, is manager
Fund's overall performance during the Plantronics and Con-Way were trading at of AIM Trimark
fiscal year. However, the detraction attractive valuations and we added to Endeavor Fund. Mr.
from the Fund's performance due to the our positions in these quality Hyrich joined AIM Trimark Investments in
hedge was more than offset by the businesses in response to these 1999. Prior to that, he worked as an
positive contribution of the underlying short-term reactions. investment analyst and portfolio manager
securities. at another investment firm. He earned
During the fiscal year, we continued his undergraduate degree in finance and
Among the top contributors to Fund to focus on finding quality businesses accounting from the University of
performance for the fiscal year were trading at attractive valuations Manitoba.
TEMPUR-PEDIC and MANPOWER. relative to what we believe are their
long-term prospects. In contrast, the
Tempur-Pedic is a manufacturer of market is often driven by short-term
premium visco-elastic mattresses and events or outlooks in both good times
pillows. While memory foam makes up only and bad. Market volatility allows us to
a small portion of the total bedding take advantage of investment
market, Tempur-Pedic enjoys a opportunities we believe have the
significant market share within this potential to benefit your Fund in the
niche. We believe its proprietary long term.
technology and manufacturing facilities
provide the company with a potentially IN CLOSING
sustainable competitive advantage.
As always, we thank you for your
investment in AIM Trimark Endeavor Fund
and for sharing our long-term investment
perspective.
FOR A PRESENTATION OF YOUR FUND'S
LONG-TERM PERFORMANCE, PLEASE SEE PAGES
8 AND 9.
6
AIM Trimark Endeavor Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur estimate the expenses that you paid over The hypothetical account values and
two types of costs: (1) transaction the period. Simply divide your account expenses may not be used to estimate the
costs, which may include sales charges value by $1,000 (for example, an $8,600 actual ending account balance or
(loads) on purchase payments or account value divided by $1,000 = 8.6), expenses you paid for the period. You
contingent deferred sales charges on then multiply the result by the number may use this information to compare the
redemptions, and redemption fees, if in the table under the heading entitled ongoing costs of investing in the Fund
any; and (2) ongoing costs, including "Actual Expenses Paid During Period" to and other funds. To do so, compare this
management fees; distribution and/or estimate the expenses you paid on your 5% hypothetical example with the 5%
service (12b-1) fees; and other Fund account during this period. hypothetical examples that appear in the
expenses. This example is intended to shareholder reports of the other funds.
help you understand your ongoing costs HYPOTHETICAL EXAMPLE FOR
(in dollars) of investing in the Fund COMPARISON PURPOSES Please note that the expenses shown
and to compare these costs with ongoing in the table are meant to highlight your
costs of investing in other mutual The table below also provides ongoing costs only and do not reflect
funds. The example is based on an information about hypothetical account any transaction costs, such as sales
investment of $1,000 invested at the values and hypothetical expenses based charges (loads) on purchase payments,
beginning of the period and held for the on the Fund's actual expense ratio and contingent deferred sales charges on
entire period May 1, 2006, through an assumed rate of return of 5% per year redemptions, and redemption fees, if
October 31, 2006. before expenses, which is not the Fund's any. Therefore, the hypothetical
actual return. The Fund's actual information is useful in comparing
ACTUAL EXPENSES cumulative total returns at net asset ongoing costs only, and will not help
value after expenses for the six months you determine the relative total costs
The table below provides information ended October 31, 2006, appear in the of owning different funds. In addition,
about actual account values and actual table "Cumulative Total Returns" on if these transaction costs were
expenses. You may use the information in page 9. included, your costs would have been
this table, together with the amount you higher.
invested, to
===================================================================================================================================
ACTUAL HYPOTHETICAL
(5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
Class (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
A $1,000.00 $1,046.10 $ 8.05 $1,017.34 $ 7.93 1.56%
B 1,000.00 1,042.70 11.89 1,013.56 11.72 2.31
C 1,000.00 1,042.70 11.89 1,013.56 11.72 2.31
R 1,000.00 1,045.60 9.33 1,016.08 9.20 1.81
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 six months ended October 31, 2006, appear in the table "Cumulative Total Returns" on page 9.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
===================================================================================================================================
</Table>
7
AIM Trimark Endeavor Fund
Your Fund's long-term performance
RESULTS OF A $10,000 INVESTMENT
Index data from 10/31/03, fund data from 11/4/03
=====================================================================================================================
[MOUNTAIN CHART]
LIPPER
DATE AIM TRIMARK AIM TRIMARK AIM TRIMARK RUSSELL MID-CAP
ENDEAVOR FUND- ENDEAVOR FUND- ENDEAVOR FUND- S&P 500 MIDCAP CORE FUNDS
CLASS A SHARES CLASS B SHARES CLASS C SHARES INDEX INDEX INDEX
10/31/03 $10000 $10000 $10000
11/03 $9648 $10210 $10210 10088 10281 10273
12/03 9818 10379 10379 10617 10589 10533
1/04 10082 10649 10649 10811 10896 10818
2/04 10271 10850 10850 10962 11131 11024
3/04 10441 11020 11020 10796 11133 10998
4/04 10281 10860 10860 10627 10725 10652
5/04 10441 11020 11020 10773 10991 10819
6/04 10810 11400 11400 10982 11295 11114
7/04 10403 10970 10970 10619 10801 10548
8/04 10252 10800 10800 10661 10848 10509
9/04 10828 11401 11401 10777 11200 10877
10/04 10895 11470 11470 10941 11509 11056
11/04 11433 12030 12030 11384 12210 11714
12/04 11887 12489 12489 11771 12730 12160
1/05 11755 12350 12350 11484 12415 11841
2/05 11820 12420 12420 11726 12798 12135
3/05 11754 12340 12340 11518 12697 12012
4/05 11254 11810 11810 11300 12293 11554
5/05 11546 12110 12110 11659 12882 12103
6/05 11943 12520 12520 11676 13228 12388
7/05 12340 12930 12930 12110 13925 12962
8/05 12208 12780 12780 11999 13828 12885
9/05 12000 12550 12550 12097 14011 12992
10/05 11839 12380 12380 11895 13590 12655
11/05 12369 12920 12920 12344 14193 13181
12/05 12767 13330 13330 12349 14340 13310
1/06 13202 13770 13770 12676 15077 13994
2/06 13212 13779 13779 12710 15059 13974
3/06 13922 14509 14509 12868 15432 14356
4/06 14178 14759 14759 13041 15540 14502
5/06 13458 14009 14009 12666 15017 13928
6/06 13496 14039 14039 12683 15035 13883
7/06 13269 13789 13789 12761 14705 13618
8/06 13629 14158 14158 13064 15079 13912
9/06 13950 14488 14488 13400 15352 14091
10/06 14835 15090 15390 13837 15956 14607
=====================================================================================================================
SOURCE: LIPPER INC.
Past performance cannot guarantee reporting period and paid the applicable shareholder would pay on Fund
comparable future results. contingent deferred sales charges. Index distributions or sale of Fund shares.
results include reinvested dividends, Performance of the indexes does not
The data shown in the chart include but they do not reflect sales charges. reflect the effects of taxes.
reinvested distributions, applicable Performance of an index of funds
sales charges, Fund expenses and reflects fund expenses and management
management fees. Results for Class B fees; performance of a market index does
shares are calculated as if a not. Performance shown in the chart and
hypothetical shareholder had liquidated table(s) does not reflect deduction of
his entire investment in the Fund at the taxes a
close of the
8
AIM Trimark Endeavor Fund
======================================== ======================================== ========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/06, including applicable As of 9/30/06, the most recent calendar 6 months ended 10/31/06, excluding
sales charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 4.61%
Inception (11/4/03) 14.09% CLASS A SHARES Class B Shares 4.27
1 Year 18.37 Inception (11/4/03) 12.15% Class C Shares 4.27
1 Year 9.85 Class R Shares 4.56
CLASS B SHARES ========================================
Inception (11/4/03) 14.74% CLASS B SHARES
1 Year 19.31 Inception (11/4/03) 12.79%
1 Year 10.46
CLASS C SHARES
Inception (11/4/03) 15.50% CLASS C SHARES
1 Year 23.31 Inception (11/4/03) 13.61%
1 Year 14.46
CLASS R SHARES
Inception 16.01% CLASS R SHARES
1 Year 25.04 Inception 14.10%
1 Year 16.07
======================================== ========================================
CLASS R SHARES' INCEPTION DATE IS APRIL IN NET ASSET VALUE AND THE EFFECT OF THE BE IMPOSED ON A TOTAL REDEMPTION OF
30, 2004. RETURNS SINCE THAT DATE ARE MAXIMUM SALES CHARGE UNLESS OTHERWISE RETIREMENT PLAN ASSETS WITHIN THE FIRST
HISTORICAL RETURNS. ALL OTHER RETURNS STATED. INVESTMENT RETURN AND PRINCIPAL YEAR.
ARE BLENDED RETURNS OF HISTORICAL CLASS VALUE WILL FLUCTUATE SO THAT YOU MAY
R SHARE PERFORMANCE AND RESTATED CLASS A HAVE A GAIN OR LOSS WHEN YOU SELL THE PERFORMANCE OF THE FUND'S SHARE
SHARE PERFORMANCE (FOR PERIODS PRIOR TO SHARES. CLASSES WILL DIFFER PRIMARILY DUE TO
THE INCEPTION DATE OF CLASS R SHARES) AT DIFFERENT SALES CHARGE STRUCTURES AND
NET ASSET VALUE, ADJUSTED TO REFLECT THE CLASS A SHARE PERFORMANCE REFLECTS CLASS EXPENSES.
HIGHER RULE 12b-1 FEES APPLICABLE TO THE MAXIMUM 5.50% SALES CHARGE, AND
CLASS R SHARES. CLASS A SHARES' CLASS B AND CLASS C SHARE PERFORMANCE HAD THE ADVISOR NOT WAIVED FEES
INCEPTION DATE IS NOVEMBER 4, 2003. REFLECTS THE APPLICABLE CONTINGENT AND/OR REIMBURSED EXPENSES IN THE PAST,
DEFERRED SALES CHARGE (CDSC) FOR THE PERFORMANCE WOULD HAVE BEEN LOWER.
THE PERFORMANCE DATA QUOTED REPRESENT PERIOD INVOLVED. THE CDSC ON CLASS B
PAST PERFORMANCE AND CANNOT GUARANTEE SHARES DECLINES FROM 5% BEGINNING AT THE
COMPARABLE FUTURE RESULTS; CURRENT TIME OF PURCHASE TO 0% AT THE BEGINNING
PERFORMANCE MAY BE LOWER OR HIGHER. OF THE SEVENTH YEAR. THE CDSC ON CLASS C
PLEASE VISIT AIMinvestments.com FOR THE SHARES IS 1% FOR THE FIRST YEAR AFTER
MOST RECENT MONTH-END PERFORMANCE. PURCHASE. CLASS R SHARES DO NOT HAVE A
PERFORMANCE FIGURES REFLECT REINVESTED FRONT-END SALES CHARGE; RETURNS SHOWN ARE
DISTRIBUTIONS, CHANGES AT NET ASSET VALUE AND DO NOT REFLECT A
0.75% CDSC THAT MAY
</Table>
9
AIM Trimark Endeavor Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees of AIM Investment investment strategies comparable to those funds were above those for the Fund; and
Funds (the "Board") oversees the of the Fund. The Board noted that the (v) below the total advisory fee rates
management of AIM Trimark Endeavor Fund Fund's performance was below the median for a separately managed account/wrap
(the "Fund") and, as required by law, performance of such comparable funds for account managed by an AIM affiliate with
determines annually whether to approve the one year period and above such investment strategies comparable to
the continuance of the Fund's advisory median performance for the two year those of the Fund and above the total
agreement with A I M Advisors, Inc. period. Based on this review and after advisory fee rates for 31 other
("AIM"). Based upon the recommendation taking account of all of the other separately managed accounts/wrap
of the Investments Committee of the factors that the Board considered in accounts managed by an AIM affiliate
Board, at a meeting held on June 27, determining whether to continue the with investment strategies comparable to
2006, the Board, including all of the Advisory Agreement for the Fund, the those of the Fund. The Board noted that
independent trustees, approved the Board concluded that no changes should AIM has agreed to waive advisory fees of
continuance of the advisory agreement be made to the Fund and that it was not the Fund and to limit the Fund's total
(the "Advisory Agreement") between the necessary to change the Fund's portfolio operating expenses, as discussed below.
Fund and AIM for another year, effective management team at this time. However, Based on this review, the Board
July 1, 2006. due to the Fund's under-performance, the concluded that the advisory fee rate for
Board also concluded that it would be the Fund under the Advisory Agreement
The Board considered the factors appropriate for the Board to continue to was fair and reasonable.
discussed below in evaluating the closely monitor and review the
fairness and reasonableness of the performance of the Fund. Although the o Fees relative to those of comparable
Advisory Agreement at the meeting on independent written evaluation of the funds with other advisors. The Board
June 27, 2006 and as part of the Board's Fund's Senior Officer (discussed below) reviewed the advisory fee rate for the
ongoing oversight of the Fund. In their only considered Fund performance through Fund under the Advisory Agreement. The
deliberations, the Board and the the most recent calendar year, the Board Board compared effective contractual
independent trustees did not identify also reviewed more recent Fund advisory fee rates at a common asset
any particular factor that was performance, which did not change their level at the end of the past calendar
controlling, and each trustee attributed conclusions. year and noted that the Fund's rate was
different weights to the various below the median rate of the funds
factors. o The performance of the Fund relative advised by other advisors with
to indices. The Board reviewed the investment strategies comparable to
One responsibility of the independent performance of the Fund during the past those of the Fund that the Board
Senior Officer of the Fund is to manage one and two calendar years against the reviewed. The Board noted that AIM has
the process by which the Fund's proposed performance of the Lipper Mid-Cap Core agreed to waive advisory fees of the
management fees are negotiated to ensure Index. The Board noted that the Fund's Fund and to limit the Fund's total
that they are negotiated in a manner performance was below the performance of operating expenses, as discussed below.
which is at arms' length and reasonable. such Index for the one year period and Based on this review, the Board
To that end, the Senior Officer must above such Index for the two year concluded that the advisory fee rate for
either supervise a competitive bidding period. Based on this review and after the Fund under the Advisory Agreement
process or prepare an independent taking account of all of the other was fair and reasonable.
written evaluation. The Senior Officer factors that the Board considered in
has recommended an independent written determining whether to continue the o Expense limitations and fee waivers.
evaluation in lieu of a competitive Advisory Agreement for the Fund, the The Board noted that AIM has
bidding process and, upon the direction Board concluded that no changes should contractually agreed to waive advisory
of the Board, has prepared such an be made to the Fund and that it was not fees of the Fund through June 30, 2007
independent written evaluation. Such necessary to change the Fund's portfolio to the extent necessary so that the
written evaluation also considered management team at this time. However, advisory fees payable by the Fund do not
certain of the factors discussed below. due to the Fund's under-performance, the exceed a specified maximum advisory fee
In addition, as discussed below, the Board also concluded that it would be rate, which maximum rate includes
Senior Officer made a recommendation to appropriate for the Board to continue to breakpoints and is based on net asset
the Board in connection with such closely monitor and review the levels. The Board considered the
written evaluation. performance of the Fund. Although the contractual nature of this fee waiver
independent written evaluation of the and noted that it remains in effect
The discussion below serves as a Fund's Senior Officer (discussed below) until June 30, 2007. The Board also
summary of the Senior Officer's only considered Fund performance through noted that AIM has contractually agreed
independent written evaluation and the most recent calendar year, the Board to waive fees and/or limit expenses of
recommendation to the Board in also reviewed more recent Fund the Fund through June 30, 2007 so that
connection therewith, as well as a performance, which did not change their total annual operating expenses are
discussion of the material factors and conclusions. limited to a specified percentage of
the conclusions with respect thereto average daily net assets for each class
that formed the basis for the Board's o Meeting with the Fund's portfolio of the Fund. The Board considered the
approval of the Advisory Agreement. managers and investment personnel. With contractual nature of this fee waiver/
After consideration of all of the respect to the Fund, the Board is expense limitation and noted that it
factors below and based on its informed meeting periodically with such Fund's remains in effect until June 30, 2007.
business judgment, the Board determined portfolio managers and/or other The Board considered the effect these
that the Advisory Agreement is in the investment personnel and believes that fee waivers/expense limitations would
best interests of the Fund and its such individuals are competent and able have on the Fund's estimated expenses
shareholders and that the compensation to continue to carry out their for the Fund.
to AIM under the Advisory Agreement is responsibilities under the Advisory
fair and reasonable and would have been Agreement. o Breakpoints and economies of scale.
obtained through arm's length The Board reviewed the structure of the
negotiations. o Overall performance of AIM. The Board Fund's advisory fee under the Advisory
considered the overall performance of Agreement, noting that it includes one
Unless otherwise stated, information AIM in providing investment advisory and breakpoint. The Board reviewed the level
presented below is as of June 27, 2006 portfolio administrative services to the of the Fund's advisory fees, and noted
and does not reflect any changes that Fund and concluded that such performance that such fees, as a percentage of the
may have occurred since June 27, 2006, was satisfactory. Fund's net assets, would decrease as net
including but not limited to changes to assets increase because the Advisory
the Fund's performance, advisory fees, o Fees relative to those clients of AIM Agreement includes a breakpoint. The
expense limitations and/or fee waivers. with comparable investment strategies. Board noted that, due to the Fund's
The Board reviewed the effective asset levels at the end of the past
o The nature and extent of the advisory advisory fee rate (before waivers) for calendar year and the way in which the
services to be provided by AIM. The the Fund under the Advisory Agreement. advisory fee breakpoint has been
Board reviewed the services to be The Board noted that this rate was (i) structured, the Fund has yet to benefit
provided by AIM under the Advisory below the effective advisory fee rate from the breakpoint. The Board noted
Agreement. Based on such review, the (before waivers) for one mutual fund that AIM has contractually agreed to
Board concluded that the range of advised by AIM with investment waive advisory fees of the Fund through
services to be provided by AIM under the strategies comparable to those of the June 30, 2007 to the extent necessary so
Advisory Agreement was appropriate and Fund and above the effective advisory that the advisory fees payable by the
that AIM currently is providing services fee rate (before waivers) for a second Fund do not exceed a specified maximum
in accordance with the terms of the mutual fund advised by AIM with advisory fee rate, which maximum rate
Advisory Agreement. investment strategies comparable to includes breakpoints and is based on net
those of the Fund; (ii) above the asset levels. The Board concluded that
o The quality of services to be provided effective advisory fee rate (before the Fund's fee levels under the Advisory
by AIM. The Board reviewed the waivers) for one variable insurance fund Agreement therefore would reflect
credentials and experience of the advised by AIM and offered to insurance economies of scale at higher asset
officers and employees of AIM who will company separate accounts with levels and that it was not necessary to
provide investment advisory services to investment strategies comparable to change the advisory fee breakpoints in
the Fund. In reviewing the those of the Fund; (iii) above the the Fund's advisory fee schedule.
qualifications of AIM to provide effective sub-advisory fee rate for one
investment advisory services, the Board Canadian mutual fund advised by an AIM o Investments in affiliated money market
considered such issues as AIM's affiliate and sub-advised by AIM with funds. The Board also took into account
portfolio and product review process, investment strategies comparable to the fact that uninvested cash and cash
various back office support functions those of the Fund, although the total collateral from securities lending
provided by AIM and AIM's equity and advisory fees for such Canadian mutual arrangements, if any, (collectively,
fixed income trading operations. Based fund were above those for the Fund; (iv) "cash balances") of the Fund may be
on the review of these and other above the effective sub-advisory fee invested in money market funds advised
factors, the Board concluded that the rates for two variable insurance funds by AIM pursuant to the terms of an SEC
quality of services to be provided by sub-advised by an AIM affiliate and exemptive order. The Board found that
AIM was appropriate and that AIM offered to insurance company separate the Fund may realize certain benefits
currently is providing satisfactory accounts with investment strategies upon investing cash balances in AIM
services in accordance with the terms of comparable to those of the Fund, advised money market funds, including a
the Advisory Agreement. although the total advisory fees for higher net return, increased liquidity,
such variable insurance increased
o The performance of the Fund relative
to comparable funds. The Board reviewed
the performance of the Fund during the
past one and two calendar years against
the performance of funds advised by
other advisors with
(continued)
10
AIM Trimark Endeavor Fund
diversification or decreased transaction AIM and its affiliates were qualified to for the two year period. Based on this
costs. The Board also found that the continue to provide non-investment review and after taking account of all
Fund will not receive reduced services advisory services to the Fund, including of the other factors that the Board
if it invests its cash balances in such administrative, transfer agency and considered in determining whether to
money market funds. The Board noted distribution services, and that AIM and continue the Advisory Agreement for the
that, to the extent the Fund invests its affiliates currently are providing Fund, the Board concluded that no
uninvested cash in affiliated money satisfactory non-investment advisory changes should be made to the Fund and
market funds, AIM has voluntarily agreed services. that it was not necessary to change the
to waive a portion of the advisory fees Fund's portfolio management team at this
it receives from the Fund attributable o Other factors and current trends. The time. However, due to the Fund's
to such investment. The Board further Board considered the steps that AIM and under-performance, the Board also
determined that the proposed securities its affiliates have taken over the last concluded that it would be appropriate
lending program and related procedures several years, and continue to take, in for the Board to continue to closely
with respect to the lending Fund is in order to improve the quality and monitor and review the performance of
the best interests of the lending Fund efficiency of the services they provide the Fund. Although the independent
and its respective shareholders. The to the Funds in the areas of investment written evaluation of the Fund's Senior
Board therefore concluded that the performance, product line Officer (discussed below) only
investment of cash collateral received diversification, distribution, fund considered Fund performance through the
in connection with the securities operations, shareholder services and most recent calendar year, the Board
lending program in the money market compliance. The Board concluded that also reviewed more recent Fund
funds according to the procedures is in these steps taken by AIM have improved, performance, which did not change their
the best interests of the lending Fund and are likely to continue to improve, conclusions.
and its respective shareholders. the quality and efficiency of the
services AIM and its affiliates provide o The performance of the Fund relative
o Independent written evaluation and to the Fund in each of these areas, and to indices. The Board reviewed the
recommendations of the Fund's Senior support the Board's approval of the performance of the Fund during the past
Officer. The Board noted that, upon continuance of the Advisory Agreement one and two calendar years against the
their direction, the Senior Officer of for the Fund. performance of the Lipper Mid-Cap Core
the Fund, who is independent of AIM and Index. The Board noted that the Fund's
AIM's affiliates, had prepared an APPROVAL OF SUB-ADVISORY AGREEMENT performance was below the performance of
independent written evaluation in order such Index for the one year period and
to assist the Board in determining the The Board oversees the management of the above such Index for the two year
reasonableness of the proposed Fund and, as required by law, determines period. Based on this review and after
management fees of the AIM Funds, annually whether to approve the taking account of all of the other
including the Fund. The Board noted that continuance of the Fund's sub-advisory factors that the Board considered in
the Senior Officer's written evaluation agreement. Based upon the recommendation determining whether to continue the
had been relied upon by the Board in of the Investments Committee of the Advisory Agreement for the Fund, the
this regard in lieu of a competitive Board, at a meeting held on June 27, Board concluded that no changes should
bidding process. In determining whether 2006, the Board, including all of the be made to the Fund and that it was not
to continue the Advisory Agreement for independent trustees, approved the necessary to change the Fund's portfolio
the Fund, the Board considered the continuance of the sub-advisory management team at this time. However,
Senior Officer's written evaluation and agreement (the "Sub-Advisory Agreement") due to the Fund's under-performance, the
the recommendation made by the Senior between AIM Funds Management Inc. (the Board also concluded that it would be
Officer to the Board that the Board "Sub-Advisor") and AIM with respect to appropriate for the Board to continue to
consider whether the advisory fee the Fund for another year, effective closely monitor and review the
waivers for certain equity AIM Funds, July 1, 2006. performance of the Fund. Although the
including the Fund, should be independent written evaluation of the
simplified. The Board concluded that it The Board considered the factors Fund's Senior Officer (discussed below)
would be advisable to consider this discussed below in evaluating the only considered Fund performance through
issue and reach a decision prior to the fairness and reasonableness of the Sub- the most recent calendar year, the Board
expiration date of such advisory fee Advisory Agreement at the meeting on also reviewed more recent Fund
waivers. June 27, 2006 and as part of the Board's performance, which did not change their
ongoing oversight of the Fund. In their conclusions.
o Profitability of AIM and its deliberations, the Board and the
affiliates. The Board reviewed independent trustees did not identify o Meetings with the Fund's portfolio
information concerning the profitability any particular factor that was managers and investment personnel. The
of AIM's (and its affiliates') controlling, and each trustee attributed Board is meeting periodically with the
investment advisory and other activities different weights to the various Fund's portfolio managers and/or other
and its financial condition. The Board factors. investment personnel and believes that
considered the overall profitability of such individuals are competent and able
AIM, as well as the profitability of AIM The discussion below serves as a to continue to carry out their
in connection with managing the Fund. discussion of the material factors and responsibilities under the Sub-Advisory
The Board noted that AIM's operations the conclusions with respect thereto Agreement.
remain profitable, although increased that formed the basis for the Board's
expenses in recent years have reduced approval of the Sub-Advisory Agreement. o Overall performance of the
AIM's profitability. Based on the review After consideration of all of the Sub-Advisor. The Board considered the
of the profitability of AIM's and its factors below and based on its informed overall performance of the Sub-Advisor
affiliates' investment advisory and business judgment, the Board determined in providing investment advisory
other activities and its financial that the Sub-Advisory Agreement is in services to the Fund and concluded that
condition, the Board concluded that the the best interests of the Fund and its such performance was satisfactory.
compensation to be paid by the Fund to shareholders and that the compensation
AIM under its Advisory Agreement was not to the Sub-Advisor under the Sub- o Fees relative to those clients of the
excessive. Advisory Agreement is fair and Sub-Advisor with comparable investment
reasonable. strategies. The Board noted that the
o Benefits of soft dollars to AIM. The Sub-Advisor does not serve as an advisor
Board considered the benefits realized Unless otherwise stated, information or sub-advisor to other mutual funds or
by AIM as a result of brokerage presented below is as of June 27, 2006 other clients with investment strategies
transactions executed through "soft and does not reflect any changes that comparable to those of the Fund.
dollar" arrangements. Under these may have occurred since June 27, 2006,
arrangements, brokerage commissions paid including but not limited to changes to o Profitability of AIM and its
by the Fund and/or other funds advised the Fund's performance. affiliates. The Board reviewed
by AIM are used to pay for research and information concerning the profitability
execution services. This research may be o The nature and extent of the advisory of AIM's (and its affiliates')
used by AIM in making investment services to be provided by the investment advisory and other activities
decisions for the Fund. The Board Sub-Advisor. The Board reviewed the and its financial condition. The Board
concluded that such arrangements were services to be provided by the considered the overall profitability of
appropriate. Sub-Advisor under the Sub-Advisory AIM, as well as the profitability of AIM
Agreement. Based on such review, the in connection with managing the Fund.
o AIM's financial soundness in light of Board concluded that the range of The Board noted that AIM's operations
the Fund's needs. The Board considered services to be provided by the remain profitable, although increased
whether AIM is financially sound and has Sub-Advisor under the Sub-Advisory expenses in recent years have reduced
the resources necessary to perform its Agreement was appropriate and that the AIM's profitability. Based on the review
obligations under the Advisory Sub-Advisor currently is providing of the profitability of AIM's and its
Agreement, and concluded that AIM has services in accordance with the terms of affiliates' investment advisory and
the financial resources necessary to the Sub-Advisory Agreement. other activities and its financial
fulfill its obligations under the condition, the Board concluded that the
Advisory Agreement. o The quality of services to be provided compensation to be paid by the Fund to
by the Sub-Advisor. The Board reviewed AIM under its Advisory Agreement was not
o Historical relationship between the the credentials and experience of the excessive.
Fund and AIM. In determining whether to officers and employees of the
continue the Advisory Agreement for the Sub-Advisor who will provide investment o The Sub-Advisor's financial soundness
Fund, the Board also considered the advisory services to the Fund. Based on in light of the Fund's needs. The Board
prior relationship between AIM and the the review of these and other factors, considered whether the Sub-Advisor is
Fund, as well as the Board's knowledge the Board concluded that the quality of financially sound and has the resources
of AIM's operations, and concluded that services to be provided by the necessary to perform its obligations
it was beneficial to maintain the Sub-Advisor was appropriate, and that under the Sub-Advisory Agreement, and
current relationship, in part, because the Sub-Advisor currently is providing concluded that the Sub-Advisor has the
of such knowledge. The Board also satisfactory services in accordance with financial resources necessary to fulfill
reviewed the general nature of the the terms of the Sub-Advisory Agreement. its obligations under the Sub-Advisory
non-investment advisory services Agreement.
currently performed by AIM and its o The performance of the Fund relative
affiliates, such as administrative, to comparable funds. The Board reviewed
transfer agency and distribution the performance of the Fund during the
services, and the fees received by AIM past one and two calendar years against
and its affiliates for performing such the performance of funds advised by
services. In addition to reviewing such other advisors with investment
services, the trustees also considered strategies comparable to those of the
the organizational structure employed by Fund. The Board noted that the Fund's
AIM and its affiliates to provide those performance was below the median
services. Based on the review of these performance of such comparable funds for
and other factors, the Board concluded the one year period and above such
that median performance
11
Supplement to Annual Report dated 10/31/06
AIM Trimark Endeavor Fund
===================================
Institutional Class Shares AVERAGE ANNUAL TOTAL RETURNS HAD THE ADVISOR NOT WAIVED FEES AND/OR
For periods ended 10/31/06 REIMBURSED EXPENSES IN THE PAST, PERFORMANCE
The following information has been prepared to WOULD HAVE BEEN LOWER.
provide Institutional Class shareholders with Inception 16.71%
a performance overview specific to their 1 Year 25.91 PLEASE NOTE THAT PAST PERFORMANCE IS NOT
holdings. Institutional Class shares are 6 Months* 4.92 INDICATIVE OF FUTURE RESULTS. MORE RECENT
offered exclusively to institutional RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
investors, including defined contribution =================================== ALL RETURNS ASSUME REINVESTMENT OF
plans that meet certain criteria. DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND
AVERAGE ANNUAL TOTAL RETURNS PRINCIPAL VALUE WILL FLUCTUATE SO YOUR
For periods ended 9/30/06,most SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
recent calendar quarter-end LESS THAN THEIR ORIGINAL COST. SEE FULL
REPORT FOR INFORMATION ON COMPARATIVE
Inception 14.79% BENCHMARKS. PLEASE CONSULT YOUR FUND
1 Year 16.92 PROSPECTUS FOR MORE INFORMATION. FOR THE MOST
6 Months* 0.54 CURRENT MONTH-END PERFORMANCE, PLEASE CALL
800-451-4246 OR VISIT AIMINVESTMENTS.COM.
*Cumulative total return that has
not been annualized
===================================
INSTITUTIONAL CLASS SHARES'
INCEPTION DATE IS APRIL 30, 2004.
RETURNS SINCE THAT DATE ARE
HISTORICAL RETURNS. ALL OTHER
RETURNS ARE BLENDED RETURNS OF
HISTORICAL INSTITUTIONAL CLASS
SHARE PERFORMANCE AND RESTATED
CLASS A SHARE PERFORMANCE (FOR
PERIODS PRIOR TO THE INCEPTION DATE
OF INSTITUTIONAL CLASS SHARES) AT
NET ASSET VALUE (NAV) AND REFLECT
THE HIGHER RULE 12B-1 FEES
APPLICABLE TO CLASS A SHARES. CLASS
A SHARES' INCEPTION DATE IS
NOVEMBER 4, 2003.
INSTITUTIONAL CLASS SHARES
HAVE NO SALES CHARGE; THEREFORE,
PERFORMANCE IS AT NAV. PERFORMANCE
OF INSTITUTIONAL CLASS SHARES WILL
DIFFER FROM PERFORM- ANCE OF OTHER
SHARE CLASSES PRIMARILY DUE TO
DIFFERING SALES CHARGES AND CLASS
EXPENSES.
==============================================
NASDAQ SYMBOL ATDIX
==============================================
Over for information on your Fund's expenses.
================================================================================
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.
================================================================================
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted,
reproduced or shown to the public, nor used in written form as sales literature
for public use.
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO]
AIMINVESTMENTS.COM T-END-INS-1 A I M Distributors, Inc. --REGISTERED TRADEMARK-- --REGISTERED TRADEMARK--
Information about your Fund's expenses
Calculating Your Ongoing Fund Expenses
Example divide your account value by $1,000 The hypothetical account values and
(for example, an $8,600 account expenses may not be used to estimate the
As a shareholder of the Fund, you incur value divided by $1,000 = 8.6), actual ending account balance or expenses you
ongoing costs, including management fees and then multiply the result by the paid for the period. You may use this
other Fund expenses. This example is intended number in the table under the information to compare the ongoing costs of
to help you understand your ongoing costs (in heading entitled "Actual Expenses investing in the Fund and other funds. To do
dollars) of investing in the Fund and to com Paid During Period" to estimate the so, compare this 5% hypothetical example with
pare these costs with ongoing costs of expenses you paid on your the 5% hypothetical examples that appear in
investing in other mutual funds. The example account during this period. the shareholder reports of the other funds.
is based on an investment of $1,000 invested
at the beginning of the period and held for Hypothetical Example for Comparison Please note that the expenses shown in
the entire period May 1, 2006, through October Purposes the table are meant to highlight your ongoing
31, 2006. costs only. Therefore, the hypothetical
The table below also provides information is useful in comparing ongoing
Actual Expenses information about hypothetical costs only, and will not help you determine
account values and hypothetical the relative total costs of owning different
The table below provides information about expenses based on the Fund's actual funds.
actual account values and actual expenses. You expense ratio and an assumed rate
may use the information in this table, of return of 5% per year before
together with the amount you invested, to expenses, which is not the Fund's
estimate the expenses that you paid over the actual return. The Fund's actual
period. Simply cumulative total return after
expenses for the six months ended
October 31, 2006, appears in the
table on the front of this
supplement.
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
Institutional $1,000.00 $1,049.20 $5.37 $1,019.96 $5.30 1.04%
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 return after expenses for the
six months ended October 31, 2006, appears in the table on the front of this supplement.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMINVESTMENTS.COM T-END-INS-1 A I M Distributors, Inc.
AIM Trimark Endeavor Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS-61.94%
APPAREL RETAIL-4.28%
Ross Stores, Inc. 153,600 $ 4,520,448
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-5.01%
Liz Claiborne, Inc. 125,400 5,288,118
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-3.12%
Investors Financial Services Corp. 83,700 3,291,084
=======================================================================
AUTOMOTIVE RETAIL-2.60%
AutoZone, Inc.(a) 24,500 2,744,000
=======================================================================
BREWERS-1.34%
Molson Coors Brewing Co.-Class B 19,904 1,416,767
=======================================================================
COMMUNICATIONS EQUIPMENT-4.38%
Plantronics, Inc. 219,100 4,625,201
=======================================================================
HEALTH CARE EQUIPMENT-10.75%
Cytyc Corp.(a) 36,700 969,614
- -----------------------------------------------------------------------
Kinetic Concepts, Inc.(a) 149,000 5,179,240
- -----------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 72,200 5,199,122
=======================================================================
11,347,976
=======================================================================
HOME FURNISHINGS-5.63%
Tempur-Pedic International Inc.(a) 301,000 5,941,740
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-3.32%
Manpower Inc. 51,800 3,510,486
=======================================================================
INSURANCE BROKERS-4.72%
Arthur J. Gallagher & Co. 178,900 4,982,365
=======================================================================
LEISURE PRODUCTS-3.96%
Polaris Industries Inc. 97,600 4,179,232
=======================================================================
MANAGED HEALTH CARE-4.37%
WellPoint Inc.(a) 60,400 4,609,728
=======================================================================
PHARMACEUTICALS-2.47%
Endo Pharmaceuticals Holdings Inc.(a) 91,400 2,608,556
=======================================================================
RESTAURANTS-1.62%
Wendy's International, Inc. 49,600 1,716,160
=======================================================================
TRUCKING-4.37%
Con-way Inc. 97,800 4,613,226
=======================================================================
Total Common Stocks (Cost $56,967,557) 65,395,087
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-25.17%
AUSTRALIA-3.41%
Cochlear Ltd. (Health Care Equipment)(b) 83,700 $ 3,604,391
=======================================================================
CANADA-3.43%
Tim Hortons, Inc. (Restaurants) 67,172 1,941,271
- -----------------------------------------------------------------------
Tim Hortons, Inc. (Restaurants) 58,000 1,680,021
=======================================================================
3,621,292
=======================================================================
FRANCE-1.90%
Zodiac S.A. (Aerospace & Defense)(b) 32,100 2,003,673
=======================================================================
IRELAND-8.29%
DCC PLC (Industrial Conglomerates) 84,700 2,291,865
- -----------------------------------------------------------------------
Kingspan Group PLC (Building Products)(b) 172,600 3,663,622
- -----------------------------------------------------------------------
Ryanair Holdings PLC-ADR (Airlines)(a) 41,900 2,799,758
=======================================================================
8,755,245
=======================================================================
MEXICO-6.30%
Grupo Modelo, S.A. de C.V.-Series C (Brewers) 628,100 3,021,584
- -----------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 147,300 3,635,364
=======================================================================
6,656,948
=======================================================================
SWEDEN-1.84%
Hoganas A.B.-Class B (Steel) 75,500 1,939,248
=======================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $15,224,360) 26,580,797
=======================================================================
FOREIGN PREFERRED STOCKS-2.03%
GERMANY-2.03%
Hugo Boss A.G.-Pfd. (Apparel, Accessories &
Luxury Goods)(b) 46,100 2,144,573
=======================================================================
Total Foreign Preferred Stocks (Cost
$1,188,068) 2,144,573
=======================================================================
MONEY MARKET FUNDS-10.31%
Liquid Assets Portfolio-Institutional
Class(c) 5,441,207 5,441,207
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 5,441,207 5,441,207
=======================================================================
Total Money Market Funds (Cost
$10,882,414) 10,882,414
=======================================================================
TOTAL INVESTMENTS-99.45% (Cost $84,262,399) 105,002,871
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.55% 577,868
=======================================================================
NET ASSETS-100.00% $105,580,739
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depository Receipts
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2006 was $11,416,259,
which represented 10.81% of the Fund's Net Assets. See Note 1A.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-1
AIM Trimark Endeavor Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $73,379,985) $ 94,120,457
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $10,882,414) 10,882,414
===========================================================
Total investments (Cost $84,262,399) 105,002,871
===========================================================
Foreign currencies, at value (cost $499) 505
- -----------------------------------------------------------
Receivables for:
Investments sold 1,424,604
- -----------------------------------------------------------
Fund shares sold 478,460
- -----------------------------------------------------------
Dividends 66,513
- -----------------------------------------------------------
Foreign currency contracts 7,703
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 8,646
- -----------------------------------------------------------
Other assets 29,727
===========================================================
Total assets 107,019,029
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,194,131
- -----------------------------------------------------------
Fund shares reacquired 99,088
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 10,696
- -----------------------------------------------------------
Accrued distribution fees 39,301
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,057
- -----------------------------------------------------------
Accrued transfer agent fees 38,417
- -----------------------------------------------------------
Accrued operating expenses 55,600
===========================================================
Total liabilities 1,438,290
===========================================================
Net assets applicable to shares outstanding $105,580,739
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 79,029,772
- -----------------------------------------------------------
Undistributed net investment income (loss) (8,511)
- -----------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies
and foreign currency contracts 5,811,252
- -----------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and foreign
currency contracts 20,748,226
===========================================================
$105,580,739
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 69,660,222
___________________________________________________________
===========================================================
Class B $ 14,103,840
___________________________________________________________
===========================================================
Class C $ 16,437,267
___________________________________________________________
===========================================================
Class R $ 811,951
___________________________________________________________
===========================================================
Institutional Class $ 4,567,459
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 4,447,601
___________________________________________________________
===========================================================
Class B 916,404
___________________________________________________________
===========================================================
Class C 1,068,064
___________________________________________________________
===========================================================
Class R 52,125
___________________________________________________________
===========================================================
Institutional Class 289,462
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 15.66
- -----------------------------------------------------------
Offering price per share
(Net asset value of $15.66 divided by
94.50%) $ 16.57
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 15.39
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 15.39
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 15.58
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 15.78
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-2
AIM Trimark Endeavor Fund
STATEMENT OF OPERATIONS
For the year ended October 31, 2006
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $20,401) $ 1,016,639
- -------------------------------------------------------------------------
Dividends from affiliated money market funds 226,904
- -------------------------------------------------------------------------
Interest 43,591
=========================================================================
Total investment income 1,287,134
=========================================================================
EXPENSES:
Advisory fees 741,702
- -------------------------------------------------------------------------
Administrative services fees 50,000
- -------------------------------------------------------------------------
Custodian fees 34,054
- -------------------------------------------------------------------------
Distribution fees:
Class A 151,124
- -------------------------------------------------------------------------
Class B 132,945
- -------------------------------------------------------------------------
Class C 144,238
- -------------------------------------------------------------------------
Class R 2,401
- -------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 243,450
- -------------------------------------------------------------------------
Transfer agent fees -- Institutional 455
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 17,124
- -------------------------------------------------------------------------
Other 168,210
=========================================================================
Total expenses 1,685,703
=========================================================================
Less: Fees waived and expense offset arrangements (59,863)
=========================================================================
Net expenses 1,625,840
=========================================================================
Net investment income (loss) (338,706)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FOREIGN CURRENCY
CONTRACTS:
Net realized gain (loss) from:
Investment securities 6,452,470
- -------------------------------------------------------------------------
Foreign currencies (37,535)
- -------------------------------------------------------------------------
Foreign currency contracts 124,290
=========================================================================
6,539,225
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 14,809,685
- -------------------------------------------------------------------------
Foreign currencies 868
- -------------------------------------------------------------------------
Foreign currency contracts (277,987)
=========================================================================
14,532,566
=========================================================================
Net gain from investment securities, foreign currencies and
foreign currency contracts 21,071,791
=========================================================================
Net increase in net assets resulting from operations $20,733,085
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
AIM Trimark Endeavor Fund
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2006 and 2005
<Table>
<Caption>
2006 2005
- -----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (338,706) $ (119,080)
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and foreign currency contracts 6,539,225 (378,571)
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and foreign currency
contracts 14,532,566 4,499,891
=========================================================================================
Net increase in net assets resulting from operations 20,733,085 4,002,240
=========================================================================================
Distributions to shareholders from net investment income:
Class A (134,294) --
- -----------------------------------------------------------------------------------------
Class R (401) --
- -----------------------------------------------------------------------------------------
Institutional Class (22,673) --
=========================================================================================
Decrease in net assets resulting from distributions (157,368) --
=========================================================================================
Share transactions-net:
Class A 1,028,546 27,494,637
- -----------------------------------------------------------------------------------------
Class B (2,063,623) 6,234,653
- -----------------------------------------------------------------------------------------
Class C 385,623 6,393,704
- -----------------------------------------------------------------------------------------
Class R 456,363 216,872
- -----------------------------------------------------------------------------------------
Institutional Class 277,138 1,422,873
=========================================================================================
Net increase in net assets resulting from share
transactions 84,047 41,762,739
=========================================================================================
Net increase in net assets 20,659,764 45,764,979
=========================================================================================
NET ASSETS:
Beginning of year 84,920,975 39,155,996
=========================================================================================
End of year (including undistributed net investment income
(loss) of $(8,511) and $(134,308) respectively) $105,580,739 $84,920,975
_________________________________________________________________________________________
=========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM Trimark Endeavor Fund
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Endeavor Fund (the "Fund") is a series portfolio of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of nine
separate series portfolios, each authorized to issue an unlimited number of
shares of beneficial interest. The Fund currently offers multiple classes of
shares. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class. The assets, liabilities and
operations of each portfolio are accounted for separately. Information presented
in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. 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.
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. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. 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.
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
F-5
AIM Trimark Endeavor Fund
investment income reported in the Statement of Operations and Statement of
Changes in Net Assets, or the net investment income per share and ratios of
expenses and net investment income reported in the Financial Highlights,
nor are they limited by any expense limitation arrangements between the
Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to treat 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 to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- 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.
H. INDEMNIFICATIONS -- 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.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
J. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F-6
AIM Trimark Endeavor Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $1 billion 0.80%
- -------------------------------------------------------------------
Over $1 billion 0.75%
__________________________________________________________________
===================================================================
</Table>
Through at least June 30, 2007, AIM has contractually agreed to waive
advisory fees to the extent necessary so that the advisory fees payable by the
Fund (based on the Fund's average daily net assets) do not exceed the annual
rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.745%
- --------------------------------------------------------------------
Next $250 million 0.73%
- --------------------------------------------------------------------
Next $500 million 0.715%
- --------------------------------------------------------------------
Next $1.5 billion 0.70%
- --------------------------------------------------------------------
Next $2.5 billion 0.685%
- --------------------------------------------------------------------
Next $2.5 billion 0.67%
- --------------------------------------------------------------------
Next $2.5 billion 0.655%
- --------------------------------------------------------------------
Over $10 billion 0.64%
___________________________________________________________________
====================================================================
</Table>
Under the terms of a master sub-advisory agreement between AIM and AIM Funds
Management Inc. ("AIM Funds Management"), AIM pays AIM Funds Management 40% of
the amount of AIM's compensation on the sub-advised assets.
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C, Class R
and Institutional Class shares to 1.90%, 2.65%, 2.65%, 2.15% and 1.65% of
average daily net assets, respectively, through at least June 30, 2007. In
determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP")
described more fully below, the expense offset arrangements from which the Fund
may benefit are in the form of credits that the Fund receives from banks where
the Fund or its transfer agent has deposit accounts in which it holds uninvested
cash. In addition, the Fund may also benefit from a one time credit to be used
to offset future custodian expenses. These credits are used to pay certain
expenses incurred by the Fund. AIM did not waive fees and/or reimburse expenses
during the period under this expense limitation.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in
the amount of 25% of the advisory fee AIM receives from the affiliated money
market funds on investments by the Fund in such affiliated money market funds.
Voluntary fee waivers or reimbursements may be modified or discontinued at any
time upon consultation with the Board of Trustees without further notice to
investors.
For the year ended October 31, 2006, AIM waived advisory fees of $51,965.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. These expenses along with the related expense
reimbursement are included in the Statement of Operations. For the year ended
October 31, 2006, AMVESCAP did not reimburse any expenses.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2006, AIM was paid $50,000.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AIS") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AIS for certain expenses
incurred by AIS in the course of providing such services. AIS may make payments
to intermediaries that provide omnibus account services, sub-accounting services
and/or networking services. All fees payable by AIS to intermediaries that
provide omnibus account services or sub-accounting are charged back to the Fund,
subject to certain limitations approved by the Trust's Board of Trustees. For
the year ended October 31, 2006, the Fund paid AIS $243,450 for Class A, Class
B, Class C and Class R share classes and $455 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C, Class R and Institutional Class shares of the Fund. The Trust has
adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans").
The Fund, pursuant to the Plans, pays ADI compensation at the annual rate of
0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the
average daily net assets of Class B and Class C shares and 0.50% of the average
daily net assets of Class R shares. Of the Rule 12b-1 payments, up to 0.25% of
the average daily net assets of the Class A, Class B, Class C or Class R shares
may be paid to furnish continuing personal shareholder services to customers who
purchase and own shares of such classes. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge. National
Association of Securities Dealers ("NASD") Rules impose a
F-7
AIM Trimark Endeavor Fund
cap on the total sales charges, including asset-based sales charges that may be
paid by any class of shares of the Fund. Pursuant to the Plans, for the year
ended October 31, 2006, the Class A, Class B, Class C and Class R shares paid
$151,124, $132,945, $144,238 and $2,401, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2006, ADI advised the Fund that it retained $35,335 in
front-end sales commissions from the sale of Class A shares and $5,568, $15,824,
$2,437 and $0 from Class A, Class B, Class C and Class R shares, respectively,
for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the year ended October 31, 2006.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ -- $16,020,256 $(10,579,049) $ -- $ 5,441,207 $113,286 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-
Institutional
Class -- 10,205,085 (4,763,878) -- 5,441,207 57,302 --
- ----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class -- 9,643,850 (9,643,850) -- -- 56,316 --
==================================================================================================================================
Total
Investments
in
Affiliates $ -- $35,869,191 $(24,986,777) $ -- $10,882,414 $226,904 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the year
ended October 31, 2006, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $7,898.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2006, the Fund paid legal fees of $3,980
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
F-8
AIM Trimark Endeavor Fund
During the year ended October 31, 2006, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank 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 contractually agreed upon rate.
NOTE 7--FOREIGN CURRENCY CONTRACTS
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
- --------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT ---------------------------------- VALUE UNREALIZED
DATE DELIVER RECEIVE 10/31/06 APPRECIATION
- --------------------------------------------------------------------------------------------------------------------------------
11/15/2006 EUR 3,000,000 USD 3,840,060 $3,832,357 $7,703
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
Currency Abbreviations:
<Table>
EUR - Euro
USD - U.S. Dollar
</Table>
NOTE 8--DISTRIBUTION TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2006
and 2005 was as follows:
<Table>
<Caption>
2006 2005
- --------------------------------------------------------------------------------
Distributions paid from ordinary income $157,368 $ --
________________________________________________________________________________
================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- --------------------------------------------------------------------------
Undistributed long term gain $ 5,883,232
- --------------------------------------------------------------------------
Unrealized appreciation-investments 20,676,246
- --------------------------------------------------------------------------
Temporary book/tax differences (8,511)
- --------------------------------------------------------------------------
Shares of beneficial interest 79,029,772
==========================================================================
Total net assets $105,580,739
__________________________________________________________________________
==========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales and the tax recognition of unrealized gains and losses on certain
foreign currency contracts. The tax-basis net unrealized appreciation on
investments amount includes appreciation on foreign currencies of $51.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
The Fund utilized $325,818 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund did not have a capital loss carryforward as of October 31, 2006.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2006 was $24,474,067 and $33,198,420,
respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $23,234,757
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,558,562)
===============================================================================
Net unrealized appreciation of investment securities $20,676,195
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $84,326,676.
</Table>
F-9
AIM Trimark Endeavor Fund
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses on October 31, 2006, undistributed net
investment income (loss) was increased by $621,871, undistributed net realized
gain was decreased by $330,539 and shares of beneficial interest decreased by
$291,332. This reclassification had no effect on the net assets of the Fund.
NOTE 11--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A, Class B,
Class C, Class R and Institutional Class. Class A shares are sold with a
front-end sales charge unless certain waiver criteria are met. Class B shares
and Class C shares are sold with CDSC. Class R shares and Institutional Class
shares are sold at net asset value. Under certain circumstances, Class A shares
and Class R shares are subject to CDSC. Generally, Class B shares will
automatically convert to Class A shares on or about the month-end which is at
least eight years after the date of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED
--------------------------------------------------------
OCTOBER 31, 2006(A) OCTOBER 31, 2005
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,461,361 $ 20,792,878 3,302,056 $ 40,928,055
- ----------------------------------------------------------------------------------------------------------------------
Class B 207,320 2,908,360 749,770 9,200,148
- ----------------------------------------------------------------------------------------------------------------------
Class C 285,699 3,985,374 831,938 10,203,669
- ----------------------------------------------------------------------------------------------------------------------
Class R 44,440 636,447 17,955 225,131
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class 82,148 1,159,645 182,873 2,271,573
======================================================================================================================
Issued as reinvestment of dividends:
Class A 9,333 125,814 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class R 30 401 -- --
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class 1,677 22,673 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 55,313 782,005 44,313 549,458
- ----------------------------------------------------------------------------------------------------------------------
Class B (56,097) (782,005) (44,700) (549,458)
======================================================================================================================
Reacquired:
Class A (1,477,849) (20,672,151) (1,114,960) (13,982,876)
- ----------------------------------------------------------------------------------------------------------------------
Class B (304,286) (4,189,978) (194,091) (2,416,037)
- ----------------------------------------------------------------------------------------------------------------------
Class C (260,718) (3,599,751) (307,262) (3,809,965)
- ----------------------------------------------------------------------------------------------------------------------
Class R (12,633) (180,485) (661) (8,259)
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class (63,762) (905,180) (67,551) (848,700)
======================================================================================================================
(28,024) $ 84,047 3,399,680 $ 41,762,739
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are three entities that are each record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 32% of the
outstanding shares of the Fund. ADI has an agreement with these entities to
sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to
these entities, which are considered to be related to the Fund, for
providing services such as, securities brokerage, distribution, third party
record keeping and account servicing. The trust has no knowledge as to
whether all or any portion of the shares owned of record by these entities
is also owned beneficially.
NOTE 12--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
F-10
AIM Trimark Endeavor Fund
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-----------------------------------------
NOVEMBER 4, 2003
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2006 2005 2004
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.53 $ 11.53 $ 10.00
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.02) 0.01 (0.05)
- -------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.18 0.99 1.58
=======================================================================================================
Total from investment operations 3.16 1.00 1.53
=======================================================================================================
Less dividends from net investment income (0.03) -- --
=======================================================================================================
Net asset value, end of period $ 15.66 $ 12.53 $ 11.53
_______________________________________________________________________________________________________
=======================================================================================================
Total return(b) 25.26% 8.67% 15.30%
_______________________________________________________________________________________________________
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $69,660 $55,124 $24,996
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.56%(c) 1.66% 2.00%(d)
- -------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.62%(c) 1.71% 3.02%(d)
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of net investment income (loss) to average net assets (0.16)%(c) 0.04% (0.49)%(d)
_______________________________________________________________________________________________________
=======================================================================================================
Portfolio turnover rate(e) 28% 15% 35%
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $60,449,668.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS B
-----------------------------------------
NOVEMBER 4, 2003
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2006 2005 2004
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.38 $ 11.47 $10.00
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.13) (0.08) (0.13)
- -------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.14 0.99 1.60
=======================================================================================================
Total from investment operations 3.01 0.91 1.47
=======================================================================================================
Net asset value, end of period $ 15.39 $ 12.38 $11.47
_______________________________________________________________________________________________________
=======================================================================================================
Total return(b) 24.31% 7.93% 14.70%
_______________________________________________________________________________________________________
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $14,104 $13,237 $6,403
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.31%(c) 2.35% 2.65%(d)
- -------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.37%(c) 2.40% 3.67%(d)
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of net investment income (loss) to average net assets (0.91)%(c) (0.65)% (1.14)%(d)
_______________________________________________________________________________________________________
=======================================================================================================
Portfolio turnover rate(e) 28% 15% 35%
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $13,294,548.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-11
AIM Trimark Endeavor Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
-----------------------------------------
NOVEMBER 4, 2003
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2006 2005 2004
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.38 $ 11.47 $10.00
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.13) (0.08) (0.13)
- -------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.14 0.99 1.60
=======================================================================================================
Total from investment operations 3.01 0.91 1.47
_______________________________________________________________________________________________________
=======================================================================================================
Net asset value, end of period $ 15.39 $ 12.38 $11.47
_______________________________________________________________________________________________________
=======================================================================================================
Total return(b) 24.31% 7.93% 14.70%
_______________________________________________________________________________________________________
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $16,437 $12,910 $5,944
=======================================================================================================
With fee waivers and/or expense reimbursements 2.31%(c) 2.35% 2.65%(d)
- -------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.37%(c) 2.40% 3.67%(d)
_______________________________________________________________________________________________________
=======================================================================================================
Ratio of net investment income (loss) to average net assets (0.91)%(c) (0.65)% (1.14)%(d)
_______________________________________________________________________________________________________
=======================================================================================================
Portfolio turnover rate(e) 28% 15% 35%
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $14,423,770.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS R
--------------------------------------
APRIL 30, 2004
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
-------------------- OCTOBER 31,
2006 2005 2004
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.48 $11.51 $10.88
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.06) (0.02) (0.04)
- ----------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.18 0.99 0.67
====================================================================================================
Total from investment operations 3.12 0.97 0.63
====================================================================================================
Less dividends from net investment income (0.02) -- --
====================================================================================================
Net asset value, end of period $ 15.58 $12.48 $11.51
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 25.04% 8.43% 5.79%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 812 $ 253 $ 34
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.81%(c) 1.85% 2.15%(d)
- ----------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.87%(c) 1.90% 3.17%(d)
____________________________________________________________________________________________________
====================================================================================================
Ratio of net investment income (loss) to average net assets (0.41)%(c) (0.15)% (0.64)%(d)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate(e) 28% 15% 35%
____________________________________________________________________________________________________
====================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $480,271.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-12
AIM Trimark Endeavor Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------
APRIL 30, 2004
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
------------------- OCTOBER 31,
2006 2005 2004
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $12.61 $11.55 $10.88
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) 0.05 0.06 (0.01)
- ---------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.20 1.00 0.68
===================================================================================================
Total from investment operations 3.25 1.06 0.67
===================================================================================================
Less dividends from net investment income (0.08) -- --
___________________________________________________________________________________________________
===================================================================================================
Net asset value, end of period $15.78 $12.61 $11.55
___________________________________________________________________________________________________
===================================================================================================
Total return(b) 25.91% 9.18% 6.16%
___________________________________________________________________________________________________
===================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,567 $3,396 $1,779
___________________________________________________________________________________________________
===================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.05%(c) 1.18% 1.62%(d)
- ---------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.11%(c) 1.23% 2.64%(d)
___________________________________________________________________________________________________
===================================================================================================
Ratio of net investment income (loss) to average net assets 0.35%(c) 0.52% (0.11)%(d)
___________________________________________________________________________________________________
===================================================================================================
Portfolio turnover rate(e) 28% 15% 35%
___________________________________________________________________________________________________
===================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $4,064,477.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 (Order No. 05-1318). The
WVASC makes findings of fact that AIM and ADI entered into certain arrangements
permitting market timing of the AIM Funds and failed to disclose these
arrangements in the prospectuses for such Funds, 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, including restitution to affected investors, disgorgement of fees,
reimbursement of investigatory, administrative and legal costs and an
"administrative assessment," to be determined by the Commissioner. Initial
research indicates that these damages could be limited or capped by statute.
F-13
AIM Trimark Endeavor Fund
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and
failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other mutual
funds and that the defendants concealed such payments from investors by
disguising them as brokerage commissions (all the claims in this category of
lawsuits were dismissed with prejudice by the court on September 29, 2006,
except for the Section 36(b) claim which was dismissed with leave to amend
to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received inquiries
from numerous regulators in the form of subpoenas or other oral or written
requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
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 and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-14
AIM Trimark Endeavor Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Trimark Endeavor Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Trimark Endeavor Fund (one of
the funds constituting AIM Investment Funds, hereafter referred to as the
"Fund") at October 31, 2006, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 20, 2006
Houston, Texas
F-15
AIM Trimark Endeavor Fund
TAX DISCLOSURES
REQUIRED FEDERAL INCOME TAX INFORMATION
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2006, 99.17% is eligible for the dividends received deduction for
corporations.
For its tax year ended October 31, 2006 the Fund designates 99.17%, or the
maximum amount allowable, of its dividend distributions as qualified dividend
income. Your actual amount of qualified dividend income for the calendar year
will be reported in your Form 1099-DIV. You should consult your tax advisor
regarding treatment of the amounts.
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDER
For its tax year ended October 31, 2006, the Fund designates 0%, or the maximum
amount allowable, of its dividend distributions as qualified interest income
exempt from U.S. income tax for non-resident alien shareholders. Your actual
amount of qualified interest income for the calendar year will be reported in
your Form 1042-S mailing. You should consult your tax advisor regarding
treatment of the amounts.
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2006, April 30, 2006, July 31, 2006 and
October 31, 2006 are 32.57%, 30.64%, 30.99% and 35.29%, respectively.
F-16
AIM Trimark Endeavor Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm) and
Trustee and Vice Chair of The AIM Family
of Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
- -------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, A I M Management Group Inc.,
Principal AIM Mutual Fund Dealer Inc. (registered
Executive Officer broker dealer), AIM Funds Management
Inc. (registered investment advisor) and
1371 Preferred Inc. (holding company);
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Capital Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, AVZ Callco Inc. (holding
company); AMVESCAP Inc. (holding
company) and AIM Canada Holdings Inc.
(holding company); Director and Chief
Executive Officer, AIM Trimark Corporate
Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund
company) and AIM Trimark Canada Fund
Inc. (corporate mutual fund company);
Trustee, President and Principal
Executive Officer of The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
Powershares Capital Management LLC
Formerly: President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer,
AIM Funds Management Inc.; President,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and Director,
Trimark Trust (federally regulated
Canadian Trust Company)
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder
Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); CompuDyne Corporation
(provider of products and services to
the public security market); and
Homeowners of America Holding
Corporation (property casualty company)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and Director of various
affiliated Volvo companies; and
Director, Magellan Insurance Company
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired Director, Mainstay VP Series
Trustee Formerly: Partner, Deloitte & Touche Funds, Inc. (21 portfolios)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
F-17
TRUSTEES AND OFFICERS--(CONTINUED)
AIM Trimark Endeavor Fund
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc. and A I M
Advisors, Inc.; Director, Vice President
and Secretary, INVESCO Distributors,
Inc.; Vice President and Secretary,
A I M Capital Management, Inc., AIM
Investment Services, Inc., and Fund
Management Company; Senior Vice
President and Secretary, A I M
Distributors, Inc.; Director, INVESCO
Funds Group Inc.; Senior Vice President,
Chief Legal Officer and Secretary of The
AIM Family of Funds--Registered
Trademark--; and Manager, Powershares
Capital Management LLC
Formerly: Chief Operating Officer,
Senior Vice President, General Counsel,
and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice
President and Secretary, PBHG Funds (an
investment company); Vice President and
Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel
and Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- ------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, AMVESCAP N/A
Vice President PLC; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- ------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Senior Vice President and General
Vice President Counsel, AMVESCAP PLC; Director, INVESCO
Funds Group, Inc.; and Vice President of
The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Vice President and N/A
General Counsel, Fund Management
Company; Director, Senior Vice
President, Secretary and General
Counsel, A I M Management Group Inc. and
A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Senior Vice President, A I M
Distributors, Inc.; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Chief
Executive Officer and President, INVESCO
Funds Group, Inc.; and Senior Vice
President, and General Counsel, Liberty
Financial Companies, Inc. and Senior
Vice President and General Counsel
Liberty Funds Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.; and Vice President,
Financial Officer and Treasurer and Principal Officer of The
Treasurer AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc. and Vice President
of The AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, Senior Vice
President and Senior Investment Officer,
A I M Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); and
President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust Only)
Formerly: Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- ------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc., Fund Management
Company and The AIM Family of
Funds--Registered Trademark--
Formerly: Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Global Head of Product
Development, AIG-Global Investment
Group, Inc.; Chief Compliance Officer
and Deputy General Counsel,
AIG-SunAmerica Asset Management; and
Chief Compliance Officer, Chief
Operating Officer and Deputy General
Counsel, American General Investment
Management
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers AIM Funds Management,
Suite 100 11 Greenway Plaza Inc. LLP Inc.
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street 5140 Yonge St.
Houston, TX 77046-1173 Suite 100 Suite 2900 Suite 900
Houston, TX 77046-1173 Houston, TX 77002-5678 Toronto, Canada M2N 6X7
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 225 Franklin Street
Floor 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Philadelphia, PA 19103-7599 Americas
New York, NY 10036-2714
</Table>
F-18
[eDelivery
GO PAPERLESS
AIMinvestments.com/edelivery
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REGISTER FOR eDELIVERY
eDelivery is the process of receiving your fund and account If used after January 20, 2007, this report must be
information via e-mail. Once your quarterly statements, tax accompanied by a Fund Performance & Commentary or by an AIM
forms, fund reports, and prospectuses are available, we will Quarterly Performance Review for the most recent
send you an e-mail notification containing links to these quarter-end.
documents. For security purposes, you will need to log in to
your account to view your statements and tax forms. Mutual funds distributed by A I M Distributors, Inc.
WHY SIGN UP? A I M Management Group Inc. has provided leadership in the
investment management industry since 1976. AIM Investment
Register for eDelivery to: Services, Inc. is the transfer agent for the products and
services represented by AIM Investments. AIM is a subsidiary
o reduce the amount of paper you receive. of AMVESCAP PLC, one of the world's largest independent
financial services companies with $450 billion in assets
o gain access to your documents faster by not waiting for under management as of October 31, 2006.
the mail.
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND
o view your documents online anytime at your convenience. EXPENSES CAREFULLY. FOR THIS AND OTHER INFORMATION ABOUT AIM
FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AND
o save the documents to your personal computer or print them READ IT CAREFULLY BEFORE INVESTING.
out for your records.
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It's easy. Just follow these simple steps:
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2. Click on the "Service Center" tab.
3. Select "Register for eDelivery" and complete the
consent process.
This AIM service is provided by AIM Investment Services, Inc. AIMinvestments.com T-END-AR-1 A I M Distributors, Inc.
[YOUR GOALS. OUR SOLUTIONS.]--Registered Trademark--
- ------------------------------------------------------------------------------------
Mutual Retirement Annuities College Separately Offshore Cash
Funds Products Savings Managed Products Management [AIM INVESTMENTS LOGO APPEARS HERE]
Plans Accounts -- Registered Trademark --
- ------------------------------------------------------------------------------------
</Table>
INTERNATIONAL/ AIM TRIMARK FUND
GLOBAL EQUITY
Annual Report to Shareholders o October 31, 2006
International/Global Blend
Table of Contents
Supplemental Information ......... 2
Letters to Shareholders .......... 3
Performance Summary .............. 5
Management Discussion ............ 5
Fund Expenses .................... 7
Long-term Fund Performance ....... 8
Approval of Advisory Agreement ... 10
Schedule of Investments .......... F-1
Financial Statements ............. F-3
Notes to Financial Statements .... F-5
Financial Highlights ............. F-12
Auditor's Report ................. F-17 [COVER GLOBE IMAGE]
Tax Disclosures .................. F-18
Trustees and Officers ............ F-19
[AIM INVESTMENT SOLUTIONS]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[DOMESTIC [INTERNATIONAL/ [SECTOR
EQUITY] GLOBAL EQUITY] EQUITY]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[FIXED [ALLOCATION [DIVERSIFIED
INCOME] SOLUTIONS] PORTFOLIOS]
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM Trimark Fund
AIM TRIMARK FUND SEEKS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2006, and is based on total net assets.
ABOUT SHARE CLASSES o Because a large percentage of the o Industry classifications used in this
Fund's assets may be invested in a report are generally according to the
o Class B shares are not available as an limited number of securities, a change Global Industry Classification Standard,
investment for retirement plans in the value of these securities could which was developed by and is the
maintained pursuant to Section 401 of significantly affect the value of your exclusive property and a service mark of
the Internal Revenue Code, including investment in the Fund. Morgan Stanley Capital International
401(k) plans, money purchase pension Inc. and Standard & Poor's.
plans and profit sharing plans. Plans ABOUT INDEXES USED IN THIS REPORT
that had existing accounts invested in The Fund provides a complete list of its
Class B shares prior to September 30, o The unmanaged LIPPER GLOBAL MULTI-CAP holdings four times in each fiscal year,
2003, will continue to be allowed to CORE FUNDS INDEX represents an average at the quarter-ends. For the second and
make additional purchases. of the performance of the 10 largest fourth quarters, the lists appear in the
global multi-capitalization core funds Fund's semiannual and annual reports to
o Class R shares are available only to tracked by Lipper Inc., an independent shareholders. For the first and third
certain retirement plans. Please see the mutual fund performance monitor. quarters, the Fund files the lists with
prospectus for more information. the Securities and Exchange Commission
o The unmanaged MSCI WORLD (SEC) on Form N-Q. The most recent list
PRINCIPAL RISKS OF INVESTING IN THE FUND INDEX--Service Mark-- is a group of of portfolio holdings is available at
global securities tracked by Morgan AIMinvestments.com. From our home page,
o Foreign securities have additional Stanley Capital International. click on Products & Performance, then
risks, including exchange rate changes, Mutual Funds, then Fund Overview. Select
political and economic upheaval, the o The Fund is not managed to track the your Fund from the drop-down menu and
relative lack of information about the performance of any particular index, click on Complete Quarterly Holdings.
companies, relatively low market including the indexes defined here, and Shareholders can also look up the Fund's
liquidity and the potential lack of consequently, the performance of the Forms N-Q on the SEC Web site at
strict financial and accounting controls Fund may deviate significantly from the sec.gov. Copies of the Fund's Forms N-Q
and standards. performance of the index. may be reviewed and copied at the SEC
Public Reference Room in Washington,
o Investing in emerging markets involves o A direct investment cannot be made in D.C. You can obtain information on the
greater risk than investing in more an index. Unless otherwise indicated, operation of the Public Reference Room,
established markets. Risks for emerging index results include reinvested including information about duplicating
markets include, for instance, risks dividends, and they do not reflect sales fee charges, by calling 202-942-8090 or
relating to the relatively smaller size charges. Performance of an index of 800-732-0330, or by electronic request
and lesser liquidity of these markets, funds reflects fund expenses; at the following e-mail address:
high inflation rates, adverse political performance of a market index does not. publicinfo@sec.gov. The SEC file numbers
developments and lack of timely for the Fund are 811-05426 and
information. OTHER INFORMATION 033-19338.
o Prices of equity securities change in o The returns shown in the management's A description of the policies and
response to many factors including the discussion of Fund performance are based procedures that the Fund uses to
historical and prospective earnings of on net asset values calculated for determine how to vote proxies relating
the issuer, the value of its assets, shareholder transactions. Generally to portfolio securities is available
general economic conditions, interest accepted accounting principles require without charge, upon request, from our
rates, investor perceptions and market adjustments to be made to the net assets Client Services department at
liquidity. of the Fund at period end for financial 800-959-4246 or on the AIM Web site,
reporting purposes, and as such, the net AIMinvestments.com. On the home page,
o The value of convertible securities in asset values for shareholder scroll down and click on AIM Funds Proxy
which the Fund invests may be affected transactions and the returns based on Policy. The information is also
by market interest rates, the risk that those net asset values may differ from available on the SEC Web site, sec.gov.
the issuer may default on interest or the net asset values and returns
principal payments and the value of the reported in the Financial Highlights. Information regarding how the Fund voted
underlying common stock into which these proxies related to its portfolio
securities may be converted. securities during the 12 months ended
June 30, 2006, is available at our Web
site. Go to AIMinvestments.com, access
the About Us tab, click on Required
Notices and then click on Proxy Voting
Activity. Next, select the Fund from the
drop-down menu. The information is also
available on the SEC Web site, sec.gov.
==========================================
FUND NASDAQ SYMBOLS
====================================================================================== Class A Shares ATKAX
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND Class B Shares ATKBX
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND Class C Shares ATKCX
EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class R Shares ATKRX
====================================================================================== ==========================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIMinvestments.com
2
AIM Trimark Fund
Dear Shareholders of The AIM Family of Funds--Registered
Trademark-- :
We're pleased to provide you with this report, which
includes a discussion of how your Fund was managed during
the review period ended October 31, 2006, and what factors
affected its performance.
As we approach the end of 2006, it seems likely that many
[TAYLOR investors may see the value of their investments increase
PHOTO] this year. Global equity markets, collectively, recorded
double-digit gains for the year ended October 31, 2006, as
did the U.S. stock market. Also, the investment grade bond
market in the United States rose for the same period.
While stock and bond markets generally enjoyed positive
year-to-date returns, their performance was affected by
short-term economic and geopolitical events. For example,
the U.S. stock market was weak in the second quarter of 2006
Philip Taylor when it appeared that inflation might be rising. Only after
the U.S. Federal Reserve Board decided in August that
inflation was contained and that short-term interest rates
need not be increased--the first time it kept rates
unchanged in more than two years--did equities truly surge.
Short-term market fluctuations are a fact of life for all
investors. At AIM Investments--Registered Trademark-- , we
believe that investors can do two things to deal with
short-term market fluctuations: maintain a long-term
investment horizon and maintain a diversified portfolio. AIM
Investments can help by offering a broad product line that
gives your financial advisor the necessary tools to build a
portfolio that's right for you regardless of market
conditions. AIM Investments offers a comprehensive range of
retail mutual funds, including domestic, global and
international equity funds, taxable and tax-exempt
fixed-income funds, and a variety of allocation
portfolios--with varied risk and return characteristics to
match your needs. We maintain this extensive set of product
solutions for one reason: We believe in the value of
comprehensive, diversified investment portfolios.
We've changed the look of our annual reports to reflect
that belief. In our marketing and now our shareholder
literature, we represent a fully diversified portfolio
graphically as an allocation pie chart and assign each asset
class a color--green for domestic equity, blue for
international, orange for sector and purple for fixed
income. A legend in the left column illustrates the
methodology. Your report cover now shows your Fund's asset
class color, plus the asset class and sub-asset class name
are shown in the upper-left corner. The reason for these
changes is to help you better understand where your Fund
fits into your overall portfolio.
AIM has a variety of investment solutions, and knowing
which ones are right for your portfolio is complex. That's
why we also believe in the value of a trusted financial
advisor who will work with you to create an investment plan
you can stick with for the long term. Your financial advisor
can help allocate your portfolio appropriately and review
your investments regularly to help ensure they remain
suitable as your financial situation changes. While there
are no guarantees with any investment program, a long-term
plan that's based on your financial goals, risk tolerance
and time horizon is more likely to keep you and your
investments on track.
OUR COMMITMENT TO YOU
In the short term, the one sure thing about markets is their
unpredictability. While past performance cannot guarantee
comparable future results, we believe that staying invested
for the long term with a thoughtful plan offers the best
opportunity for weathering that unpredictability. We at AIM
Investments remain committed to building enduring solutions
to help you achieve your investment goals, and we're pleased
you've placed your trust in us.
Information about investing, the markets and your Fund is
always available on our Web site, AIMinvestments.com. If you
have questions about your individual account, we invite you
to contact one of our highly trained client services
representatives at 800-959-4246.
Sincerely,
/S/ PHILIP TAYLOR
Philip Taylor
President - AIM Funds
CEO, AIM Investments
December 14, 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. A I M
DISTRIBUTORS, INC. IS THE DISTRIBUTOR FOR THE RETAIL FUNDS
REPRESENTED BY AIM INVESTMENTS.
3
AIM Trimark Fund
Dear Fellow AIM Fund Shareholders:
At our meeting at the end of June, your Board completed its
comprehensive review* of each fund's advisory agreement with
A I M Advisors, Inc. (AIM) to make certain your interests
are being served in terms of fees, performance and
operations.
Looking ahead, your Board finds many reasons to be
[CROCKETT positive about AIM's management and strategic direction.
PHOTO] Most importantly, AIM's investment management discipline has
paid off in terms of improved overall performance. We are
also pleased with AIM's efforts to seek more cost-effective
ways of delivering superior service.
In addition, AIM is realizing the benefits of belonging
to a leading independent global investment management
Bruce L. Crockett organization in its parent company, AMVESCAP PLC, which is
dedicated to helping people worldwide build their financial
security. AMVESCAP managed approximately $450 billion
globally as of October 31, 2006, operating under the AIM,
INVESCO, AIM Trimark, INVESCO PERPETUAL and Atlantic Trust
brands. These companies are home to an abundance of
investment talent that is gradually being integrated and
leveraged into centers of excellence, each focusing on a
given market segment or asset class. Over the next few
years, your Board will be meeting at these various centers
of excellence to learn about their progress and how they may
serve you through our goal of enhancing performance and
reducing costs.
The seven new AIM funds--which include Asian funds,
structured U.S. equity funds and specialized bond funds--are
an early example of the kind of opportunities the AMVESCAP
organization can provide AIM clients. More information on
these funds can be found on AIM's Web site.
Your Board is very pleased with the overall direction and
progress of the AIM Funds. We're working closely and
effectively with AIM's management to continue this momentum.
As always, your Board is eager to hear your views on how we
might better serve you. Please send your comments in a
letter addressed to me at AIM Investments, AIM Investments
Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board
December 14, 2006
*To learn more about all the factors we considered before
approving each fund's advisory agreement, go to the
"Products & Performance" tab at the AIM Web site
(AIMinvestments.com) and click on "Investment Advisory
Agreement Renewals." The approval of advisory agreement
information for your Fund is also included in this annual
report on pages 10-11.
4
AIM Trimark Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
====================================================================================== Also central to the Trimark
discipline is our adherence to an
PERFORMANCE SUMMARY investment horizon of three to five
years. We use this long-term approach
For the fiscal year ended October 31, 2006, all share classes of AIM Trimark because we believe good business
Fund, at net asset value, posted double-digit gains--outperforming the Fund's strategies usually take that amount of
broad market, style-specific and peer group indexes. time to implement and to produce strong
earnings growth. We also use a
Your Fund's outperformance versus its broad market and style-specific index concentrated portfolio approach,
was driven by above-market returns from investments in the consumer constructing a portfolio of about 35 to
discretionary, information technology and industrials sectors. While all 50 stocks. We believe this allows each
sectors contributed positively to the Fund's overall return, holdings in the investment opportunity to materially
financial sector detracted from the Fund's relative performance versus the impact the Fund's performance. While the
MSCI World Index during the fiscal year. portfolio is concentrated, it is also
diversified by business idea/investment
Your Fund's long-term performance appears on pages 8 and 9. thesis.
FUND VS. INDEXES While efforts are made to manage risk
through diversifying by investment ideas,
Total returns, 10/31/05-10/31/06, excluding applicable sales charges. If our primary method of attempting to manage
sales charges were included, returns would be lower. risk is to purchase businesses that are
trading below their estimated intrinsic
Class A Shares 27.40% value.
Class B Shares 26.42
Class C Shares 26.42 Holdings are considered for sale if a
Class R Shares 27.12 more attractive investment opportunity
MSCI World Index (Broad Market Index / Style-Specific Index) 21.32 exists. Holdings are also considered for
Lipper Global Multi-Cap Core Funds Index (Peer Group Index) 19.86 sale if the original thesis for buying
the company changes due to a fundamental
SOURCE: LIPPER INC. negative change in management strategy
or a fundamental negative change in the
competitive environment.
MARKET CONDITIONS AND YOUR FUND
======================================================================================
International stocks generally
HOW WE INVEST culated to be the true value of the outperformed their U.S. counterparts
company based on its future cash flows, during the fiscal year, which aided your
We view ourselves as business people management performance and business Fund's absolute returns. However, most
buying businesses, and we consider the fundamentals. major U.S. stock market indexes also
purchase of a stock as an ownership posted healthy gains as favorable
interest in a business. We strive to In conducting a comprehensive economic data and solid corporate
develop a proprietary view of a business analysis of a company, we strive to profits overshadowed housing market
through in-depth, fundamental research identify U.S. or foreign stocks which concerns and volatility and investor
that includes careful financial have: uncertainty regarding interest rates and
statement analysis and meetings with oil prices. Within the MSCI World Index,
company management teams. We then seek o Sustainable competitive advantages. the
to purchase businesses whose stock
prices are below what we have cal- o Strong long-term growth prospects. (continued)
o High barriers to entry.
o Honest and capable management teams.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Broadcasting & Cable TV 6.3% 1. WPP Group PLC (United Kingdom) 5.0%
2. Packaged Foods & Meats 5.6 2. Cemex S.A. de C.V.-ADR (Mexico) 4.9
[PIE CHART] 3. Advertising 5.0 3. Reed Elsevier PLC
4. Construction Materials 4.9 (United Kingdom) 4.8
Consumer Staples 10.7% 5. Publishing 4.8 4. Grupo Televisa S.A.-ADR
Information Technology 8.8% (Mexico) 3.9
Health Care 8.3% Total Net Assets $45.66 million 5. Accor S.A. (France) 3.8
Materials 7.2% 6. Smiths Group PLC
Money Market Funds Plus Total Number of Holdings* 39 (United Kingdom) 3.6
Other Assets Less Liabilities 7.0% 7. WellPoint Inc. 3.4
Consumer Discretionary 31.1% 8. ING Groep N.V. (Netherlands) 3.2
Industrials 14.6% 9. Kerry Group PLC-Class A
Financials 12.3% (Ireland) 3.1
10. Ryanair Holdings PLC-ADR
(Ireland) 3.0
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
5
AIM Trimark Fund
materials sector led for the fiscal year ties, such as crude oil, in the short THE VIEWS AND OPINIONS EXPRESSED IN
due to higher prices for many industrial term. As such, we have shied away from MANAGEMENT'S DISCUSSION OF FUND
commodities, such as gold, steel and investing in businesses whose fortunes PERFORMANCE ARE THOSE OF A I M ADVISORS,
aluminum. Health care and information depend on the prices of commodities. INC. THESE VIEWS AND OPINIONS ARE
technology stocks generally trailed Generally, as the price for a commodity SUBJECT TO CHANGE AT ANY TIME BASED ON
during the year. rises, consumers will look for FACTORS SUCH AS MARKET AND ECONOMIC
substitutes or simply use less of it. At CONDITIONS. THESE VIEWS AND OPINIONS MAY
Our investment approach focuses on the same time, higher prices generally NOT BE RELIED UPON AS INVESTMENT ADVICE
individual businesses rather than market lead to an increase in supply as OR RECOMMENDATIONS, OR AS AN OFFER FOR A
sectors. Therefore, your Fund shares producers of the commodity try to PARTICULAR SECURITY. THE INFORMATION IS
little in common with sector and/or capitalize on the higher prices. The NOT A COMPLETE ANALYSIS OF EVERY ASPECT
regional weightings of the Fund's combination of falling demand and OF ANY MARKET, COUNTRY, INDUSTRY,
indexes. However, if we were to broadly increasing supply often leads to lower SECURITY OR THE FUND. STATEMENTS OF FACT
categorize businesses with which we had prices for the commodity. We believe ARE FROM SOURCES CONSIDERED RELIABLE,
the most success during the fiscal year, this pattern may recur in the current BUT A I M ADVISORS, INC. MAKES NO
companies in the consumer discretionary, market cycle. REPRESENTATION OR WARRANTY AS TO THEIR
information technology and industrials COMPLETENESS OR ACCURACY. ALTHOUGH
sectors were the largest contributors to The Fund's underweight position in HISTORICAL PERFORMANCE IS NO GUARANTEE
overall Fund performance. In terms of financials stocks also hurt performance OF FUTURE RESULTS, THESE INSIGHTS MAY
regions, our investments in European relative to the MSCI World Index, as HELP YOU UNDERSTAND OUR INVESTMENT
companies benefited Fund performance the this sector performed very well during MANAGEMENT PHILOSOPHY.
most. Although every sector in which we the fiscal year.
invested had a positive absolute return, See important Fund and index
our holdings in financials stocks Before the close of the fiscal year, disclosures on the inside front cover.
generally hindered performance versus we sold our holdings in
the MSCI World Index. Our cash position SHERWIN-WILLIAMS, AMERICAN EXPRESS, Tye Bousada
also detracted from relative performance NINTENDO, ERICSSON, VULCAN MATERIALS, Chartered Financial
during the fiscal year. HARRAH'S ENTERTAINMENT and COSTCO. All [BOUSADA Analyst, portfolio
of these companies, with the exception PHOTO] manager, is lead
Among the top contributors to Fund of Sherwin-Williams, had become more manager of AIM
performance were food services company expensive, and we replaced them with Trimark Fund. Prior
COMPASS GROUP, camera equipment and more attractive investment ideas. to joining AIM
supply company CANON and surface and Trimark
materials science company ENGELHARD. The We also initiated some new positions Investments in 1999, Mr. Bousada worked
acquisition of Engelhard by German including HBOS, a leading U.K. mortgage as an investment analyst and portfolio
chemical maker BASF (not a Fund holding) and savings provider, BAYERISHE MOTOREN manager at another investment firm. He
was completed in June. Engelhard's WERKE (BMW), manufacturer of premium earned an Honors B.A. in business
catalyst technology increases the output automobiles and motorcycles, ALK-ABELLO, administration from The University of
of refineries by making them more energy a world leader in the production of Western Ontario.
efficient. Its catalysts also allow for allergy vaccines, AMERICAN POWER
new forms of higher-mileage diesel fuel CONVERSION, a leading provider of global
to be produced at lower costs. With the end-to-end backup power products, and Dana Love
high cost of energy, the catalysts CISCO SYSTEMS, a worldwide leader in [LOVE Chartered Financial
produced by Engelhard have the potential networking solutions for the Internet. PHOTO] Analyst, portfolio
to benefit auto and chemical companies. All of these companies were purchased at manager, is co-manager
We sold our holdings in Engelhard before a discount to our estimate of their of AIM Trimark Fund.
the close of the fiscal year. long-term intrinsic value. He began his
investment career in
Currency fluctuations also enhanced In general, our buy and sell 1993 and joined AIM Trimark Investments in
your Fund's total return as the value of decisions were driven by our discipline 1999. From 1995 to 1997, Mr. Love worked
the U.S. dollar depreciated versus of constantly upgrading the growth as an investment specialist at another
foreign currencies, including the euro, prospects of the overall portfolio and investment firm. He earned a M.Sc.
British pound and Japanese yen. The replacing less attractive business ideas in finance from the London Business School
decline in the value of the dollar with stocks that we believe are more in 1998 and a B.A. in sociology from the
helped your Fund's performance because attractive. University of Waterloo in 1992.
stocks purchased in foreign currencies
were worth more when translated into IN CLOSING
U.S. dollars.
In a market that continues to focus on
Although the energy sector performed short-term results, we believe that
strongly during most of the fiscal year, shareholders are wise to maintain a
we continued to avoid oil, gas and base long-term investment perspective. We
metal company stocks. Our avoidance of thank you for your investment in AIM
this sector detracted slightly from your Trimark Fund and for sharing our
Fund's return relative to the MSCI World long-term investment perspective.
Index. We believe that it is extremely For a presentation of your Fund's
difficult to accurately forecast the long-term performance, please see pages
price of commodi- 8 and 9.
6
AIM Trimark Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE mate the expenses that you paid over the The hypothetical account values and
period. Simply divide your account value expenses may not be used to estimate the
As a shareholder of the Fund, you incur by $1,000 (for example, an $8,600 actual ending account balance or
two types of costs: (1) transaction account value divided by $1,000 = 8.6), expenses you paid for the period. You
costs, which may include sales charges then multiply the result by the number may use this information to compare the
(loads) on purchase payments or in the table under the heading entitled ongoing costs of investing in the Fund
contingent deferred sales charges on "Actual Expenses Paid During Period" to and other funds. To do so, compare this
redemptions, and redemption fees, if estimate the expenses you paid on your 5% hypothetical example with the 5%
any; and (2) ongoing costs, including account during this period. hypothetical examples that appear in the
management fees; distribution and/or shareholder reports of the other funds.
service (12b-1) fees; and other Fund HYPOTHETICAL EXAMPLE FOR
expenses. This example is intended to COMPARISON PURPOSES Please note that the expenses shown
help you understand your ongoing costs in the table are meant to highlight your
(in dollars) of investing in the Fund The table below also provides ongoing costs only and do not reflect
and to compare these costs with ongoing information about hypothetical account any transaction costs, such as sales
costs of investing in other mutual values and hypothetical expenses based charges (loads) on purchase payments,
funds. The example is based on an on the Fund's actual expense ratio and contingent deferred sales charges on
investment of $1,000 invested at the an assumed rate of return of 5% per year redemptions, and redemption fees, if
beginning of the period and held for the before expenses, which is not the Fund's any. Therefore, the hypothetical
entire period May 1, 2006, through actual return. The Fund's actual information is useful in comparing
October 31, 2006. cumulative total returns at net asset ongoing costs only, and will not help
value after expenses for the six months you determine the relative total costs
ACTUAL EXPENSES ended October 31, 2006, appear in the of owning different funds. In addition,
table "Cumulative Total Returns" on page if these transaction costs were
The table below provides information 9. included, your costs would have been
about actual account values and actual higher.
expenses. You may use the information in
this table, together with the amount you
invested, to esti-
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
A $1,000.00 $1,070.70 $10.33 $1,015.22 $10.06 1.98%
B 1,000.00 1,066.70 14.22 1,011.44 13.84 2.73
C 1,000.00 1,066.70 14.22 1,011.44 13.84 2.73
R 1,000.00 1,070.30 11.64 1,013.96 11.32 2.23
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 six months ended October 31, 2006, appear in the table "Cumulative Total Returns" on page 9.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
7
AIM Trimark Fund
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
Index data from 10/31/03, Fund data from 11/4/03
====================================================================================================================================
[MOUNTAIN CHART]
DATE AIM TRIMARK FUND AIM TRIMARK FUND AIM TRIMARK FUND MSCI WORLD LIPPER GLOBAL MULTI-CAP
-CLASS A SHARES -CLASS B SHARES -CLASS C SHARES INDEX CORE FUNDS INDEX
10/31/03 $10000 $10000
11/03 $ 9545 $10090 $10090 10151 10199
12/03 9809 10369 10369 10787 10724
1/04 9950 10509 10509 10960 10937
2/04 10054 10620 10620 11144 11134
3/04 9997 10560 10560 11070 11108
4/04 9931 10480 10480 10843 10884
5/04 9940 10480 10480 10934 10951
6/04 10158 10710 10710 11167 11155
7/04 9629 10140 10140 10802 10789
8/04 9544 10039 10039 10849 10833
9/04 9723 10229 10229 11055 11054
10/04 9808 10309 10309 11325 11364
11/04 10365 10889 10889 11920 11928
12/04 10809 11349 11349 12375 12404
1/05 10648 11179 11179 12097 12247
2/05 10808 11339 11339 12480 12631
3/05 10591 11108 11108 12239 12400
4/05 10374 10868 10868 11971 12178
5/05 10592 11088 11088 12184 12385
6/05 10677 11178 11178 12289 12533
7/05 11064 11578 11578 12718 12992
8/05 11017 11518 11518 12814 13054
9/05 11045 11537 11537 13147 13413
10/05 10809 11287 11287 12828 13134
11/05 11168 11647 11657 13255 13486
12/05 11540 12041 12040 13549 13809
1/06 12028 12527 12526 14154 14334
2/06 11960 12456 12465 14133 14396
3/06 12410 12922 12921 14444 14688
4/06 12861 13378 13377 14882 15056
5/06 12372 12861 12861 14374 14672
6/06 12459 12942 12942 14370 14643
7/06 12287 12750 12759 14459 14724
8/06 12736 13216 13225 14835 15058
9/06 13148 13642 13640 15012 15280
10/06 13776 13973 14273 15563 15743
====================================================================================================================================
SOURCE: LIPPER INC.
Past performance cannot guarantee reporting period and paid the applicable shareholder would pay on Fund
comparable future results. contingent deferred sales charges. Index distributions or sale of Fund shares.
results include reinvested dividends, Performance of the indexes does not
The data shown in the chart include but they do not reflect sales charges. reflect the effects of taxes.
reinvested distributions, applicable Performance of an index of funds
sales charges, Fund expenses and reflects fund expenses and management
management fees. Results for Class B fees; performance of a market index does
shares are calculated as if a not. Performance shown in the chart and
hypothetical shareholder had liquidated table(s) does not reflect deduction of
his entire investment in the Fund at the taxes a
close of the
8
AIM Trimark Fund
========================================== ========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/06, including applicable As of 9/30/06, the most recent calendar 6 months ended 10/31/06, excluding
sales charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 7.07%
Inception (11/4/03) 11.30% CLASS A SHARES
1 Year 20.35 Inception (11/4/03) 9.89% Class B Shares 6.67
1 Year 12.50
CLASS B SHARES Class C Shares 6.67
Inception (11/4/03) 11.83% CLASS B SHARES
1 Year 21.42 Inception (11/4/03) 10.44% Class R Shares 7.03
1 Year 13.24
CLASS C SHARES ==========================================
Inception (11/4/03) 12.63% CLASS C SHARES
1 Year 25.42 Inception (11/4/03) 11.28%
1 Year 17.24
CLASS R SHARES
Inception 13.21% CLASS R SHARES
1 Year 27.12 Inception 11.84%
1 Year 18.83
========================================== ==========================================
CLASS R SHARES' INCEPTION DATE IS APRIL REINVESTED DISTRIBUTIONS, CHANGES IN NET SHOWN ARE AT NET ASSET VALUE AND DO NOT
30, 2004. RETURNS SINCE THAT DATE ARE ASSET VALUE AND THE EFFECT OF THE REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
HISTORICAL RETURNS. ALL OTHER RETURNS MAXIMUM SALES CHARGE UNLESS OTHERWISE ON A TOTAL REDEMPTION OF RETIREMENT PLAN
ARE BLENDED RETURNS OF HISTORICAL CLASS STATED. INVESTMENT RETURN AND PRINCIPAL ASSETS WITHIN THE FIRST YEAR.
R SHARE PERFORMANCE AND RESTATED CLASS A VALUE WILL FLUCTUATE SO THAT YOU MAY
SHARE PERFORMANCE (FOR PERIODS PRIOR TO HAVE A GAIN OR LOSS WHEN YOU SELL THE PERFORMANCE OF THE FUND'S SHARE
THE INCEPTION DATE OF CLASS R SHARES) AT SHARES. CLASSES WILL DIFFER PRIMARILY DUE TO
NET ASSET VALUE, ADJUSTED TO REFLECT THE DIFFERENT SALES CHARGE STRUCTURES AND
HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS A SHARE PERFORMANCE REFLECTS CLASS EXPENSES.
CLASS R SHARES. CLASS A SHARES' THE MAXIMUM 5.50% SALES CHARGE, AND
INCEPTION DATE IS NOVEMBER 4, 2003. CLASS B AND CLASS C SHARE PERFORMANCE A REDEMPTION FEE OF 2% WILL BE
REFLECTS THE APPLICABLE CONTINGENT IMPOSED ON CERTAIN REDEMPTIONS OR
THE PERFORMANCE DATA QUOTED REPRESENT DEFERRED SALES CHARGE (CDSC) FOR THE EXCHANGES OUT OF THE FUND WITHIN 30 DAYS
PAST PERFORMANCE AND CANNOT GUARANTEE PERIOD INVOLVED. THE CDSC ON CLASS B OF PURCHASE. EXCEPTIONS TO THE
COMPARABLE FUTURE RESULTS; CURRENT SHARES DECLINES FROM 5% BEGINNING AT THE REDEMPTION FEE ARE LISTED IN THE FUND'S
PERFORMANCE MAY BE LOWER OR HIGHER. TIME OF PURCHASE TO 0% AT THE BEGINNING PROSPECTUS.
PLEASE VISIT AIMINVESTMENTS.COM FOR THE OF THE SEVENTH YEAR. THE CDSC ON CLASS C
MOST RECENT MONTH-END PERFORMANCE. SHARES IS 1% FOR THE FIRST YEAR AFTER HAD THE ADVISOR NOT WAIVED FEES
PERFORMANCE FIGURES REFLECT PURCHASE. CLASS R SHARES DO NOT HAVE A AND/OR REIMBURSED EXPENSES IN THE PAST,
FRONT-END SALES CHARGE; RETURNS PERFORMANCE WOULD HAVE BEEN LOWER.
9
AIM Trimark Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees of AIM Investment funds. Based on this review and after Based on this review, the Board
Funds (the "Board") oversees the taking account of all of the other concluded that the advisory fee rate for
management of AIM Trimark Fund (the factors that the Board considered in the Fund under the Advisory Agreement
"Fund") and, as required by law, determining whether to continue the was fair and reasonable.
determines annually whether to approve Advisory Agreement for the Fund, the
the continuance of the Fund's advisory Board concluded that no changes should o Fees relative to those of comparable
agreement with A I M Advisors, Inc. be made to the Fund and that it was not funds with other advisors. The Board
("AIM"). Based upon the recommendation necessary to change the Fund's portfolio reviewed the advisory fee rate for the
of the Investments Committee of the management team at this time. However, Fund under the Advisory Agreement. The
Board, at a meeting held on June 27, due to the Fund's under-performance, the Board compared effective contractual
2006, the Board, including all of the Board also concluded that it would be advisory fee rates at a common asset
independent trustees, approved the appropriate for the Board to continue to level at the end of the past calendar
continuance of the advisory agreement closely monitor and review the year and noted that the Fund's rate was
(the "Advisory Agreement") between the performance of the Fund. Although the below the median rate of the funds
Fund and AIM for another year, effective independent written evaluation of the advised by other advisors with
July 1, 2006. Fund's Senior Officer (discussed below) investment strategies comparable to
only considered Fund performance through those of the Fund that the Board
The Board considered the factors the most recent calendar year, the Board reviewed. The Board noted that AIM has
discussed below in evaluating the also reviewed more recent Fund agreed to waive advisory fees of the
fairness and reasonableness of the performance, which did not change their Fund and to limit the Fund's total
Advisory Agreement at the meeting on conclusions. operating expenses, as discussed below.
June 27, 2006 and as part of the Board's Based on this review, the Board
ongoing oversight of the Fund. In their o The performance of the Fund relative concluded that the advisory fee rate for
deliberations, the Board and the to indices. The Board reviewed the the Fund under the Advisory Agreement
independent trustees did not identify performance of the Fund during the past was fair and reasonable.
any particular factor that was one and two calendar years against the
controlling, and each trustee attributed performance of the Lipper Global o Expense limitations and fee waivers.
different weights to the various Multi-Cap Growth Index. The Board noted The Board noted that AIM has
factors. that the Fund's performance in such contractually agreed to waive advisory
periods was below the performance of fees of the Fund through June 30, 2007
One responsibility of the independent such Index. Based on this review and to the extent necessary so that the
Senior Officer of the Fund is to manage after taking account of all of the other advisory fees payable by the Fund do not
the process by which the Fund's proposed factors that the Board considered in exceed a specified maximum advisory fee
management fees are negotiated to ensure determining whether to continue the rate, which maximum rate includes
that they are negotiated in a manner Advisory Agreement for the Fund, the breakpoints and is based on net asset
which is at arms' length and reasonable. Board concluded that no changes should levels. The Board considered the
To that end, the Senior Officer must be made to the Fund and that it was not contractual nature of this fee waiver
either supervise a competitive bidding necessary to change the Fund's portfolio and noted that it remains in effect
process or prepare an independent management team at this time. However, until June 30, 2007. The Board also
written evaluation. The Senior Officer due to the Fund's under-performance, the noted that AIM has contractually agreed
has recommended an independent written Board also concluded that it would be to waive fees and/or limit expenses of
evaluation in lieu of a competitive appropriate for the Board to continue to the Fund through June 30, 2007 so that
bidding process and, upon the direction closely monitor and review the total annual operating expenses are
of the Board, has prepared such an performance of the Fund. Although the limited to a specified percentage of
independent written evaluation. Such independent written evaluation of the average daily net assets for each class
written evaluation also considered Fund's Senior Officer (discussed below) of the Fund. The Board considered the
certain of the factors discussed below. only considered Fund performance through contractual nature of this fee
In addition, as discussed below, the the most recent calendar year, the Board waiver/expense limitation and noted that
Senior Officer made a recommendation to also reviewed more recent Fund it remains in effect until June 30,
the Board in connection with such performance, which did not change their 2007. The Board considered the effect
written evaluation. conclusions. these fee waivers/expense limitations
would have on the Fund's estimated
The discussion below serves as a o Meeting with the Fund's portfolio expenses for the Fund.
summary of the Senior Officer's managers and investment personnel. With
independent written evaluation and respect to the Fund, the Board is o Breakpoints and economies of scale.
recommendation to the Board in meeting periodically with such Fund's The Board reviewed the structure of the
connection therewith, as well as a portfolio managers and/or other Fund's advisory fee under the Advisory
discussion of the material factors and investment personnel and believes that Agreement, noting that it includes one
the conclusions with respect thereto such individuals are competent and able breakpoint. The Board reviewed the level
that formed the basis for the Board's to continue to carry out their of the Fund's advisory fees, and noted
approval of the Advisory Agreement. responsibilities under the Advisory that such fees, as a percentage of the
After consideration of all of the Agreement. Fund's net assets, would decrease as net
factors below and based on its informed assets increase because the Advisory
business judgment, the Board determined o Overall performance of AIM. The Board Agreement includes a breakpoint. The
that the Advisory Agreement is in the considered the overall performance of Board noted that, due to the Fund's
best interests of the Fund and its AIM in providing investment advisory and asset levels at the end of the past
shareholders and that the compensation portfolio administrative services to the calendar year and the way in which the
to AIM under the Advisory Agreement is Fund and concluded that such performance advisory fee breakpoint has been
fair and reasonable and would have been was satisfactory. structured, the Fund has yet to benefit
obtained through arm's length from the breakpoint. The Board noted
negotiations. o Fees relative to those clients of AIM that AIM has contractually agreed to
with comparable investment strategies. waive advisory fees of the Fund through
Unless otherwise stated, information The Board reviewed the effective June 30, 2007 to the extent necessary so
presented below is as of June 27, 2006 advisory fee rate (before waivers) for that the advisory fees payable by the
and does not reflect any changes that the Fund under the Advisory Agreement. Fund do not exceed a specified maximum
may have occurred since June 27, 2006, The Board noted that this rate was (i) advisory fee rate, which maximum rate
including but not limited to changes to below the effective advisory fee rate includes breakpoints and is based on net
the Fund's performance, advisory fees, (before waivers) for one mutual fund asset levels. The Board concluded that
expense limitations and/or fee waivers. advised by AIM with investment the Fund's fee levels under the Advisory
strategies comparable to those of the Agreement therefore would reflect
o The nature and extent of the advisory Fund; (ii) comparable to the effective economies of scale at higher asset
services to be provided by AIM. The advisory fee rate (before waivers) for levels and that it was not necessary to
Board reviewed the services to be one variable insurance fund advised by change the advisory fee breakpoints in
provided by AIM under the Advisory AIM and offered to insurance company the Fund's advisory fee schedule.
Agreement. Based on such review, the separate accounts with investment
Board concluded that the range of strategies comparable to those of the o Investments in affiliated money market
services to be provided by AIM under the Fund; (iii) above the effective funds. The Board also took into account
Advisory Agreement was appropriate and sub-advisory fee rates for two offshore the fact that uninvested cash and cash
that AIM currently is providing services funds advised and sub-advised by AIM collateral from securities lending
in accordance with the terms of the affiliates with investment strategies arrangements, if any, (collectively,
Advisory Agreement. comparable to those of the Fund, "cash balances") of the Fund may be
although the total advisory fees for one invested in money market funds advised
o The quality of services to be provided such offshore fund were the same as by AIM pursuant to the terms of an SEC
by AIM. The Board reviewed the those for the Fund; (iv) above the exemptive order. The Board found that
credentials and experience of the effective sub-advisory fee rates for two the Fund may realize certain benefits
officers and employees of AIM who will Canadian mutual funds advised by an AIM upon investing cash balances in AIM
provide investment advisory services to affiliate and sub-advised by AIM with advised money market funds, including a
the Fund. In reviewing the investment strategies comparable to higher net return, increased liquidity,
qualifications of AIM to provide those of the Fund, although the total increased diversification or decreased
investment advisory services, the Board advisory fees for one such Canadian transaction costs. The Board also found
considered such issues as AIM's mutual fund were above those for the that the Fund will not receive reduced
portfolio and product review process, Fund; (v) above the effective services if it invests its cash balances
various back office support functions sub-advisory fee rates for three in such money market funds. The Board
provided by AIM and AIM's equity and collective trust funds sub-advised by an noted that, to the extent the Fund
fixed income trading operations. Based AIM affiliate with investment strategies invests uninvested cash in affiliated
on the review of these and other comparable to those of the Fund, money market funds, AIM has voluntarily
factors, the Board concluded that the although the total advisory fees for agreed to waive a portion of the
quality of services to be provided by such collective trust funds were advisory fees it receives from the Fund
AIM was appropriate and that AIM comparable to those for the Fund; and attributable to such investment. The
currently is providing satisfactory (vi) above the effective sub-advisory Board further determined that the
services in accordance with the terms of fee rates for three mutual funds proposed securities lending program and
the Advisory Agreement. sub-advised by an AIM affiliate with related procedures with respect to the
investment strategies comparable to lending Fund is in the best interests of
o The performance of the Fund relative those of the Fund. The Board noted that the lending Fund and its respective
to comparable funds. The Board reviewed AIM has agreed to waive advisory fees of shareholders. The Board therefore
the performance of the Fund during the the Fund and to limit the Fund's total concluded that the investment of cash
past one and two calendar years against operating expenses, as discussed below. collateral received in connection
the performance of funds advised by
other advisors with investment (continued)
strategies comparable to those of the
Fund. The Board noted that the Fund's
performance in such periods was below
the median performance of such
comparable
10
AIM Trimark Fund
with the securities lending program in the steps that AIM and its affiliates the Fund's Senior Officer (discussed
the money market funds according to the have taken over the last several years, below) only considered Fund performance
procedures is in the best interests of and continue to take, in order to through the most recent calendar year,
the lending Fund and its respective improve the quality and efficiency of the Board also reviewed more recent Fund
shareholders. the services they provide to the Funds performance, which did not change their
in the areas of investment performance, conclusions.
o Independent written evaluation and product line diversification,
recommendations of the Fund's Senior distribution, fund operations, o The performance of the Fund relative
Officer. The Board noted that, upon shareholder services and compliance. The to indices. The Board reviewed the
their direction, the Senior Officer of Board concluded that these steps taken performance of the Fund during the past
the Fund, who is independent of AIM and by AIM have improved, and are likely to one and two calendar years against the
AIM's affiliates, had prepared an continue to improve, the quality and performance of the Lipper Global
independent written evaluation in order efficiency of the services AIM and its Multi-Cap Growth Index. The Board noted
to assist the Board in determining the affiliates provide to the Fund in each that the Fund's performance in such
reasonableness of the proposed of these areas, and support the Board's periods was below the performance of
management fees of the AIM Funds, approval of the continuance of the such Index. Based on this review and
including the Fund. The Board noted that Advisory Agreement for the Fund. after taking account of all of the other
the Senior Officer's written evaluation factors that the Board considered in
had been relied upon by the Board in APPROVAL OF SUB-ADVISORY AGREEMENT determining whether to continue the
this regard in lieu of a competitive Advisory Agreement for the Fund, the
bidding process. In determining whether The Board oversees the management of the Board concluded that no changes should
to continue the Advisory Agreement for Fund and, as required by law, determines be made to the Fund and that it was not
the Fund, the Board considered the annually whether to approve the necessary to change the Fund's portfolio
Senior Officer's written evaluation and continuance of the Fund's sub-advisory management team at this time. However,
the recommendation made by the Senior agreement. Based upon the recommendation due to the Fund's under-performance, the
Officer to the Board that the Board of the Investments Committee of the Board also concluded that it would be
consider whether the advisory fee Board, at a meeting held on June 27, appropriate for the Board to continue to
waivers for certain equity AIM Funds, 2006, the Board, including all of the closely monitor and review the
including the Fund, should be independent trustees, approved the performance of the Fund. Although the
simplified. The Board concluded that it continuance of the sub-advisory independent written evaluation of the
would be advisable to consider this agreement (the "Sub-Advisory Agreement") Fund's Senior Officer (discussed below)
issue and reach a decision prior to the between AIM Funds Management Inc. (the only considered Fund performance through
expiration date of such advisory fee "Sub-Advisor") and AIM with respect to the most recent calendar year, the Board
waivers. the Fund for another year, effective also reviewed more recent Fund
July 1, 2006. performance, which did not change their
o Profitability of AIM and its conclusions.
affiliates. The Board reviewed The Board considered the factors
information concerning the profitability discussed below in evaluating the o Meetings with the Fund's portfolio
of AIM's (and its affiliates') fairness and reasonableness of the managers and investment personnel. The
investment advisory and other activities Sub-Advisory Agreement at the meeting on Board is meeting periodically with the
and its financial condition. The Board June 27, 2006 and as part of the Board's Fund's portfolio managers and/or other
considered the overall profitability of ongoing oversight of the Fund. In their investment personnel and believes that
AIM, as well as the profitability of AIM deliberations, the Board and the such individuals are competent and able
in connection with managing the Fund. independent trustees did not identify to continue to carry out their
The Board noted that AIM's operations any particular factor that was responsibilities under the Sub-Advisory
remain profitable, although increased controlling, and each trustee attributed Agreement.
expenses in recent years have reduced different weights to the various
AIM's profitability. Based on the review factors. o Overall performance of the
of the profitability of AIM's and its Sub-Advisor. The Board considered the
affiliates' investment advisory and The discussion below serves as a overall performance of the Sub-Advisor
other activities and its financial discussion of the material factors and in providing investment advisory
condition, the Board concluded that the the conclusions with respect thereto services to the Fund and concluded that
compensation to be paid by the Fund to that formed the basis for the Board's such performance was satisfactory.
AIM under its Advisory Agreement was not approval of the Sub-Advisory Agreement.
excessive. After consideration of all of the o Fees relative to those clients of the
factors below and based on its informed Sub-Advisor with comparable investment
o Benefits of soft dollars to AIM. The business judgment, the Board determined strategies. The Board reviewed the
Board considered the benefits realized that the Sub-Advisory Agreement is in sub-advisory fee rate for the Fund under
by AIM as a result of brokerage the best interests of the Fund and its the Sub-Advisory Agreement and the
transactions executed through "soft shareholders and that the compensation sub-advisory fees paid thereunder. The
dollar" arrangements. Under these to the Sub-Advisor under the Sub- Board noted that this rate was (i) the
arrangements, brokerage commissions paid Advisory Agreement is fair and same as the sub-advisory fee rate for
by the Fund and/or other funds advised reasonable. one offshore fund sub-advised by the
by AIM are used to pay for research and Sub-Advisor with investment strategies
execution services. This research may be Unless otherwise stated, information comparable to those of the Fund; (ii)
used by AIM in making investment presented below is as of June 27, 2006 comparable to the sub-advisory fee rates
decisions for the Fund. The Board and does not reflect any changes that for three collective trust funds
concluded that such arrangements were may have occurred since June 27, 2006, sub-advised by the Sub-Advisor with
appropriate. including but not limited to changes to investment strategies comparable to
the Fund's performance. those of the Fund; and (iii) below the
o AIM's financial soundness in light of sub-advisory fee rates for three mutual
the Fund's needs. The Board considered o The nature and extent of the advisory funds sub-advised by the Sub-Advisor
whether AIM is financially sound and has services to be provided by the with investment strategies comparable to
the resources necessary to perform its Sub-Advisor. The Board reviewed the those of the Fund. The Board noted that
obligations under the Advisory services to be provided by the AIM has agreed to waive advisory fees of
Agreement, and concluded that AIM has Sub-Advisor under the Sub-Advisory the Fund and to limit the Fund's total
the financial resources necessary to Agreement. Based on such review, the operating expenses. The Board also
fulfill its obligations under the Board concluded that the range of considered the services to be provided
Advisory Agreement. Although the services to be provided by the by the Sub-Advisor pursuant to the
independent written evaluation of the Sub-Advisor under the Sub-Advisory Sub-Advisory Agreement and the services
Fund's Senior Officer (discussed below) Agreement was appropriate and that the to be provided by AIM pursuant to the
only considered Fund performance through Sub-Advisor currently is providing Advisory Agreement, as well as the
the most recent calendar year, the Board services in accordance with the terms of allocation of fees between AIM and the
also reviewed more recent Fund the Sub-Advisory Agreement. Sub-Advisor pursuant to the Sub-Advisory
performance, which did not change their Agreement. The Board noted that the
conclusions. o The quality of services to be provided sub-advisory fees have no direct effect
by the Sub-Advisor. The Board reviewed on the Fund or its shareholders, as they
o Historical relationship between the the credentials and experience of the are paid by AIM to the Sub-Advisor, and
Fund and AIM. In determining whether to officers and employees of the that AIM and the Sub-Advisor are
continue the Advisory Agreement for the Sub-Advisor who will provide investment affiliates. Based on this review, the
Fund, the Board also considered the advisory services to the Fund. Based on Board concluded that the sub-advisory
prior relationship between AIM and the the review of these and other factors, fee rate under the Sub-Advisory
Fund, as well as the Board's knowledge the Board concluded that the quality of Agreement was fair and reasonable.
of AIM's operations, and concluded that services to be provided by the
it was beneficial to maintain the Sub-Advisor was appropriate, and that o Profitability of AIM and its
current relationship, in part, because the Sub-Advisor currently is providing affiliates. The Board reviewed
of such knowledge. The Board also satisfactory services in accordance with information concerning the profitability
reviewed the general nature of the the terms of the Sub-Advisory Agreement. of AIM's (and its affiliates')
non-investment advisory services investment advisory and other activities
currently performed by AIM and its o The performance of the Fund relative and its financial condition. The Board
affiliates, such as administrative, to comparable funds. The Board reviewed considered the overall profitability of
transfer agency and distribution the performance of the Fund during the AIM, as well as the profitability of AIM
services, and the fees received by AIM past one and two calendar years against in connection with managing the Fund.
and its affiliates for performing such the performance of funds advised by The Board noted that AIM's operations
services. In addition to reviewing such other advisors with investment remain profitable, although increased
services, the trustees also considered strategies comparable to those of the expenses in recent years have reduced
the organizational structure employed by Fund. The Board noted that the Fund's AIM's profitability. Based on the review
AIM and its affiliates to provide those performance in such periods was below of the profitability of AIM's and its
services. Based on the review of these the median performance of such affiliates' investment advisory and
and other factors, the Board concluded comparable funds. Based on this review other activities and its financial
that AIM and its affiliates were and after taking account of all of the condition, the Board concluded that the
qualified to continue to provide other factors that the Board considered compensation to be paid by the Fund to
non-investment advisory services to the in determining whether to continue the AIM under its Advisory Agreement was not
Fund, including administrative, transfer Advisory Agreement for the Fund, the excessive.
agency and distribution services, and Board concluded that no changes should
that AIM and its affiliates currently be made to the Fund and that it was not o The Sub-Advisor's financial soundness
are providing satisfactory necessary to change the Fund's portfolio in light of the Fund's needs. The Board
non-investment advisory services. management team at this time. However, considered whether the Sub-Advisor is
Although the independent written due to the Fund's under-performance, the financially sound and has the resources
evaluation of the Fund's Senior Officer Board also concluded that it would be necessary to perform its obligations
(discussed below) only considered Fund appropriate for the Board to continue to under the Sub-Advisory Agreement, and
performance through the most recent closely monitor and review the concluded that the Sub-Advisor has the
calendar year, the Board also reviewed performance of the Fund. Although the financial resources necessary to fulfill
more recent Fund performance, which did independent written evaluation of its obligations under the Sub-Advisory
not change their conclusions. Agreement.
o Other factors and current trends. The
Board considered
11
Supplement to Annual Report dated 10/31/06
AIM Trimark Fund
===================================
Institutional Class Shares AVERAGE ANNUAL TOTAL RETURNS A REDEMPTION FEE OF 2% WILL BE IMPOSED
For periods ended 10/31/06 ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
The following information has been prepared to THE FUND WITHIN 30 DAYS OF PURCHASE.
provide Institutional Class shareholders with Inception 13.76% EXCEPTIONS TO THE REDEMPTION FEE ARE LISTED
a performance overview specific to their 1 Year 27.87 IN THE FUND'S PROSPECTUS.
holdings. Institutional Class shares are 6 Months* 7.32
offered exclusively to institutional HAD THE ADVISOR NOT WAIVED FEES AND/OR
investors, including defined contribution =================================== REIMBURSED EXPENSES IN THE PAST, PERFORMANCE
plans that meet certain criteria. WOULD HAVE BEEN LOWER.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 9/30/06,most PLEASE NOTE THAT PAST PERFORMANCE IS NOT
recent calendar quarter-end INDICATIVE OF FUTURE RESULTS. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
Inception 12.40% ALL RETURNS ASSUME REINVESTMENT OF
1 Year 19.65 DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND
6 Months* 6.21 PRINCIPAL VALUE WILL FLUCTUATE SO YOUR
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
*Cumulative total return that has LESS THAN THEIR ORIGINAL COST. SEE FULL
not been annualized REPORT FOR INFORMATION ON COMPARATIVE
BENCHMARKS. PLEASE CONSULT YOUR FUND
=================================== PROSPECTUS FOR MORE INFORMATION. FOR THE MOST
CURRENT MONTH-END PERFORMANCE, PLEASE CALL
INSTITUTIONAL CLASS SHARES' 800-451-4246 OR VISIT AIMINVESTMENTS.COM.
INCEPTION DATE IS APRIL 30, 2004.
RETURNS SINCE THAT DATE ARE
HISTORICAL RETURNS. ALL OTHER
RETURNS ARE BLENDED RETURNS OF
HISTORICAL INSTITUTIONAL CLASS
SHARE PERFORMANCE AND RESTATED
CLASS A SHARE PERFORMANCE (FOR
PERIODS PRIOR TO THE INCEPTION DATE
OF INSTITUTIONAL CLASS SHARES) AT
NET ASSET VALUE (NAV) AND REFLECT
THE HIGHER RULE 12B-1 FEES
APPLICABLE TO CLASS A SHARES. CLASS
A SHARES' INCEPTION DATE IS
NOVEMBER 4, 2003.
INSTITUTIONAL CLASS SHARES
HAVE NO SALES CHARGE; THEREFORE,
PERFORMANCE IS AT NAV. PERFORMANCE
OF INSTITUTIONAL CLASS SHARES WILL
DIFFER FROM PERFORMANCE OF OTHER
SHARE CLASSES PRIMARILY DUE TO
DIFFERING SALES CHARGES AND CLASS
EXPENSES.
==============================================
NASDAQ SYMBOL ATKIX
==============================================
Over for information on your Fund's expenses.
================================================================================
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.
================================================================================
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted,
reproduced or shown to the public,nor used in written form as sales literature
for public use.
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE]
AIMINVESTMENTS.COM T-TRI-INS-1 A I M Distributors, Inc. --REGISTERED TRADEMARK-- --REGISTERED TRADEMARK--
Information about your Fund's expenses
Calculating your ongoing Fund expenses
Example divide your account value by $1,000 The hypothetical account values and
(for example, an $8,600 account expenses may not be used to estimate the
As a shareholder of the Fund, you incur ongo- value divided by $1,000 = 8.6), actual ending account balance or expenses you
ing costs, including management fees and other then multiply the result by the paid for the period. You may use this
Fund expenses. This example is intended to number in the table under the information to compare the ongoing costs of
help you understand your ongoing costs (in heading entitled "Actual Expenses investing in the Fund and other funds. To do
dollars) of investing in the Fund and to com- Paid During Period" to estimate so, compare this 5% hypothetical example with
pare these costs with ongoing costs of the expenses you paid on your the 5% hypothetical examples that appear in
investing in other mutual funds. The example account during this period. the shareholder reports of the other funds.
is based on an investment of $1,000 invested
at the beginning of the period and held for Hypothetical example for comparison Please note that the expenses shown in
the entire period May 1, 2006, through October purposes the table are meant to highlight your ongoing
31, 2006. costs only. Therefore, the hypothetical
The table below also provides information is useful in comparing ongoing
Actual expenses information about hypothetical costs only, and will not help you determine
account values and hypothetical the relative total costs of owning different
The table below provides information about expenses based on the Fund's actual funds.
actual account values and actual expenses. You expense ratio and an assumed rate
may use the information in this table, of return of 5% per year before
together with the amount you invested, to expenses, which is not the Fund's
estimate the expenses that you paid over the actual return. The Fund's actual
period. Simply cumulative total return after
expenses for the six months ended
October 31, 2006, appears in the
table on the front of this
supplement.
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
Institutional $1,000.00 $1,073.20 $8.57 $1,016.94 $8.34 1.64%
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 return after expenses for the
six months ended October 31, 2006, appears in the table on the front of this supplement.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
====================================================================================================================================
AIMINVESTMENTS.COM T-TRI-INS-1 A I M Distributors, Inc.
AIM Trimark Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-66.67%
AUSTRIA-2.30%
Wienerberger A.G. (Building Products) 20,200 $ 1,050,112
======================================================================
DENMARK-0.74%
Alk-Abello A.S. (Pharmaceuticals)(a)(b) 2,200 336,504
======================================================================
FINLAND-1.97%
Nokian Renkaat Oyj (Tires & Rubber)(a) 47,100 901,368
======================================================================
FRANCE-3.78%
Accor S.A. (Hotels, Resorts & Cruise
Lines)(a) 24,900 1,727,930
======================================================================
GERMANY-4.10%
Adidas A.G. (Apparel, Accessories & Luxury
Goods) 23,200 1,162,541
- ----------------------------------------------------------------------
Bayerische Motoren Werke A.G. (Automobile
Manufacturers)(a) 12,400 711,688
======================================================================
1,874,229
======================================================================
IRELAND-7.38%
Anglo Irish Bank Corp. PLC (Diversified
Banks)(a) 33,219 595,655
- ----------------------------------------------------------------------
Kerry Group PLC-Class A (Packaged Foods &
Meats)(a) 58,300 1,408,800
- ----------------------------------------------------------------------
Ryanair Holdings PLC-ADR (Airlines)(b) 20,400 1,363,128
======================================================================
3,367,583
======================================================================
JAPAN-2.37%
Canon Inc. (Office Electronics)(a) 20,300 1,079,876
======================================================================
MEXICO-11.04%
Cemex S.A. de C.V.-ADR (Construction
Materials)(b) 72,606 2,231,909
- ----------------------------------------------------------------------
Grupo Modelo, S.A. de C.V.-Series C (Brewers) 211,300 1,016,495
- ----------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 72,600 1,791,768
======================================================================
5,040,172
======================================================================
NETHERLANDS-5.56%
ING Groep N.V. (Other Diversified Financial
Services)(a) 32,500 1,439,945
- ----------------------------------------------------------------------
Vedior N.V. (Human Resource & Employment
Services)(a) 60,168 1,100,130
======================================================================
2,540,075
======================================================================
SWITZERLAND-4.29%
Nestle S.A. (Packaged Foods & Meats)(a) 3,300 1,126,596
- ----------------------------------------------------------------------
Schindler Holding A.G. (Industrial Machinery) 4,200 241,379
- ----------------------------------------------------------------------
Schindler Holding A.G.-Participation Ctfs.
(Industrial Machinery)(a) 10,300 590,869
======================================================================
1,958,844
======================================================================
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
UNITED KINGDOM-23.14%
Compass Group PLC (Restaurants)(a) 90,900 $ 486,012
- ----------------------------------------------------------------------
HBOS PLC (Diversified Banks)(a) 65,763 1,361,365
- ----------------------------------------------------------------------
Reed Elsevier PLC (Publishing)(a) 193,700 2,203,896
- ----------------------------------------------------------------------
Smiths Group PLC (Industrial
Conglomerates)(a) 90,000 1,621,680
- ----------------------------------------------------------------------
Tesco PLC (Food Retail) 178,441 1,339,415
- ----------------------------------------------------------------------
Willis Group Holdings Ltd. (Insurance
Brokers) 33,500 1,274,005
- ----------------------------------------------------------------------
WPP Group PLC (Advertising)(a) 178,200 2,281,465
======================================================================
10,567,838
======================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $24,206,920) 30,444,531
======================================================================
DOMESTIC COMMON STOCKS-26.27%
APPAREL RETAIL-2.10%
Ross Stores, Inc. 32,500 956,475
======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.08%
State Street Corp. 14,800 950,604
======================================================================
AUTO PARTS & EQUIPMENT-1.89%
BorgWarner, Inc. 15,000 862,500
======================================================================
BROADCASTING & CABLE TV-2.40%
Clear Channel Communications, Inc. 31,500 1,097,775
======================================================================
COMMUNICATIONS EQUIPMENT-0.48%
Cisco Systems, Inc.(b) 9,100 219,583
======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.09%
CheckFree Corp.(b) 1,000 39,480
======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.53%
American Power Conversion Corp. 23,100 698,313
======================================================================
ELECTRONIC MANUFACTURING SERVICES-1.70%
Molex Inc.-Class A 26,200 774,210
======================================================================
HEALTH CARE EQUIPMENT-2.70%
Kinetic Concepts, Inc.(b) 35,400 1,230,504
======================================================================
HEALTH CARE TECHNOLOGY-1.48%
IMS Health Inc. 24,300 676,755
======================================================================
MANAGED HEALTH CARE-3.41%
WellPoint Inc.(b) 20,400 1,556,928
======================================================================
SEMICONDUCTORS-2.02%
Altera Corp.(b) 50,100 923,844
======================================================================
</Table>
F-1
AIM Trimark Fund
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------
SPECIALTY CHEMICALS-2.25%
Sigma-Aldrich Corp. 13,700 $ 1,029,007
======================================================================
SYSTEMS SOFTWARE-2.14%
Oracle Corp.(b) 52,900 977,063
======================================================================
Total Domestic Common Stocks (Cost
$10,084,033) 11,993,041
======================================================================
</Table>
<Table>
SHARES VALUE
- ----------------------------------------------------------------------
<Caption>
MONEY MARKET FUNDS-5.49%
Liquid Assets Portfolio-Institutional
Class(c) 1,252,761 $ 1,252,761
- ----------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 1,252,761 1,252,761
======================================================================
Total Money Market Funds (Cost
$2,505,522) 2,505,522
======================================================================
TOTAL INVESTMENTS-98.43% (Cost $36,796,475) 44,943,094
======================================================================
OTHER ASSETS LESS LIABILITIES-1.57% 718,817
======================================================================
NET ASSETS-100.00% $45,661,911
______________________________________________________________________
======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Ctfs. - Certificates
</Table>
Notes to Schedule of Investments:
(a) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2006 was $18,973,779,
which represented 41.55% of the Fund's Net Assets. See Note 1A.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-2
AIM Trimark Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $34,290,953) $42,437,572
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $2,505,522) 2,505,522
===========================================================
Total Investments (cost $36,796,475) 44,943,094
===========================================================
Receivables for:
Investments sold 869,755
- -----------------------------------------------------------
Fund shares sold 262,303
- -----------------------------------------------------------
Dividends 43,426
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 7,761
- -----------------------------------------------------------
Other assets 23,978
===========================================================
Total assets 46,150,317
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 337,671
- -----------------------------------------------------------
Fund shares reacquired 38,429
- -----------------------------------------------------------
Amount due custodian 11,678
- -----------------------------------------------------------
Trustee deferred compensation and retirement
plans 8,321
- -----------------------------------------------------------
Accrued distribution fees 17,867
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 957
- -----------------------------------------------------------
Accrued transfer agent fees 14,637
- -----------------------------------------------------------
Accrued operating expenses 58,846
===========================================================
Total liabilities 488,406
===========================================================
Net assets applicable to shares outstanding $45,661,911
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $35,703,844
- -----------------------------------------------------------
Undistributed net investment income (loss) (6,835)
- -----------------------------------------------------------
Undistributed net realized gain from
investment securities and foreign currencies 1,816,398
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 8,148,504
===========================================================
$45,661,911
___________________________________________________________
===========================================================
NET ASSETS:
Class A $31,258,003
___________________________________________________________
===========================================================
Class B $ 7,549,352
___________________________________________________________
===========================================================
Class C $ 6,620,552
___________________________________________________________
===========================================================
Class R $ 220,010
___________________________________________________________
===========================================================
Institutional Class $ 13,994
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 2,173,199
___________________________________________________________
===========================================================
Class B 536,073
___________________________________________________________
===========================================================
Class C 469,896
___________________________________________________________
===========================================================
Class R 15,373
___________________________________________________________
===========================================================
Institutional Class 964.3
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 14.38
- -----------------------------------------------------------
Offering price per share
(Net asset value of $14.38 divided by
94.50%) $ 15.22
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 14.08
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 14.09
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 14.31
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 14.51
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
AIM Trimark Fund
STATEMENT OF OPERATIONS
For the year ended October 31, 2006
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $20,777) $ 507,155
- ------------------------------------------------------------------------
Dividends from affiliated money market funds 64,253
- ------------------------------------------------------------------------
Interest 10,049
========================================================================
Total investment income 581,457
========================================================================
EXPENSES:
Advisory fees 289,295
- ------------------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------------------
Custodian fees 39,085
- ------------------------------------------------------------------------
Distribution fees:
Class A 53,589
- ------------------------------------------------------------------------
Class B 67,525
- ------------------------------------------------------------------------
Class C 57,290
- ------------------------------------------------------------------------
Class R 526
- ------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 89,263
- ------------------------------------------------------------------------
Transfer agent fees -- Institutional 15
- ------------------------------------------------------------------------
Trustees' and officer's fees and benefits 15,652
- ------------------------------------------------------------------------
Registration and filing fees 48,056
- ------------------------------------------------------------------------
Professional services fees 56,899
- ------------------------------------------------------------------------
Other 35,077
========================================================================
Total expenses 802,272
========================================================================
Less: Fees waived and expense offset arrangements (21,668)
========================================================================
Net expenses 780,604
========================================================================
Net investment income (loss) (199,147)
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 2,098,697
- ------------------------------------------------------------------------
Foreign currencies (19,316)
========================================================================
2,079,381
========================================================================
Change in net unrealized appreciation of:
Investment securities 6,625,173
- ------------------------------------------------------------------------
Foreign currencies 556
========================================================================
6,625,729
========================================================================
Net gain from investment securities and foreign currencies 8,705,110
========================================================================
Net increase in net assets resulting from operations $8,505,963
________________________________________________________________________
========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM Trimark Fund
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2006 and 2005
<Table>
<Caption>
2006 2005
- ----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (199,147) $ (200,758)
- ----------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 2,079,381 731,267
- ----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 6,625,729 1,425,470
========================================================================================
Net increase in net assets resulting from operations 8,505,963 1,955,979
========================================================================================
Distributions to shareholders from net realized gains:
Class A (262,036) --
- ----------------------------------------------------------------------------------------
Class B (89,140) --
- ----------------------------------------------------------------------------------------
Class C (82,585) --
- ----------------------------------------------------------------------------------------
Class R (881) --
- ----------------------------------------------------------------------------------------
Institutional Class (155) --
========================================================================================
Decrease in net assets resulting from distributions (434,797) --
========================================================================================
Share transactions-net:
Class A 7,628,231 7,497,457
- ----------------------------------------------------------------------------------------
Class B (258,487) 1,525,150
- ----------------------------------------------------------------------------------------
Class C (339,068) 1,223,419
- ----------------------------------------------------------------------------------------
Class R 134,706 49,128
- ----------------------------------------------------------------------------------------
Institutional Class 156 --
========================================================================================
Net increase in net assets resulting from share
transactions 7,165,538 10,295,154
========================================================================================
Net increase in net assets 15,236,704 12,251,133
========================================================================================
NET ASSETS:
Beginning of year 30,425,207 18,174,074
========================================================================================
End of year (including undistributed net investment income
(loss) of $(6,835) and $(3,743), respectively) $45,661,911 $30,425,207
________________________________________________________________________________________
========================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Fund (the "Fund") is a series portfolio of AIM Investment Funds (the
"Trust"). The Trust is organized as a Delaware statutory trust and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of nine separate series
portfolios, each authorized to issue an unlimited number of shares of beneficial
interest. The Fund currently offers multiple classes of shares. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. 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").
F-5
AIM Trimark Fund
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.
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. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. 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.
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.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to treat 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 to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F-6
AIM Trimark Fund
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- 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.
H. INDEMNIFICATIONS -- 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.
I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained
by the Fund to offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee, subject to certain
exceptions, is imposed on certain redemptions, including exchanges of
shares held less than 30 days. The redemption fee is recorded as an
increase in shareholder capital and is allocated among the share classes
based on the relative net assets of each class.
J. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
K. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $1 billion 0.85%
- -------------------------------------------------------------------
Over $1 billion 0.80%
__________________________________________________________________
===================================================================
</Table>
F-7
AIM Trimark Fund
Through June 30, 2007, AIM has contractually agreed to waive advisory fees
to the extent necessary so that the advisory fees payable by the Fund (based on
the Fund's average daily net assets) do not exceed the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.80%
- --------------------------------------------------------------------
Next $250 million 0.78%
- --------------------------------------------------------------------
Next $500 million 0.76%
- --------------------------------------------------------------------
Next $1.5 billion 0.74%
- --------------------------------------------------------------------
Next $2.5 billion 0.72%
- --------------------------------------------------------------------
Next $2.5 billion 0.70%
- --------------------------------------------------------------------
Next $2.5 billion 0.68%
- --------------------------------------------------------------------
Over $10 billion 0.66%
___________________________________________________________________
====================================================================
</Table>
Under the terms of a master sub-advisory agreement between AIM and AIM Funds
Management Inc. ("AIM Funds Management"), AIM pays AIM Funds Management 40% of
the amount of AIM's compensation on the sub-advised assets.
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C, Class R
and Institutional Class shares to 2.15%, 2.90%, 2.90%, 2.40% and 1.90% of
average daily net assets, respectively, through at least June 30, 2007. In
determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP")
described more fully below, the expense offset arrangements from which the Fund
may benefit are in the form of credits that the Fund receives from banks where
the Fund or its transfer agent has deposit accounts in which it holds uninvested
cash. In addition, the Fund may also benefit from a one time credit to be used
to offset future custodian expenses. Those credits are used to pay certain
expenses incurred by the Fund. AIM did not waive fees and/or reimburse expenses
during the period under this expense limitation.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in
the amount of 25% of the advisory fee AIM receives from the affiliated money
market funds on investments by the Fund in such affiliated money market funds.
Voluntary fee waivers or reimbursements may be modified or discontinued at any
time upon consultation with the Board of Trustees without further notice to
investors.
For the year ended October 31, 2006, AIM waived advisory fees of $17,290.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. These expenses along with the related expense
reimbursement are included in the Statement of Operations. For the year ended
October 31, 2006, AMVESCAP did not reimburse any expenses.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2006, AIM was paid $50,000.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AIS") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AIS for certain expenses
incurred by AIS in the course of providing such services. AIS may make payments
to intermediaries that provide omnibus account services, sub-accounting services
and/or networking services. All fees payable by AIS to intermediaries that
provide omnibus account services or sub-accounting are charged back to the Fund,
subject to certain limitations approved by the Trust's Board of Trustees. For
the year ended October 31, 2006, the Fund paid AIS $89,263 for Class A, Class B,
Class C and Class R share classes and $15 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C, Class R and Institutional Class shares of the Fund. The Trust has
adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans").
The Fund, pursuant to the Plans, pays ADI compensation at the annual rate of
0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the
average daily net assets of Class B and Class C shares and 0.50% of the average
daily net assets of Class R shares. Of the Rule 12b-1 payments, up to 0.25% of
the average daily net assets of the Class A, Class B, Class C or Class R shares
may be paid to furnish continuing personal shareholder services to customers who
purchase and own shares of such classes. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge. National
Association of Securities Dealers ("NASD") Rules impose a cap on the total sales
charges, including asset-based sales charges that may be paid by any class of
shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2006,
the Class A, Class B, Class C and Class R shares paid $53,589, $67,525, $57,290
and $526, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2006, ADI advised the Fund that it retained $33,025 in
front-end sales commissions from the sale of Class A shares and $0, $12,300,
$1,669 and $0 from Class A, Class B, Class C and Class R shares, respectively,
for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
F-8
AIM Trimark Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the year ended October 31, 2006.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ -- $ 7,902,294 $ (6,649,533) $ -- $1,252,761 $32,096 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class -- 5,303,167 (4,050,406) -- 1,252,761 15,794 --
- ----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class -- 2,965,498 (2,965,498) -- -- 16,363 --
==================================================================================================================================
Total
Investments
in
Affiliates $ -- $16,170,959 $(13,665,437) $ -- $2,505,522 $64,253 $ --
==================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the year
ended October 31, 2006, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $4,378.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2006, the Fund paid legal fees of $3,779
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the year ended October 31, 2006, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank 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 contractually agreed upon rate.
F-9
AIM Trimark Fund
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2006
and 2005 was as follows:
<Table>
<Caption>
2006 2005
- ------------------------------------------------------------------------------------
Distributions paid from long-term capital gain $ 434,797 $ --
____________________________________________________________________________________
====================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- ---------------------------------------------------------------------------
Undistributed long-term gain $ 1,947,920
- ---------------------------------------------------------------------------
Unrealized appreciation -- investments 8,016,982
- ---------------------------------------------------------------------------
Temporary book/tax differences (6,835)
- ---------------------------------------------------------------------------
Shares of beneficial interest 35,703,844
===========================================================================
Total net assets $45,661,911
___________________________________________________________________________
===========================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales. The tax-basis unrealized appreciation on investments amount includes
appreciation on foreign currencies of $1,886.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
The Fund does not have a capital loss carryforward as of October 31, 2006.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2006 was $23,283,965 and $18,447,005,
respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $8,019,389
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (4,293)
==============================================================================
Net unrealized appreciation of investment securities $8,015,096
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $36,927,998.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on October 31, 2006, undistributed net
investment income (loss) was increased by $196,055, undistributed net realized
gain was decreased by $176,155 and shares of beneficial interest decreased by
$19,900. This reclassification had no effect on the net assets of the Fund.
F-10
AIM Trimark Fund
NOTE 10--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A, Class B,
Class C, Class R and Institutional Class. Class A shares are sold with a
front-end sales charge unless certain waiver criteria are met. Class B shares
and Class C shares are sold with CDSC. Class R shares and Institutional Class
shares are sold at net asset value. Under certain circumstances, Class A shares
and Class R shares are subject to CDSC. Generally, Class B shares will
automatically convert to Class A shares on or about the month-end which is at
least eight years after the date of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------
2006(A) 2005
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,014,548 $13,360,571 966,575 $10,922,294
- -----------------------------------------------------------------------------------------------------------------
Class B 123,333 1,586,277 266,236 2,975,818
- -----------------------------------------------------------------------------------------------------------------
Class C 195,136 2,488,592 262,297 2,940,934
- -----------------------------------------------------------------------------------------------------------------
Class R 11,786 156,371 4,822 54,684
- -----------------------------------------------------------------------------------------------------------------
Institutional Class 2 27 -- --
=================================================================================================================
Issued as reinvestment of dividends:
Class A 20,431 246,603 -- --
- -----------------------------------------------------------------------------------------------------------------
Class B 6,809 80,962 -- --
- -----------------------------------------------------------------------------------------------------------------
Class C 6,176 73,498 -- --
- -----------------------------------------------------------------------------------------------------------------
Class R 73 881 -- --
- -----------------------------------------------------------------------------------------------------------------
Institutional Class 13 155 -- --
=================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 19,538 248,354 16,450 186,973
- -----------------------------------------------------------------------------------------------------------------
Class B (19,877) (248,354) (16,626) (186,973)
- -----------------------------------------------------------------------------------------------------------------
Reacquired:(b)
Class A (486,978) (6,227,297) (317,315) (3,611,810)
- -----------------------------------------------------------------------------------------------------------------
Class B (133,704) (1,677,372) (112,665) (1,263,695)
- -----------------------------------------------------------------------------------------------------------------
Class C (233,680) (2,901,158) (151,730) (1,717,515)
- -----------------------------------------------------------------------------------------------------------------
Class R (1,765) (22,546) (495) (5,556)
- -----------------------------------------------------------------------------------------------------------------
Institutional Class (2) (26) -- --
=================================================================================================================
521,839 $ 7,165,538 917,549 $10,295,154
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(a) There are two entities that each are record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 25% of
the outstanding shares of the Fund. ADI has an agreement with these
entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may
make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, AIM and/or AIM affiliates
including but not limited to services such as, securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially.
(b) Amount is net of redemption fees of $1,087, $362, $292, $6 and $1 for
Class A, Class B, Class C, Class R and Institutional Class shares,
respectively, the year ended October 31, 2006 and $1,281, $479, $462, $2
and $0 for Class A, Class B, Class C, Class R and Institutional Class
shares, respectively, the year ended October 31, 2005.
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
F-11
AIM Trimark Fund
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-----------------------------------------------
NOVEMBER 4, 2003
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------------- OCTOBER 31,
2006 2005 2004
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.44 $ 10.38 $10.00
- -------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.04) (0.05)(a)
- -------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.14 1.10 0.43
=============================================================================================================
Total from investment operations 3.10 1.06 0.38
=============================================================================================================
Less distributions from net realized gains (0.16) -- --
=============================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00
=============================================================================================================
Net asset value, end of period $ 14.38 $ 11.44 $10.38
_____________________________________________________________________________________________________________
=============================================================================================================
Total return(b) 27.40% 10.21% 3.80%
_____________________________________________________________________________________________________________
=============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $31,258 $18,368 $9,757
_____________________________________________________________________________________________________________
=============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.03%(c) 2.21% 2.25%(d)
- -------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.08%(c) 2.53% 3.84%(d)
=============================================================================================================
Ratio of net investment income (loss) to average net assets (0.31)%(c) (0.46)% (0.53)%(d)
_____________________________________________________________________________________________________________
=============================================================================================================
Portfolio turnover rate(e) 59% 44% 38%
_____________________________________________________________________________________________________________
=============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $21,435,577.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-12
AIM Trimark Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------------------
NOVEMBER 4, 2003
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
------------------------- OCTOBER 31,
2006 2005 2004
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.29 $10.31 $10.00
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(a) (0.12) (0.12)(a)
- -----------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.08 1.10 0.43
===========================================================================================================
Total from investment operations 2.95 0.98 0.31
===========================================================================================================
Less distributions from net realized gains (0.16) -- --
===========================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00
===========================================================================================================
Net asset value, end of period $14.08 $11.29 $10.31
___________________________________________________________________________________________________________
===========================================================================================================
Total return(b) 26.42% 9.51% 3.10%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $7,549 $6,315 $4,358
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.78%(c) 2.90% 2.90%(d)
- -----------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.83%(c) 3.22% 4.49%(d)
===========================================================================================================
Ratio of net investment income (loss) to average net assets (1.06)%(c) (1.15)% (1.18)%(d)
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate(e) 59% 44% 38%
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $6,752,541.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS C
---------------------------------------------
NOVEMBER 4, 2003
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
------------------------- OCTOBER 31,
2006 2005 2004
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.29 $10.31 $10.00
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(a) (0.12) (0.12)(a)
- -----------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.09 1.10 0.43
===========================================================================================================
Total from investment operations 2.96 0.98 0.31
===========================================================================================================
Less distributions from net realized gains (0.16) -- --
===========================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00
===========================================================================================================
Net asset value, end of period $14.09 $11.29 $10.31
___________________________________________________________________________________________________________
===========================================================================================================
Total return(b) 26.51% 9.51% 3.10%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,621 $5,671 $4,040
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.78%(c) 2.90% 2.90%(d)
- -----------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.83%(c) 3.22% 4.49%(d)
===========================================================================================================
Ratio of net investment income (loss) to average net assets (1.06)%(c) (1.15)% (1.18)%(d)
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate(e) 59% 44% 38%
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $5,729,003.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-13
AIM Trimark Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS R
-------------------------------------------------
APRIL 30, 2004
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
------------------------- OCTOBER 31,
2006 2005 2004
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.41 $10.37 $10.51
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.03) (0.04)(a)
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.13 1.07 (0.10)
===============================================================================================================
Total from investment operations 3.06 1.04 (0.14)
===============================================================================================================
Less distributions from net realized gains (0.16) -- --
===============================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00
===============================================================================================================
Net asset value, end of period $14.31 $11.41 $10.37
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 27.12% 10.03% (1.33)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 220 $ 60 $ 10
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.28%(c) 2.40% 2.40%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.33%(c) 2.72% 3.99%(d)
===============================================================================================================
Ratio of net investment income (loss) to average net assets (0.56)%(c) (0.65)% (0.68)%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(e) 59% 44% 38%
_______________________________________________________________________________________________________________
===============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $105,125.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------------
APRIL 30, 2004
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
------------------------- OCTOBER 31,
2006 2005 2004
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.50 $10.40 $10.51
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) (0.02) (0.01)(a)
- ---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.16 1.12 (0.10)
===============================================================================================================
Total from investment operations 3.17 1.10 (0.11)
===============================================================================================================
Less distributions from net realized gains (0.16) -- --
===============================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00
===============================================================================================================
Net asset value, end of period $14.51 $11.50 $10.40
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 27.87% 10.58% (1.05)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 14 $ 11 $ 10
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.64%(c) 1.90% 1.90%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.69%(c) 2.00% 3.42%(d)
===============================================================================================================
Ratio of net investment income (loss) to average net assets 0.08%(c) (0.15)% (0.18)%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(e) 59% 44% 38%
_______________________________________________________________________________________________________________
===============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $12,447.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-14
AIM Trimark Fund
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 (Order No. 05-1318). The
WVASC makes findings of fact that AIM and ADI entered into certain arrangements
permitting market timing of the AIM Funds and failed to disclose these
arrangements in the prospectuses for such Funds, 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, including restitution to affected investors, disgorgement of fees,
reimbursement of investigatory, administrative and legal costs and an
"administrative assessment," to be determined by the Commissioner. Initial
research indicates that these damages could be limited or capped by statute.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and
failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other mutual
funds and that the defendants concealed such payments from investors by
disguising them as brokerage commissions (all the claims in this category of
lawsuits were dismissed with prejudice by the court on September 29, 2006,
except for the Section 36(b) claim which was dismissed with leave to amend
to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
F-15
AIM Trimark Fund
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
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 and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-16
AIM Trimark Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Trimark Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Trimark Fund (one of the funds
constituting AIM Investment Funds, hereafter referred to as the "Fund") at
October 31, 2006, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 20, 2006
Houston, Texas
F-17
AIM Trimark Fund
TAX DISCLOSURES
REQUIRED FEDERAL INCOME TAX INFORMATION
The Fund distributed long-term capital gains of $434,796 for the Fund's tax year
ended October 31, 2006.
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2006, April 30, 2006, July 31, 2006 and
October 31, 2006, are 61.98%, 66.41%, 68.56% and 73.28%, respectively.
F-18
AIM Trimark Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm) and
Trustee and Vice Chair of The AIM Family
of Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
- -------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, A I M Management Group Inc.,
Principal AIM Mutual Fund Dealer Inc. (registered
Executive Officer broker dealer), AIM Funds Management
Inc. (registered investment advisor) and
1371 Preferred Inc. (holding company);
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Capital Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, AVZ Callco Inc. (holding
company); AMVESCAP Inc. (holding
company) and AIM Canada Holdings Inc.
(holding company); Director and Chief
Executive Officer, AIM Trimark Corporate
Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund
company) and AIM Trimark Canada Fund
Inc. (corporate mutual fund company);
Trustee, President and Principal
Executive Officer of The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
Powershares Capital Management LLC
Formerly: President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer,
AIM Funds Management Inc.; President,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and Director,
Trimark Trust (federally regulated
Canadian Trust Company)
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder
Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); CompuDyne Corporation
(provider of products and services to
the public security market); and
Homeowners of America Holding
Corporation (property casualty company)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and Director of various
affiliated Volvo companies; and
Director, Magellan Insurance Company
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired Director, Mainstay VP Series
Trustee Formerly: Partner, Deloitte & Touche Funds, Inc. (21 portfolios)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
F-19
TRUSTEES AND OFFICERS--(CONTINUED)
AIM Trimark Fund
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc. and A I M
Advisors, Inc.; Director, Vice President
and Secretary, INVESCO Distributors,
Inc.; Vice President and Secretary,
A I M Capital Management, Inc., AIM
Investment Services, Inc., and Fund
Management Company; Senior Vice
President and Secretary, A I M
Distributors, Inc.; Director, INVESCO
Funds Group Inc.; Senior Vice President,
Chief Legal Officer and Secretary of The
AIM Family of Funds--Registered
Trademark--; and Manager, Powershares
Capital Management LLC
Formerly: Chief Operating Officer,
Senior Vice President, General Counsel,
and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice
President and Secretary, PBHG Funds (an
investment company); Vice President and
Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel
and Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- ------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, AMVESCAP N/A
Vice President PLC; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- ------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Senior Vice President and General
Vice President Counsel, AMVESCAP PLC; Director, INVESCO
Funds Group, Inc.; and Vice President of
The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Vice President and N/A
General Counsel, Fund Management
Company; Director, Senior Vice
President, Secretary and General
Counsel, A I M Management Group Inc. and
A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Senior Vice President, A I M
Distributors, Inc.; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Chief
Executive Officer and President, INVESCO
Funds Group, Inc.; and Senior Vice
President, and General Counsel, Liberty
Financial Companies, Inc. and Senior
Vice President and General Counsel
Liberty Funds Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.; and Vice President,
Financial Officer and Treasurer and Principal Officer of The
Treasurer AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc. and Vice President
of The AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, Senior Vice
President and Senior Investment Officer,
A I M Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); and
President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust Only)
Formerly: Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- ------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc., Fund Management
Company and The AIM Family of
Funds--Registered Trademark--
Formerly: Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Global Head of Product
Development, AIG-Global Investment
Group, Inc.; Chief Compliance Officer
and Deputy General Counsel,
AIG-SunAmerica Asset Management; and
Chief Compliance Officer, Chief
Operating Officer and Deputy General
Counsel, American General Investment
Management
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers AIM Funds Management,
Suite 100 11 Greenway Plaza Inc. LLP Inc.
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street 5140 Yonge St.
Houston, TX 77046-1173 Suite 100 Suite 2900 Suite 900
Houston, TX 77046-1173 Houston, TX 77002-5678 Toronto, Canada M2N 6X7
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 225 Franklin Street
Floor 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Philadelphia, PA 19103-7599 Americas
New York, NY 10036-2714
</Table>
F-20
[eDELIVERY
GO PAPERLESS
AIMinvestments.com/edelivery
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REGISTER FOR EDELIVERY
eDelivery is the process of receiving your fund and account If used after January 20, 2007, this report must be
information via e-mail. Once your quarterly statements, tax accompanied by a Fund Performance & Commentary or by an AIM
forms, fund reports, and prospectuses are available, we will Quarterly Performance Review for the most recent quarter-end.
send you an e-mail notification containing links to these Mutual funds distributed by A I M Distributors, Inc.
documents. For security purposes, you will need to log in to
your account to view your statements and tax forms. A I M Management Group Inc. has provided leadership in the
investment management industry since 1976. AIM Investment
WHY SIGN UP? Services, Inc. is the transfer agent for the products and
services represented by AIM Investments. AIM is a subsidiary
Register for eDelivery to: of AMVESCAP PLC, one of the world's largest independent
financial services companies with $450 billion in assets
o reduce the amount of paper you receive. under management as of October 31, 2006.
o gain access to your documents faster by not waiting for
the mail.
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND
o view your documents online anytime at your convenience. EXPENSES CAREFULLY. FOR THIS AND OTHER INFORMATION ABOUT AIM
FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AND
o save the documents to your personal computer or print READ IT CAREFULLY BEFORE INVESTING.
them out for your records.
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This AIM service is provided by AIM Investment Services, Inc. AIMinvestments.com T-TRI-AR-1 A I M Distributors,Inc.
[YOUR GOALS. OUR SOLUTIONS.]--Registered Trademark--
- ------------------------------------------------------------------------------
Mutual Retirement Annuities College Separately Offshore Cash
Funds Products Savings Managed Products Management
Plans Accounts [AIM INVESTMENTS LOGO APPEARS HERE]
- ------------------------------------------------------------------------------ --Registered Trademark--
DOMESTIC EQUITY AIM Trimark Small
Companies Fund
Small Cap
Annual Report to Shareholders October 31, 2006
Table of Contents
Supplemental Information ......... 2
Letters to Shareholders .......... 3
Performance Summary .............. 5
Management Discussion ............ 5
Fund Expenses .................... 7
Long-term Fund Performance ....... 8
Approval of Advisory Agreement ... 10
Schedule of Investments .......... F-1
Financial Statements ............. F-3
Notes to Financial Statements .... F-6
Financial Highlights ............. F-12
Auditor's Report ................. F-17 [COVER GLOBE IMAGE]
Tax Disclosures .................. F-18
Trustees and Officers ............ F-19
[AIM INVESTMENT SOLUTIONS]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[DOMESTIC [INTERNATIONAL/ [SECTOR
EQUITY] GLOBAL EQUITY] EQUITY]
[GRAPHIC] [GRAPHIC] [GRAPHIC]
[FIXED [ALLOCATION [DIVERSIFIED
INCOME] SOLUTIONS] PORTFOLIOS]
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM Trimark Small Companies Fund
AIM TRIMARK SMALL COMPANIES FUND SEEKS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2006, and is based on total net assets.
ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT o Industry classifications used in this
report are generally according to the
o Class B shares are not available as an o The unmanaged LIPPER SMALL-CAP CORE Global Industry Classification Standard,
investment for retirement plans maintained FUNDS INDEX represents an average of the which was developed by and is the
pursuant to Section 401 of the Internal performance of the 30 largest exclusive property and a service mark of
Revenue Code, including 401(k) plans, small-capitalization core equity funds Morgan Stanley Capital International Inc.
money purchase pension plans and profit tracked by Lipper Inc., an independent and Standard & Poor's.
sharing plans, except for plans that have mutual fund performance monitor.
existing accounts invested in Class B The Fund provides a complete list of its
shares. o The unmanaged RUSSELL 2000--Registered holdings four times in each fiscal year,
Trademark-- INDEX represents the at the quarter-ends. For the second and
o Class R shares are available only to performance of the stocks of small- fourth quarters, the lists appear in the
certain retirement plans. Please see the capitalization companies. Fund's semiannual and annual reports to
prospectus for more information. shareholders. For the first and third
o The unmanaged STANDARD & POOR'S quarters, the Fund files the lists with
PRINCIPAL RISKS OF INVESTING IN THE FUND COMPOSITE INDEX OF 500 STOCKS (the S&P the Securities and Exchange Commission
500--Registered Trademark-- Index) is an (SEC) on Form N-Q. The most recent list
o Foreign securities have additional index of common stocks frequently used as of portfolio holdings is available at
risks, including exchange rate changes, a general measure of U.S. stock market AIMinvestments.com. From our home
political and economic upheaval, the performance. page, click on Products & Performance,
relative lack of information about these then Mutual Funds, then Fund Overview.
companies, relatively low market liquidity o The Fund is not managed to track the Select your Fund from the drop-down menu
and the potential lack of strict financial performance of any particular index, and click on Complete Quarterly Holdings.
and accounting controls and standards. including the indexes defined here, and Shareholders can also look up the Fund's
consequently, the performance of the Fund Forms N-Q on the SEC Web site at sec.gov.
o Investing in a fund that invests in may deviate significantly from the Copies of the Fund's Forms N-Q may be
smaller companies involves risks not performance of the index. reviewed and copied at the SEC Public
associated with investing in more Reference Room in Washington, D.C. You can
established companies, such as business o A direct investment cannot be made in an obtain information on the operation of the
risk, stock price fluctuations and index. Unless otherwise indicated, index Public Reference Room, including
illiquidity. results include reinvested dividends, and information about duplicating fee
they do not reflect sales charges. charges, by calling 202-942-8090 or
o Prices of equity securities change in Performance of an index of funds reflects 800-732-0330, or by electronic request at
response to many factors including the fund expenses; performance of a market the following e-mail address:
historical and prospective earnings of the index does not. publicinfo@sec.gov. The SEC file numbers
issuer, the value of its assets, general for the Fund are 811-05426 and 033-19338.
economic conditions, interest rates, OTHER INFORMATION
investor perceptions and market liquidity. A description of the policies and
o The returns shown in the management's procedures that the Fund uses to determine
o The value of convertible securities in discussion of Fund performance are based how to vote proxies relating to portfolio
which the Fund invests may be affected by on net asset values calculated for securities is available without
market interest rates, the risk that the shareholder transactions. Generally charge, upon request, from our Client
issuer may default on interest or accepted accounting principles require Services department at 800-959-4246 or on
principal payments and the value of the adjustments to be made to the net assets the AIM Web site, AIMinvestments.com. On
underlying common stock into which these of the Fund at period end for financial the home page, scroll down and click on
securities may be converted. reporting purposes, and as such, the net AIM Funds Proxy Policy. The information is
asset values for shareholder transactions also available on the SEC Web
o Because a large percentage of the Fund's and the returns based on those net asset site, sec.gov.
assets may be invested in a limited number values may differ from the net asset
of securities, a change in the value of values and returns reported in the Information regarding how the Fund voted
these securities could significantly Financial Highlights. proxies related to its portfolio
affect the value of your investment in the securities during the 12 months ended June
Fund. 30, 2006, is available at our Web site. Go
to AIMinvestments.com, access the About Us
tab, click on Required Notices and then
click on Proxy Voting Activity.
Next, select the Fund from the drop-down
menu. The information is also available on
the SEC Web site, sec.gov.
==========================================
FUND NASDAQ SYMBOLS
====================================================================================== Class A Shares ATIAX
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND Class B Shares ATIBX
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND Class C Shares ATICX
EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class R Shares ATIRX
====================================================================================== ==========================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIMinvestments.com
2
AIM Trimark Small Companies Fund
Dear Shareholders of The AIM Family of Funds
--Registered Trademark--:
We're pleased to provide you with this report, which
includes a discussion of how your Fund was managed during
the review period ended October 31, 2006, and what factors
affected its performance.
As we approach the end of 2006, it seems likely that many
[TAYLOR investors may see the value of their investments increase
PHOTO] this year. Global equity markets, collectively, recorded
double-digit gains for the year ended October 31, 2006, as
did the U.S. stock market. Also, the investment grade bond
market in the United States rose for the same period.
While stock and bond markets generally enjoyed positive
year-to-date returns, their performance was affected by
short-term economic and geopolitical events. For example,
PHILIP TAYLOR the U.S. stock market was weak in the second quarter of 2006
when it appeared that inflation might be rising. Only after
the U.S. Federal Reserve Board decided in August that
inflation was contained and that short-term interest rates
need not be increased--the first time it kept rates
unchanged in more than two years--did equities truly surge.
Short-term market fluctuations are a fact of life for all
investors. At AIM Investments --Registered Trademark--, we
believe that investors can do two things to deal with
short-term market fluctuations: maintain a long-term
investment horizon and maintain a diversified portfolio. AIM
Investments can help by offering a broad product line that
gives your financial advisor the necessary tools to build a
portfolio that's right for you regardless of market
conditions. AIM Investments offers a comprehensive range of
retail mutual funds, including domestic, global and
international equity funds, taxable and tax-exempt
fixed-income funds, and a variety of allocation
portfolios--with varied risk and return characteristics to
match your needs. We maintain this extensive set of product
solutions for one reason: We believe in the value of
comprehensive, diversified investment portfolios.
We've changed the look of our annual reports to reflect
that belief. In our marketing and now our shareholder
literature, we represent a fully diversified portfolio
graphically as an allocation pie chart and assign each asset
class a color--green for domestic equity, blue for
international, orange for sector and purple for fixed
income. A legend in the left column illustrates the
methodology. Your report cover now shows your Fund's asset
class color, plus the asset class and sub-asset class name
are shown in the upper-left corner. The reason for these
changes is to help you better understand where your Fund
fits into your overall portfolio.
AIM has a variety of investment solutions, and knowing
which ones are right for your portfolio is complex. That's
why we also believe in the value of a trusted financial
advisor who will work with you to create an investment plan
you can stick with for the long term. Your financial advisor
can help allocate your portfolio appropriately and review
your investments regularly to help ensure they remain
suitable as your financial situation changes. While there
are no guarantees with any investment program, a long-term
plan that's based on your financial goals, risk tolerance
and time horizon is more likely to keep you and your
investments on track.
OUR COMMITMENT TO YOU
In the short term, the one sure thing about markets is their
unpredictability. While past performance cannot guarantee
comparable future results, we believe that staying invested
for the long term with a thoughtful plan offers the best
opportunity for weathering that unpredictability. We at AIM
Investments remain committed to building enduring solutions
to help you achieve your investment goals, and we're pleased
you've placed your trust in us.
Information about investing, the markets and your Fund is
always available on our Web site, AIMinvestments.com. If you
have questions about your individual account, we invite you
to contact one of our highly trained client services
representatives at 800-959-4246.
Sincerely,
/S/ PHILIP TAYLOR
Philip Taylor
President - AIM Funds
CEO, AIM Investments
December 14, 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. A I M
Distributors, Inc. is the distributor for the retail funds
represented by AIM Investments.
3
AIM Trimark Small Companies Fund
Dear Fellow AIM Fund Shareholders:
At our meeting at the end of June, your Board completed its
comprehensive review* of each fund's advisory agreement with
A I M Advisors, Inc. (AIM) to make certain your interests
are being served in terms of fees, performance and
operations.
Looking ahead, your Board finds many reasons to be
[CROCKETT positive about AIM's management and strategic direction.
PHOTO] Most importantly, AIM's investment management discipline has
paid off in terms of improved overall performance. We are
also pleased with AIM's efforts to seek more cost-effective
ways of delivering superior service.
In addition, AIM is realizing the benefits of belonging
to a leading independent global investment management
organization in its parent company, AMVESCAP PLC, which is
BRUCE L. CROCKETT dedicated to helping people worldwide build their financial
security. AMVESCAP managed approximately $450 billion
globally as of October 31, 2006, operating under the AIM,
INVESCO, AIM Trimark, INVESCO PERPETUAL and Atlantic Trust
brands. These companies are home to an abundance of
investment talent that is gradually being integrated and
leveraged into centers of excellence, each focusing on a
given market segment or asset class. Over the next few
years, your Board will be meeting at these various centers
of excellence to learn about their progress and how they may
serve you through our goal of enhancing performance and
reducing costs.
The seven new AIM funds--which include Asian funds,
structured U.S. equity funds and specialized bond funds--are
an early example of the kind of opportunities the AMVESCAP
organization can provide AIM clients. More information on
these funds can be found on AIM's Web site.
Your Board is very pleased with the overall direction and
progress of the AIM Funds. We're working closely and
effectively with AIM's management to continue this momentum.
As always, your Board is eager to hear your views on how we
might better serve you. Please send your comments in a
letter addressed to me at AIM Investments, AIM Investments
Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board
December 14, 2006
*To learn more about all the factors we considered before
approving each fund's advisory agreement, go to the
"Products & Performance" tab at the AIM Web site
(AIMinvestments.com) and click on "Investment Advisory
Agreement Renewals." The approval of advisory agreement
information for your Fund is also included in this annual
report on pages 10-11.
4
AIM Trimark Small Companies Fund
MANAGEMENT'S DISCUSSION In conducting a comprehensive analysis
OF FUND PERFORMANCE of a company, we strive to identify
primarily U.S. stocks which have:
======================================================================================
o Sustainable competitive advantages.
PERFORMANCE SUMMARY
o Strong growth prospects.
For the fiscal year ended October 31, 2006, Class A shares of AIM Trimark Small
Companies Fund, at net asset value, posted double-digit gains, outperforming the Fund's o High barriers to entry.
broad market and peer group indexes, as shown below. They performed in line with the
Fund's style-specific index. o Honest and capable management teams.
Your Fund outperformed its broad market index largely because of above-market Also central to the Trimark discipline
returns from selected investments in the consumer discretionary and consumer staples is our adherence to an investment horizon
sectors. While all sectors made positive contributions to the Fund's returns, primary of three to five years. We use this
detractors from performance were selected investments in the information technology long-term approach because we believe good
and industrials sectors. business strategies usually take that
amount of time to implement and to produce
Your Fund's long-term performance appears on pages 8 and 9. strong earnings growth. We also use a
concentrated portfolio approach,
FUND VS. INDEXES constructing a portfolio of about 25 to 45
stocks. We believe this allows each
Total returns, 10/31/05-10/31/06, excluding applicable sales charges. If sales charges investment opportunity to materially
were included, returns would be lower. impact the Fund's performance.
Class A Shares 19.55% While deliberate efforts are made to
Class B Shares 18.67 manage risk through industry
Class C Shares 18.60 diversification, our primary method of
Class R Shares 19.15 attempting to manage risk is to purchase
S&P 500 Index (Broad Market Index) 16.33 businesses that are trading below their
Russell 2000 Index (Style-Specific Index) 19.98 estimated intrinsic value.
Lipper Small-Cap Core Funds Index (Peer Group Index) 15.69
Holdings are considered for sale if:
SOURCE: LIPPER INC.
o A more attractive investment opportunity
====================================================================================== exists.
HOW WE INVEST ment analysis and meetings with company o Full value of the investment is deemed
management teams. We then seek to purchase to have been realized.
We view ourselves as business people businesses whose stock prices are below
buying businesses, and we consider the what we have calculated to be the true Holdings are also considered for sale
purchase of a stock as an ownership value of the company based on its future if the original thesis for buying the
interest in a business. We strive to cash flows, management performance and company changes due to a fundamental
develop a proprietary view of a business business fundamentals. negative change in management strategy or
through in-depth, fundamental research a fundamental negative change in the
that includes careful financial state- competitive environment.
(continued)
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Leisure Products 9.4% 1. Kinetic Concepts, Inc. 5.5%
2. Communications Equipment 8.8 2. MEGA Brands Inc. (Canada) 5.5
[PIE CHART] 3. Air Freight & Logistics 6.0 3. Tempur-Pedic International Inc. 5.3
4. Diversified Commercial 4. Embarcadero Technologies, Inc. 4.7
Health Care 13.2% & Professional Services 5.9 5. Con-Way Inc. 4.2
Materials 5.0% 5. Health Care Equipment 5.5 6. Sabre Holdings Corp.-Class A 3.9
Financials 2.5% 7. Polaris Industries Inc. 3.9
Consumer Staples 1.8% Total Net Assets $289.07 million 8. Columbia Sportswear Co. 3.4
Money Market Funds Plus 9. Dynamex Inc. 3.3
Other Assets Less Liabilities 13.3% Total Number of Holdings* 32 10. Plantronics Inc. 3.3
Consumer Discretionary 27.1%
Industrials 19.7%
Information Technology 17.4%
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
========================================== ========================================== ==========================================
5
AIM Trimark Small Companies Fund
MARKET CONDITIONS AND YOUR FUND While few Fund holdings declined in The views and opinions expressed in
price during the reporting period, the management's discussion of Fund
Equity markets posted healthy gains during Fund's largest detractor from performance performance are those of A I M Advisors,
the fiscal year, as favorable economic was SPECTRALINK. The company's stock Inc. These views and opinions are subject
data and solid corporate profits declined during the second quarter of 2006 to change at any time based on factors
overshadowed housing market concerns and because of disappointing earnings. such as market and economic conditions.
volatility and investor uncertainty Spectralink is a leader in workplace These views and opinions may not be relied
regarding interest rates and oil prices. wireless telephony, a market that is upon as investment advice or
The telecommunication services and growing substantially. However, the recommendations, or as an offer for a
materials sectors led the market for the company's recent acquisition of KIRK particular security. The information is
year, while information technology and Telecom (not a Fund holding) and not a complete analysis of every aspect of
health care stocks generally trailed. engineering expenses related to new any market, country, industry, security or
product development put pressure on the Fund. Statements of fact are from
Although the energy sector performed earnings during the fiscal year. In sources considered reliable, but A I M
strongly during most of the fiscal year, response to this short-term issue, we Advisors, Inc. makes no representation or
we continued to avoid investing in oil, added to our position in this quality warranty as to their completeness or
gas and base metal companies. We believe business. accuracy. Although historical performance
most of these companies are currently is no guarantee of future results, these
trading at high prices that reflect much During the fiscal year, we sold some insights may help you understand our
higher long-term commodity price of our investments, including OAKLEY, investment management philosophy.
expectations than we believe are SYBRON DENTAL SPECIALTIES, ALABAMA
SUSTAINABLE. Our avoidance of this sector NATIONAL BANCORP and ADVO based mainly on See important Fund and index
detracted slightly from Fund performance valuations. We also initiated new disclosures on the inside front cover.
versus the Russell 2000 Index during the positions in trucking company CON-WAY,
fiscal year. medical technology company KINETIC
CONCEPTS and education services firm Ted Chisholm
Our investment approach focuses on EDUCATE. We believe that these companies [CHISHOLM Portfolio manager, is
individual businesses rather than market possess distinct advantages over their PHOTO] manager of AIM Trimark
sectors. Therefore, your Fund shares competitors and are well positioned to Small Companies Fund.
little in common with sector weightings of capitalize on attractive market Mr. Chisholm joined
various indexes. However, if we were to opportunities. AIM Trimark Investments in 1991 where he
broadly categorize businesses with which worked until opening his own financial
we had the most success during the fiscal We continued to focus on finding planning software firm in 2000. From 2001
year, our investments in consumer quality businesses trading at attractive to 2002, he worked as an equity analyst
discretionary and consumer staples stocks valuations relative to what we believe are before rejoining AIM Trimark Investments
aided Fund performance versus the Russell their long-term prospects. In contrast, in 2003 as an investment analyst. Mr.
2000 Index. Selected investments in the the market is often driven by short-term Chisholm earned a B.A. from the University
information technology and industrials events or outlooks in both good times and of Western Ontario.
sectors hindered Fund performance. Our bad. Market volatility may allow us to
cash position also detracted from relative take advantage of investment opportunities Rob Mikalachki
performance in a rising market that we believe have the potential to [MIKALACHKI Chartered Financial
environment. benefit your Fund in the long term. PHOTO] Analyst, portfolio
manager, is manager of
The top contributor to Fund IN CLOSING AIM Trimark Small
performance for the fiscal year was Companies Fund. Prior to joining AIM
TEMPUR-PEDIC, a manufacturer of premium As always, we thank you for your Trimark Investments in 1999 as a small-cap
visco-elastic mattresses and pillows. We investment in AIM Trimark Small Companies analyst, Mr. Mikalachki advised small- and
added this company to the portfolio in Fund and for sharing our long-term medium-sized businesses in the areas of
2005 and remain excited about its growth investment perspective. valuation, financing and mergers and
prospects. While memory foam only makes up acquisitions. He earned an undergraduate
a small portion of the total bedding degree in business at Wilfrid Laurier.
market, Tempur-Pedic enjoys a significant
market share within this niche. We believe
its proprietary technology and
manufacturing facilities provide the
company with a sustainable competitive
advantage. Combined with an outstanding
management team and attractive valuation,
this company possesses many of the
attributes we look for in a business. FOR A PRESENTATION OF YOUR FUND'S
LONG-TERM PERFORMANCE, PLEASE
SEE PAGES 8 AND 9.
6
AIM Trimark Small Companies Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE mate the expenses that you paid over the The hypothetical account values and
period. Simply divide your account value expenses may not be used to estimate the
As a shareholder of the Fund, you incur by $1,000 (for example, an $8,600 account actual ending account balance or expenses
two types of costs: (1) transaction costs, value divided by $1,000 = 8.6), then you paid for the period. You may use this
which may include sales charges (loads) on multiply the result by the number in the information to compare the ongoing costs
purchase payments or contingent deferred table under the heading entitled "Actual of investing in the Fund and other funds.
sales charges on redemptions, and Expenses Paid During Period" to estimate To do so, compare this 5% hypothetical
redemption fees, if any; and (2) ongoing the expenses you paid on your account example with the 5% hypothetical examples
costs, including management fees; during this period. that appear in the shareholder reports of
distribution and/or service (12b-1) fees; the other funds.
and other Fund expenses. This example is HYPOTHETICAL EXAMPLE FOR
intended to help you understand your COMPARISON PURPOSES Please note that the expenses shown in
ongoing costs (in dollars) of investing in the table are meant to highlight your
the Fund and to compare these costs with The table below also provides information ongoing costs only and do not reflect any
ongoing costs of investing in other mutual about hypothetical account values and transaction costs, such as sales charges
funds. The example is based on an hypothetical expenses based on the Fund's (loads) on purchase payments, contingent
investment of $1,000 invested at the actual expense ratio and an assumed rate deferred sales charges on redemptions, and
beginning of the period and held for the of return of 5% per year before expenses, redemption fees, if any. Therefore, the
entire period May 1, 2006, through October which is not the Fund's actual return. The hypothetical information is useful in
31, 2006. Fund's actual cumulative total returns at comparing ongoing costs only, and will not
net asset value after expenses for the six help you determine the relative total
ACTUAL EXPENSES months ended October 31, 2006, appear in costs of owning different funds. In
the table "Cumulative Total Returns" on addition, if these transaction costs were
The table below provides information about page 9. included, your costs would have been
actual account values and actual expenses. higher.
You may use the information in this table,
together with the amount you invested, to
esti-
====================================================================================================================================
HYPOTHETICAL
ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
A $1,000.00 $1,046.90 $ 7.27 $1,018.10 $ 7.17 1.41%
B 1,000.00 1,043.00 11.12 1,014.32 10.97 2.16
C 1,000.00 1,043.10 11.12 1,014.32 10.97 2.16
R 1,000.00 1,045.10 8.56 1,016.84 8.44 1.66
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 six months ended October 31, 2006, appear in the table "Cumulative Total Returns" on page 9.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half-year.
====================================================================================================================================
7
AIM Trimark Small Companies Fund
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
Index data from 10/31/03, Fund data from 11/4/03
====================================================================================================================================
[MOUNTAIN CHART]
DATE AIM TRIMARK AIM TRIMARK AIM TRIMARK S&P 500 RUSSELL 2000 LIPPER SMALL CAP CORE
SMALL COMPANIES FUND SMALL COMPANIES FUND SMALL COMPANIES FUND INDEX INDEX FUNDS INDEX
-CLASS A SHARES -CLASS B SHARES -CLASS C SHARES
10/31/03 $10000 $10000 $10000
11/03 $ 9488 $10040 $10040 10088 10355 10360
12/03 9639 10190 10200 10617 10565 10648
1/04 9723 10279 10279 10811 11024 10986
2/04 9894 10449 10459 10962 11123 11177
3/04 10149 10718 10729 10796 11226 11298
4/04 9978 10529 10539 10627 10654 10910
5/04 10082 10638 10639 10773 10824 11005
6/04 10479 11058 11049 10982 11279 11474
7/04 10016 10549 10549 10619 10520 10870
8/04 10044 10589 10579 10661 10466 10775
9/04 10677 11248 11239 10777 10957 11311
10/04 11244 11838 11829 10941 11173 11496
11/04 11821 12427 12429 11384 12142 12404
12/04 12223 12842 12844 11771 12501 12604
1/05 12308 12923 12925 11484 11980 12239
2/05 12536 13165 13156 11726 12183 12525
3/05 12460 13085 13076 11518 11834 12209
4/05 11927 12512 12503 11300 11156 11550
5/05 12260 12853 12846 11659 11886 12169
6/05 12688 13295 13298 11676 12345 12584
7/05 13382 14009 14012 12110 13127 13332
8/05 13297 13908 13911 11999 12884 13208
9/05 13344 13958 13952 12097 12924 13334
10/05 12992 13576 13579 11895 12523 12925
11/05 13553 14149 14152 12344 13131 13516
12/05 13803 14412 14405 12349 13071 13557
1/06 14160 14769 14764 12676 14243 14590
2/06 14170 14769 14764 12710 14204 14493
3/06 14721 15332 15337 12868 14893 15132
4/06 14838 15444 15440 13041 14890 15245
5/06 14152 14728 14723 12666 14054 14509
6/06 14124 14686 14682 12683 14144 14411
7/06 13863 14410 14406 12761 13684 13921
8/06 14481 15044 15040 13064 14089 14197
9/06 14820 15381 15377 13400 14207 14263
10/06 15537 15815 16105 13837 15025 14953
Past performance cannot guarantee
comparable future results.
The data shown in the chart include
reinvested distributions, applicable sales
charges, Fund expenses and management
fees. Results for Class B shares are
calculated as if a hypothetical
shareholder had liquidated his entire
investment in the Fund at the close of the
reporting period and paid the applicable
contingent deferred sales charges. Index
results include reinvested dividends, but
they do not reflect sales charges.
Performance of an index of funds reflects
fund expenses and management fees;
performance of a market index does not.
Performance shown in the chart and
table(s) does not reflect deduction of
taxes a shareholder would pay on Fund
distributions or sale of Fund shares.
Performance of the indexes does not
reflect the effects of taxes.
8
AIM Trimark Small Companies Fund
========================================== ========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
As of 10/31/06, including applicable sales As of 9/30/06, the most recent calendar 6 months ended 10/31/06, excluding
charges quarter-end, including applicable sales applicable sales charges
charges
CLASS A SHARES Class A Shares 4.69%
Inception (11/4/03) 15.87% CLASS A SHARES Class B Shares 4.30
1 Year 12.94 Inception (11/4/03) 14.50% Class C Shares 4.31
1 Year 4.91 Class R Shares 4.51
CLASS B SHARES
Inception (11/4/03) 16.56% CLASS B SHARES ==========================================
1 Year 13.67 Inception (11/4/03) 15.20%
1 Year 5.22
CLASS C SHARES
Inception (11/4/03) 17.27% CLASS C SHARES
1 Year 17.60 Inception (11/4/03) 15.96%
1 Year 9.23
CLASS R SHARES
Inception 17.82% CLASS R SHARES
1 Year 19.15 Inception 16.53%
1 Year 10.77
========================================== ==========================================
CLASS R SHARES' INCEPTION DATE IS APRIL PERFORMANCE FIGURES REFLECT REINVESTED END SALES CHARGE; RETURNS SHOWN ARE AT NET
30, 2004. RETURNS SINCE THAT DATE ARE DISTRIBUTIONS, CHANGES IN NET ASSET VALUE ASSET VALUE AND DO NOT REFLECT A 0.75%
HISTORICAL RETURNS. ALL OTHER RETURNS ARE AND THE EFFECT OF THE MAXIMUM SALES CHARGE CDSC THAT MAY BE IMPOSED ON A TOTAL
BLENDED RETURNS OF HISTORICAL CLASS R UNLESS OTHERWISE STATED. INVESTMENT RETURN REDEMPTION OF RETIREMENT PLAN ASSETS
SHARE PERFORMANCE AND RESTATED CLASS A AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT WITHIN THE FIRST YEAR.
SHARE PERFORMANCE (FOR PERIODS PRIOR TO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
THE INCEPTION DATE OF CLASS R SHARES) AT SHARES. THE PERFORMANCE OF THE FUND'S SHARE
NET ASSET VALUE,ADJUSTED TO REFLECT THE CLASSES WILL DIFFER PRIMARILY DUE TO
HIGHER RULE 12b-1 FEES APPLICABLE TO CLASS CLASS A SHARE PERFORMANCE REFLECTS THE DIFFERENT SALES CHARGE STRUCTURES AND
R SHARES. CLASS A SHARES' INCEPTION DATE MAXIMUM 5.50% SALES CHARGE, AND CLASS B CLASS EXPENSES.
IS NOVEMBER 4, 2003. AND CLASS C SHARE PERFORMANCE REFLECTS THE
APPLICABLE CONTINGENT DEFERRED SALES HAD THE ADVISOR NOT WAIVED FEES AND/OR
THE PERFORMANCE DATA QUOTED REPRESENT CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE REIMBURSED EXPENSES IN THE
PAST PERFORMANCE AND CANNOT GUARANTEE CDSC ON CLASS B SHARES DECLINES FROM 5% PAST, PERFORMANCE WOULD HAVE BEEN LOWER.
COMPARABLE FUTURE RESULTS; CURRENT BEGINNING AT THE TIME OF PURCHASE TO 0% AT
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE THE BEGINNING OF THE SEVENTH YEAR. THE
VISIT AIMINVESTMENTS.COM FOR THE MOST CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
RECENT MONTH-END PERFORMANCE. YEAR AFTER PURCHASE. CLASS R SHARES DO NOT
HAVE A FRONT-
9
AIM Trimark Small Companies Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees of AIM Investment performance of funds advised by other o Fees relative to those of comparable
Funds (the "Board") oversees the advisors with investment strategies funds with other advisors. The Board
management of AIM Trimark Small Companies comparable to those of the Fund. The Board reviewed the advisory fee rate for the
Fund (the "Fund") and, as required by law, noted that the Fund's performance in such Fund under the Advisory Agreement. The
determines annually whether to approve the periods was above the median performance Board compared effective contractual
continuance of the Fund's advisory of such comparable funds. Based on this advisory fee rates at a common asset level
agreement with A I M Advisors, Inc. review and after taking account of all of at the end of the past calendar year and
("AIM"). Based upon the recommendation of the other factors that the Board noted that the Fund's rate was comparable
the Investments Committee of the Board, at considered in determining whether to to the median rate of the funds advised by
a meeting held on June 27, 2006, the continue the Advisory Agreement for the other advisors with investment strategies
Board, including all of the independent Fund, the Board concluded that no changes comparable to those of the Fund that the
trustees, approved the continuance of the should be made to the Fund and that it was Board reviewed. The Board noted that AIM
advisory agreement (the "Advisory not necessary to change the Fund's has agreed to waive advisory fees of the
Agreement") between the Fund and AIM for portfolio management team at this time. Fund and to limit the Fund's total
another year, effective July 1, 2006. However, due to the Fund's operating expenses, as discussed below.
under-performance, the Board also Based on this review, the Board concluded
The Board considered the factors concluded that it would be appropriate for that the advisory fee rate for the Fund
discussed below in evaluating the fairness the Board to continue to closely monitor under the Advisory Agreement was fair and
and reasonableness of the Advisory and review the performance of the Fund. reasonable.
Agreement at the meeting on June 27, 2006 Although the independent written
and as part of the Board's ongoing evaluation of the Fund's Senior Officer o Expense limitations and fee waivers. The
oversight of the Fund. In their (discussed below) only considered Fund Board noted that AIM has contractually
deliberations, the Board and the performance through the most recent agreed to waive advisory fees of the Fund
independent trustees did not identify any calendar year, the Board also reviewed through June 30, 2007 to the extent
particular factor that was controlling, more recent Fund performance, which did necessary so that the advisory fees
and each trustee attributed different not change their conclusions. payable by the Fund do not exceed a
weights to the various factors. specified maximum advisory fee rate, which
o The performance of the Fund relative to maximum rate includes breakpoints and is
One responsibility of the independent indices. The Board reviewed the based on net asset levels. The Board
Senior Officer of the Fund is to manage performance of the Fund during the past considered the contractual nature of this
the process by which the Fund's proposed one and two calendar years against the fee waiver and noted that it remains in
management fees are negotiated to ensure performance of the Lipper Small-Cap Core effect until June 30, 2007. The Board also
that they are negotiated in a manner which Index. The Board noted that the Fund's noted that AIM has contractually agreed to
is at arms' length and reasonable. To that performance in such periods was above the waive fees and/or limit expenses of the
end, the Senior Officer must either performance of such Index. Based on this Fund through June 30, 2007 so that total
supervise a competitive bidding process or review and after taking account of all of annual operating expenses are limited to a
prepare an independent written evaluation. the other factors that the Board specified percentage of average daily net
The Senior Officer has recommended an considered in determining whether to assets for each class of the Fund. The
independent written evaluation in lieu of continue the Advisory Agreement for the Board considered the contractual nature of
a competitive bidding process and, upon Fund, the Board concluded that no changes this fee waiver/expense limitation and
the direction of the Board, has prepared should be made to the Fund and that it was noted that it remains in effect until June
such an independent written evaluation. not necessary to change the Fund's 30, 2007. The Board considered these
Such written evaluation also considered portfolio management team at this time. effect these fee waivers/expense
certain of the factors discussed below. In However, due to the Fund's limitations would have on the Fund's
addition, as discussed below, the Senior under-performance, the Board also estimated expenses and concluded that the
Officer made a recommendation to the Board concluded that it would be appropriate for levels of fee waivers/expense limitations
in connection with such written the Board to continue to closely monitor for the Fund were fair and reasonable.
evaluation. and review the performance of the Fund.
Although the independent written o Breakpoints and economies of scale. The
The discussion below serves as a evaluation of the Fund's Senior Officer Board reviewed the structure of the Fund's
summary of the Senior Officer's (discussed below) only considered Fund advisory fee under the Advisory Agreement,
independent written evaluation and performance through the most recent noting that it includes one breakpoint.
recommendation to the Board in connection calendar year, the Board also reviewed The Board reviewed the level of the Fund's
therewith, as well as a discussion of the more recent Fund performance, which did advisory fees, and noted that such fees,
material factors and the conclusions with not change their conclusions. as a percentage of the Fund's net assets,
respect thereto that formed the basis for would decrease as net assets increase
the Board's approval of the Advisory o Meeting with the Fund's portfolio because the Advisory Agreement includes a
Agreement. After consideration of all of managers and investment personnel. With breakpoint. The Board noted that, due to
the factors below and based on its respect to the Fund, the Board is meeting the Fund's asset levels at the end of the
informed business judgment, the Board periodically with such Fund's portfolio past calendar year and the way in which
determined that the Advisory Agreement is managers and/or other investment personnel the advisory fee breakpoint has been
in the best interests of the Fund and its and believes that such individuals are structured, the Fund has yet to benefit
shareholders and that the compensation to competent and able to continue to carry from the breakpoint. The Board noted that
AIM under the Advisory Agreement is fair out their responsibilities under the AIM has contractually agreed to waive
and reasonable and would have been Advisory Agreement. advisory fees of the Fund through June 30,
obtained through arm's length 2007 to the extent necessary so that the
negotiations. o Overall performance of AIM. The Board advisory fees payable by the Fund do not
considered the overall performance of AIM exceed a specified maximum advisory fee
Unless otherwise stated, information in providing investment advisory and rate, which maximum rate includes
presented below is as of June 27, 2006 and portfolio administrative services to the breakpoints and is based on net asset
does not reflect any changes that may have Fund and concluded that such performance levels. The Board concluded that the
occurred since June 27, 2006, including was satisfactory. Fund's fee levels under the Advisory
but not limited to changes to the Fund's Agreement therefore would reflect
performance, advisory fees, expense o Fees relative to those clients of AIM economies of scale at higher asset levels
limitations and/or fee waivers. with comparable investment strategies. The and that it was not necessary to change
Board reviewed the effective advisory fee the advisory fee breakpoints in the Fund's
o The nature and extent of the advisory rate (before waivers) for the Fund under advisory fee schedule.
services to be provided by AIM. The Board the Advisory Agreement. The Board noted
reviewed the services to be provided by that this rate was (i) the same as the o Investments in affiliated money market
AIM under the Advisory Agreement. Based on effective advisory fee rate (before funds. The Board also took into account
such review, the Board concluded that the waivers) for one mutual fund advised by the fact that uninvested cash and cash
range of services to be provided by AIM AIM with investment strategies comparable collateral from securities lending
under the Advisory Agreement was to those of the Fund and below the arrangements, if any, (collectively, "cash
appropriate and that AIM currently is effective advisory fee rate (before balances") of the Fund may be invested in
providing services in accordance with the waivers) for a second mutual fund advised money market funds advised by AIM pursuant
terms of the Advisory Agreement. by AIM with investment strategies to the terms of an SEC exemptive order.
comparable to those of the Fund; (ii) the The Board found that the Fund may realize
o The quality of services to be provided same as the effective advisory fee rate certain benefits upon investing cash
by AIM. The Board reviewed the credentials (before waivers) for one variable balances in AIM advised money market
and experience of the officers and insurance fund advised by AIM and offered funds, including a higher net return,
employees of AIM who will provide to insurance company separate accounts increased liquidity, increased
investment advisory services to the Fund. with investment strategies comparable to diversification or decreased transaction
In reviewing the qualifications of AIM to those of the Fund; and (iii) above the costs. The Board also found that the Fund
provide investment advisory services, the effective sub-advisory fee rate for one will not receive reduced services if it
Board considered such issues as AIM's Canadian mutual fund sub-advised by an AIM invests its cash balances in such money
portfolio and product review process, affiliate with investment strategies market funds. The Board noted that, to the
various back office support functions comparable to those of the Fund. The Board extent the Fund invests uninvested cash in
provided by AIM and AIM's equity and fixed noted that AIM has agreed to waive affiliated money market funds, AIM has
income trading operations. Based on the advisory fees of the Fund and to limit the voluntarily agreed to waive a portion of
review of these and other factors, the Fund's total operating expenses, as the advisory fees it receives from the
Board concluded that the quality of discussed below. Based on this review, the Fund attributable to such investment. The
services to be provided by AIM was Board concluded that the advisory fee rate Board further determined that
appropriate and that AIM currently is for the Fund under the Advisory Agreement
providing satisfactory services in was fair and reasonable.
accordance with the terms of the Advisory
Agreement.
o The performance of the Fund relative to
comparable funds. The Board reviewed the
performance of the Fund during the past
one and two calendar years against the (continued)
10
AIM Trimark Small Companies Fund
the proposed securities lending program administrative, transfer agency and periods was above the median performance
and related procedures with respect to the distribution services, and that AIM and of such comparable funds. Based on this
lending Fund is in the best interests of its affiliates currently are providing review and after taking account of all of
the lending Fund and its respective satisfactory non-investment advisory the other factors that the Board
shareholders. The Board therefore services. considered in determining whether to
concluded that the investment of cash continue the Advisory Agreement for the
collateral received in connection with the o Other factors and current trends. The Fund, the Board concluded that no changes
securities lending program in the money Board considered the steps that AIM and should be made to the Fund and that it was
market funds according to the procedures its affiliates have taken over the last not necessary to change the Fund's
is in the best interests of the lending several years, and continue to take, in portfolio management team at this time.
Fund and its respective shareholders. order to improve the quality and However, due to the Fund's
efficiency of the services they provide to under-performance, the Board also
o Independent written evaluation and the Funds in the areas of investment concluded that it would be appropriate for
recommendations of the Fund's Senior performance, product line diversification, the Board to continue to closely monitor
Officer. The Board noted that, upon their distribution, fund operations, shareholder and review the performance of the Fund.
direction, the Senior Officer of the Fund, services and compliance. The Board Although the independent written
who is independent of AIM and AIM's concluded that these steps taken by AIM evaluation of the Fund's Senior Officer
affiliates, had prepared an independent have improved, and are likely to continue (discussed below) only considered Fund
written evaluation in order to assist the to improve, the quality and efficiency of performance through the most recent
Board in determining the reasonableness of the services AIM and its affiliates calendar year, the Board also reviewed
the proposed management fees of the AIM provide to the Fund in each of these more recent Fund performance, which did
Funds, including the Fund. The Board noted areas, and support the Board's approval of not change their conclusions.
that the Senior Officer's written the continuance of the Advisory Agreement
evaluation had been relied upon by the for the Fund. o The performance of the Fund relative to
Board in this regard in lieu of a indices. The Board reviewed the
competitive bidding process. In APPROVAL OF SUB-ADVISORY AGREEMENT performance of the Fund during the past
determining whether to continue the one and two calendar years against the
Advisory Agreement for the Fund, the Board The Board oversees the management of the performance of the Lipper Small-Cap Core
considered the Senior Officer's written Fund and, as required by law, determines Index. The Board noted that the Fund's
evaluation and the recommendation made by annually whether to approve the performance in such periods was above the
the Senior Officer to the Board that the continuance of the Fund's sub-advisory performance of such Index. Based on this
Board consider whether the advisory fee agreement. Based upon the recommendation review and after taking account of all of
waivers for certain equity AIM Funds, of the Investments Committee of the Board, the other factors that the Board
including the Fund, should be simplified. at a meeting held on June 27, 2006, the considered in determining whether to
The Board concluded that it would be Board, including all of the independent continue the Advisory Agreement for the
advisable to consider this issue and reach trustees, approved the continuance of the Fund, the Board concluded that no changes
a decision prior to the expiration date of sub-advisory agreement (the "Sub-Advisory should be made to the Fund and that it was
such advisory fee waivers. Agreement") between AIM Funds Management not necessary to change the Fund's
Inc. (the "Sub-Advisor") and AIM with portfolio management team at this time.
o Profitability of AIM and its affiliates. respect to the Fund for another year, However, due to the Fund's
The Board reviewed information concerning effective July 1, 2006. under-performance, the Board also
the profitability of AIM's (and its concluded that it would be appropriate for
affiliates') investment advisory and other The Board considered the factors the Board to continue to closely monitor
activities and its financial condition. discussed below in evaluating the fairness and review the performance of the Fund.
The Board considered the overall and reasonableness of the Sub-Advisory Although the independent written
profitability of AIM, as well as the Agreement at the meeting on June 27, 2006 evaluation of the Fund's Senior Officer
profitability of AIM in connection with and as part of the Board's ongoing (discussed below) only considered Fund
managing the Fund. The Board noted that oversight of the Fund. In their performance through the most recent
AIM's operations remain profitable, deliberations, the Board and the calendar year, the Board also reviewed
although increased expenses in recent independent trustees did not identify any more recent Fund performance, which did
years have reduced AIM's profitability. particular factor that was controlling, not change their conclusions.
Based on the review of the profitability and each trustee attributed different
of AIM's and its affiliates' investment weights to the various factors. o Meetings with the Fund's portfolio
advisory and other activities and its managers and investment personnel. The
financial condition, the Board concluded The discussion below serves as a Board is meeting periodically with the
that the compensation to be paid by the discussion of the material factors and the Fund's portfolio managers and/or other
Fund to AIM under its Advisory Agreement conclusions with respect thereto that investment personnel and believes that
was not excessive. formed the basis for the Board's approval such individuals are competent and able to
of the Sub-Advisory Agreement. After continue to carry out their
o Benefits of soft dollars to AIM. The consideration of all of the factors below responsibilities under the Sub-Advisory
Board considered the benefits realized by and based on its informed business Agreement.
AIM as a result of brokerage transactions judgment, the Board determined that the
executed through "soft dollar" Sub-Advisory Agreement is in the best o Overall performance of the Sub-Advisor.
arrangements. Under these arrangements, interests of the Fund and its shareholders The Board considered the overall
brokerage commissions paid by the Fund and that the compensation to the performance of the Sub-Advisor in
and/or other funds advised by AIM are used Sub-Advisor under the Sub-Advisory providing investment advisory services to
to pay for research and execution Agreement is fair and reasonable. the Fund and concluded that such
services. This research may be used by AIM performance was satisfactory.
in making investment decisions for the Unless otherwise stated, information
Fund. The Board concluded that such presented below is as of June 27, 2006 and o Fees relative to those clients of the
arrangements were appropriate. does not reflect any changes that may have Sub-Advisor with comparable investment
occurred since June 27, 2006, including strategies. The Board noted that the
o AIM's financial soundness in light of but not limited to changes to the Fund's Sub-Advisor does not serve as an advisor
the Fund's needs. The Board considered performance. or sub-advisor to other mutual funds or
whether AIM is financially sound and has other clients with investment strategies
the resources necessary to perform its o The nature and extent of the advisory comparable to those of the Fund.
obligations under the Advisory Agreement, services to be provided by the
and concluded that AIM has the financial Sub-Advisor. The Board reviewed the o Profitability of AIM and its affiliates.
resources necessary to fulfill its services to be provided by the Sub-Advisor The Board reviewed information concerning
obligations under the Advisory Agreement. under the Sub-Advisory Agreement. Based on the profitability of AIM's (and its
such review, the Board concluded that the affiliates') investment advisory and other
o Historical relationship between the Fund range of services to be provided by the activities and its financial condition.
and AIM. In determining whether to Sub-Advisor under the Sub-Advisory The Board considered the overall
continue the Advisory Agreement for the Agreement was appropriate and that the profitability of AIM, as well as the
Fund, the Board also considered the prior Sub-Advisor currently is providing profitability of AIM in connection with
relationship between AIM and the Fund, as services in accordance with the terms of managing the Fund. The Board noted that
well as the Board's knowledge of AIM's the Sub-Advisory Agreement. AIM's operations remain profitable,
operations, and concluded that it was although increased expenses in recent
beneficial to maintain the current o The quality of services to be provided years have reduced AIM's profitability.
relationship, in part, because of such by the Sub-Advisor. The Board reviewed the Based on the review of the profitability
knowledge. The Board also reviewed the credentials and experience of the officers of AIM's and its affiliates' investment
general nature of the non-investment and employees of the Sub-Advisor who will advisory and other activities and its
advisory services currently performed by provide investment advisory services to financial condition, the Board concluded
AIM and its affiliates, such as the Fund. Based on the review of these and that the compensation to be paid by the
administrative, transfer agency and other factors, the Board concluded that Fund to AIM under its Advisory Agreement
distribution services, and the fees the quality of services to be provided by was not excessive.
received by AIM and its affiliates for the Sub-Advisor was appropriate, and that
performing such services. In addition to the Sub-Advisor currently is providing o The Sub-Advisor's financial soundness in
reviewing such services, the trustees also satisfactory services in accordance with light of the Fund's needs. The Board
considered the organizational structure the terms of the Sub-Advisory Agreement. considered whether the Sub-Advisor is
employed by AIM and its affiliates to financially sound and has the resources
provide those services. Based on the o The performance of the Fund relative to necessary to perform its obligations under
review of these and other factors, the comparable funds. The Board reviewed the the Sub-Advisory Agreement, and concluded
Board concluded that AIM and its performance of the Fund during the past that the Sub-Advisor has the financial
affiliates were qualified to continue to one and two calendar years against the resources necessary to fulfill its
provide non-investment advisory services performance of funds advised by other obligations under the Sub-Advisory
to the Fund, including advisors with investment strategies Agreement.
comparable to those of the Fund. The Board
noted that the Fund's performance in such
11
Supplement to Annual Report dated 10/31/06
AIM Trimark Small Companies Fund
===================================
Institutional Class Shares AVERAGE ANNUAL TOTAL RETURNS HAD THE ADVISOR NOT WAIVED FEES AND/OR
For periods ended 10/31/06 REIMBURSED EXPENSES IN THE PAST, PERFORMANCE
The following information has been prepared to WOULD HAVE BEEN LOWER.
provide Institutional Class shareholders with Inception 18.53%
a performance overview specific to their 1 Year 20.16 PLEASE NOTE THAT PAST PERFORMANCE IS NOT
holdings. Institutional Class shares are 6 Months* 4.97 INDICATIVE OF FUTURE RESULTS. MORE RECENT
offered exclusively to institutional RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
investors, including defined contribution =================================== ALL RETURNS ASSUME REINVESTMENT OF
plans that meet certain criteria. DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND
AVERAGE ANNUAL TOTAL RETURNS PRINCIPAL VALUE WILL FLUCTUATE SO YOUR
For periods ended 9/30/06,most SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
recent calendar quarter-end LESS THAN THEIR ORIGINAL COST. SEE FULL
REPORT FOR INFORMATION ON COMPARATIVE
Inception 17.20% BENCHMARKS. PLEASE CONSULT YOUR FUND
1 Year 11.61 PROSPECTUS FOR MORE INFORMATION. FOR THE MOST
6 Months* 0.91 CURRENT MONTH-END PERFORMANCE, PLEASE CALL
800-451-4246 OR VISIT AIMINVESTMENTS.COM.
*Cumulative total return that has
not been annualized
===================================
INSTITUTIONAL CLASS SHARES'
INCEPTION DATE IS APRIL 30, 2004.
RETURNS SINCE THAT DATE ARE
HISTORICAL RETURNS. ALL OTHER
RETURNS ARE BLENDED RETURNS OF
HISTORICAL INSTITUTIONAL CLASS
SHARE PERFORMANCE AND RESTATED
CLASS A SHARE PERFORMANCE (FOR
PERIODS PRIOR TO THE INCEPTION DATE
OF INSTITUTIONAL CLASS SHARES) AT
NET ASSET VALUE (NAV) AND REFLECT
THE HIGHER RULE 12B-1 FEES
APPLICABLE TO CLASS A SHARES. CLASS
A SHARES' INCEPTION DATE IS
NOVEMBER 4, 2003.
INSTITUTIONAL CLASS SHARES
HAVE NO SALES CHARGE; THEREFORE,
PERFORMANCE IS AT NAV. PERFORMANCE
OF INSTITUTIONAL CLASS SHARES WILL
DIFFER FROM PERFORMANCE OF OTHER
SHARE CLASSES PRIMARILY DUE TO
DIFFERING SALES CHARGES AND CLASS
EXPENSES.
==============================================
NASDAQ SYMBOL ATIIX
==============================================
Over for information on your Fund's expenses.
================================================================================
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.
================================================================================
FOR INSTITUTIONAL INVESTOR USE ONLY
This material is for institutional investor use only and may not be quoted,
reproduced or shown to the public, nor used in written form as sales literature
for public use.
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE]
AIMINVESTMENTS.COM T-SCO-INS-1 A I M Distributors, Inc. --REGISTERED TRADEMARK-- --REGISTERED TRADEMARK--
Information about your Fund's expenses
Calculating your ongoing Fund expenses
Example divide your account value by $1,000 The hypothetical account values and
(for example, an $8,600 account expenses may not be used to estimate the
As a shareholder of the Fund, you incur value divided by $1,000 = 8.6), actual ending account balance or expenses you
ongoing costs, including management fees and then multiply the result by the paid for the period. You may use this
other Fund expenses. This example is intended number in the table under the information to compare the ongoing costs of
to help you understand your ongoing costs (in heading entitled "Actual Expenses investing in the Fund and other funds. To do
dollars) of investing in the Fund and to Paid During Period" to estimate so, compare this 5% hypothetical example with
compare these costs with ongoing costs of the expenses you paid on your the 5% hypothetical examples that appear in
investing in other mutual funds. The example account during this period. the shareholder reports of the other funds.
is based on an investment of $1,000 invested
at the beginning of the period and held for Hypothetical example for comparison Please note that the expenses shown in
the entire period May 1, 2006, through October purposes the table are meant to highlight your ongoing
31, 2006. costs only. Therefore, the hypothetical
The table below also provides information is useful in comparing ongoing
Actual expenses information about hypothetical costs only, and will not help you determine
account values and hypothetical the relative total costs of owning different
The table below provides information about expenses based on the Fund's actual funds.
actual account values and actual expenses. You expense ratio and an assumed rate
may use the information in this table, of return of 5% per year before
together with the amount you invested, to expenses, which is not the Fund's
estimate the expenses that you paid over the actual return. The Fund's actual
period. Simply cumulative total return after
expenses for the six months ended
October 31, 2006, appears in the
table on the front of this
supplement.
====================================================================================================================================
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (5/1/06) (10/31/06)(1) PERIOD(2) (10/31/06) PERIOD(2) RATIO
Institutional $1,000.00 $1,049.70 $4.70 $1,020.62 $4.63 0.91%
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2006, through October 31,
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 return after expenses for the
six months ended October 31, 2006, appears in the table on the front of this supplement.
(2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the
period, multiplied by 184/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMINVESTMENTS.COM T-SCO-INS-1 A I M Distributors, Inc.
AIM Trimark Small Companies Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-73.45%
ADVERTISING-1.93%
Harte-Hanks, Inc. 221,100 $ 5,582,775
========================================================================
AGRICULTURAL PRODUCTS-1.75%
Delta and Pine Land Co. 125,000 5,063,750
========================================================================
AIR FREIGHT & LOGISTICS-5.95%
Dynamex Inc.(a)(b) 450,209 9,539,929
- ------------------------------------------------------------------------
Pacer International, Inc. 249,400 7,654,086
========================================================================
17,194,015
========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-4.93%
Columbia Sportswear Co.(b) 178,300 9,956,272
- ------------------------------------------------------------------------
Hampshire Group, Ltd.(b) 315,800 4,291,722
========================================================================
14,247,994
========================================================================
AUTOMOTIVE RETAIL-3.08%
Lithia Motors, Inc.-Class A 349,700 8,917,350
========================================================================
BIOTECHNOLOGY-1.73%
Tercica, Inc.(b) 989,674 5,007,750
========================================================================
COMMUNICATIONS EQUIPMENT-8.78%
Plantronics, Inc. 446,000 9,415,060
- ------------------------------------------------------------------------
SpectraLink Corp.(a) 1,010,562 9,327,487
- ------------------------------------------------------------------------
Tekelec(b) 449,500 6,630,125
========================================================================
25,372,672
========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.89%
Sabre Holdings Corp.-Class A 441,900 11,233,098
========================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-3.15%
FTI(b) 320,300 9,099,723
========================================================================
EDUCATION SERVICES-2.46%
Educate, Inc.(b) 930,240 7,116,336
========================================================================
HEALTH CARE EQUIPMENT-5.53%
Kinetic Concepts, Inc.(b) 460,100 15,993,076
========================================================================
HEALTH CARE SUPPLIES-2.87%
Cooper Cos., Inc. (The) 143,724 8,282,814
========================================================================
HOME FURNISHINGS-5.33%
Tempur-Pedic International Inc.(b) 780,400 15,405,096
========================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-0.91%
Learning Tree International, Inc.(b) 302,700 2,630,463
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
LEISURE PRODUCTS-3.87%
Polaris Industries Inc. 261,100 $ 11,180,302
========================================================================
OFFICE SERVICES & SUPPLIES-0.82%
HNI Corp. 53,000 2,383,410
========================================================================
PHARMACEUTICALS-3.02%
Endo Pharmaceuticals Holdings Inc.(b) 305,600 8,721,824
========================================================================
SPECIALTY CHEMICALS-2.07%
MacDermid, Inc. 179,200 5,994,240
========================================================================
SYSTEMS SOFTWARE-4.71%
Embarcadero Technologies, Inc.(a)(b) 1,638,800 13,602,040
========================================================================
THRIFTS & MORTGAGE FINANCE-2.52%
Northwest Bancorp, Inc. 272,428 7,287,449
========================================================================
TRUCKING-4.15%
Con-way Inc. 254,200 11,990,614
========================================================================
Total Domestic Common Stocks (Cost
$185,903,871) 212,306,791
========================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-13.22%
CANADA-13.22%
Chemtrade Logistics Income Fund (Commodity
Chemicals) 888,800 8,264,961
- ------------------------------------------------------------------------
Cymat Technologies Ltd. (Aluminum)(b) 2,497,500 322,566
- ------------------------------------------------------------------------
Cymat Technologies Ltd.-Wts. expiring 6/23/08
(Aluminum) (Acquired 06/22/05; Cost
$0)(c)(d)(e)(f) 700,000 0
- ------------------------------------------------------------------------
Duntroon Energy Ltd. (Oil & Gas Exploration &
Production)(b)(e)(f) 69,374 0
- ------------------------------------------------------------------------
FirstService Corp. (Diversified Commercial &
Professional Services)(b) 334,000 8,032,422
- ------------------------------------------------------------------------
Husky Injection Molding Systems Ltd.
(Industrial Machinery) 1,328,900 5,740,772
- ------------------------------------------------------------------------
MEGA Brands Inc. (Leisure Products)(b) 697,000 15,862,074
========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $33,541,181) 38,222,795
========================================================================
MONEY MARKET FUNDS-12.74%
Liquid Assets Portfolio-Institutional
Class(g) 18,412,324 18,412,324
- ------------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 18,412,324 18,412,324
========================================================================
Total Money Market Funds (Cost
$36,824,648) 36,824,648
========================================================================
TOTAL INVESTMENTS-99.41% (Cost $256,269,700) 287,354,234
========================================================================
OTHER ASSETS LESS LIABILITIES-0.59% 1,719,102
========================================================================
NET ASSETS-100.00% $289,073,336
________________________________________________________________________
========================================================================
</Table>
F-1
AIM Trimark Small Companies Fund
Investment Abbreviations:
<Table>
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
(a) Affiliated company. The Investment Company Act of 1940 defines affiliates as
those companies in which a fund holds 5% or more of the outstanding voting
securities. The Fund has not owned enough of the outstanding voting
securities of the issuer to have control (as defined in the Investment
Company Act of 1940) of that issuer. The aggregate value of these securities
as of October 31, 2006 was $32,469,456, which represented 11.23% of the
Fund's Net Assets. See Note 3.
(b) Non-income producing security.
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The value of this security at October 31, 2006 represented less than 0.00%
of the Fund's Net Assets. This security is not considered to be illiquid.
(d) Non-income producing security acquired through a corporate action.
(e) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at October 31, 2006 was $6, which represented less than 0.00% of
the Fund's Net Assets. See Note 1A.
(f) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The aggregate
value of these securities at October 31, 2006 was $6 which represented less
than 0.00% of the Fund's Net Assets.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-2
AIM Trimark Small Companies Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $191,958,186) $218,060,130
- -----------------------------------------------------------
Investments in affiliates, at value (cost
$64,311,514) 69,294,104
===========================================================
Total investments (cost $256,269,700) 287,354,234
===========================================================
Foreign currencies, at value (cost $98,942) 99,268
- -----------------------------------------------------------
Receivables for:
Investments sold 831,717
- -----------------------------------------------------------
Fund shares sold 862,951
- -----------------------------------------------------------
Dividends 446,242
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 10,413
- -----------------------------------------------------------
Other assets 33,867
===========================================================
Total assets 289,638,692
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 286,102
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 14,440
- -----------------------------------------------------------
Accrued distribution fees 93,600
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 1,417
- -----------------------------------------------------------
Accrued transfer agent fees 107,442
- -----------------------------------------------------------
Accrued operating expenses 62,355
===========================================================
Total liabilities 565,356
===========================================================
Net assets applicable to shares outstanding $289,073,336
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $236,664,150
- -----------------------------------------------------------
Undistributed net investment income (loss) (10,810)
- -----------------------------------------------------------
Undistributed net realized gain from
investment securities and foreign
currencies 21,335,132
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 31,084,864
===========================================================
$289,073,336
___________________________________________________________
===========================================================
NET ASSETS:
Class A $193,126,702
___________________________________________________________
===========================================================
Class B $ 21,066,417
___________________________________________________________
===========================================================
Class C $ 42,640,154
___________________________________________________________
===========================================================
Class R $ 2,758,923
___________________________________________________________
===========================================================
Institutional Class $ 29,481,140
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 12,021,371
___________________________________________________________
===========================================================
Class B 1,337,620
___________________________________________________________
===========================================================
Class C 2,709,107
___________________________________________________________
===========================================================
Class R 172,598
___________________________________________________________
===========================================================
Institutional Class 1,813,540
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 16.07
- -----------------------------------------------------------
Offering price per share
(Net asset value of $16.07 divided by
94.50%) $ 17.01
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 15.75
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 15.74
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 15.98
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 16.26
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
AIM Trimark Small Companies Fund
STATEMENT OF OPERATIONS
For the year ended October 31, 2006
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $164,056) $ 2,400,864
- -------------------------------------------------------------------------
Dividends from affiliates 727,646
- -------------------------------------------------------------------------
Interest 130,724
=========================================================================
Total investment income 3,259,234
=========================================================================
EXPENSES:
Advisory fees 2,055,953
- -------------------------------------------------------------------------
Administrative services fees 95,632
- -------------------------------------------------------------------------
Custodian fees 40,455
- -------------------------------------------------------------------------
Distribution fees:
Class A 403,281
- -------------------------------------------------------------------------
Class B 207,098
- -------------------------------------------------------------------------
Class C 334,228
- -------------------------------------------------------------------------
Class R 10,653
- -------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 567,943
- -------------------------------------------------------------------------
Transfer agent fees -- Institutional 1,215
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 20,914
- -------------------------------------------------------------------------
Other 226,216
=========================================================================
Total expenses 3,963,588
=========================================================================
Less: Fees waived and expense offset arrangements (274,173)
=========================================================================
Net expenses 3,689,415
=========================================================================
Net investment income (loss) (430,181)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 21,940,724
- -------------------------------------------------------------------------
Foreign currencies (56,398)
=========================================================================
21,884,326
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 20,730,250
- -------------------------------------------------------------------------
Foreign currencies (19,828)
=========================================================================
20,710,422
=========================================================================
Net gain from investment securities and foreign currencies 42,594,748
=========================================================================
Net increase in net assets resulting from operations $42,164,567
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM Trimark Small Companies Fund
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2006 and 2005
<Table>
<Caption>
2006 2005
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (430,181) $ (689,923)
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 21,884,326 4,609,343
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 20,710,422 7,556,279
==========================================================================================
Net increase in net assets resulting from operations 42,164,567 11,475,699
==========================================================================================
Distributions to shareholders from net realized gains:
Class A (2,434,107) (196,595)
- ------------------------------------------------------------------------------------------
Class B (369,102) (50,849)
- ------------------------------------------------------------------------------------------
Class C (494,184) (38,970)
- ------------------------------------------------------------------------------------------
Class R (31,492) (275)
- ------------------------------------------------------------------------------------------
Institutional Class (349,345) (41,277)
==========================================================================================
Decrease in net assets resulting from distributions (3,678,230) (327,966)
==========================================================================================
Share transactions-net:
Class A 40,386,818 98,110,668
- ------------------------------------------------------------------------------------------
Class B (1,602,422) 11,658,554
- ------------------------------------------------------------------------------------------
Class C 12,640,041 18,887,288
- ------------------------------------------------------------------------------------------
Class R 639,091 1,673,597
- ------------------------------------------------------------------------------------------
Institutional Class 6,742,452 12,205,626
==========================================================================================
Net increase in net assets resulting from share
transactions 58,805,980 142,535,733
==========================================================================================
Net increase in net assets 97,292,317 153,683,466
==========================================================================================
NET ASSETS:
Beginning of year 191,781,019 38,097,553
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(10,810) and $(5,235), respectively) $289,073,336 $191,781,019
__________________________________________________________________________________________
==========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
AIM Trimark Small Companies Fund
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Small Companies Fund (the "Fund") is a series portfolio of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware statutory
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of nine separate series portfolios, each authorized to issue an unlimited number
of shares of beneficial interest. The Fund currently offers multiple classes of
shares. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class. The assets, liabilities and
operations of each portfolio are accounted for separately. Information presented
in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. 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.
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. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. 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.
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,
F-6
AIM Trimark Small Companies Fund
accordingly, they reduce the Fund's total returns. These transaction costs
are not considered operating expenses and are not reflected in net
investment income reported in the Statement of Operations and Statement of
Changes in Net Assets, or the net investment income per share and ratios of
expenses and net investment income reported in the Financial Highlights,
nor are they limited by any expense limitation arrangements between the
Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to treat 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 to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and
expenses attributable to the Institutional Class are charged to such class.
Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- 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.
H. INDEMNIFICATIONS -- 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.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
J. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F-7
AIM Trimark Small Companies Fund
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $1 billion 0.85%
- -------------------------------------------------------------------
Over $1 billion 0.80%
__________________________________________________________________
===================================================================
</Table>
Through June 30, 2007, AIM has contractually agreed to waive advisory fees
to the extent necessary so that the advisory fees payable by the Fund (based on
the Fund's average daily net assets) do not exceed the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.745%
- -------------------------------------------------------------------
Next $250 million 0.73%
- -------------------------------------------------------------------
Next $500 million 0.715%
- -------------------------------------------------------------------
Next $1.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.685%
- -------------------------------------------------------------------
Next $2.5 billion 0.67%
- -------------------------------------------------------------------
Next $2.5 billion 0.655%
- -------------------------------------------------------------------
Over $10 billion 0.64%
__________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement between AIM and AIM Funds
Management Inc. ("AIM Funds Management"), AIM pays AIM Funds Management 40% of
the amount of AIM's compensation on the sub-advised assets.
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C, Class R
and Institutional Class shares to 1.50%, 2.25%, 2.25%, 1.75% and 1.25% of
average daily net assets, respectively, through at least June 30, 2007. In
determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP")
described more fully below, the expense offset arrangements from which the Fund
may benefit are in the form of credits that the Fund receives from banks where
the Fund or its transfer agent has deposit accounts in which it holds uninvested
cash. In addition, the Fund may also benefit from a one time credit to be used
to offset future custodian expenses. Those credits are used to pay certain
expenses incurred by the Fund.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in
the amount of 25% of the advisory fee AIM receives from the affiliated money
market funds on investments by the Fund in such affiliated money market funds.
Voluntary fee waivers or reimbursements may be modified or discontinued at any
time upon consultation with the Board of Trustees without further notice to
investors.
For the year ended October 31, 2006, AIM waived advisory fees of $256,761.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. These expenses along with the related expense
reimbursement are included in the Statement of Operations. For the year ended
October 31, 2006, AMVESCAP did not reimburse any expenses.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2006, AIM was paid $95,632.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AIS") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AIS for certain expenses
incurred by AIS in the course of providing such services. AIS may make payments
to intermediaries that provide omnibus account services, sub-accounting services
and/or networking services. All fees payable by AIS to intermediaries that
provide omnibus account services or sub-accounting are charged back to the Fund,
subject to certain limitations approved by the Trust's Board of Trustees. For
the year ended October 31, 2006, the Fund paid AIS $567,943 for Class A, Class
B, Class C and Class R share classes and $1,215 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C, Class R and Institutional Class shares of the Fund. The Trust has
adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans").
The Fund, pursuant to the Plans, pays ADI compensation at the annual rate of
0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the
average daily net assets of Class B and Class C shares and 0.50% of the average
daily net assets of Class R shares. Of the Rule 12b-1 payments, up to 0.25% of
the average daily net assets of the Class A, Class B, Class C or Class R shares
may be paid to furnish continuing personal shareholder services to customers who
purchase and own shares of such classes. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge. National
Association of Securities Dealers ("NASD") Rules impose a
F-8
AIM Trimark Small Companies Fund
cap on the total sales charges, including asset-based sales charges that may be
paid by any class of shares of the Fund. Pursuant to the Plans, for the year
ended October 31, 2006, the Class A, Class B, Class C and Class R shares paid
$403,281, $207,098, $334,228 and $10,653, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2006, ADI advised the Fund that it retained $77,934 in
front-end sales commissions from the sale of Class A shares and $49,036,
$12,525, $7,839 and $0 from Class A, Class B, Class C and Class R shares,
respectively, for CDSC imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to procedures approved by the Board of Trustees,
to invest daily available cash balances in affiliated money market funds. The
Fund and the money market funds below have the same investment advisor and
therefore, are considered to be affiliated. The table below shows the
transactions in and earnings from investments in affiliated money market funds
for the year ended October 31, 2006.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ -- $ 63,318,738 $ (44,906,414) $ -- $18,412,324 $334,864 $ --
- --------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-
Institutional
Class -- 37,105,072 (18,692,748) -- 18,412,324 174,639 --
- --------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class -- 37,529,039 (37,529,039) -- -- 161,067 --
================================================================================================================================
Subtotal $ -- $137,952,849 $(101,128,201) $ -- $36,824,648 $670,570 $ --
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
INVESTMENTS IN OTHER AFFILIATES:
The Investment Company Act of 1940 defines affiliates as those issuances in
which a fund holds 5% or more of the outstanding voting securities. The Fund has
not owned enough of the outstanding voting securities of the issuer to have
control (as defined in the Investment Company Act of 1940) of that issuer. The
following is a summary of the transactions with affiliates for the year ended
October 31, 2006
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------
Dynamex Inc. $ 9,018,012 $ -- $ (2,119,967) $ 2,641,884 $ 9,539,929 $ -- $289,464
- ------------------------------------------------------------------------------------------------------------------------------
Embarcadero
Technologies
Inc. 5,777,428 5,469,892 -- 2,354,720 13,602,040 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Spectralink
Inc. 7,180,186 4,053,441 -- (1,906,140) 9,327,487 57,076 --
==============================================================================================================================
Subtotal $21,975,626 $ 9,523,333 $ (2,119,967) $ 3,090,464 $32,469,456 $ 57,076 $289,464
==============================================================================================================================
Total
Investments
in
Affiliates $21,975,626 $147,476,182 $(103,248,168) $ 3,090,464 $69,294,104 $727,646 $289,464
______________________________________________________________________________________________________________________________
==============================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the year
ended October 31, 2006, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $17,412.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
F-9
AIM Trimark Small Companies Fund
During the year ended October 31, 2006, the Fund paid legal fees of $4,390
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources exceed
10% of the Fund's total assets. To the extent that the loan is required to be
secured by collateral, the collateral is marked to market daily to ensure that
the market value is at least 102% of the outstanding principal value of the
loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the year ended October 31, 2006, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank 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 contractually agreed upon rate.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended October 31, 2006
and 2005 was as follows:
<Table>
<Caption>
2006 2005
- ------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $3,323,963 $327,966
- ------------------------------------------------------------------------------------
Long-term capital gain 354,267 --
====================================================================================
Total distributions $3,678,230 $327,966
____________________________________________________________________________________
====================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- ----------------------------------------------------------------------------
Undistributed ordinary income $ 5,487,443
- ----------------------------------------------------------------------------
Undistributed long-term gain 16,259,528
- ----------------------------------------------------------------------------
Unrealized appreciation -- investments 30,673,025
- ----------------------------------------------------------------------------
Temporary book/tax differences (10,810)
- ----------------------------------------------------------------------------
Shares of beneficial interest 236,664,150
============================================================================
Total net assets $289,073,336
____________________________________________________________________________
============================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales. The tax-basis unrealized appreciation on investments amount includes
appreciation on foreign currencies of $330.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
The Fund has no capital loss carryforward as of October 31, 2006.
F-10
AIM Trimark Small Companies Fund
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2006 was $128,727,629 and
$105,821,763, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $37,810,130
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (7,137,435)
===============================================================================
Net unrealized appreciation of investment securities $30,672,695
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $256,681,539.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses
and foreign currency transactions, on October 31, 2006, undistributed net
investment income (loss) was increased by $424,606 and undistributed net
realized gain was decreased by $424,606. This reclassification had no effect on
the net assets of the Fund.
NOTE 10--SHARE INFORMATION
The Fund currently offers five different classes of shares: Class A, Class B,
Class C, Class R and Institutional Class. Class A shares are sold with a
front-end sales charge unless certain waiver criteria are met. Class B shares
and Class C shares are sold with CDSC. Class R shares and Institutional Class
shares are sold at net asset value. Under certain circumstances, Class A shares
and Class R shares are subject to CDSC. Generally, Class B shares will
automatically convert to Class A shares on or about the month-end which is at
least eight years after the date of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2006(A) 2005
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,334,375 $ 93,178,359 10,119,625 $133,711,057
- ----------------------------------------------------------------------------------------------------------------------
Class B 463,043 6,675,126 1,147,251 14,931,995
- ----------------------------------------------------------------------------------------------------------------------
Class C 1,383,674 19,965,765 1,683,952 21,999,614
- ----------------------------------------------------------------------------------------------------------------------
Class R 85,883 1,255,970 134,259 1,788,046
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class 487,102 7,217,168 987,101 12,936,760
======================================================================================================================
Issued as reinvestment of dividends:
Class A 162,060 2,333,653 15,350 191,412
- ----------------------------------------------------------------------------------------------------------------------
Class B 24,160 343,068 3,944 48,870
- ----------------------------------------------------------------------------------------------------------------------
Class C 32,958 468,010 2,967 36,729
- ----------------------------------------------------------------------------------------------------------------------
Class R 2,193 31,492 22 275
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class 24,093 349,345 3,302 41,277
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 99,536 1,463,334 41,792 550,687
- ----------------------------------------------------------------------------------------------------------------------
Class B (101,214) (1,463,334) (42,178) (550,687)
======================================================================================================================
Reacquired:
Class A (3,865,598) (56,588,528) (2,722,736) (36,342,488)
- ----------------------------------------------------------------------------------------------------------------------
Class B (498,551) (7,157,282) (212,921) (2,771,624)
- ----------------------------------------------------------------------------------------------------------------------
Class C (539,420) (7,793,734) (239,629) (3,149,055)
- ----------------------------------------------------------------------------------------------------------------------
Class R (44,171) (648,371) (8,448) (114,724)
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class (56,960) (824,061) (58,298) (772,411)
======================================================================================================================
3,993,163 $ 58,805,980 10,855,355 $142,535,733
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) There are four entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 46% of
the outstanding shares of the Fund. ADI has an agreement with these
entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may
make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, AIM and/or AIM affiliates
including but not limited to services such as, securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially. In
addition, 10% of the outstanding shares of the Fund are owned by
affiliated mutual funds. Affiliated mutual funds are other mutual funds
that are also advised by AIM.
F-11
AIM Trimark Small Companies Fund
NOTE 11--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
------------------------------------------------
NOVEMBER 4, 2003
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
----------------------- OCTOBER 31,
2006 2005 2004
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.67 $ 11.90 $ 10.00
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.06)(a) (0.04)
- --------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.65 1.90 1.94
==============================================================================================================
Total from investment operations 2.64 1.84 1.90
==============================================================================================================
Less distributions from net realized gains (0.24) (0.07) --
==============================================================================================================
Net asset value, end of period $ 16.07 $ 13.67 $ 11.90
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 19.55% 15.55% 19.00%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $193,127 $127,013 $21,862
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.41%(c) 1.51% 2.01%(d)
- --------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.52%(c) 1.61% 3.26%(d)
==============================================================================================================
Ratio of net investment income (loss) to average net assets (0.06)%(c) (0.45)% (1.17)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(e) 47% 20% 29%
______________________________________________________________________________________________________________
==============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $161,312,331.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-12
AIM Trimark Small Companies Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
----------------------------------------------
NOVEMBER 4, 2003
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2006 2005 2004
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.50 $ 11.84 $10.00
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12)(a) (0.15)(a) (0.08)
- ------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.61 1.88 1.92
============================================================================================================
Total from investment operations 2.49 1.73 1.84
============================================================================================================
Less distributions from net realized gains (0.24) (0.07) --
============================================================================================================
Net asset value, end of period $ 15.75 $ 13.50 $11.84
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 18.67% 14.69% 18.40%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $21,066 $19,582 $6,558
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.16%(c) 2.21% 2.66%(d)
- ------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.27%(c) 2.31% 3.91%(d)
============================================================================================================
Ratio of net investment income (loss) to average net assets (0.81)%(c) (1.15)% (1.82)%(d)
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate(e) 47% 20% 29%
____________________________________________________________________________________________________________
============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $20,709,838.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS C
----------------------------------------------
NOVEMBER 4, 2003
YEAR ENDED (DATE OPERATIONS
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2006 2005 2004
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.50 $ 11.83 $10.00
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12)(a) (0.15)(a) (0.07)
- ------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.60 1.89 1.90
============================================================================================================
Total from investment operations 2.48 1.74 1.83
============================================================================================================
Less distributions from net realized gains (0.24) (0.07) --
============================================================================================================
Net asset value, end of period $ 15.74 $ 13.50 $11.83
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 18.60% 14.79% 18.30%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $42,640 $24,724 $4,550
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.16%(c) 2.21% 2.66%(d)
- ------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.27%(c) 2.31% 3.91%(d)
============================================================================================================
Ratio of net investment income (loss) to average net assets (0.81)%(c) (1.15)% (1.82)%(d)
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate(e) 47% 20% 29%
____________________________________________________________________________________________________________
============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $33,422,761.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-13
AIM Trimark Small Companies Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS R
------------------------------------------
APRIL 30, 2004
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
------------------- OCTOBER 31,
2006 2005 2004
- --------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.64 $11.89 $10.56
- --------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.09)(a) (0.04)
- --------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.63 1.91 1.37
========================================================================================================
Total from investment operations 2.58 1.82 1.33
========================================================================================================
Less distributions from net realized gains (0.24) (0.07) --
========================================================================================================
Net asset value, end of period $15.98 $13.64 $11.89
________________________________________________________________________________________________________
========================================================================================================
Total return(b) 19.15% 15.39% 12.59%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,759 $1,755 $ 34
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.66%(c) 1.71% 2.16%(d)
- --------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.77%(c) 1.81% 3.41%(d)
========================================================================================================
Ratio of net investment income (loss) to average net assets (0.31)%(c) (0.65)% (1.32)%(d)
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate(e) 47% 20% 29%
________________________________________________________________________________________________________
========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $2,130,643.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
INSTITUTIONAL CLASS
--------------------------------------------
APRIL 30, 2004
YEAR ENDED (DATE SALES
OCTOBER 31, COMMENCED) TO
--------------------- OCTOBER 31,
2006 2005 2004
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.76 $ 11.92 $10.56
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.06(a) 0.00(a) (0.02)
- ----------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.68 1.91 1.38
==========================================================================================================
Total from investment operations 2.74 1.91 1.36
==========================================================================================================
Less distributions from net realized gains (0.24) (0.07) --
==========================================================================================================
Net asset value, end of period $ 16.26 $ 13.76 $11.92
__________________________________________________________________________________________________________
==========================================================================================================
Total return(b) 20.16% 16.11% 12.88%
__________________________________________________________________________________________________________
==========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $29,481 $18,708 $5,094
__________________________________________________________________________________________________________
==========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.91%(c) 1.02% 1.60%(d)
- ----------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.01%(c) 1.12% 2.86%(d)
==========================================================================================================
Ratio of net investment income (loss) to average net assets 0.44%(c) 0.04% (0.77)%(d)
__________________________________________________________________________________________________________
==========================================================================================================
Portfolio turnover rate(e) 47% 20% 29%
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $24,301,220.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-14
AIM Trimark Small Companies Fund
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 (Order No. 05-1318). The WVASC makes
findings of fact that AIM and ADI entered into certain arrangements permitting
market timing of the AIM Funds and failed to disclose these arrangements in the
prospectuses for such Funds, 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, including
restitution to affected investors, disgorgement of fees, reimbursement of
investigatory, administrative and legal costs and an "administrative
assessment," to be determined by the Commissioner. Initial research indicates
that these damages could be limited or capped by statute.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions (all the claims in
this category of lawsuits were dismissed with prejudice by the court on
September 29, 2006, except for the Section 36(b) claim which was dismissed
with leave to amend to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
F-15
AIM Trimark Small Companies Fund
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are providing full
cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
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 and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-16
AIM Trimark Small Companies Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Trimark Small Companies Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Trimark Small Companies Fund
(one of the funds constituting AIM Investment Funds, hereafter referred to as
the "Fund") at October 31, 2006, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 20, 2006
Houston, Texas
F-17
AIM Trimark Small Companies Fund
TAX DISCLOSURES
REQUIRED FEDERAL INCOME TAX INFORMATION
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2006, 20.31% is eligible for the dividends received deduction for
corporations. The Fund distributed long term capital gains of $354,266 for the
Fund's tax year ended October 31, 2006.
For its tax year ended October 31, 2006 the Fund designates 20.16%, or the
maximum amount allowable, of its dividend distributions as qualified dividend
income. Your actual amount of qualified dividend income for the calendar year
will be reported in your Form 1099-DIV. You should consult your tax advisor
regarding treatment of the amounts.
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS
For its tax year ended October 31, 2006, the Fund designates 0%, or the maximum
amount allowable, of its dividend distributions as qualified interest income
exempt from U.S. income tax for non-resident alien shareholders. Your actual
amount of qualified interest income for the calendar year will be reported in
your Form 1042-S mailing. You should consult your tax advisor regarding
treatment of the amounts.
The Fund designates qualified short-term capital gains of $2,534 for the
Fund's tax year ended October 31, 2006.
The percentage of qualifying assets not subject to the U.S. estate tax for
the fiscal quarters ended January 31, 2006, April 30, 2006 and July 31, 2006 and
October 31, 2006 are 26.15%, 23.23%, 24.61% and 26.00%, respectively.
F-18
AIM Trimark Small Companies Fund
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm) and
Trustee and Vice Chair of The AIM Family
of Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc., (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP
PLC -- Managed Products; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
- -------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None
Trustee, President and President, A I M Management Group Inc.,
Principal AIM Mutual Fund Dealer Inc. (registered
Executive Officer broker dealer), AIM Funds Management
Inc. (registered investment advisor) and
1371 Preferred Inc. (holding company);
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc.
(registered investment advisor and
register transfer agent) and AIM GP
Canada Inc. (general partner for a
limited partnership); Director, A I M
Capital Management, Inc. and A I M
Distributors, Inc.; Director and
Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO
Distributors, Inc. (registered broker
dealer); Director, President and
Chairman, AVZ Callco Inc. (holding
company); AMVESCAP Inc. (holding
company) and AIM Canada Holdings Inc.
(holding company); Director and Chief
Executive Officer, AIM Trimark Corporate
Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund
company) and AIM Trimark Canada Fund
Inc. (corporate mutual fund company);
Trustee, President and Principal
Executive Officer of The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); Trustee and
Executive Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); and Manager,
Powershares Capital Management LLC
Formerly: President and Principal
Executive Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer,
AIM Funds Management Inc.; President,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and Director,
Trimark Trust (federally regulated
Canadian Trust Company)
- -------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee and Chair (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc. (registered
Trustee investment company (2 portfolios))
Formerly: Partner, law firm of Baker &
McKenzie
- -------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., None
Trustee (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder
Insurance Corporation
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director of a number of public and None
Trustee private business corporations, including
the Boss Group Ltd. (private investment
and management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity and
Life Re (Holdings), Ltd. (insurance
company); CompuDyne Corporation
(provider of products and services to
the public security market); and
Homeowners of America Holding
Corporation (property casualty company)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North
America, Inc.; Senior Vice President, AB
Volvo; and Director of various
affiliated Volvo companies; and
Director, Magellan Insurance Company
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff, and Discovery Global
Trustee Century Group, Inc. (government affairs Education Fund (non-profit)
company); and Owner, Dos Angelos Ranch,
L.P.
Formerly: Chief Executive Officer,
Texana Timber LP (sustainable forestry
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company (3 portfolios))
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired Director, Mainstay VP Series
Trustee Formerly: Partner, Deloitte & Touche Funds, Inc. (21 portfolios)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
F-19
TRUSTEES AND OFFICERS--(CONTINUED)
AIM Trimark Small Companies Fund
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 109
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer N/A
Senior Vice President and of The AIM Family of Funds--Registered
Senior Officer Trademark--
Formerly: Director of Compliance and
Assistant General Counsel, ICON
Advisers, Inc.; Financial Consultant,
Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual
Funds, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, N/A
Senior Vice President, Chief Secretary and General Counsel, A I M
Legal Officer and Secretary Management Group Inc. and A I M
Advisors, Inc.; Director, Vice President
and Secretary, INVESCO Distributors,
Inc.; Vice President and Secretary,
A I M Capital Management, Inc., AIM
Investment Services, Inc., and Fund
Management Company; Senior Vice
President and Secretary, A I M
Distributors, Inc.; Director, INVESCO
Funds Group Inc.; Senior Vice President,
Chief Legal Officer and Secretary of The
AIM Family of Funds--Registered
Trademark--; and Manager, Powershares
Capital Management LLC
Formerly: Chief Operating Officer,
Senior Vice President, General Counsel,
and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice
President and Secretary, PBHG Funds (an
investment company); Vice President and
Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel
and Secretary, Pilgrim Baxter Value
Investors (an investment adviser); Chief
Operating Officer, General Counsel and
Secretary, Old Mutual Investment
Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund
Services (an administrator); General
Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder
servicing center); Executive Vice
President, General Counsel and
Secretary, Old Mutual Capital, Inc. (an
investment adviser); and Vice President
and Secretary, Old Mutual Advisors Funds
(an investment company)
- ------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, AMVESCAP N/A
Vice President PLC; and Vice President of The AIM
Family of Funds--Registered Trademark--
Formerly: Senior Vice President, A I M
Management Group Inc. (financial
services holding company); Senior Vice
President and Chief Compliance Officer,
A I M Advisors, Inc. and The AIM Family
of Funds--Registered Trademark--; Vice
President and Chief Compliance Officer,
A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund
Management Company; Senior Vice
President and Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; and Senior Vice President
and Compliance Director, Delaware
Investments Family of Funds
- ------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 Senior Vice President and General
Vice President Counsel, AMVESCAP PLC; Director, INVESCO
Funds Group, Inc.; and Vice President of
The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Vice President and N/A
General Counsel, Fund Management
Company; Director, Senior Vice
President, Secretary and General
Counsel, A I M Management Group Inc. and
A I M Advisors, Inc.; Director and Vice
President, INVESCO Distributors, Inc.;
Senior Vice President, A I M
Distributors, Inc.; Vice President,
A I M Capital Management, Inc. and AIM
Investment Services, Inc.; Senior Vice
President, Chief Legal Officer and
Secretary of The AIM Family of
Funds--Registered Trademark--; Chief
Executive Officer and President, INVESCO
Funds Group, Inc.; and Senior Vice
President, and General Counsel, Liberty
Financial Companies, Inc. and Senior
Vice President and General Counsel
Liberty Funds Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Principal Advisors, Inc.; and Vice President,
Financial Officer and Treasurer and Principal Officer of The
Treasurer AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A
Vice President Investment Officer, A I M Advisors Inc.;
Director, Chairman, Chief Executive
Officer, President and Chief Investment
Officer, A I M Capital Management, Inc.;
Executive Vice President, A I M
Management Group Inc. and Vice President
of The AIM Family of Funds--Registered
Trademark--
Formerly: Senior Vice President, AIM
Private Asset Management, Inc.; and
Chief Equity Officer, Senior Vice
President and Senior Investment Officer,
A I M Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A
Vice President Director and Chief Cash Management
Officer, A I M Capital Management, Inc;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust,
Short-Term Investments Trust and
Tax-Free Investments Trust); and
President and Principal Executive
Officer, The AIM Family of
Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust Only)
Formerly: Vice President, The AIM Family
of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free
Investments Trust only)
- ------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance N/A
Anti-Money Laundering Officer, A I M Advisors, Inc., A I M
Compliance Officer Capital Management, Inc., A I M
Distributors, Inc., AIM Investment
Services, Inc., AIM Private Asset
Management, Inc., Fund Management
Company and The AIM Family of
Funds--Registered Trademark--
Formerly: Manager of the Fraud
Prevention Department, AIM Investment
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, A I M Management N/A
Chief Compliance Officer Group Inc.; Senior Vice President and
Chief Compliance Officer, A I M
Advisors, Inc.; Chief Compliance Officer
of The AIM Family of Funds--Registered
Trademark--; Vice President and Chief
Compliance Officer, A I M Capital
Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management
Company
Formerly: Global Head of Product
Development, AIG-Global Investment
Group, Inc.; Chief Compliance Officer
and Deputy General Counsel,
AIG-SunAmerica Asset Management; and
Chief Compliance Officer, Chief
Operating Officer and Deputy General
Counsel, American General Investment
Management
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS SUB-ADVISOR
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers AIM Funds Management,
Suite 100 11 Greenway Plaza Inc. LLP Inc.
Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street 5140 Yonge St.
Houston, TX 77046-1173 Suite 100 Suite 2900 Suite 900
Houston, TX 77046-1173 Houston, TX 77002-5678 Toronto, Canada M2N 6X7
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and
Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company
1735 Market Street, 51st & Frankel LLP P.O. Box 4739 225 Franklin Street
Floor 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Philadelphia, PA 19103-7599 Americas
New York, NY 10036-2714
</Table>
F-20
[eDELIVERY
GO PAPERLESS
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REGISTER FOR eDELIVERY
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forms, fund reports, and prospectuses are available, we will Quarterly Performance Review for the most recent quarter-end.
send you an e-mail notification containing links to these Mutual funds distributed by A I M Distributors, Inc.
documents. For security purposes, you will need to log in to
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CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND
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[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.
As of the end of the period covered by this report, the Registrant had
adopted a code of ethics (the "Code") that applies to the Registrant's
principal executive officer ("PEO") and principal financial officer
("PFO"). The Code was amended in September, 2006, to (i) remove individuals
listed in Exhibit A and any references to Exhibit A thus allowing for
future flexibility and (ii) remove ambiguities found in the second
paragraph of Section III. The Registrant did not grant any waivers,
including implicit waivers, from any provisions of the Code to the PEO or
PFO during the period covered by this report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that the Registrant has at least one
audit committee financial expert serving on its Audit Committee. The Audit
Committee financial expert is Raymond Stickel, Jr. Mr. Stickel is
"independent" within the meaning of that term as used in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
FEES BILLED BY PWC RELATED TO THE REGISTRANT
PWC billed the Registrant aggregate fees for services rendered to the
Registrant for the last two fiscal years as follows:
Percentage of Fees
Billed Applicable Percentage of Fees
to Non-Audit Billed Applicable to
Services Provided Non-Audit Services
Fees Billed for for fiscal year end Provided for fiscal
Services Rendered 2006 Pursuant to Fees Billed for year end 2005
to the Registrant Waiver of Services Rendered to Pursuant to Waiver
for fiscal year end Pre-Approval the Registrant for of Pre-Approval
2006 Requirement(1) fiscal year end 2005 Requirement(1)
------------------- ------------------- -------------------- --------------------
Audit Fees $345,827 N/A $192,225 N/A
Audit-Related Fees(2) $ 0 0% $ 5,625 0%
Tax Fees(3) $ 69,828 0% $ 45,783 0%
All Other Fees $ 0 0% $ 0 0%
-------- --------
Total Fees $415,655 0% $243,633 0%
======== ========
PWC billed the Registrant aggregate non-audit fees of $69,828 for the fiscal
year ended 2006, and $51,408 for the fiscal year ended 2005, for non-audit
services rendered to the Registrant.
- ----------
(1) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by the Registrant at the
time of engagement, (ii) the aggregate amount of all such services provided
is no more than 5% of the aggregate audit and non-audit fees paid by the
Registrant to PWC during a fiscal year; and (iii) such services are
promptly approved by the Registrant's Audit Committee prior to the
completion of the audit by the Audit Committee.
(2) Audit-Related fees for the fiscal year end October 31, 2005 includes fees
billed for completing agreed upon procedures related to fund mergers.
(3) Tax fees for the fiscal year end October 31, 2006 includes fees billed for
reviewing tax returns. Tax fees for fiscal year end October 31, 2005
includes fees billed for reviewing tax returns.
FEES BILLED BY PWC RELATED TO AIM AND AIM AFFILIATES
PWC billed AIM Advisors, Inc. ("AIM"), the Registrant's adviser, and any
entity controlling, controlled by or under common control with AIM that provides
ongoing services to the Registrant ("AIM Affiliates") aggregate fees for
pre-approved non-audit services rendered to AIM and AIM Affiliates for the last
two fiscal years as follows:
Fees Billed for Fees Billed for
Non-Audit Services Percentage of Fees Non-Audit Services Percentage of Fees
Rendered to AIM and Billed Applicable to Rendered to AIM and Billed Applicable to
AIM Affiliates for Non-Audit Services AIM Affiliates for Non-Audit Services
fiscal year end 2006 Provided for fiscal fiscal year end 2005 Provided for fiscal
That Were Required year end 2006 That Were Required year end 2005
to be Pre-Approved Pursuant to Waiver to be Pre-Approved Pursuant to Waiver of
by the Registrant's of Pre-Approval by the Registrant's Pre-Approval
Audit Committee Requirement(1) Audit Committee Requirement(1)
-------------------- -------------------- -------------------- ---------------------
Audit-Related Fees $0 0% $0 0%
Tax Fees $0 0% $0 0%
All Other Fees $0 0% $0 0%
--- ---
Total Fees(2) $0 0% $0 0%
=== ===
- ----------
(1) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by the Registrant at the
time of engagement, (ii) the aggregate amount of all such services provided
is no more than 5% of the aggregate audit and non-audit fees paid by the
Registrant, AIM and AIM Affiliates to PWC during a fiscal year; and (iii)
such services are promptly approved by the Registrant's Audit Committee
prior to the completion of the audit by the Audit Committee.
(2) Including the fees for services not required to be pre-approved by the
registrant's audit committee, PWC billed AIM and AIM Affiliates aggregate
non-audit fees of $0 for the fiscal year ended 2006, and $0 for the fiscal
year ended 2005, for non-audit services rendered to AIM and AIM Affiliates.
The Audit Committee also has considered whether the provision of non-audit
services that were rendered to AIM and AIM Affiliates that were not
required to be pre-approved pursuant to SEC regulations, if any, is
compatible with maintaining PWC's independence.
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
POLICIES AND PROCEDURES
As adopted by the Audit Committees of
the AIM Funds (the "Funds")
Last Amended September 18, 2006
STATEMENT OF PRINCIPLES
Under the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and
Exchange Commission ("SEC") ("Rules"), the Audit Committees of the Funds' (the
"Audit Committee") Board of Trustees (the "Board") are responsible for the
appointment, compensation and oversight of the work of independent accountants
(an "Auditor"). As part of this responsibility and to assure that the Auditor's
independence is not impaired, the Audit Committees pre-approve the audit and
non-audit services provided to the Funds by each Auditor, as well as all
non-audit services provided by the Auditor to the Funds' investment adviser and
to affiliates of the adviser that provide ongoing services to the Funds
("Service Affiliates") if the services directly impact the Funds' operations or
financial reporting. The SEC Rules also specify the types of services that an
Auditor may not provide to its audit client. The following policies and
procedures comply with the requirements for pre-approval and provide a mechanism
by which management of the
Funds may request and secure pre-approval of audit and non-audit services in an
orderly manner with minimal disruption to normal business operations.
Proposed services either may be pre-approved without consideration of specific
case-by-case services by the Audit Committees ("general pre-approval") or
require the specific pre-approval of the Audit Committees ("specific
pre-approval"). As set forth in these policies and procedures, unless a type of
service has received general pre-approval, it will require specific pre-approval
by the Audit Committees. Additionally, any fees exceeding 110% of estimated
pre-approved fee levels provided at the time the service was pre-approved will
also require specific approval by the Audit Committees before payment is made.
The Audit Committees will also consider the impact of additional fees on the
Auditor's independence when determining whether to approve any additional fees
for previously pre-approved services.
The Audit Committees will annually review and generally pre-approve the services
that may be provided by each Auditor without obtaining specific pre-approval
from the Audit Committee. The term of any general pre-approval runs from the
date of such pre-approval through September 30th of the following year, unless
the Audit Committees consider a different period and state otherwise. The Audit
Committees will add to or subtract from the list of general pre-approved
services from time to time, based on subsequent determinations.
The purpose of these policies and procedures is to set forth the guidelines to
assist the Audit Committees in fulfilling their responsibilities.
DELEGATION
The Audit Committees may from time to time delegate pre-approval authority to
one or more of its members who are Independent Trustees. All decisions to
pre-approve a service by a delegated member shall be reported to the Audit
Committee at its next quarterly meeting.
AUDIT SERVICES
The annual audit services engagement terms will be subject to specific
pre-approval of the Audit Committees. Audit services include the annual
financial statement audit and other procedures such as tax provision work that
is required to be performed by the independent auditor to be able to form an
opinion on the Funds' financial statements. The Audit Committee will obtain,
review and consider sufficient information concerning the proposed Auditor to
make a reasonable evaluation of the Auditor's qualifications and independence.
In addition to the annual Audit services engagement, the Audit Committees may
grant either general or specific pre-approval of other audit services, which are
those services that only the independent auditor reasonably can provide. Other
Audit services may include services such as issuing consents for the inclusion
of audited financial statements with SEC registration statements, periodic
reports and other documents filed with the SEC or other documents issued in
connection with securities offerings.
NON-AUDIT SERVICES
The Audit Committees may provide either general or specific pre-approval of any
non-audit services to the Funds and its Service Affiliates if the Audit
Committees believe that the provision of the service will not impair the
independence of the Auditor, is consistent with the SEC's Rules on auditor
independence, and otherwise conforms to the Audit Committee's general principles
and policies as set forth herein.
AUDIT-RELATED SERVICES
"Audit-related services" are assurance and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements or that are traditionally performed by the independent auditor.
Audit-related services include, among others, accounting consultations related
to accounting, financial reporting or disclosure matters not classified as
"Audit services"; assistance with understanding and implementing new accounting
and financial reporting guidance from rulemaking authorities; and agreed-upon
procedures related to mergers, compliance with ratings agency requirements and
interfund lending activities.
TAX SERVICES
"Tax services" include, but are not limited to, the review and signing of the
Funds' federal tax returns, the review of required distributions by the Funds
and consultations regarding tax matters such as the tax treatment of new
investments or the impact of new regulations. The Audit Committee will
scrutinize carefully the retention of the Auditor in connection with a
transaction initially recommended by the Auditor, the major business purpose of
which may be tax avoidance or the tax treatment of which may not be supported in
the Internal Revenue Code and related regulations. The Audit Committee will
consult with the Funds' Treasurer (or his or her designee) and may consult with
outside counsel or advisors as necessary to ensure the consistency of Tax
services rendered by the Auditor with the foregoing policy.
No Auditor shall represent any Fund or any Service Affiliate before a tax court,
district court or federal court of claims.
Under rules adopted by the Public Company Accounting Oversight Board and
approved by the SEC, in connection with seeking Audit Committee pre-approval of
permissible Tax services, the Auditor shall:
1. Describe in writing to the Audit Committees, which writing may be in
the form of the proposed engagement letter:
a. The scope of the service, the fee structure for the
engagement, and any side letter or amendment to the
engagement letter, or any other agreement between the
Auditor and the Fund, relating to the service; and
b. Any compensation arrangement or other agreement, such as a
referral agreement, a referral fee or fee-sharing
arrangement, between the Auditor and any person (other than
the Fund) with respect to the promoting, marketing, or
recommending of a transaction covered by the service;
2. Discuss with the Audit Committees the potential effects of the
services on the independence of the Auditor; and
3. Document the substance of its discussion with the Audit Committees.
ALL OTHER AUDITOR SERVICES
The Audit Committees may pre-approve non-audit services classified as "All other
services" that are not categorically prohibited by the SEC, as listed in Exhibit
1 to this policy.
PRE-APPROVAL FEE LEVELS OR ESTABLISHED AMOUNTS
Pre-approval of estimated fees or established amounts for services to be
provided by the Auditor under general or specific pre-approval policies will be
set periodically by the Audit Committees. Any proposed fees exceeding 110% of
the maximum estimated pre-approved fees or established amounts for pre-approved
audit and non-audit services will be reported to the Audit Committees at the
quarterly Audit Committees meeting and will require specific approval by the
Audit Committees before payment is made. The Audit Committee will always factor
in the overall relationship of fees for audit and non-audit services in
determining whether to pre-approve any such services and in determining whether
to approve any additional fees exceeding 110% of the maximum pre-approved fees
or established amounts for previously pre-approved services.
PROCEDURES
On an annual basis, A I M Advisors, Inc. ("AIM") will submit to the Audit
Committees for general pre-approval, a list of non-audit services that the Funds
or Service Affiliates of the Funds may request from the Auditor. The list will
describe the non-audit services in reasonable detail and will include an
estimated range of fees and such other information as the Audit Committee may
request.
Each request for services to be provided by the Auditor under the general
pre-approval of the Audit Committees will be submitted to the Funds' Treasurer
(or his or her designee) and must include a detailed
description of the services to be rendered. The Treasurer or his or her designee
will ensure that such services are included within the list of services that
have received the general pre-approval of the Audit Committees. The Audit
Committees will be informed at the next quarterly scheduled Audit Committees
meeting of any such services for which the Auditor rendered an invoice and
whether such services and fees had been pre-approved and if so, by what means.
Each request to provide services that require specific approval by the Audit
Committees shall be submitted to the Audit Committees jointly by the Fund's
Treasurer or his or her designee and the Auditor, and must include a joint
statement that, in their view, such request is consistent with the policies and
procedures and the SEC Rules.
Each request to provide tax services under either the general or specific
pre-approval of the Audit Committees will describe in writing: (i) the scope of
the service, the fee structure for the engagement, and any side letter or
amendment to the engagement letter, or any other agreement between the Auditor
and the audit client, relating to the service; and (ii) any compensation
arrangement or other agreement between the Auditor and any person (other than
the audit client) with respect to the promoting, marketing, or recommending of a
transaction covered by the service. The Auditor will discuss with the Audit
Committees the potential effects of the services on the Auditor's independence
and will document the substance of the discussion.
Non-audit services pursuant to the de minimis exception provided by the SEC
Rules will be promptly brought to the attention of the Audit Committees for
approval, including documentation that each of the conditions for this
exception, as set forth in the SEC Rules, has been satisfied.
On at least an annual basis, the Auditor will prepare a summary of all the
services provided to any entity in the investment company complex as defined in
section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of
the engagement and the fees associated with those services.
The Audit Committees have designated the Funds' Treasurer to monitor the
performance of all services provided by the Auditor and to ensure such services
are in compliance with these policies and procedures. The Funds' Treasurer will
report to the Audit Committee on a periodic basis as to the results of such
monitoring. Both the Funds' Treasurer and management of AIM will immediately
report to the chairman of the Audit Committee any breach of these policies and
procedures that comes to the attention of the Funds' Treasurer or senior
management of AIM.
EXHIBIT 1 TO PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICIES AND
PROCEDURES
CONDITIONALLY PROHIBITED NON-AUDIT SERVICES (NOT PROHIBITED IF THE FUND CAN
REASONABLY CONCLUDE THAT THE RESULTS OF THE SERVICE WOULD NOT BE SUBJECT TO
AUDIT PROCEDURES IN CONNECTION WITH THE AUDIT OF THE FUND'S FINANCIAL
STATEMENTS)
- Bookkeeping or other services related to the accounting records or
financial statements of the audit client
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions, or
contribution-in-kind reports
- Actuarial services
- Internal audit outsourcing services
CATEGORICALLY PROHIBITED NON-AUDIT SERVICES
- Management functions
- Human resources
- Broker-dealer, investment adviser, or investment banking services
- Legal services
- Expert services unrelated to the audit
- Any service or product provided for a contingent fee or a commission
- Services related to marketing, planning, or opining in favor of the
tax treatment of confidential transactions or aggressive tax position
transactions, a significant purpose of which is tax avoidance
- Tax services for persons in financial reporting oversight roles at the
Fund
- Any other service that the Public Company Oversight Board determines
by regulation is impermissible.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Investments in securities of unaffiliated issuers is included as part of
the reports to stockholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 11. CONTROLS AND PROCEDURES.
(a) As of December 14, 2006, an evaluation was performed under the supervision
and with the participation of the officers of the Registrant, including the
PEO and PFO, to assess the effectiveness of the Registrant's disclosure
controls and procedures, as that term is defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act"), as amended. Based on that
evaluation, the Registrant's officers, including the PEO and PFO, concluded
that, as of December 14, 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 this
report that have materially affected, or are reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
12(a)(1) Code of Ethics.
12(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act
of 1940.
12(a)(3) Not applicable.
12(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act
of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AIM Investment Funds
By: /s/ PHILIP A. TAYLOR
----------------------------------
Philip A. Taylor
Principal Executive Officer
Date: January 5, 2007
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/ PHILIP A. TAYLOR
---------------------------------
Philip A. Taylor
Principal Executive Officer
Date: January 5, 2007
By: /s/ SIDNEY M. DILGREN
---------------------------------
Sidney M. Dilgren
Principal Financial Officer
Date: January 5, 2007
EXHIBIT INDEX
12(a)(1) Code of Ethics.
12(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act
of 1940.
12(a)(3) Not applicable.
12(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act
of 1940.