---------------------------
OMB APPROVAL
---------------------------
OMB Number: 3235-0570
Expires: April 30, 2008
Estimated average burden
hours per response: 19.4
---------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file
number 811-01540
-------------------------------------------------------------------------
AIM Funds Group
- --------------------------------------------------------------------------------
(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: 12/31
-----
Date of reporting period: 06/30/07
--------
Item 1. Reports to Stockholders.
AIM BASIC BALANCED FUND
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Large-Cap Value
Table of Contents
Letter to Shareholders ................... 2
Fund Performance ......................... 3
Schedule of Investments .................. 4
Financial Statements ..................... 14
Notes to Financial Statements ............ 16
Financial Highlights ..................... 24
Fund Expenses ............................ 29
Approval of Advisory Agreement ........... 30
For the most current month-end Fund performance and
commentary, please visit AIMinvestments.com.
Unless otherwise noted, all data in this report are
from A I M Management Group Inc.
If used after October 20, 2007, this report must be
accompanied by a Fund Performance & Commentary or
by an AIM Quarterly Performance Review for the most
recent quarter-end.
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.
[AIM INVESTMENTS LOGO]
- --REGISTERED TRADEMARK-- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM BASIC BALANCED FUND
Dear Fellow Shareholders:
In overseeing the management of the AIM family of funds on your behalf, your Board of
Trustees of the AIM Funds continues to focus on improved investment performance,
[CROCKETT reduced shareholder costs, and high ethical standards.
PHOTO]
Since my last letter, your Board has welcomed two new members: Marty Flanagan,
President and CEO of INVESCO, AIM's parent company, and Phil Taylor, who was named CEO
Bruce L. Crockett of AIM Investments --REGISTERED TRADEMARK-- in April 2006. Robert Graham, who has given
more than 30 years of leadership to the company and the mutual fund industry since
founding AIM in 1976, has retired, stepping down in the process from his most recent
role as Vice Chairman of the Board. We thank Bob for his many contributions and wish
him a long and happy future.
Our review of fund performance has shown healthy progress, but the process is
necessarily one of continuous improvement. In general, as of June 30, 2007, we have
seen persistent investment discipline and more consistently good results. While this
statement may not apply to every AIM Fund all the time, as I write this letter, the
overall trend in fund management and performance has been positive.
The investment management talent at AIM has recently been enhanced by the promotion
of Karen Dunn Kelley to Head of INVESCO's Worldwide Fixed Income as well as Director of
AIM Global and Cash Management, with responsibility for all fixed income and money
market funds that serve both institutional and individual investors. Under Karen's
direction, AIM's cash management organization grew to one of the world's largest and
most respected, with top-tier performance. The operations now combined under her charge
represent more than $150 billion in assets, 120 investment professionals, and products
that span the entire yield curve.
In other news, your Board took a more active role in preparing for "proxy season,"
the period when fund managers must vote the shares held by their funds "for" or
"against" various proposals on the ballots of the issuing companies. Beginning in the
2007 proxy season, AIM implemented new proxy voting policies, developed by management
in conjunction with an ad hoc Board committee, which provided a solid framework for
properly evaluating and executing the many decisions the AIM Funds are required to make
to vote shares.
In general, the AIM Funds voted for proposals that would allow shareholders a
greater role in election of directors, proxy access and "say for pay." The AIM Funds
voted against directors who AIM believed failed to govern well in cases of corporate
mismanagement, such as the backdating of options grants, and against "poison pill" and
"take under" proposals that would favor the financial interests of managers at the
expense of investors in the case of a merger or acquisition. You can view the proxy
votes cast for your fund by going to AIMinvestments.com. Click the "About Us" tab, then
go to "Required Notices" and "Proxy Voting Activity."
Additionally, your Board raised the amount its members are recommended to invest in
the AIM Funds within three years of joining the Board, with the goal of aligning our
interests even more closely with yours.
Furthermore, at our June meeting we renewed the investment advisory contracts
between the AIM Funds and AIM for another year, applying the same rigorous evaluation
process that was enhanced and formalized in 2005. For more information on this process,
please visit AIMinvestments.com. Click on the "Products and Performance" tab and go to
"Investment Advisory Agreement Renewals."
Your Board's ability to best represent your interests depends on our knowledge of
your opinions and concerns. Please send me an email (bruce@brucecrockett.com) with your
thoughts on the following:
1) How important is it to you to hear about your Board's decisions and activities in
these letters?
2) What other information (on overall performance, specific funds, managers, etc.)
would make the letters more meaningful to you?
3) Would you prefer that communication from your Board continue to be delivered in
paper form by regular mail or be sent electronically by email?
If you would prefer to communicate through a quick online survey, please go to
AIMinvestments.com and provide your responses there.
We need to hear from you to do our best job, and I look forward to your responses.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Directors
August 10, 2007
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 mutual funds represented by AIM
Investments and the PowerShares Exchange-Traded Fund Trust.
2
AIM BASIC BALANCED FUND
FUND PERFORMANCE
======================================================================================= ==========================================
PERFORMANCE SUMMARY FUND PERFORMANCE
FUND VS. INDEXES As of 6/30/07, including applicable sales
charges
Cumulative total returns, 12/31/06-6/30/07, excluding applicable sales charges.
If sales charges were included, returns would be lower. CLASS A SHARES
Inception (9/28/01) 6.80%
Class A Shares 5.92% 5 Years 7.31
Class B Shares 5.53 1 Year 9.53
Class C Shares 5.52
Class R Shares 5.79 CLASS B SHARES
Investor Class Shares 5.92 Inception (9/28/01) 6.97%
S&P 500 Index(1) (Broad Market Index) 6.96 5 Years 7.44
Custom Basic Balanced Index(2) (Style-Specific Index) 4.15 1 Year 10.05
Lipper Mixed-Asset Target Allocation Moderate Funds Index(1)
(Peer Group Index)* 5.16 CLASS C SHARES
Lipper Balanced Funds Index(1) (Former Peer Group Index)* 5.73 Inception (9/28/01) 7.11%
5 Years 7.76
SOURCES: (1)LIPPER INC.; (2)A I M MANAGEMENT GROUP INC., LIPPER INC. 1 Year 14.04
* During the year, Lipper reclassified AIM Basic Balanced Fund from the Lipper CLASS R SHARES
Balanced Funds category to the Lipper Mixed-Asset Target Allocation Moderate Funds Inception 7.63%
category. 5 Years 8.30
1 Year 15.60
The unmanaged S&P 500 --REGISTERED TRADEMARK-- Index is an index of common stocks
frequently used as a general measure of U.S. stock market performance. INVESTOR CLASS SHARES
Inception 7.85%
The Custom BASIC BALANCED INDEX used in this report is an index created by A I M 5 Years 8.52
Advisors, Inc. to benchmark the Fund. The index consists of the following indexes: 60% 1 Year 15.97
Russell 1000 --REGISTERED TRADEMARK-- Value Index and 40% Lehman Brothers U.S. ==========================================
AGGREGATE BOND INDEX. The Russell 1000 Value Index measures the performance of those
Russell 1000 companies with lower price-to-book ratios and lower forecasted growth THE TOTAL ANNUAL FUND OPERATING EXPENSE
values. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell RATIO SET FORTH IN THE MOST RECENT FUND
Company. Russell --REGISTERED TRADEMARK-- is a trademark of the Frank Russell Company. PROSPECTUS AS OF THE DATE OF THIS REPORT
The Lehman Brothers U.S. Aggregate Bond Index covers U.S. investment-grade fixed-rate FOR CLASS A, CLASS B, CLASS C, CLASS R AND
bonds with components for government and corporate securities, mortgage pass-throughs INVESTOR CLASS SHARES WAS 1.14%, 1.89%,
and asset-backed securities. 1.89%, 1.39% AND 1.14%, RESPECTIVELY. THE
EXPENSE RATIOS PRESENTED ABOVE MAY VARY
The unmanaged LIPPER MIXED-ASSET TARGET ALLOCATION MODERATE FUNDS INDEX is an FROM THE EXPENSE RATIOS PRESENTED IN OTHER
equally weighted representation of the largest moderate funds that by portfolio SECTIONS OF THIS REPORT THAT ARE BASED ON
practice maintain a mix of between 40%-60% equity securities, with the remainder EXPENSES INCURRED DURING THE PERIOD
invested in bonds, cash and cash equivalents. Lipper Inc. is an independent mutual fund COVERED BY THIS REPORT.
performance monitor.
CLASS A SHARE PERFORMANCE REFLECTS THE
The unmanaged LIPPER BALANCED FUNDS INDEX represents an average of the largest MAXIMUM 5.50% SALES CHARGE, AND CLASS B
balanced funds tracked by Lipper Inc., an independent mutual fund performance monitor. AND CLASS C SHARE PERFORMANCE REFLECTS THE
It is calculated daily, with adjustments for distributions as of the ex-dividend dates. APPLICABLE CONTINGENT DEFERRED SALES
CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
The Fund is not managed to track the performance of any particular index, including CDSC ON CLASS B SHARES DECLINES FROM 5%
the indexes defined here, and consequently, the performance of the Fund may deviate BEGINNING AT THE TIME OF PURCHASE TO 0% AT
significantly from the performance of the indexes. THE BEGINNING OF THE SEVENTH YEAR. THE
CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
A direct investment cannot be made in an index. Unless otherwise indicated, index YEAR AFTER PURCHASE. CLASS R SHARES DO NOT
results include reinvested dividends, and they do not reflect sales charges. HAVE A FRONT-END SALES CHARGE; RETURNS
Performance of an index of funds reflects fund expenses; performance of a market index SHOWN ARE AT NET ASSET VALUE AND DO NOT
does not. REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
======================================================================================= ON A TOTAL REDEMPTION OF RETIREMENT PLAN
ASSETS WITHIN THE FIRST YEAR. INVESTOR
CLASS R SHARES' INCEPTION DATE IS APRIL CLASS A SHARES FOR THE PERIOD USING CLASS SHARES DO NOT HAVE A FRONT-END SALES
30, 2004. RETURNS SINCE THAT DATE ARE BLENDED RETURNS. CLASS A SHARES' INCEPTION CHARGE OR A CDSC; THEREFORE, PERFORMANCE
HISTORICAL RETURNS. ALL OTHER RETURNS ARE DATE IS SEPTEMBER 28, 2001. IS AT NET ASSET VALUE.
BLENDED RETURNS OF HISTORICAL CLASS R
SHARE PERFORMANCE AND RESTATED CLASS A THE PERFORMANCE DATA QUOTED REPRESENT THE PERFORMANCE OF THE FUND'S SHARE
SHARE PERFORMANCE (FOR PERIODS PRIOR TO PAST PERFORMANCE AND CANNOT GUARANTEE CLASSES WILL DIFFER PRIMARILY DUE TO
THE INCEPTION DATE OF CLASS R SHARES) AT COMPARABLE FUTURE RESULTS; CURRENT DIFFERENT SALES CHARGE STRUCTURES AND
NET ASSET VALUE, ADJUSTED TO REFLECT THE PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CLASS EXPENSES.
HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS VISIT AIMINVESTMENTS.COM FOR THE MOST
R SHARES. CLASS A SHARES' INCEPTION DATE RECENT MONTH-END PERFORMANCE. PERFORMANCE
IS SEPTEMBER 28, 2001. FIGURES REFLECT REINVESTED DISTRIBUTIONS,
CHANGES IN NET ASSET VALUE AND THE EFFECT
INVESTOR CLASS SHARES' INCEPTION DATE OF THE MAXIMUM SALES CHARGE UNLESS
IS JULY 15, 2005. RETURNS SINCE THAT DATE OTHERWISE STATED. PERFORMANCE FIGURES DO
ARE HISTORICAL RETURNS. ALL OTHER RETURNS NOT REFLECT DEDUCTION OF TAXES A
ARE BLENDED RETURNS OF HISTORICAL INVESTOR SHAREHOLDER WOULD PAY ON FUND
CLASS SHARE PERFORMANCE AND RESTATED CLASS DISTRIBUTIONS OR SALE OF FUND SHARES.
A SHARE PERFORMANCE. (FOR PERIODS PRIOR TO INVESTMENT RETURN AND PRINCIPAL VALUE WILL
THE INCEPTION DATE OF INVESTOR CLASS FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR
SHARES) AT NET ASSET VALUE, WHICH RESTATED LOSS WHEN YOU SELL SHARES.
PERFORMANCE WILL REFLECT THE HIGHER RULE
12B-1 FEES APPLICABLE TO
3
AIM Basic Balanced Fund
PORTFOLIO COMPOSITION
By security type, based on Net Assets
As of June 30, 2007
<Table>
Common Stocks & Other Equity Interests 62.5%
- ---------------------------------------------------------
Bonds & Notes 25.3
- ---------------------------------------------------------
U.S. Mortgage-Backed Securities 13.8
- ---------------------------------------------------------
Asset-Backed Securities 3.2
- ---------------------------------------------------------
U.S. Government Agency Securities 1.0
- ---------------------------------------------------------
Commercial Paper 0.8
- ---------------------------------------------------------
Municipal Obligations 0.4
- ---------------------------------------------------------
Preferred Stocks 0.4
- ---------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities (7.4)
_________________________________________________________
=========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-62.46%
ADVERTISING-3.53%
Interpublic Group of Cos., Inc. (The)(a) 2,306,244 $ 26,291,182
- ---------------------------------------------------------------------------
Omnicom Group Inc. 502,594 26,597,274
===========================================================================
52,888,456
===========================================================================
AEROSPACE & DEFENSE-0.35%
Honeywell International Inc. 93,252 5,248,223
===========================================================================
APPAREL RETAIL-1.35%
Gap, Inc., (The) 1,058,705 20,221,265
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.22%
Bank of New York Mellon Corp. 442,966 18,356,511
===========================================================================
BREWERS-1.70%
Molson Coors Brewing Co.-Class B 275,945 25,513,875
===========================================================================
BROADCASTING & CABLE TV-0.00%
Citadel Broadcasting Corp. 1 5
===========================================================================
BUILDING PRODUCTS-0.75%
American Standard Cos., Inc. 189,964 11,204,077
===========================================================================
COMPUTER HARDWARE-2.58%
Dell Inc.(a) 1,355,013 38,685,621
===========================================================================
CONSTRUCTION MATERIALS-2.09%
Cemex S.A.B. de C.V.-ADR (Mexico)(a) 850,910 31,398,579
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.72%
First Data Corp. 523,163 17,091,735
- ---------------------------------------------------------------------------
Western Union Co. (The) 1,139,519 23,736,181
===========================================================================
40,827,916
===========================================================================
</Table>
<Table>
SHARES VALUE
- ---------------------------------------------------------------------------
<Caption>
EDUCATION SERVICES-1.76%
Apollo Group, Inc.-Class A(a) 451,656 $ 26,390,260
===========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.75%
Tyco Electronics Ltd.(a) 289,690 11,315,282
===========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.63%
Waste Management, Inc. 242,948 9,487,119
===========================================================================
GENERAL MERCHANDISE STORES-1.85%
Target Corp. 436,898 27,786,713
===========================================================================
HEALTH CARE DISTRIBUTORS-2.37%
Cardinal Health, Inc. 502,974 35,530,083
===========================================================================
HEALTH CARE EQUIPMENT-1.34%
Baxter International Inc. 246,882 13,909,332
- ---------------------------------------------------------------------------
Covidien Ltd.(a) 142,690 6,149,928
===========================================================================
20,059,260
===========================================================================
HOME IMPROVEMENT RETAIL-1.32%
Home Depot, Inc. (The) 501,622 19,738,826
===========================================================================
INDUSTRIAL CONGLOMERATES-2.70%
General Electric Co. 651,294 24,931,534
- ---------------------------------------------------------------------------
Tyco International Ltd. 289,690 15,550,546
===========================================================================
40,482,080
===========================================================================
</Table>
4
AIM Basic Balanced Fund
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
INDUSTRIAL MACHINERY-1.38%
Illinois Tool Works Inc. 382,418 $ 20,723,231
===========================================================================
INSURANCE BROKERS-0.43%
Marsh & McLennan Cos., Inc. 210,000 6,484,800
===========================================================================
INVESTMENT BANKING & BROKERAGE-2.14%
Merrill Lynch & Co., Inc. 156,862 13,110,526
- ---------------------------------------------------------------------------
Morgan Stanley 227,067 19,046,380
===========================================================================
32,156,906
===========================================================================
MANAGED HEALTH CARE-2.59%
UnitedHealth Group Inc. 758,728 38,801,350
===========================================================================
MOVIES & ENTERTAINMENT-1.44%
Walt Disney Co. (The) 632,102 21,579,962
===========================================================================
MULTI-LINE INSURANCE-1.16%
American International Group, Inc. 148,357 10,389,441
- ---------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 71,588 7,052,134
===========================================================================
17,441,575
===========================================================================
OIL & GAS DRILLING-2.01%
Transocean Inc.(a) 284,184 30,117,820
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-3.47%
Halliburton Co. 794,443 27,408,284
- ---------------------------------------------------------------------------
Schlumberger Ltd. 290,028 24,634,978
===========================================================================
52,043,262
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.97%
Citigroup Inc. 716,578 36,753,285
- ---------------------------------------------------------------------------
JPMorgan Chase & Co. 469,395 22,742,188
===========================================================================
59,495,473
===========================================================================
PACKAGED FOODS & MEATS-1.20%
Unilever N.V. (Netherlands)(b) 576,752 17,934,940
===========================================================================
PHARMACEUTICALS-4.50%
Pfizer Inc. 779,428 19,929,974
- ---------------------------------------------------------------------------
Sanofi-Aventis (France)(b) 257,970 20,830,744
- ---------------------------------------------------------------------------
Wyeth 464,790 26,651,059
===========================================================================
67,411,777
===========================================================================
PROPERTY & CASUALTY INSURANCE-0.96%
ACE Ltd. 229,067 14,321,269
===========================================================================
SEMICONDUCTOR EQUIPMENT-1.29%
KLA-Tencor Corp. 350,589 19,264,866
===========================================================================
SYSTEMS SOFTWARE-3.52%
CA Inc. 1,183,969 30,581,919
- ---------------------------------------------------------------------------
Microsoft Corp. 753,837 22,215,577
===========================================================================
52,797,496
===========================================================================
</Table>
<Table>
SHARES VALUE
- ---------------------------------------------------------------------------
<Caption>
THRIFTS & MORTGAGE FINANCE-2.16%
Fannie Mae 495,396 $ 32,364,221
===========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.23%
Sprint Nextel Corp. 892,944 18,492,870
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $670,056,458) 936,565,969
===========================================================================
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES-25.30%
AEROSPACE & DEFENSE-0.30%
Goodrich Corp., Unsec. Unsub. Notes, 6.45%,
04/15/08(c) $ 1,520,000 1,529,987
- ---------------------------------------------------------------------------
Systems 2001 Asset Trust LLC (United
Kingdom)-Series 2001, Class G, Pass Through
Ctfs., (INS-MBIA Insurance Corp.) 6.66%,
09/15/13 (Acquired 02/09/05-10/27/05; Cost
$3,147,111)(c)(d)(e) 2,857,404 2,963,799
===========================================================================
4,493,786
===========================================================================
AGRICULTURAL PRODUCTS-0.38%
Corn Products International Inc., Sr. Unsec.
Notes, 8.25%, 07/15/07(c) 5,665,000 5,668,739
===========================================================================
ALUMINUM-0.09%
Alcoa Inc., Sr. Unsec. Global Notes, 4.25%,
08/15/07(c) 281,000 280,587
- ---------------------------------------------------------------------------
Cordant Technologies Holding Co., Sr. Unsec.
Notes, 6.63%, 03/01/08(c) 1,000,000 1,005,390
===========================================================================
1,285,977
===========================================================================
APPAREL RETAIL-0.10%
Gap Inc. (The), Unsec. Notes, 6.90%,
09/15/07(c) 1,430,000 1,431,787
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.07%
Bank of New York Co. Inc. (The), Sr. Unsec.
Sub. Notes, 4.25%, 09/04/12(c)(f) 610,000 609,542
- ---------------------------------------------------------------------------
Tokai Preferred Capital Co. LLC-Series A,
Bonds, 9.98% (Acquired 01/29/07; Cost
$475,007)(c)(e)(f)(g) 450,000 468,630
===========================================================================
1,078,172
===========================================================================
AUTO PARTS & EQUIPMENT-0.03%
Johnson Controls, Inc., Sr. Floating Rate
Notes, 5.59%, 01/17/08(c) 500,000 500,656
===========================================================================
AUTOMOBILE MANUFACTURERS-0.49%
DaimlerChrysler N.A. Holding Corp., Unsec.
Gtd. Unsub. Global Notes, 4.05%,
06/04/08(c) 2,270,000 2,236,699
- ---------------------------------------------------------------------------
Unsec. Gtd. Unsub. Global Notes, 4.75%,
01/15/08(c) 440,000 438,064
- ---------------------------------------------------------------------------
-Series E, Unsec. Gtd. Unsub. Floating Rate
Medium Term Notes, 5.89%, 10/31/08(c)(f) 4,720,000 4,743,351
===========================================================================
7,418,114
===========================================================================
AUTOMOTIVE RETAIL-0.03%
AutoZone, Inc., Unsec. Deb., 6.50%,
07/15/08(c) 480,000 483,648
===========================================================================
</Table>
5
AIM Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
BIOTECHNOLOGY-0.17%
Amgen Inc.; Sr. Unsec. Notes,
5.85%, 06/01/17 (Acquired 05/24/07; Cost
$1,282,983)(c)(e) $ 1,285,000 $ 1,269,966
- ---------------------------------------------------------------------------
6.38%, 06/01/37 (Acquired 05/24/07; Cost
$1,283,625)(c)(e) 1,285,000 1,263,476
===========================================================================
2,533,442
===========================================================================
BROADCASTING & CABLE TV-1.53%
Clear Channel Communications Inc., Sr. Unsec.
Sub. Global Notes, 4.63%, 01/15/08(c) 4,000,000 3,972,480
- ---------------------------------------------------------------------------
Comcast Cable Communications Holdings Inc.,
Unsec. Gtd. Global Notes, 9.46%,
11/15/22(c) 3,135,000 4,005,151
- ---------------------------------------------------------------------------
Comcast Holdings Corp., Sr. Gtd. Sub. Notes,
10.63%, 07/15/12(c) 2,175,000 2,605,889
- ---------------------------------------------------------------------------
Cox Communications Inc.,
Sr. Unsec. Notes, 6.40%, 08/01/08(c) 1,300,000 1,310,920
- ---------------------------------------------------------------------------
Unsec. Floating Rate Global Notes,
5.91%, 12/14/07(c)(f) 625,000 626,319
- ---------------------------------------------------------------------------
Cox Enterprises, Inc.,
Notes, 4.38%, 05/01/08 (Acquired 04/25/07;
Cost $2,314,213)(c)(e) 2,340,000 2,317,185
- ---------------------------------------------------------------------------
Notes, 7.88%, 09/15/10 (Acquired 05/02/07;
Cost $692,162)(c)(e) 645,000 682,042
- ---------------------------------------------------------------------------
Hearst-Argyle Television Inc., Sr. Unsec.
Unsub. Notes, 7.00%, 11/15/07(c) 1,560,000 1,567,129
- ---------------------------------------------------------------------------
Time Warner Entertainment Co. L.P., Sr.
Unsec. Notes, 10.15%, 05/01/12(c) 4,970,000 5,849,491
===========================================================================
22,936,606
===========================================================================
BUILDING PRODUCTS-0.37%
American Standard Inc., Sr. Unsec. Gtd.
Notes, 7.38%, 02/01/08(c) 4,220,000 4,260,765
- ---------------------------------------------------------------------------
Masco Corp., Unsec. Notes, 4.63%, 08/15/07(c) 1,250,000 1,248,675
===========================================================================
5,509,440
===========================================================================
CASINOS & GAMING-0.14%
Verizon New York Inc., Unsec. Deb., 7.00%,
12/01/33(c) 2,070,000 2,065,115
===========================================================================
CONSUMER FINANCE-0.56%
Capital One Capital III, Jr. Gtd. Sub. Notes,
7.69%, 08/15/36(c) 900,000 932,625
- ---------------------------------------------------------------------------
Ford Motor Credit Co. LLC, Sr. Unsec. Notes,
4.95%, 01/15/08(c) 5,850,000 5,811,156
- ---------------------------------------------------------------------------
SLM Corp.-Series A, Medium Term Notes, 3.95%,
08/15/08(c) 1,630,000 1,593,912
===========================================================================
8,337,693
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.49%
Computer Sciences Corp., Notes, 3.50%,
04/15/08(c) 6,420,000 6,323,636
- ---------------------------------------------------------------------------
Fiserv Inc., Sr. Unsec. Global Notes, 3.00%,
06/27/08(c) 990,000 966,071
===========================================================================
7,289,707
===========================================================================
</Table>
<Table>
- ---------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
DEPARTMENT STORES-0.08%
JC Penney Corp. Inc.-Series A, Medium Term
Notes, 6.50%, 12/15/07(c) $ 500,000 $ 502,360
- ---------------------------------------------------------------------------
May Department Stores Co. (The),
Unsec. Global Notes, 3.95%, 07/15/07(c) 475,000 474,753
- ---------------------------------------------------------------------------
Unsec. Gtd. Deb.,
7.90%, 10/15/07(c) 155,000 155,970
===========================================================================
1,133,083
===========================================================================
DIVERSIFIED BANKS-1.82%
Bangkok Bank PCL (Hong Kong), Unsec. Sub.
Notes, 9.03%, 03/15/29 (Acquired 04/22/05;
Cost $1,471,124)(c)(e) 1,175,000 1,410,106
- ---------------------------------------------------------------------------
BankAmerica Institutional-Series A, Gtd.
Trust Pfd. Capital Securities, 8.07%,
12/31/26 (Acquired 09/26/06; Cost
$1,870,264)(c)(e) 1,790,000 1,869,458
- ---------------------------------------------------------------------------
Barclays Bank PLC (United Kingdom), Floating
Rate Global Notes, 4.85%, 08/08/07
(Acquired 04/06/06; Cost
$1,293,253)(c)(e)(f) 1,300,000 1,300,130
- ---------------------------------------------------------------------------
BBVA International Preferred S.A. Unipersonal
(Spain), Unsec. Gtd. Unsub. Notes, 5.92%
(Acquired 03/22/07; Cost
$790,000)(c)(e)(f)(g) 790,000 739,061
- ---------------------------------------------------------------------------
Calyon (France), Gtd. Floating Rate Medium
Term Notes, 5.38%, 02/11/08 (Acquired
04/02/07; Cost $1,293,500)(c)(e) 1,300,000 1,295,151
- ---------------------------------------------------------------------------
Centura Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.85%, 06/01/27
(Acquired 05/22/03; Cost $1,847,528)(c)(e) 1,460,000 1,521,130
- ---------------------------------------------------------------------------
First Union Institutional Capital I, Jr.
Unsec. Gtd. Sub. Trust Pfd. Bonds, 8.04%,
12/01/26(c) 540,000 563,744
- ---------------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)- Series
1, Unsec. Sub. Floating Rate Euro Notes,
5.63%(c)(f)(g) 4,010,000 3,529,137
- ---------------------------------------------------------------------------
Mizuho Financial Group Cayman Ltd. (Cayman
Islands), Gtd. Sub. Second Tier Euro Bonds,
8.38%(c)(g) 550,000 574,492
- ---------------------------------------------------------------------------
National Bank of Canada (Canada), Floating
Rate Euro Deb., 5.56%, 08/29/87(c)(f) 1,580,000 1,292,950
- ---------------------------------------------------------------------------
National Westminster Bank PLC (United
Kingdom)-Series B, Unsec. Sub. Floating
Rate Euro Notes, 5.63%(c)(f)(g) 1,150,000 994,198
- ---------------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Sub. Deb.,
8.25%, 11/01/24(c) 915,000 1,097,186
- ---------------------------------------------------------------------------
North Fork Bancorp., Inc., Unsec. Sub. Notes,
5.00%, 08/15/12(c)(f) 3,320,000 3,320,963
- ---------------------------------------------------------------------------
RBD Capital S.A. (Luxembourg), Euro Notes,
6.50%, 08/11/08(c) 1,220,000 1,227,648
- ---------------------------------------------------------------------------
RBS Capital Trust III, Jr. Gtd. Sub. Trust
Pfd. Global Notes, 5.51%(c)(f)(g) 1,140,000 1,096,589
- ---------------------------------------------------------------------------
Skandinaviska Enskilda Banken A.B. (Sweden),
Unsec. Sub. Notes, 7.50% (Acquired
02/02/07; Cost $933,453)(c)(e)(f)(g) 900,000 933,174
- ---------------------------------------------------------------------------
</Table>
6
AIM Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
DIVERSIFIED BANKS-(CONTINUED)
Sumitomo Mitsui Banking Corp. (Japan), Sub.
Second Tier Euro Notes, 8.15%(c)(g) $ 1,675,000 $ 1,719,953
- ---------------------------------------------------------------------------
VTB Capital S.A. (Russia), Sr. Floating Rate
Notes, 6.11%, 09/21/07 (Acquired 12/14/05;
Cost $2,850,000)(c)(e)(f) 2,850,000 2,851,908
===========================================================================
27,336,978
===========================================================================
DIVERSIFIED CHEMICALS-0.44%
Bayer Corp., Bonds, 6.20%, 02/15/08 (Acquired
08/01/06-05/24/07; Cost
$3,407,444)(c)(e)(f) 3,390,000 3,399,967
- ---------------------------------------------------------------------------
Dow Chemical Co. (The),
Sr. Unsec. Global Notes, 5.75%, 12/15/08(c) 1,800,000 1,808,352
- ---------------------------------------------------------------------------
Sr. Unsec. Medium Term Notes Notes,
4.80%, 08/15/07(c) 100,000 99,946
- ---------------------------------------------------------------------------
FMC Corp.-Series A, Medium Term Notes, 7.00%,
05/15/08(c) 440,000 444,563
- ---------------------------------------------------------------------------
Hercules Inc., Unsec. Deb., 6.60%,
08/01/27(c) 910,000 910,409
===========================================================================
6,663,237
===========================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-0.10%
Erac USA Finance Co., Bonds, 5.30%, 11/15/08
(Acquired 05/24/07; Cost $961,873)(c)(e) 965,000 959,538
- ---------------------------------------------------------------------------
Science Applications International Corp.,
Unsec. Notes, 6.75%, 02/01/08(c) 500,000 503,320
===========================================================================
1,462,858
===========================================================================
DIVERSIFIED METALS & MINING-0.07%
Reynolds Metals Co., Medium Term Notes,
7.00%, 05/15/09(c) 1,018,000 1,034,553
===========================================================================
DRUG RETAIL-0.04%
CVS Caremark Corp. Sr. Unsec. Global Notes,
3.88%, 11/01/07(c) 540,000 537,122
===========================================================================
ELECTRIC UTILITIES-0.47%
Carolina Power & Light Co., First Mortgage
Bonds, 6.80%, 08/15/07(c) 530,000 530,763
- ---------------------------------------------------------------------------
Duke Energy Indiana, Inc., Unsec. Deb.,
7.85%, 10/15/07(c) 1,045,000 1,051,521
- ---------------------------------------------------------------------------
Entergy Gulf States, Inc., Sec. First
Mortgage Bonds, 3.60%, 06/01/08(c) 1,420,000 1,394,809
- ---------------------------------------------------------------------------
Ohio Edison Co., Sr. Unsec. Global Notes,
4.00%, 05/01/08(c) 1,560,000 1,539,923
- ---------------------------------------------------------------------------
Pepco Holdings Inc., Unsec. Unsub. Global
Notes, 5.50%, 08/15/07(c) 2,547,000 2,547,280
===========================================================================
7,064,296
===========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.14%
Thomas & Betts Corp., Medium Term Notes,
6.63%, 05/07/08(c) 2,040,000 2,056,055
===========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.08%
Waste Management Inc., Sr. Unsec. Unsub.
Notes, 6.50%, 11/15/08(c) 1,265,000 1,279,231
===========================================================================
</Table>
<Table>
- ---------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
FOOD RETAIL-0.62%
Safeway Inc., Sr. Unsec. Notes, 4.80%,
07/16/07(c) $ 9,065,000 $ 9,063,006
- ---------------------------------------------------------------------------
7.00%, 09/15/07(c) 175,000 175,418
===========================================================================
9,238,424
===========================================================================
GAS UTILITIES-0.16%
CenterPoint Energy Resources Corp., Unsec.
Deb., 6.50%, 02/01/08(c) 785,000 789,168
- ---------------------------------------------------------------------------
National Fuel Gas Co.-Series D, Medium Term
Notes, 6.30%, 05/27/08(c) 575,000 579,077
- ---------------------------------------------------------------------------
Southern Union Co., Unsec. Unsub. Notes,
6.15%, 08/16/08(c) 1,065,000 1,071,252
===========================================================================
2,439,497
===========================================================================
GENERAL MERCHANDISE STORES-0.07%
Target Corp., Sr. Unsec. Notes, 5.38%,
05/01/17(c) 1,170,000 1,127,377
===========================================================================
HOMEBUILDING-0.08%
DR Horton Inc. Sr. Unsec. Gtd. Notes, 5.00%,
01/15/09(c) 1,280,000 1,261,184
===========================================================================
HOTELS, RESORTS & CRUISE LINES-0.03%
Carnival Corp., Sr. Unsec. Gtd. Global Notes,
3.75%, 11/15/07(c) 385,000 382,575
===========================================================================
HOUSEHOLD APPLIANCES-0.02%
Whirlpool Corp. Deb., 9.10%, 02/01/08(c) 250,000 254,623
===========================================================================
HOUSEWARES & SPECIALTIES-0.04%
Newell Rubbermaid Inc.-Series A, Unsec.
Unsub. Putable Medium Term Notes, 6.35%,
07/15/08(c)(f) 660,000 665,953
===========================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-0.33%
TXU Energy Co. LLC, Sr. Unsec. Floating Rate
Notes, 5.86%, 09/16/08 (Acquired 03/13/07;
Cost $4,880,000)(c)(e)(f) 4,880,000 4,882,279
===========================================================================
INDUSTRIAL MACHINERY-0.08%
IDEX Corp., Sr. Unsec. Notes, 6.88%,
02/15/08(c) 1,140,000 1,148,846
===========================================================================
INDUSTRIAL REIT'S-0.14%
AMB Property L.P., Sr. Unsec. Gtd. Sub.
Notes, 7.10%, 06/30/08(c) 1,750,000 1,775,462
- ---------------------------------------------------------------------------
ProLogis, Sr. Unsec. Notes, 7.10%,
04/15/08(c) 340,000 343,941
===========================================================================
2,119,403
===========================================================================
INSURANCE BROKERS-0.35%
Marsh & McLennan Cos., Inc., Unsec. Global
Bonds, 3.63%, 02/15/08(c) 5,295,000 5,233,419
===========================================================================
INTEGRATED OIL & GAS-0.55%
ConocoPhillips, Unsec. Deb., 7.13%,
03/15/28(c) 1,100,000 1,130,613
- ---------------------------------------------------------------------------
Husky Oil Ltd. (Canada), Unsec. Sub. Yankee
Bonds, 8.90%, 08/15/28(c)(f) 6,944,000 7,178,360
===========================================================================
8,308,973
===========================================================================
</Table>
7
AIM Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES-1.03%
Southwestern Bell Telephone L.P., Unsec.
Unsub. Deb., 7.20%, 10/15/26(c) $ 1,926,000 $ 1,988,518
- ---------------------------------------------------------------------------
Telecom Italia Capital S.A. (Italy), Unsec.
Gtd. Unsub. Global Notes, 4.00%,
11/15/08(c) 9,812,000 9,625,965
- ---------------------------------------------------------------------------
Verizon Communications Inc., Sr. Unsec.
Notes, 6.25%, 04/01/37(c) 1,110,000 1,080,374
- ---------------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Unsec. Global
Deb., 4.63%, 03/15/13(c) 2,870,000 2,693,093
===========================================================================
15,387,950
===========================================================================
INTERNET RETAIL-0.07%
Expedia, Inc., Sr. Unsec. Gtd. Putable Global
Notes, 7.46%, 08/15/13(c) 1,065,000 1,065,671
===========================================================================
INVESTMENT BANKING & BROKERAGE-0.58%
Jefferies Group, Inc.,
Sr. Unsec. Deb., 5.88%, 06/08/14(c) 4,060,000 4,031,621
- ---------------------------------------------------------------------------
Sr. Unsec. Notes, 6.45%, 06/08/27(c) 900,000 890,523
- ---------------------------------------------------------------------------
-Series B, Sr. Unsec. Notes, 7.50%,
08/15/07(c) 555,000 556,088
- ---------------------------------------------------------------------------
Lazard Group, Sr. Unsec. Notes, 6.85%,
06/15/17 (Acquired 06/18/07; Cost
$1,266,215)(c)(e) 1,270,000 1,272,083
- ---------------------------------------------------------------------------
Merrill Lynch & Co. Inc.-Series C, Sr. Unsec.
Floating Rate Medium Term Notes, 5.69%,
07/21/09(c)(f) 760,000 760,015
- ---------------------------------------------------------------------------
SB Treasury Co. LLC, Bond, 9.40% (Acquired
06/29/07; Cost $1,263,554)(c)(e)(f)(g) 1,220,000 1,262,163
===========================================================================
8,772,493
===========================================================================
LEISURE FACILITIES-0.07%
International Speedway Corp. Unsec. Global
Notes, 4.20%, 04/15/09(c) 1,135,000 1,109,417
===========================================================================
LEISURE PRODUCTS-0.05%
Hasbro Inc., Sr. Unsec. Notes, 6.15%,
07/15/08(c) 690,000 691,207
===========================================================================
LIFE & HEALTH INSURANCE-0.41%
John Hancock Financial Services Inc., Sr.
Notes, 5.63%, 12/01/08(c) 250,000 250,925
- ---------------------------------------------------------------------------
Prudential Holdings, LLC-Series B, Bonds,
(INS-Financial Security Assurance Inc.)
7.25%, 12/18/23 (Acquired
01/22/04-02/17/06; Cost
$6,129,407)(c)(d)(e) 5,220,000 5,843,425
===========================================================================
6,094,350
===========================================================================
MANAGED HEALTH CARE-0.05%
Wellpoint Inc., Unsec. Unsub. Notes, 3.50%,
09/01/07(c) 730,000 727,365
===========================================================================
MORTGAGE REIT'S-0.14%
iStar Financial Inc.,
Sr. Notes, 7.00%, 03/15/08(c) 680,000 690,493
- ---------------------------------------------------------------------------
Sr. Unsec. Notes, 8.75%, 08/15/08(c) 1,430,000 1,478,105
===========================================================================
2,168,598
===========================================================================
</Table>
<Table>
- ---------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
MOVIES & ENTERTAINMENT-0.21%
Historic TW Inc., Notes, 8.18%, 08/15/07(c) $ 3,000,000 $ 3,008,640
- ---------------------------------------------------------------------------
News America Inc., Sr. Global Notes, 6.63%,
01/09/08(c) 134,000 134,793
===========================================================================
3,143,433
===========================================================================
MULTI-LINE INSURANCE-0.14%
American General Finance Corp.-Series H, Sr.
Unsec. Medium Term Notes, 4.50%,
11/15/07(c) 250,000 249,172
- ---------------------------------------------------------------------------
Unitrin Inc., Sr. Unsec. Notes, 5.75%,
07/01/07(c) 1,900,000 1,900,000
===========================================================================
2,149,172
===========================================================================
MULTI-UTILITIES-1.30%
Centerpoint Energy Inc.-Series B, Sr. Unsec.
Global Notes, 5.88%, 06/01/08(c) 300,000 300,897
- ---------------------------------------------------------------------------
Consumers Energy Co.-Series A, Sr. Sec.
Global Notes, 6.38%, 02/01/08(c) 2,370,000 2,381,092
- ---------------------------------------------------------------------------
Dominion Capital Trust I, Jr. Unsec. Gtd.
Trust Pfd. Capital Securities, 7.83%,
12/01/27(c) 2,490,000 2,596,423
- ---------------------------------------------------------------------------
Dominion Resources, Inc.,
Notes, 4.13%, 02/15/08(c) 525,000 520,600
- ---------------------------------------------------------------------------
-Series D, Sr. Floating Rate Notes,
5.66%, 09/28/07(c)(f) 1,390,000 1,390,443
- ---------------------------------------------------------------------------
DTE Energy Co., Sr. Unsec. Notes, 5.63%,
08/16/07(c) 525,000 525,089
- ---------------------------------------------------------------------------
Midamerica Energy Holdings Co., Sr. Unsec.
Notes, 7.63%, 10/15/07(c) 858,000 862,848
- ---------------------------------------------------------------------------
7.52%, 09/15/08(c) 1,395,000 1,426,890
- ---------------------------------------------------------------------------
PSEG Funding Trust I, Notes, 5.38%,
11/16/07(c) 4,265,000 4,262,825
- ---------------------------------------------------------------------------
Public Service Co of New Mexico, Sr. Unsec.
Notes, 4.40%, 09/15/08(c) 615,000 606,863
- ---------------------------------------------------------------------------
Tampa Electric Co., Unsec. Unsub. Notes,
5.38%, 08/15/07(c) 3,850,000 3,849,615
- ---------------------------------------------------------------------------
TE Products Pipeline Co., Sr. Unsec. Notes,
6.45%, 01/15/08(c) 510,000 512,116
- ---------------------------------------------------------------------------
Xcel Energy Inc., Sr. Global Notes, 3.40%,
07/01/08(c) 250,000 244,955
===========================================================================
19,480,656
===========================================================================
OFFICE SERVICES & SUPPLIES-0.07%
Avery Dennison Corp., Floating Rate Notes,
5.59%, 08/10/07(c)(f) 1,055,000 1,055,084
===========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.10%
Pemex Project Funding Master Trust (Mexico),
Unsec. Gtd. Unsub. Global Notes, 8.63%,
02/01/22(c) 1,250,000 1,528,062
===========================================================================
OIL & GAS REFINING & MARKETING-0.11%
Premcor Refining Group Inc. (The), Sr. Unsec.
Global Notes, 9.50%, 02/01/13(c) 1,545,000 1,648,546
===========================================================================
</Table>
8
AIM Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
OIL & GAS STORAGE & TRANSPORTATION-0.19%
Enterprise Products Operating L.P.-Series B,
Sr. Unsec. Gtd. Unsub. Global Notes, 4.00%,
10/15/07(c) $ 2,830,000 $ 2,818,369
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.91%
BankAmerica Capital II-Series 2, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities,
8.00%, 12/15/26(c) 1,420,000 1,482,011
- ---------------------------------------------------------------------------
BankAmerica Capital III, Gtd. Floating Rate
Trust Pfd. Capital Securities, 5.93%,
01/15/27(c)(f) 2,210,000 2,153,471
- ---------------------------------------------------------------------------
Capmark Financial Group Inc. Sr. Unsec. Gtd.
Floating Rate Notes, 6.01%, 05/10/10
(Acquired 05/03/07; Cost
$3,710,000)(c)(e)(f) 3,710,000 3,712,189
- ---------------------------------------------------------------------------
Countrywide Home Loans, Inc.-Series L, Medium
Term Global Notes, 3.25%, 05/21/08(c) 2,500,000 2,449,375
- ---------------------------------------------------------------------------
General Electric Capital Corp., Unsec.
Floating Rate Putable Deb., 5.34%,
09/01/10(c)(f) 1,000,000 988,973
- ---------------------------------------------------------------------------
Mantis Reef Ltd. (Cayman Islands), Notes,
4.69%, 11/14/08 (Acquired
08/11/06-05/23/07; Cost $4,438,836)(c)(e) 4,525,000 4,455,948
- ---------------------------------------------------------------------------
Mizuho JGB Investment LLC-Series A, Sub.
Bonds, 9.87% (Acquired 06/16/04-07/28/05;
Cost $6,664,804)(c)(e)(f)(g) 5,890,000 6,133,434
- ---------------------------------------------------------------------------
NB Capital Trust IV, Gtd. Sub. Trust Pfd.
Capital Securities, 8.25%, 04/15/27(c) 3,140,000 3,273,764
- ---------------------------------------------------------------------------
Pemex Finance Ltd. (Mexico)-Series 1999-2,
Class A1, Global Bonds, (INS-MBIA Insurance
Corp.) 9.69%, 08/15/09(c) 4,653,000 4,847,077
- ---------------------------------------------------------------------------
Regional Diversified Funding (Cayman
Islands),
Sr. Notes, 9.25%, 03/15/30 (Acquired
09/22/04; Cost $3,504,605)(c)(e) 2,962,222 3,255,986
- ---------------------------------------------------------------------------
Class A-1a, Sr. Floating Rate Notes,
5.69%, 01/25/36 (Acquired 03/21/05; Cost
$685,890)(c)(e)(f)(h) 723,406 721,869
- ---------------------------------------------------------------------------
Residential Capital LLC, Sr. Unsec. Gtd.
Floating Rate Notes, 5.86%, 06/09/08(c)(f) 2,375,000 2,352,082
- ---------------------------------------------------------------------------
Suncorp-Metway Ltd. (Australia), Notes,
3.50%, 06/15/13 (Acquired 03/13/07; Cost
$2,484,704)(c)(e)(f) 2,540,000 2,499,792
- ---------------------------------------------------------------------------
Twin Reefs Pass-Through Trust, Floating Rate
Pass Through Ctfs., 6.32% (Acquired
12/07/04-10/23/06; Cost
$1,609,000)(c)(e)(f)(g) 1,610,000 1,615,176
- ---------------------------------------------------------------------------
Two-Rock Pass-Through Trust (Bermuda),
Floating Rate Pass Through Ctfs., 6.30%
(Acquired 11/10/06; Cost
$1,596,882)(c)(e)(f)(g) 1,595,000 1,571,474
- ---------------------------------------------------------------------------
UFJ Finance Aruba AEC (Japan), Gtd. Sub.
Second Tier Euro Bonds, 8.75%(c)(g) 1,020,000 1,060,998
- ---------------------------------------------------------------------------
Windsor Financing LLC, Sr. Gtd. Notes, 5.88%,
07/15/17 (Acquired 02/07/06; Cost
$1,030,556)(c)(e) 1,030,556 1,005,184
===========================================================================
43,578,803
===========================================================================
</Table>
<Table>
- ---------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
PACKAGED FOODS & MEATS-0.63%
Heinz (H.J.) Co., Notes, 6.43%, 12/01/08
(Acquired 05/30/07; Cost $8,193,231)(c)(e) $ 8,100,000 $ 8,198,091
- ---------------------------------------------------------------------------
Sara Lee Corp.-Series C, Medium Term Notes,
6.00%, 01/15/08(c) 1,190,000 1,192,761
===========================================================================
9,390,852
===========================================================================
PAPER PACKAGING-0.20%
Sealed Air Corp., Sr. Unsec. Notes, 5.38%,
04/15/08 (Acquired 05/18/07-05/21/07; Cost
$3,003,906)(c)(e) 3,010,000 3,007,562
===========================================================================
PAPER PRODUCTS-0.05%
Union Camp Corp., Notes, 6.50%, 11/15/07(c) 800,000 802,600
===========================================================================
PROPERTY & CASUALTY INSURANCE-2.24%
Allstate Corp. (The) Jr. Sub. Global Deb.,
6.13%, 05/15/37(c)(f) 540,000 521,511
- ---------------------------------------------------------------------------
6.50%, 05/15/57(c)(f) 360,000 343,130
- ---------------------------------------------------------------------------
Chubb Corp., Sr. Unsec. Notes, 5.47%,
08/16/08(c) 990,000 991,297
- ---------------------------------------------------------------------------
CNA Financial Corp., Sr. Unsec. Notes,
6.45%, 01/15/08(c) 3,275,000 3,289,115
- ---------------------------------------------------------------------------
6.60%, 12/15/08(c) 8,272,000 8,394,591
- ---------------------------------------------------------------------------
First American Capital Trust I, Gtd. Trust
Pfd. Capital Securities, 8.50%, 04/15/12(c) 4,705,000 5,123,463
- ---------------------------------------------------------------------------
North Front Pass-Through Trust, Pass-Through
Ctfs. Bonds, 5.81%, 12/15/24 (Acquired
12/08/04; Cost $2,369,940)(c)(e)(f) 2,350,000 2,325,842
- ---------------------------------------------------------------------------
Oil Casualty Insurance Ltd. (Bermuda), Unsec.
Sub. Deb., 8.00%, 09/15/34 (Acquired
04/29/05-06/09/05; Cost $3,737,949)(c)(e) 3,495,000 3,364,951
- ---------------------------------------------------------------------------
Oil Insurance Ltd., Notes, 7.56% (Acquired
06/15/06; Cost $6,280,000)(c)(e)(f)(g) 6,280,000 6,480,772
- ---------------------------------------------------------------------------
QBE Capital Funding II L.P. (Australia), Gtd.
Sub. Bonds, 6.80% (Acquired 04/25/07; Cost
$350,000)(c)(e)(f)(g) 350,000 340,571
- ---------------------------------------------------------------------------
Safeco Capital Trust I, Gtd. Trust Pfd.
Capital Securities, 8.07%, 07/15/37(c) 2,270,000 2,363,047
===========================================================================
33,538,290
===========================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.04%
Chelsea GCA Realty Partnership L.P., Unsec.
Unsub. Notes, 7.25%, 10/21/07(c) 150,000 150,724
- ---------------------------------------------------------------------------
Realogy Corp., Sr. Floating Rate Notes,
7.06%, 10/20/09 (Acquired 10/13/06; Cost
$495,000)(c)(e)(f) 495,000 491,831
===========================================================================
642,555
===========================================================================
REGIONAL BANKS-1.48%
Cullen/Frost Capital Trust I, Jr. Unsec. Gtd.
Floating Rate Notes, 6.91%, 03/01/34(c)(f) 4,050,000 4,139,059
- ---------------------------------------------------------------------------
Greater Bay Bancorp-Series B, Sr. Notes,
5.25%, 03/31/08(c) 975,000 969,755
- ---------------------------------------------------------------------------
</Table>
9
AIM Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
REGIONAL BANKS-(CONTINUED)
National City Corp. Sr. Unsec. Notes, 3.20%,
04/01/08(c) $ 500,000 $ 492,350
- ---------------------------------------------------------------------------
PNC Capital Trust C, Gtd. Floating Rate Trust
Pfd. Capital Securities, 5.93%,
06/01/28(c)(f) 1,175,000 1,135,720
- ---------------------------------------------------------------------------
Popular North America Inc., Gtd. Notes,
4.25%, 04/01/08(c) 605,000 596,627
- ---------------------------------------------------------------------------
Silicon Valley Bank, Unsec. Sub. Notes,
6.05%, 06/01/17(c) 2,020,000 1,974,691
- ---------------------------------------------------------------------------
TCF National Bank, Sub. Notes, 5.00%,
06/15/14(c)(f) 1,500,000 1,477,560
- ---------------------------------------------------------------------------
US AgBank FCB-Series 1, Notes, 6.11%
(Acquired 03/15/07; Cost
$1,405,000)(c)(e)(f)(g)(h) 1,405,000 1,387,747
- ---------------------------------------------------------------------------
Western Financial Bank, Unsec. Sub. Deb.,
9.63%, 05/15/12(c) 9,365,000 10,083,576
===========================================================================
22,257,085
===========================================================================
REINSURANCE-0.18%
Stingray Pass-Through Trust, Pass Through
Ctfs., 5.90%, 01/12/15 (Acquired
01/07/05-11/03/05; Cost $2,747,640)(c)(e) 2,800,000 2,637,544
===========================================================================
RESIDENTIAL REIT'S-0.04%
AvalonBay Communities Inc., Sr. Medium Term
Notes, 8.25%, 07/15/08(c) 550,000 564,779
===========================================================================
RESTAURANTS-0.14%
Yum! Brands Inc. Sr. Unsec. Notes, 7.65%,
05/15/08(c) 2,090,000 2,125,467
===========================================================================
RETAIL REIT'S-0.11%
National Retail Properties Inc., Sr. Unsec.
Notes, 7.13%, 03/15/08(c) 1,360,000 1,374,443
- ---------------------------------------------------------------------------
Simon Property Group L.P., Unsec. Unsub.
Notes, 6.38%, 11/15/07(c) 100,000 100,274
- ---------------------------------------------------------------------------
Tanger Properties L.P., Sr. Unsec. Gtd.
Notes, 9.13%, 02/15/08(c) 215,000 219,360
===========================================================================
1,694,077
===========================================================================
SPECIALIZED REIT'S-0.43%
Health Care Property Investors, Inc.,
Sr. Sec. Floating Rate Medium Term Notes,
5.81%, 09/15/08(c)(f) 2,540,000 2,541,173
- ---------------------------------------------------------------------------
Sr. Sec. Medium Term Notes,
6.30%, 09/15/16(c) 2,020,000 2,020,344
- ---------------------------------------------------------------------------
Health Care REIT, Inc., Sr. Notes, 5.88%,
05/15/15(c) 1,905,000 1,857,832
===========================================================================
6,419,349
===========================================================================
SPECIALTY CHEMICALS-0.12%
ICI Wilmington Inc., Gtd. Notes, 7.05%,
09/15/07(c) 880,000 881,355
- ---------------------------------------------------------------------------
Valspar Corp. (The), Sr. Unsec. Unsub. Notes,
5.63%, 05/01/12(c) 500,000 494,530
- ---------------------------------------------------------------------------
6.05%, 05/01/17(c) 500,000 491,700
===========================================================================
1,867,585
===========================================================================
</Table>
<Table>
- ---------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
THRIFTS & MORTGAGE FINANCE-0.25%
Countrywide Financial Corp. Gtd. Global
Medium Term Notes, 5.80%, 06/07/12(c) $ 1,740,000 $ 1,735,424
- ---------------------------------------------------------------------------
Countrywide Home Loans, Inc.-Series E, Gtd.
Medium Term Notes, 6.94%, 07/16/07(c) 1,580,000 1,580,600
- ---------------------------------------------------------------------------
PMI Group Inc. (The), Sr. Unsec. Notes,
5.57%, 11/15/08(c) 415,000 414,639
===========================================================================
3,730,663
===========================================================================
TOBACCO-0.25%
Altria Group, Inc., Unsec. Notes, 7.65%,
07/01/08(c) 3,646,000 3,716,441
===========================================================================
TRADING COMPANIES & DISTRIBUTORS-0.06%
Western Power Distribution Holdings Ltd.
(United Kingdom), Unsec. Unsub. Notes,
7.38%, 12/15/28 (Acquired 01/25/05; Cost
$1,008,342)(c)(e) 900,000 958,419
===========================================================================
TRUCKING-0.44%
Roadway Corp., Sr. Sec. Gtd. Global Notes,
8.25%, 12/01/08(c) 4,077,000 4,207,709
- ---------------------------------------------------------------------------
Stagecoach Transport Holdings PLC (United
Kingdom), Unsec. Unsub. Yankee Notes,
8.63%, 11/15/09(c) 2,300,000 2,447,361
===========================================================================
6,655,070
===========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.75%
Alamosa Delaware Inc., Sr. Gtd. Global Notes,
8.50%, 01/31/12(c) 3,550,000 3,746,102
- ---------------------------------------------------------------------------
Nextel Communications, Inc.-Series D, Sr.
Gtd. Notes, 7.38%, 08/01/15(c) 530,000 532,560
- ---------------------------------------------------------------------------
Sprint Capital Corp., Sr. Unsec. Gtd. Global
Notes, 6.13%, 11/15/08(c) 2,480,000 2,496,318
- ---------------------------------------------------------------------------
Sprint Nextel Corp., Deb., 9.25%, 04/15/22(c) 2,900,000 3,335,087
- ---------------------------------------------------------------------------
Vodafone Group PLC (United Kingdom),
Unsec. Global Bonds,
6.15%, 02/27/37(c) 480,000 448,440
- ---------------------------------------------------------------------------
Unsec. Global Notes,
5.63%, 02/27/17(c) 720,000 690,408
===========================================================================
11,248,915
===========================================================================
Total Bonds & Notes (Cost $387,494,153) 379,339,277
===========================================================================
</Table>
10
AIM Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
U.S. MORTGAGE-BACKED SECURITIES-13.79%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-3.37%
Federal Home Loan Mortgage Corp.,
Pass Through Ctfs.,
5.50%, 05/01/13 to 02/01/37(c) $ 2,193,220 $ 2,151,320
- ---------------------------------------------------------------------------
7.00%, 06/01/15 to 06/01/32(c) 3,984,714 4,119,759
- ---------------------------------------------------------------------------
6.50%, 01/01/16 to 01/01/35(c) 2,616,251 2,651,880
- ---------------------------------------------------------------------------
6.00%, 03/01/17 to 01/01/34(c) 4,687,092 4,701,501
- ---------------------------------------------------------------------------
4.50%, 10/01/18(c) 253,090 241,315
- ---------------------------------------------------------------------------
8.00%, 01/01/27(c) 647,885 682,602
- ---------------------------------------------------------------------------
7.50%, 11/01/30 to 03/01/32(c) 344,683 359,819
- ---------------------------------------------------------------------------
5.00%, 10/01/33(c) 250,712 236,275
- ---------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 07/01/37(c)(i) 13,082,000 12,262,334
- ---------------------------------------------------------------------------
5.50%, 07/01/37(c)(i) 5,000,000 4,822,658
- ---------------------------------------------------------------------------
6.50%, 09/01/37(c)(i) 18,183,000 18,350,629
===========================================================================
50,580,092
===========================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-9.02%
Federal National Mortgage Association,
Pass Through Ctfs.,
8.50%, 03/01/10 to 01/01/23(c) 116,620 123,576
- ---------------------------------------------------------------------------
6.50%, 04/01/14 to 01/01/37(c) 2,678,833 2,735,656
- ---------------------------------------------------------------------------
7.50%, 11/01/15 to 05/01/32(c) 2,454,531 2,581,408
- ---------------------------------------------------------------------------
7.00%, 12/01/15 to 09/01/32(c) 2,536,001 2,623,650
- ---------------------------------------------------------------------------
5.00%, 11/01/17 to 11/01/18(c) 1,796,549 1,743,079
- ---------------------------------------------------------------------------
5.50%, 07/01/19 to 10/01/34(c) 9,542,790 9,295,650
- ---------------------------------------------------------------------------
8.00%, 08/01/21 to 10/01/30(c) 535,261 564,665
- ---------------------------------------------------------------------------
6.00%, 03/01/22 to 03/01/37(c) 180,139 178,192
- ---------------------------------------------------------------------------
8.50%, 10/01/28(c) 1,066,072(j) 1,141,313
- ---------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.50%, 07/01/22 to 07/01/37(c)(i) 31,614,000 30,799,599
- ---------------------------------------------------------------------------
6.00%, 07/01/22 to 07/01/37(c)(i) 51,464,000 51,309,068
- ---------------------------------------------------------------------------
6.50%, 07/01/37(c)(i) 18,628,000 18,805,553
- ---------------------------------------------------------------------------
7.00%, 07/01/37(c)(i) 12,914,000 13,261,064
===========================================================================
135,162,473
===========================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-1.40%
Government National Mortgage Association
Pass Through Ctfs.,
6.50%, 10/15/08 to 04/15/37(c) 4,737,420 4,822,410
- ---------------------------------------------------------------------------
7.00%, 10/15/08 to 06/15/37(c) 3,232,296 3,345,450
- ---------------------------------------------------------------------------
</Table>
<Table>
- ---------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-(CONTINUED)
Government National Mortgage Association,
Pass Through Ctfs.,
6.00%, 11/15/08 to 10/15/33(c) $ 6,429,761 $ 6,419,075
- ---------------------------------------------------------------------------
5.00%, 03/15/18(c) 1,440,476 1,399,912
- ---------------------------------------------------------------------------
8.00%, 08/15/22 to 01/20/31(c) 401,094 424,576
- ---------------------------------------------------------------------------
7.50%, 06/15/23 to 05/15/32(c) 928,131 971,757
- ---------------------------------------------------------------------------
8.50%, 11/15/24 to 02/15/25(c) 99,707 107,726
- ---------------------------------------------------------------------------
5.50%, 12/15/31 to 05/15/35(c) 3,573,261 3,475,300
===========================================================================
20,966,206
===========================================================================
Total U.S. Mortgage-Backed Securities
(Cost $208,312,051) 206,708,771
===========================================================================
ASSET-BACKED SECURITIES-3.19%
COLLATERALIZED MORTGAGE OBLIGATIONS-2.07%
Accredited Mortgage Loan Trust-Series 2003-3,
Class A3, Floating Rate Pass Through Ctfs.,
5.70%, 01/25/34(c)(f) 279,871 280,175
- ---------------------------------------------------------------------------
Banc of America Mortgage Securities Inc.-
Series 2003-D, Class 2AI, Floating Rate
Pass Through Ctfs., 4.18%, 05/25/33(c)(f) 1,036,054 1,025,200
- ---------------------------------------------------------------------------
Capital One Multi-Asset Execution Trust-
Series 2003-B4, Class B4, Floating Rate
Pass Through Ctfs., 6.12%, 07/15/11(c)(f) 2,230,000 2,248,363
- ---------------------------------------------------------------------------
Countrywide Asset-Backed Ctfs.-Series 2004-6,
Class 2A5, Floating Rate Pass Through
Ctfs., 5.71%, 11/25/34(c)(f) 434,323 436,848
- ---------------------------------------------------------------------------
Countrywide Home Loans-Series 2004-HYB7,
Class 1A2, Pass Through Ctfs., 4.70%,
11/20/34(c)(f) 1,064,477 1,055,518
- ---------------------------------------------------------------------------
Credit Suisse First Boston Mortgage
Securities Corp.,
-Series 2004-AR3, Class 5A1, Pass Through
Ctfs., 4.72%, 04/25/34(c)(f) 1,052,406 1,040,379
- ---------------------------------------------------------------------------
-Series 2004-AR7, Class 2A1, Pass Through
Ctfs., 4.65%, 11/25/34(c)(f) 1,170,171 1,158,270
- ---------------------------------------------------------------------------
-Series 2004-C4, Class A6, Pass Through
Ctfs., 4.69%, 10/15/39(c) 2,850,000 2,676,927
- ---------------------------------------------------------------------------
Federal Home Loan Bank (FHLB)- Series
TQ-2015, Class A, Pass Through Ctfs.,
5.07%, 10/20/15(c) 2,339,701 2,288,017
- ---------------------------------------------------------------------------
GSR Mortgage Loan Trust-Series 2004-5, Class
2A1, Pass Through Ctfs., 4.49%,
05/25/34(c)(f) 659,834 648,734
- ---------------------------------------------------------------------------
Master Asset Securitization Trust-Series
2003-8, Class 1A1, Pass Through Ctfs.,
5.50%, 09/25/33(c) 2,687,144 2,575,880
- ---------------------------------------------------------------------------
MLCC Mortgage Investors, Inc.-Series 2003-G,
Class A1, Floating Rate Pass Through Ctfs.,
5.64%, 01/25/29(c)(f) 878,868 879,698
- ---------------------------------------------------------------------------
Morgan Stanley Mortgage Loan Trust- Series
2004-6AR, Class 2A2, Pass Through Ctfs.,
5.06%, 08/25/34(c)(f) 833,066 830,069
- ---------------------------------------------------------------------------
</Table>
11
AIM Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS-(CONTINUED)
Nomura Asset Acceptance Corp.-Series
2005-AR1, Class 2A1, Floating Rate Pass
Through Ctfs., 5.60%, 02/25/35(c)(f) $ 205,353 $ 205,708
- ---------------------------------------------------------------------------
Option One Mortgage Securities Corp. NIM
Trust-Series 2007-4A, Floating Rate Notes,
5.42%, 04/25/12 (Acquired 05/11/07; Cost
$1,964,812)(e)(f) 1,964,812 1,964,812
- ---------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc.-
Series 2003-RS2, Class AII, Floating Rate
Pass Through Ctfs., 5.66%, 03/25/33(c)(f) 220,530 220,760
- ---------------------------------------------------------------------------
Specialty Underwriting & Residential Finance-
Series 2003-BC3, Class A, Floating Rate
Pass Through Ctfs., 5.67%, 08/25/34(c)(f) 8,370 8,385
- ---------------------------------------------------------------------------
Structured Adjustable Rate Mortgage Loan
Trust, -Series 2004-3AC, Class A1, Floating
Rate Pass Through Ctfs., 4.94%,
01/25/34(c)(f) 1,116,448 1,109,082
- ---------------------------------------------------------------------------
-Series 2005-1, Class 1A1, Pass Through
Ctfs., 5.12%, 02/25/35(c)(f) 692,458 696,178
- ---------------------------------------------------------------------------
Structured Asset Securities Corp.,- Series
2003-37A, Class 7A, Pass Through Ctfs.,
7.16%, 12/25/33(c)(f) 474,783 485,166
- ---------------------------------------------------------------------------
-Series 2004-2AC, Class A1, Floating Rate
Pass Through Ctfs., 5.03%, 02/25/34(c)(f) 2,206,281 2,190,888
- ---------------------------------------------------------------------------
Structured Asset Securities Corp.- Series
2007-OSI, Floating Rate Pass Through Ctfs.,
5.41%, 06/25/37(c)(f) 2,711,239 2,713,135
- ---------------------------------------------------------------------------
US Bank N.A. Sr. Medium Term Notes, 5.92%,
05/25/12(c) 3,175,000 3,190,008
- ---------------------------------------------------------------------------
Vanderbilt Mortgage Finance-Series 2002-B,
Class A4, Pass Through Ctfs., 5.84%,
02/07/26(c) 1,175,000 1,172,579
===========================================================================
31,100,779
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.12%
Citicorp Lease Pass-Through Trust- Series
1999-1, Class A2, Pass Through Ctfs.,
8.04%, 12/15/19 (Acquired
06/01/00-01/26/06; Cost $6,733,854)(c)(e) 6,085,000 6,954,529
- ---------------------------------------------------------------------------
LILACS Repackaging 2005-I-Series A, Sr. Sec.
Notes, 5.14%, 01/15/64 (Acquired 07/14/05;
Cost $4,406,005)(e)(h) 4,406,005 4,193,371
- ---------------------------------------------------------------------------
Patrons' Legacy 2003-III-LILACS-III-Series A,
Ctfs., 5.65%, 04/17/18 (Acquired 11/04/04;
Cost $2,436,069)(e)(h) 2,375,703 2,291,864
- ---------------------------------------------------------------------------
Patrons' Legacy, 2004-1-LILACS-1-Series A,
Ctfs., 6.67%, 05/04/18 (Acquired
04/30/04-07/14/05; Cost $3,445,376)(e)(h) 3,402,778 3,318,304
===========================================================================
16,758,068
===========================================================================
Total Asset-Backed Securities (Cost
$44,271,005) 47,858,847
===========================================================================
</Table>
<Table>
- ---------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT AGENCY SECURITIES-1.06%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-0.80%
Unsec. Floating Rate Global Notes, 3.92%,
02/17/09(c)(f) $ 3,860,000 $ 3,768,209
- ---------------------------------------------------------------------------
Unsec. Notes,
5.30%, 01/12/10(c) 1,730,000 1,731,159
- ---------------------------------------------------------------------------
6.25%, 03/29/22(c) 6,550,000 6,449,392
===========================================================================
11,948,760
===========================================================================
STUDENT LOAN MARKETING ASSOCIATION-0.26%
Medium Term Notes, 5.05%,11/14/14(c) 1,230,000 1,024,873
- ---------------------------------------------------------------------------
Series A Medium Term Notes, 3.63%,
03/17/08(c) 1,380,000 1,358,665
- ---------------------------------------------------------------------------
Unsec. Unsub. Floating Rate Medium Term
Notes, 5.42%, 12/15/08(c) 1,520,000 1,493,689
===========================================================================
3,877,227
===========================================================================
Total U.S. Government Agency Securities
(Cost $16,080,341) 15,825,987
===========================================================================
COMMERCIAL PAPER-0.78%
BROADCASTING & CABLE TV-0.34%
Cox Communications Inc., Floating Rate
Commercial Paper, 5.62%, 08/15/07 (Acquired
11/06/06; Cost $5,030,000)(c)(e)(f) 5,030,000 5,030,357
===========================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-0.31%
PHH Corp. Disc. Commercial Paper, 5.63%,
07/18/07(k) 4,700,000 4,686,770
===========================================================================
MULTI-UTILITIES-0.13%
Puget Sound Energy, Inc. Disc. Commercial
Paper, 5.54%, 07/10/07(k) 2,000,000 1,996,614
===========================================================================
Total Commercial Paper (Cost $11,714,530) 11,713,741
===========================================================================
MUNICIPAL OBLIGATIONS-0.46%
Detroit (City of), Michigan; Series 2005 A-1,
Taxable Capital Improvement Limited Tax GO
(INS-Ambac Assurance Corp.),
4.96%, 04/01/20(c)(d) 1,550,000 1,438,199
- ---------------------------------------------------------------------------
Series 2005, Taxable COP (INS-Financial
Guaranty Insurance Co.), 4.95%,
06/15/25(c)(d) 1,920,000 1,711,181
- ---------------------------------------------------------------------------
Indianapolis (City of), Indiana Local Public
Improvement Bond Bank; Series 2005 A,
Taxable RB, 5.22%, 07/15/20(c) 1,100,000 1,045,099
- ---------------------------------------------------------------------------
5.28%, 01/15/22(c) 600,000 567,948
- ---------------------------------------------------------------------------
Industry (City of), California Urban
Development Agency (Project 3); Series
2003, Taxable Allocation RB, (INS-MBIA
Insurance Corp.) 6.10%, 05/01/24(c)(d) 2,060,000 2,102,992
===========================================================================
Total Municipal Obligations (Cost
$7,277,585) 6,865,419
===========================================================================
</Table>
12
AIM Basic Balanced Fund
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
PREFERRED STOCKS-0.38%
LIFE & HEALTH INSURANCE-0.13%
Aegon N.V., 6.38% Pfd. (Netherlands) 79,800 $ 1,943,928
===========================================================================
SPECIALIZED FINANCE-0.10%
Agfirst Farm Credit Bank-Class B, Pfd., 6.59%
(Acquired 06/05/07; Cost
$1,485,000)(c)(e)(f) 1,485,000 1,491,965
===========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.15%
Telephone & Data Systems, Inc.-Series A,
7.60% Pfd. 93,000 2,278,500
===========================================================================
Total Preferred Stocks (Cost $5,863,125) 5,714,393
===========================================================================
</Table>
<Table>
- ---------------------------------------------------------------------------
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
MONEY MARKET FUNDS-1.51%
Liquid Assets Portfolio-Institutional
Class(l) 11,337,502 $ 11,337,502
- ---------------------------------------------------------------------------
Premier Portfolio-Institutional Class(l) 11,337,502 11,337,502
===========================================================================
Total Money Market Funds (Cost
$22,675,004) 22,675,004
===========================================================================
TOTAL INVESTMENTS-108.93% (Cost
$1,373,744,252) 1,633,267,408
===========================================================================
OTHER ASSETS LESS LIABILITIES-(8.93)% (133,874,619)
===========================================================================
NET ASSETS-100.00% $1,499,392,789
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
COP - Certificates of Participation
Ctfs. - Certificates
Deb. - Debentures
Disc. - Discounted
GO - General Obligation Bonds
Gtd. - Guaranteed
INS - Insurer
LILACS - Life Insurance and Life Annuities Based Certificates
Pfd. - Preferred
RB - Revenue Bonds
REGS - Regulation S
REIT - Real Estate Investment Trust
Sec. - Secured.
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(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 June 30, 2007 was $38,765,684, which
represented 2.59% of the Fund's Net Assets. See Note 1A.
(c) 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 June 30, 2007
was $651,352,272, which represented 43.44% of the Fund's Net Assets. See
Note 1A.
(d) Principal and/or interest payments are secured by the bond insurance company
listed.
(e) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold 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 June 30, 2007 was $117,914,255,
which represented 7.86% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(f) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on June 30, 2007.
(g) Perpetual bond with no specified maturity date.
(h) 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 June 30, 2007 was
$11,913,155, which represented 0.79% of the Fund's Net Assets.
(i) Security purchased on forward commitment basis. This security is subject to
dollar roll transactions. See Note 1I.
(j) 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.
(k) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at the time of purchase by the Fund.
(l) 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.
13
AIM Basic Balanced Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $1,351,069,248) $1,610,592,404
- ------------------------------------------------------------
Investments in affiliated money market funds
(Cost $22,675,004) 22,675,004
============================================================
Total investments (Cost $1,373,744,252) 1,633,267,408
============================================================
Foreign currencies, at value (Cost $7,484) 7,565
- ------------------------------------------------------------
Receivables for:
Investments sold 93,104,373
- ------------------------------------------------------------
Variation margin 670,081
- ------------------------------------------------------------
Fund shares sold 1,192,833
- ------------------------------------------------------------
Dividends and Interest 7,821,534
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 463,291
============================================================
Total assets 1,736,527,085
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 219,936,053
- ------------------------------------------------------------
Fund shares reacquired 14,506,367
- ------------------------------------------------------------
Amount due custodian 488,632
- ------------------------------------------------------------
Trustee deferred compensation and
retirement plans 664,928
- ------------------------------------------------------------
Accrued distribution fees 602,307
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 7,431
- ------------------------------------------------------------
Accrued transfer agent fees 709,222
- ------------------------------------------------------------
Accrued operating expenses 219,356
============================================================
Total liabilities 237,134,296
============================================================
Net assets applicable to shares outstanding $1,499,392,789
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,762,268,665
- ------------------------------------------------------------
Undistributed net investment income (2,729,672)
- ------------------------------------------------------------
Undistributed net realized gain (loss) (519,320,600)
- ------------------------------------------------------------
Unrealized appreciation 259,174,396
============================================================
$1,499,392,789
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 764,743,719
____________________________________________________________
============================================================
Class B $ 303,863,178
____________________________________________________________
============================================================
Class C $ 152,707,802
____________________________________________________________
============================================================
Class R $ 7,646,167
____________________________________________________________
============================================================
Investor Class $ 270,048,838
____________________________________________________________
============================================================
Institutional Class $ 383,085
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 55,045,036
____________________________________________________________
============================================================
Class B 21,923,418
____________________________________________________________
============================================================
Class C 11,008,863
____________________________________________________________
============================================================
Class R 550,779
____________________________________________________________
============================================================
Investor Class 19,441,815
____________________________________________________________
============================================================
Institutional Class 27,610
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 13.89
- ------------------------------------------------------------
Offering price per share
(Net asset value of $13.89 divided by
94.50%) $ 14.70
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 13.86
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 13.87
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 13.88
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 13.89
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 13.87
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
14
AIM Basic Balanced Fund
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $15,001,872
- -------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $176,288) 8,229,545
- -------------------------------------------------------------------------
Dividends from affiliated money market funds 1,052,488
=========================================================================
Total investment income 24,283,905
=========================================================================
EXPENSES:
Advisory fees 3,967,171
- -------------------------------------------------------------------------
Administrative services fees 199,424
- -------------------------------------------------------------------------
Custodian fees 50,431
- -------------------------------------------------------------------------
Distribution fees:
Class A 958,014
- -------------------------------------------------------------------------
Class B 1,652,457
- -------------------------------------------------------------------------
Class C 784,029
- -------------------------------------------------------------------------
Class R 18,466
- -------------------------------------------------------------------------
Investor Class 351,107
- -------------------------------------------------------------------------
Transfer agent fees -- A, B, C, R and Investor 1,693,727
- -------------------------------------------------------------------------
Transfer agent fees -- Institutional 135
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 31,742
- -------------------------------------------------------------------------
Other 278,115
=========================================================================
Total expenses 9,984,818
=========================================================================
Less: Fee waived and expense offset arrangements (64,034)
=========================================================================
Net expenses 9,920,784
=========================================================================
Net investment income 14,363,121
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains from securities
sold to affiliates of $4,547,754) 82,521,869
- -------------------------------------------------------------------------
Foreign currencies 8,538
- -------------------------------------------------------------------------
Futures contracts (1,875,745)
- -------------------------------------------------------------------------
Swap Agreements (10,667)
=========================================================================
80,643,995
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (7,502,472)
- -------------------------------------------------------------------------
Foreign currencies 7,131
- -------------------------------------------------------------------------
Futures contracts 547,598
- -------------------------------------------------------------------------
Swap agreements 19,925
=========================================================================
(6,927,818)
=========================================================================
Net realized and unrealized gain 73,716,177
=========================================================================
Net increase in net assets resulting from operations $88,079,298
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
15
AIM Basic Balanced Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- -----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 14,363,121 $ 28,303,189
- -----------------------------------------------------------------------------------------------
Net realized gain 80,643,995 94,967,335
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (6,927,818) 41,153,333
===============================================================================================
Net increase in net assets resulting from operations 88,079,298 164,423,857
===============================================================================================
Distributions to shareholders from net investment income:
Class A (8,416,794) (17,077,479)
- -----------------------------------------------------------------------------------------------
Class B (2,330,832) (6,054,999)
- -----------------------------------------------------------------------------------------------
Class C (1,123,713) (2,530,825)
- -----------------------------------------------------------------------------------------------
Class R (72,628) (131,080)
- -----------------------------------------------------------------------------------------------
Investor Class (3,086,697) (6,589,651)
- -----------------------------------------------------------------------------------------------
Institutional Class (4,416) (2,846)
===============================================================================================
Decrease in net assets resulting from distributions (15,035,080) (32,386,880)
===============================================================================================
Share transactions-net:
Class A (59,634,205) (91,768,660)
- -----------------------------------------------------------------------------------------------
Class B (70,423,188) (190,334,691)
- -----------------------------------------------------------------------------------------------
Class C (18,353,499) (43,939,203)
- -----------------------------------------------------------------------------------------------
Class R 9,632 51,923
- -----------------------------------------------------------------------------------------------
Investor Class (31,722,880) (79,282,144)
- -----------------------------------------------------------------------------------------------
Institutional Class 221,301 106,661
===============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (179,902,839) (405,166,114)
===============================================================================================
Net increase (decrease) in net assets (106,858,621) (273,129,137)
===============================================================================================
NET ASSETS:
Beginning of period 1,606,251,410 1,879,380,547
===============================================================================================
End of period (including undistributed net investment
income of $(2,729,672) and $(2,057,713), respectively) $1,499,392,789 $1,606,251,410
_______________________________________________________________________________________________
===============================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware statutory trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of seven separate portfolios,
each authorized to issue an unlimited number of shares of beneficial interest.
The Fund currently consists of multiple classes of shares. Matters affecting
each portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund.
The Fund's primary investment objective is long-term growth of capital and
current income.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
Debt obligations (including convertible bonds) and unlisted equities 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, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
16
AIM Basic Balanced Fund
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
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. 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 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 open-end and closed-end registered
investment companies that trade on an exchange are valued at the 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.
Swap agreements are fair valued using an evaluated quote provided by an
independent pricing service. Evaluated quotes provided by the pricing
service are valued based on a model which may include end of day net
present values, spreads, ratings, industry, and company performance.
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. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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.
Valuations change in response to many factors including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions and market
liquidity.
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.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
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
17
AIM Basic Balanced Fund
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 and paid quarterly
and are recorded on ex-dividend date. 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. DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll transactions
with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, the Fund sells a mortgage-backed security
held in the Fund to a financial institution such as a bank or
broker-dealer, and simultaneously agrees to purchase a substantially
similar security (same type, coupon and maturity) from the institution at
an agreed upon price and future date. The mortgage-backed securities to be
purchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different
prepayment histories. Based on the typical structure of dollar roll
transactions by the Fund, the dollar roll transactions are accounted for as
financing transactions in which the Fund receives compensation as either a
"fee" or a "drop". "Fee" income which is agreed upon amongst the parties at
the commencement of the dollar roll and the "drop" which is the difference
between the selling price and the repurchase price of the mortgage-backed
securities are amortized to income. During the period between the sale and
purchase settlement dates, the Fund will not be entitled to receive
interest and principal payments on securities purchased and not yet
settled. Proceeds of the sale may be invested in short-term instruments,
and the income from these investments, together with any additional fee
income received on the sale, could generate income for the Fund exceeding
the yield on the security sold. Dollar roll transactions are considered
borrowings under the 1940 Act. At the time the Fund enters into the dollar
roll, it will segregate liquid assets having a dollar value equal to the
purchase price.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the
securities that the Fund has sold but is obligated to purchase under the
agreement. In the event that the buyer of securities in a dollar roll
transaction files for bankruptcy or becomes insolvent, the Fund's use of
the proceeds from the sale of the securities may be restricted pending a
determination by the other party, or its trustee or receiver, whether to
enforce the Fund's obligation to purchase the securities. The return earned
by the Fund with the proceeds of the dollar roll transaction may not exceed
the return on the securities sold.
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.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
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
18
AIM Basic Balanced Fund
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. Fluctuations in the value of these contracts are recorded as
unrealized appreciation (depreciation) until the contracts are closed. When
these contracts are closed, realized gains (losses) are recorded. 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.
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. COVERED CALL OPTIONS WRITTEN -- The Fund may write call options, including
options on futures. 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. 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.
An option on a futures contract gives the holder the right to receive a
cash "exercise settlement amount" equal to the difference between the
exercise price of the option and the value of the underlying futures
contract on the exercise date. The value of a futures contract fluctuates
with changes in the market values of the securities underlying the futures
contract. In writing futures contract options, the principal risk is that
the Fund could bear a loss on the options that would be only partially
offset (or not offset at all) by the increased value or reduced cost of
underlying portfolio securities. Risks may exceed amounts recognized in the
Statement of Assets and Liabilities.
N. PUT OPTIONS PURCHASED AND WRITTEN -- The Fund may purchase and write put
options including options on securities indexes and/or futures contracts.
By purchasing a put option, the Fund obtains the right (but not the
obligation) to sell the option's underlying instrument at a fixed strike
price. In return for this right, the Fund pays an option premium. The
option's underlying instrument may be a security, securities index, or a
futures contract. Put options may be used by the Fund to hedge securities
it owns by locking in a minimum price at which the Fund can sell. If
security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the
maximum the Fund has at risk is the cost of the option, purchasing put
options does not eliminate the potential for the Fund to profit from an
increase in the value of the underlying portfolio securities. The Fund may
write put options to earn additional income in the form of option premiums
if it expects the price of the underlying instrument to remain stable or
rise during the option period so that the option will not be exercised. The
risk in this strategy is that the price of the underlying securities may
decline by an amount greater than the premium received. Put options written
are reported as a liability in the Statement of Assets and Liabilities.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. A risk in buying an option is that the Fund
pays a premium whether or not the option is exercised. In addition, there
can be no assurance that a liquid secondary market will exist for any
option purchased.
O. 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
19
AIM Basic Balanced Fund
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.
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.
P. 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 $150 million 0.65%
- --------------------------------------------------------------------
Next $1.85 billion 0.50%
- --------------------------------------------------------------------
Next $2 billion 0.45%
- --------------------------------------------------------------------
Next $2 billion 0.40%
- --------------------------------------------------------------------
Next $2 billion 0.375%
- --------------------------------------------------------------------
Over $8 billion 0.35%
___________________________________________________________________
====================================================================
</Table>
Effective July 1, 2007, AIM has contractually agreed through at least June
30, 2008 to waive 100% of the advisory fee AIM receives from the affiliated
money market funds on investments by the Fund in such affiliated money market
funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive 25% of the
advisory fee AIM receives from the affiliated money market funds on investments
by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $6,880.
At the request of the Trustees of the Trust, INVESCO PLC ("INVESCO")
(formerly "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. These
expenses along with the related expense reimbursement are included in the
Statement of Operations. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM for certain administrative
costs incurred in providing accounting services, to the Fund. For the six months
ended June 30, 2007, expenses incurred under the agreement are shown in the
Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
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 six months ended June 30,
2007, expenses incurred under the agreement are shown in the Statement of
Operations as transfer agent fees.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C, Class R, Investor Class and Institutional Class shares of the Fund. The
Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect
to the Fund's Class A, Class B, Class C, Class R and Investor Class shares
(collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Class A shares, 1.00% of the average daily net assets of Class B and Class C
shares and 0.50% of the average daily net assets of Class R shares. The Fund,
pursuant to the Investor Class Plan, reimburses ADI for its allocated share of
expenses incurred pursuant to the Investor Class Plan for the period, up to a
maximum annual rate of 0.25% of the average daily net assets of Investor Class
shares. Of the Plan payments, up to 0.25% of the average daily net assets of
each class of shares may be paid to furnish continuing personal shareholder
services to customers who purchase and own shares of such classes. Any amounts
not paid as a service fee under the Plans would constitute an asset-based sales
charge. National Association of Securities Dealers ("NASD") Rules also impose a
cap on the total sales charges, including asset-based sales charges that may be
paid by any class of shares of the Fund. For the six months ended June 30, 2007,
expenses incurred under the Plans are shown in the Statement of Operations as
distribution fees.
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 six
months ended June 30, 2007, ADI advised the Fund that it
20
AIM Basic Balanced Fund
retained $56,853 in front-end sales commissions from the sale of Class A shares
and $344, $114,264, $3,782 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 six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- --------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $21,896,097 $189,626,385 $(200,184,980) $11,337,502 $ 527,562
- --------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 21,896,097 189,626,385 (200,184,980) 11,337,502 524,926
==================================================================================================
Total
Investments
in
Affiliates $43,792,194 $379,252,770 $(400,369,960) $22,675,004 $1,052,488
__________________________________________________________________________________________________
==================================================================================================
</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 six months ended June 30, 2007, the Fund
engaged in securities sales of $15,120,715, which resulted in net realized gains
of $4,547,754, and securities purchases of $554,208.
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 used to offset custodian fees. For the six months ended
June 30, 2007, the Fund received credits from these arrangements, which resulted
in the reduction of the Fund's total expenses of $57,154.
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 certain Trustees and Officers of the Fund. 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, certain 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 six months ended June 30, 2007, the Fund paid legal fees of
$5,308 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 participates 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.
21
AIM Basic Balanced Fund
During the six months ended June 30, 2007, 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--FUTURES CONTRACTS
On June 30, 2007, $1,066,072 principal amount of U.S. Mortgage-Backed
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 06/30/07 (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 417 Sept-07/Long $ 43,400,578 $ 45,894
- ----------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 909 Sept-07/Long 96,084,141 (613,042)
- ----------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Long Bonds 154 Sept-07/Long 16,593,500 178,905
============================================================================================================================
$156,078,219 $(388,243)
============================================================================================================================
U.S. Treasury 2 Year Notes 63 Sept-07/Short $(12,838,219) $ 30,374
============================================================================================================================
Total Futures Contracts $143,240,000 $(357,869)
____________________________________________________________________________________________________________________________
============================================================================================================================
</Table>
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
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 had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2007 $ 20,533,696
- -----------------------------------------------------------------------------
December 31, 2008 35,503,936
- -----------------------------------------------------------------------------
December 31, 2009 533,892,842
=============================================================================
Total capital loss carryforward $589,930,474
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code. To
the extent that unrealized gains as of July 18, 2005, the date of the
reorganization of AIM Total Return Fund and AIM Balanced Fund into the Fund,
are realized on securities held in each fund at such date, the capital loss
carryforward may be further limited for up to five years from the date of the
reorganization.
22
AIM Basic Balanced Fund
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 six months ended June 30, 2007 was $389,696,787 and
$571,444,380, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $271,533,718
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (22,525,421)
==============================================================================
Net unrealized appreciation of investment securities $249,008,297
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $1,384,259,111.
</Table>
NOTE 11--SHARE INFORMATION
The Fund currently consists of six different classes of shares: Class A, Class
B, Class C, Class R, Investor Class and Institutional 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 and under certain circumstances load waiver shares may be
subject to a CDSC. Class B shares and Class C shares are sold with a CDSC. Class
R shares, Investor Class and Institutional Class shares are sold at net asset
value. Under certain circumstances, Class R shares are subject to a 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
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(A) DECEMBER 31, 2006
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,367,089 $ 32,133,112 5,554,775 $ 69,877,462
- --------------------------------------------------------------------------------------------------------------------------
Class B 630,648 8,528,373 1,642,616 20,562,209
- --------------------------------------------------------------------------------------------------------------------------
Class C 443,012 6,005,192 1,035,649 12,980,241
- --------------------------------------------------------------------------------------------------------------------------
Class R 73,927 1,001,730 174,775 2,202,980
- --------------------------------------------------------------------------------------------------------------------------
Investor Class 832,851 11,314,901 2,076,711 26,090,526
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 21,638 293,092 8,219 104,034
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 585,444 7,957,884 1,288,017 16,206,328
- --------------------------------------------------------------------------------------------------------------------------
Class B 161,111 2,184,146 452,214 5,660,842
- --------------------------------------------------------------------------------------------------------------------------
Class C 75,520 1,025,216 186,996 2,344,394
- --------------------------------------------------------------------------------------------------------------------------
Class R 5,344 72,628 10,412 131,078
- --------------------------------------------------------------------------------------------------------------------------
Investor Class 218,536 2,970,841 508,154 6,386,710
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 305 4,152 224 2,846
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 2,552,230 34,722,085 6,798,647 85,418,117
- --------------------------------------------------------------------------------------------------------------------------
Class B (2,559,546) (34,722,085) (6,818,504) (85,418,117)
==========================================================================================================================
Reacquired:
Class A (9,892,700) (134,447,286) (20,956,438) (263,270,567)
- --------------------------------------------------------------------------------------------------------------------------
Class B (3,424,351) (46,413,622) (10,471,166) (131,139,625)
- --------------------------------------------------------------------------------------------------------------------------
Class C (1,870,814) (25,383,907) (4,726,936) (59,263,838)
- --------------------------------------------------------------------------------------------------------------------------
Class R (78,974) (1,064,726) (180,764) (2,282,135)
- --------------------------------------------------------------------------------------------------------------------------
Investor Class (3,375,076) (46,008,622) (8,910,860) (111,759,380)
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class (5,522) (75,943) (17) (219)
==========================================================================================================================
(13,239,328) $(179,902,839) (32,327,276) $(405,166,114)
__________________________________________________________________________________________________________________________
==========================================================================================================================
</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 8% 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.
23
AIM Basic Balanced Fund
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. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
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
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.26 $ 12.25 $ 11.86 $ 11.50 $ 9.46 $ 10.75
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a) 0.24(a) 0.16 0.08 0.05 0.11(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.64 1.05 0.41 0.71 2.05 (1.28)
=================================================================================================================================
Total from investment operations 0.78 1.29 0.57 0.79 2.10 (1.17)
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.15) (0.28) (0.18) (0.10) (0.06) (0.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.33) -- --
=================================================================================================================================
Total distributions (0.15) (0.28) (0.18) (0.43) (0.06) (0.12)
=================================================================================================================================
Net asset value, end of period $ 13.89 $ 13.26 $ 12.25 $ 11.86 $ 11.50 $ 9.46
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.92% 10.67% 4.85% 6.89% 22.35% (10.97)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $764,744 $788,003 $817,588 $68,951 $53,675 $32,414
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.06%(c) 1.14% 1.14% 1.47% 1.50% 1.48%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.06%(c) 1.14% 1.14% 1.49% 1.57% 1.67%
=================================================================================================================================
Ratio of net investment income to average net
assets 2.10%(c) 1.93% 1.59% 0.73% 0.46% 1.15%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 26% 38% 90% 64% 51% 42%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</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 annualized and based on average daily net assets of
$772,762,766.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
24
AIM Basic Balanced Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.23 $ 12.22 $ 11.84 $ 11.49 $ 9.46 $ 10.75
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09(a) 0.15(a) 0.08 0.01 (0.02) 0.05(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.64 1.04 0.40 0.69 2.06 (1.29)
=================================================================================================================================
Total from investment operations 0.73 1.19 0.48 0.70 2.04 (1.24)
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.10) (0.18) (0.10) (0.02) (0.01) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.33) -- --
=================================================================================================================================
Total distributions (0.10) (0.18) (0.10) (0.35) (0.01) (0.05)
=================================================================================================================================
Net asset value, end of period $ 13.86 $ 13.23 $ 12.22 $ 11.84 $ 11.49 $ 9.46
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.53% 9.86% 4.04% 6.12% 21.64% (11.56)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $303,863 $358,655 $517,032 $79,968 $76,304 $47,597
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.81%(c) 1.89% 1.88% 2.12% 2.15% 2.13%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.81%(c) 1.89% 1.88% 2.14% 2.22% 2.32%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets 1.35%(c) 1.18% 0.85% 0.08% (0.19)% 0.50%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 26% 38% 90% 64% 51% 42%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</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 annualized and based on average daily net assets of
$333,230,255.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.24 $ 12.23 $ 11.85 $ 11.49 $ 9.46 $ 10.75
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09(a) 0.15(a) 0.08 0.01 (0.02) 0.05(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.64 1.04 0.40 0.70 2.06 (1.29)
=================================================================================================================================
Total from investment operations 0.73 1.19 0.48 0.71 2.04 (1.24)
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.10) (0.18) (0.10) (0.02) (0.01) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.33) -- --
=================================================================================================================================
Total distributions (0.10) (0.18) (0.10) (0.35) (0.01) (0.05)
=================================================================================================================================
Net asset value, end of period $ 13.87 $ 13.24 $ 12.23 $ 11.85 $ 11.49 $ 9.46
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.52% 9.86% 4.04% 6.21% 21.64% (11.57)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $152,708 $163,630 $194,027 $27,729 $24,790 $15,727
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.81%(c) 1.89% 1.88% 2.12% 2.15% 2.13%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.81%(c) 1.89% 1.88% 2.14% 2.22% 2.32%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets 1.35%(c) 1.18% 0.85% 0.08% (0.19)% 0.50%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 26% 38% 90% 64% 51% 42%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</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 annualized and based on average daily net assets of
$158,105,322.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
25
AIM Basic Balanced Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS R
---------------------------------------------------
APRIL 30, 2004
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ---------------- DECEMBER 31,
2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.25 $12.24 $11.87 $ 11.61
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.12(a) 0.21(a) 0.13 0.05
- -----------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.64 1.05 0.40 0.60
=================================================================================================================
Total from investment operations 0.76 1.26 0.53 0.65
=================================================================================================================
Less distributions:
Dividends from net investment income (0.13) (0.25) (0.16) (0.06)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.33)
=================================================================================================================
Total distributions (0.13) (0.25) (0.16) (0.39)
=================================================================================================================
Net asset value, end of period $ 13.88 $13.25 $12.24 $ 11.87
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 5.79% 10.40% 4.47% 5.68%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 7,646 $7,293 $6,684 $ 19
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.31%(c) 1.39% 1.38% 1.62%(d)
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.31%(c) 1.39% 1.38% 1.64%(d)
=================================================================================================================
Ratio of net investment income to average net assets 1.85%(c) 1.68% 1.35% 0.58%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 26% 38% 90% 64%
_________________________________________________________________________________________________________________
=================================================================================================================
</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 annualized and based on average daily net assets of
$7,447,772.
(d) Annualized
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
INVESTOR CLASS
----------------------------------------------
JULY 15, 2005
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
JUNE 30, DECEMBER 31, DECEMBER 31,
2007 2006 2005
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.26 $ 12.25 $ 11.97
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a) 0.24(a) 0.09
- ------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.64 1.05 0.30
============================================================================================================
Total from investment operations 0.78 1.29 0.39
============================================================================================================
Less dividends from net investment income (0.15) (0.28) (0.11)
============================================================================================================
Net asset value, end of period $ 13.89 $ 13.26 $ 12.25
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 5.92% 10.67% 3.28%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $270,049 $288,522 $344,015
============================================================================================================
Ratio of expenses to average net assets 1.06%(c) 1.14% 1.10%(d)
============================================================================================================
Ratio of net investment income to average net assets 2.10%(c) 1.93% 1.63%(d)
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate(e) 26% 38% 90%
____________________________________________________________________________________________________________
============================================================================================================
</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 annualized and based on average daily net assets of
$283,213,157.
(d) Annualized
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
26
AIM Basic Balanced Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
---------------------------------------------------
APRIL 30, 2004
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ---------------- DECEMBER 31,
2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.25 $12.24 $11.86 $ 11.61
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.17(a) 0.30(a) 0.22 0.10
- -----------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.63 1.05 0.40 0.61
=================================================================================================================
Total from investment operations 0.80 1.35 0.62 0.71
=================================================================================================================
Less distributions:
Dividends from net investment income (0.18) (0.34) (0.24) (0.13)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.33)
=================================================================================================================
Total distributions (0.18) (0.34) (0.24) (0.46)
=================================================================================================================
Net asset value, end of period $ 13.87 $13.25 $12.24 $ 11.86
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) 6.07% 11.22% 5.28% 6.15%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 383 $ 149 $ 34 $ 11
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.69%(c) 0.68% 0.67% 0.93%(d)
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.69%(c) 0.68% 0.67% 0.95%(d)
=================================================================================================================
Ratio of net investment income to average net assets 2.47%(c) 2.39% 2.06% 1.27%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 26% 38% 90% 64%
_________________________________________________________________________________________________________________
=================================================================================================================
</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 annualized and based on average daily net assets of $259,818.
(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 July 6, 2007, the Securities and Exchange Commission ("SEC") published notice
of two proposed distribution plans ("Distribution Plans") for the distribution
of monies placed into two separate Fair Funds created pursuant to a settlement
reached on October 8, 2004 between Invesco Funds Group, Inc. ("IFG"), A I M
Advisors, Inc. ("AIM") and A I M Distributors, Inc. and the SEC (the "Order").
One of the Fair Funds consists of $325 million, plus interest and any
contributions by other settling parties, for distribution to shareholders of
certain mutual funds formerly advised by IFG who may have been harmed by market
timing and related activity. The second Fair Fund consists of $50 million, plus
interest and any contributions by other settling parties, for distribution to
shareholders of mutual funds advised by AIM who may have been harmed by market
timing and related activity. Comments on the Distribution Plans are due no later
than August 6, 2007. After such comment period, the Distribution Plans will be
submitted to the SEC for final approval. Distributions from the Fair Funds will
begin after the SEC finally approves the Distribution Plans. The proposed
Distribution Plans provide for distribution to all eligible investors, for the
periods spanning January 1, 2000 through July 31, 2003 (for the IFG Fair Fund)
and January 1, 2001 through September 30, 2003 (for the AIM Fair Fund), their
proportionate share of the applicable Fair Fund to compensate such investors for
injury they may have suffered as a result of market timing in the affected
funds. The Distribution Plans include a provision for any residual amounts in
the Fair Funds to be distributed in the future to the affected funds. Because
the Distribution Plans have not received final approval from the SEC and
distribution of the Fair Funds has not yet commenced, management of AIM and the
Fund are unable to estimate the amount of distribution to be made to the Fund,
if any.
At the request of the trustees of the AIM Funds, INVESCO PLC ("INVESCO")
(formerly AMVESCAP PLC), 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
27
AIM Basic Balanced Fund
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
and an "administrative assessment," to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. By agreement with the Commissioner of Securities, AIM's time to respond
to that Order has been indefinitely suspended.
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; 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.
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 INVESCO'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 INVESCO 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.
28
AIM BASIC BALANCED FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE You may use the information in this table, expenses you paid for the period. You may
together with the amount you invested, to use this information to compare the
As a shareholder of the Fund, you incur estimate the expenses that you paid over ongoing costs of investing in the Fund and
two types of costs: (1) transaction costs, the period. Simply divide your account other funds. To do so, compare this 5%
which may include sales charges (loads) on value by $1,000 (for example, an $8,600 hypothetical example with the 5%
purchase payments; contingent deferred account value divided by $1,000 = 8.6), hypothetical examples that appear in the
sales charges on redemptions, and then multiply the result by the number in shareholder reports of the other funds.
redemption fees, if any; and (2) ongoing the table under the heading entitled
costs, including management fees; "Actual Expenses Paid During Period" to Please note that the expenses shown in
distribution and/or service (12b-1) fees; estimate the expenses you paid on your the table are meant to highlight your
and other Fund expenses. This example is account during this period. ongoing costs only and do not reflect any
intended to help you understand your transaction costs, such as sales charges
ongoing costs (in dollars) of investing in HYPOTHETICAL EXAMPLE FOR COMPARISON (loads) on purchase payments, contingent
the Fund and to compare these costs with PURPOSES deferred sales charges on redemptions, and
ongoing costs of investing in other mutual redemption fees, if any. Therefore, the
funds. The example is based on an The table below also provides information hypothetical information is useful in
investment of $1,000 invested at the about hypothetical account values and comparing ongoing costs only, and will not
beginning of the period and held for the hypothetical expenses based on the Fund's help you determine the relative total
entire period January 1, 2007, through actual expense ratio and an assumed rate costs of owning different funds. In
June 30, 2007. of return of 5% per year before expenses, addition, if these transaction costs were
which is not the Fund's actual return. included, your costs would have been
ACTUAL EXPENSES higher.
The hypothetical account values and
The table below provides information about expenses may not be used to estimate the
actual account values and actual expenses. actual ending account balance or
====================================================================================================================================
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
A $1,000.00 $1,059.20 $5.41 $1,019.54 $5.31 1.06%
B 1,000.00 1,055.30 9.22 1,015.82 9.05 1.81
C 1,000.00 1,055.20 9.22 1,015.82 9.05 1.81
R 1,000.00 1,057.90 6.68 1,018.30 6.56 1.31
Investor 1,000.00 1,059.20 5.41 1,019.54 5.31 1.06
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
29
AIM BASIC BALANCED FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Funds Group is required under the recommendations regarding the performance, PROVIDED BY AIM
Investment Company Act of 1940 to approve fees and expenses of the AIM Funds to the
annually the renewal of the AIM Basic full Board. Moreover, the Investments The Board reviewed the advisory services
Balanced Fund (the Fund) investment Committee considers each Sub-Committee's provided to the Fund by AIM under the
advisory agreement with A I M Advisors, recommendations in making its annual Fund's advisory agreement, the performance
Inc. (AIM). During contract renewal recommendation to the Board whether to of AIM in providing these services, and
meetings held on June 25-27, 2007, the approve the continuance of each AIM Fund's the credentials and experience of the
Board as a whole and the disinterested or investment advisory agreement and officers and employees of AIM who provide
"independent" Trustees, voting separately, sub-advisory agreement, if applicable these services. The Board's review of the
approved the continuance of the Fund's (advisory agreements), for another year. qualifications of AIM to provide these
investment advisory agreement for another services included the Board's
year, effective July 1, 2007. In doing so, The independent Trustees, as mentioned consideration of AIM's portfolio and
the Board determined that the Fund's above, are assisted in their annual product review process, various back
advisory agreement is in the best evaluation of the advisory agreements by office support functions provided by AIM,
interests of the Fund and its shareholders the independent Senior Officer. One and AIM's equity and fixed income trading
and that the compensation to AIM under the responsibility of the Senior Officer is to operations. The Board concluded that the
Fund's advisory agreement is fair and manage the process by which the AIM Funds' nature, extent and quality of the advisory
reasonable. proposed management fees are negotiated services provided to the Fund by AIM were
during the annual contract renewal process appropriate and that AIM currently is
The independent Trustees met separately to ensure that they are negotiated in a providing satisfactory advisory services
during their evaluation of the Fund's manner which is at arms' length and in accordance with the terms of the Fund's
investment advisory agreement with reasonable. Accordingly, the Senior advisory agreement. In addition, based on
independent legal counsel from whom they Officer must either supervise a their ongoing meetings throughout the year
received independent legal advice, and the competitive bidding process or prepare an with the Fund's portfolio managers, the
independent Trustees also received independent written evaluation. The Senior Board concluded that these individuals are
assistance during their deliberations from Officer has recommended that an competent and able to continue to carry
the independent Senior Officer, a independent written evaluation be provided out their responsibilities under the
full-time officer of the AIM Funds who and, upon the direction of the Board, has Fund's advisory agreement.
reports directly to the independent prepared an independent written
Trustees. The following discussion more evaluation. In determining whether to continue the
fully describes the process employed by Fund's advisory agreement, the Board
the Board to evaluate the performance of During the annual contract renewal considered the prior relationship between
the AIM Funds (including the Fund) process, the Board considered the factors AIM and the Fund, as well as the Board's
throughout the year and, more discussed below under the heading "Factors knowledge of AIM's operations, and
specifically, during the annual contract and Conclusions and Summary of Independent concluded that it was beneficial to
renewal meetings. Written Fee Evaluation" in evaluating the maintain the current relationship, in
fairness and reasonableness of the Fund's part, because of such knowledge. The Board
THE BOARD'S FUND EVALUATION PROCESS advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
The Board's Investments Committee has the year as part of their ongoing several years to improve the quality and
established three Sub-Committees which are oversight of the Fund. The Fund's advisory efficiency of the services they provide to
responsible for overseeing the management agreement was considered separately, the Funds in the areas of investment
of a number of the series portfolios of although the Board also considered the performance, product line diversification,
the AIM Funds. This Sub-Committee common interests of all of the AIM Funds distribution, fund operations, shareholder
structure permits the Trustees to focus on in their deliberations. The Board services and compliance. The Board
the performance of the AIM Funds that have comprehensively considered all of the concluded that the quality and efficiency
been assigned to them. The Sub-Committees information provided to them and did not of the services AIM and its affiliates
meet throughout the year to review the identify any particular factor that was provide to the AIM Funds in each of these
performance of their assigned funds, and controlling. Furthermore, each Trustee may areas have generally improved, and support
the Sub-Committees review monthly and have evaluated the information provided the Board's approval of the continuance of
quarterly comparative performance differently from one another and the Fund's advisory agreement.
information and periodic asset flow data attributed different weight to the various
for their assigned funds. These materials factors. The Trustees recognized that the B. FUND PERFORMANCE
are prepared under the direction and advisory arrangements and resulting
supervision of the independent Senior advisory fees for the Fund and the other The Board compared the Fund's performance
Officer. Over the course of each year, the AIM Funds are the result of years of during the past one, three and five
Sub-Committees meet with portfolio review and negotiation between the calendar years to the performance of funds
managers for their assigned funds and Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
other members of management and review focus to a greater extent on certain not managed by AIM, and against the
with these individuals the performance, aspects of these arrangements in some performance of all funds in the Lipper
investment objective(s), policies, years than others, and that the Trustees' Mixed-Asset Target Allocation Moderate
strategies and limitations of these funds. deliberations and conclusions in a Funds Index. The Board also reviewed the
particular year may be based in part on methodology used by Lipper to identify the
In addition to their meetings their deliberations and conclusions of Fund's peers. The Board noted that the
throughout the year, the Sub-Committees these same arrangements throughout the Fund's performance was comparable to the
meet at designated contract renewal year and in prior years. median performance of its peers for the
meetings each year to conduct an in-depth one year period, and below such
review of the performance, fees and FACTORS AND CONCLUSIONS AND SUMMARY OF performance for the three and five year
expenses of their assigned funds. During INDEPENDENT WRITTEN FEE EVALUATION periods. The Board noted that the Fund's
the contract renewal process, the Trustees performance was below the performance of
receive comparative performance and fee The discussion below serves as a the Index for the one and three year
data regarding all the AIM Funds prepared summary of the Senior Officer's periods, and comparable to such Index for
by an independent company, Lipper, Inc., independent written evaluation, as well as the five year period. The Board also
under the direction and supervision of the a discussion of the material factors and considered the steps AIM has taken over
independent Senior Officer who also related conclusions that formed the basis the last several years to improve the
prepares a separate analysis of this for the Board's approval of the Fund's quality and efficiency of the services
information for the Trustees. Each advisory agreement. Unless otherwise that AIM provides to the AIM Funds. The
Sub-Committee then makes recommendations stated, information set forth below is as Board concluded that AIM continues to be
to the Investments Committee regarding the of June 27, 2007 and does not reflect any responsive to the Board's focus on fund
performance, fees and expenses of their changes that may have occurred since that performance. Although the independent
assigned funds. The Investments Committee date, including but not limited to changes written evaluation of the Fund's Senior
considers each Sub-Committee's recom- to the Fund's performance, advisory fees, Officer (discussed below) only considered
expense limitations and/or fee waivers. Fund performance through
(continued)
30
AIM BASIC BALANCED FUND
the most recent calendar year, the Board breakpoints. The Board also noted that ates were providing these services in a
also reviewed more recent Fund performance AIM's contractual advisory fee waiver satisfactory manner and in accordance with
and this review did not change their discussed above includes breakpoints based the terms of their contracts, and were
conclusions. on net asset levels. Based on this qualified to continue to provide these
information, the Board concluded that the services to the Fund.
C. ADVISORY FEES AND FEE WAIVERS Fund's advisory fees appropriately reflect
economies of scale at current asset The Board considered the benefits
The Board compared the Fund's contractual levels. The Board also noted that the Fund realized by AIM as a result of portfolio
advisory fee rate to the contractual shares directly in economies of scale brokerage transactions executed through
advisory fee rates of funds in the Fund's through lower fees charged by third party "soft dollar" arrangements. Under these
Lipper peer group that are not managed by service providers based on the combined arrangements, portfolio brokerage
AIM, at a common asset level and as of the size of all of the AIM Funds and commissions paid by the Fund and/or other
end of the past calendar year. The Board affiliates. funds advised by AIM are used to pay for
noted that the Fund's advisory fee rate research and execution services. The Board
was comparable to the median advisory fee E. PROFITABILITY AND FINANCIAL RESOURCES noted that soft dollar arrangements shift
rate of its peers. The Board also reviewed OF AIM the payment obligation for the research
the methodology used by Lipper and noted and executions services from AIM to the
that the contractual fee rates shown by The Board reviewed information from AIM funds and therefore may reduce AIM's
Lipper include any applicable long-term concerning the costs of the advisory and expenses. The Board also noted that
contractual fee waivers. The Board also other services that AIM and its affiliates research obtained through soft dollar
compared the Fund's contractual advisory provide to the Fund and the profitability arrangements may be used by AIM in making
fee rate to the contractual advisory fee of AIM and its affiliates in providing investment decisions for the Fund and may
rates of other clients of AIM and its these services. The Board also reviewed therefore benefit Fund shareholders. The
affiliates with investment strategies information concerning the financial Board concluded that AIM's soft dollar
comparable to those of the Fund, including condition of AIM and its affiliates. The arrangements were appropriate. The Board
one mutual fund advised by AIM, two Board also reviewed with AIM the also concluded that, based on their review
Canadian funds advised by an AIM affiliate methodology used to prepare the and representations made by AIM, these
and sub-advised by AIM, and one offshore profitability information. The Board arrangements were consistent with
fund advised and sub-advised by AIM considered the overall profitability of regulatory requirements.
affiliates. The Board noted that the AIM, as well as the profitability of AIM
Fund's rate was: (i) below the rate for in connection with managing the Fund. The The Board considered the fact that the
the mutual fund; (ii) above the Board noted that AIM continues to operate Fund's uninvested cash and cash collateral
sub-advisory fee rates for the two at a net profit, although increased from any securities lending arrangements
Canadian funds, although the advisory fee expenses in recent years have reduced the may be invested in money market funds
rates for such Canadian funds were above profitability of AIM and its affiliates. advised by AIM pursuant to procedures
the Fund's; and (iii) below the advisory The Board concluded that the Fund's approved by the Board. The Board noted
fee rate for the offshore fund. advisory fees were fair and reasonable, that AIM will receive advisory fees from
and that the level of profits realized by these affiliated money market funds
The Board noted that AIM has AIM and its affiliates from providing attributable to such investments, although
contractually agreed to waive advisory services to the Fund was not excessive in AIM has contractually agreed to waive the
fees of the Fund through December 31, 2012 light of the nature, quality and extent of advisory fees payable by the Fund with
and that this fee waiver includes the services provided. The Board respect to its investment of uninvested
breakpoints based on net asset levels. The considered whether AIM is financially cash in these affiliated money market
Board considered the contractual nature of sound and has the resources necessary to funds through at least June 30, 2008. The
this fee waiver and noted that it remains perform its obligations under the Fund's Board considered the contractual nature of
in effect until December 31, 2012. The advisory agreement, and concluded that AIM this fee waiver and noted that it remains
Board noted that, according to information has the financial resources necessary to in effect until at least June 30, 2008.
provided by AIM, this fee waiver reduces fulfill these obligations. The Board concluded that the Fund's
the Fund's effective advisory fees to a investment of uninvested cash and cash
level generally in line with the median F. INDEPENDENT WRITTEN EVALUATION OF THE collateral from any securities lending
effective advisory fees for the Fund's FUND'S SENIOR OFFICER arrangements in the affiliated money
peers, as determined by AIM. The Board market funds is in the best interests of
reviewed the Fund's effective advisory fee The Board noted that, upon their the Fund and its shareholders.
rate, after taking account of this fee direction, the Senior Officer of the Fund,
waiver, and considered the effect this fee who is independent of AIM and AIM's
waiver would have on the Fund's estimated affiliates, had prepared an independent
total expenses. The Board concluded that written evaluation to assist the Board in
the levels of fee waivers/expense determining the reasonableness of the
limitations for the Fund were fair and proposed management fees of the AIM Funds,
reasonable. including the Fund. The Board noted that
they had relied upon the Senior Officer's
After taking account of the Fund's written evaluation instead of a
contractual advisory fee rate, as well as competitive bidding process. In
the comparative advisory fee information determining whether to continue the Fund's
and the fee waiver discussed above, the advisory agreement, the Board considered
Board concluded that the Fund's advisory the Senior Officer's written evaluation.
fees were fair and reasonable.
G. COLLATERAL BENEFITS TO AIM AND ITS
D. ECONOMIES OF SCALE AND BREAKPOINTS AFFILIATES
The Board considered the extent to which The Board considered various other
there are economies of scale in AIM's benefits received by AIM and its
provision of advisory services to the affiliates resulting from AIM's
Fund. The Board also considered whether relationship with the Fund, including the
the Fund benefits from such economies of fees received by AIM and its affiliates
scale through contractual breakpoints in for their provision of administrative,
the Fund's advisory fee schedule or transfer agency and distribution services
through advisory fee waivers or expense to the Fund. The Board considered the
limitations. The Board noted that the performance of AIM and its affiliates in
Fund's contractual advisory fee schedule providing these services and the
includes five breakpoints and that the organizational structure employed by AIM
level of the Fund's advisory fees, as a and its affiliates to provide these
percentage of the Fund's net assets, has services. The Board also considered that
decreased as net assets increased because these services are provided to the Fund
of the pursuant to written contracts which are
reviewed and approved on an annual basis
by the Board. The Board concluded that AIM
and its affili-
31
Supplement to Semiannual Report dated 6/30/07
AIM BASIC BALANCED FUND
INSTITUTIONAL CLASS SHARES ========================================== PLEASE NOTE THAT PAST PERFORMANCE IS
AVERAGE ANNUAL TOTAL RETURNS NOT INDICATIVE OF FUTURE RESULTS. MORE
The following information has been RECENT RETURNS MAY BE MORE OR LESS THAN
prepared to provide Institutional Class For periods ended 6/30/07 THOSE SHOWN. ALL RETURNS ASSUME
shareholders with a performance overview REINVESTMENT OF DISTRIBUTIONS AT NAV.
specific to their holdings. Institutional Inception 8.13% INVESTMENT RETURN AND PRINCIPAL VALUE WILL
Class shares are offered exclusively to 5 Year 8.86 FLUCTUATE SO YOUR SHARES, WHEN REDEEMED,
institutional investors, including defined 1 Year 16.42 MAY BE WORTH MORE OR LESS THAN THEIR
contribution plans that meet certain 6 Months* 6.15 ORIGINAL COST. SEE FULL REPORT FOR
criteria. INFORMATION ON COMPARATIVE BENCHMARKS.
* Cumulative total return that has not PLEASE CONSULT YOUR FUND PROSPECTUS FOR
been annualized MORE INFORMATION. FOR THE MOST CURRENT
========================================== MONTH-END PERFORMANCE, PLEASE CALL
800-451-4246 OR VISIT AIMINVESTMENTS.COM.
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
SEPTEMBER 28, 2001.
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
NASDAQ SYMBOL BBLIX DIFFERING SALES CHARGES AND CLASS
========================================== EXPENSES.
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.
[AIM INVESTMENTS LOGO]
AIMinvestments.com BBA-INS-2 A I M Distributors, Inc. --REGISTERED TRADEMARK--
Information about your Fund's expenses
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
ongoing costs, including management fees value divided by $1,000 = 8.6), then you paid for the period. You may use this
and other Fund expenses. This example is multiply the result by the number in the information to compare the ongoing costs
intended to help you understand your table under the heading entitled "Actual of investing in the Fund and other funds.
ongoing costs (in dollars) of investing in Expenses Paid During Period" to estimate To do so, compare this 5% hypothetical
the Fund and to compare these costs with the expenses you paid on your account example with the 5% hypothetical examples
ongoing costs of investing in other mutual during this period. that appear in the shareholder reports of
funds. The example is based on an the other funds.
investment of $1,000 invested at the HYPOTHETICAL EXAMPLE FOR COMPARISON
beginning of the period and held for the PURPOSES Please note that the expenses shown in
entire period January 1, 2007, through the table are meant to highlight your
June 30, 2007. The table below also provides information ongoing costs only. Therefore, the
about hypothetical account values and hypothetical information is useful in
ACTUAL EXPENSES hypothetical expenses based on the Fund's comparing ongoing costs only, and will not
actual expense ratio and an assumed rate help you determine the relative total
The table below provides information about of return of 5% per year before expenses, costs of owning different funds.
actual account values and actual expenses. which is not the Fund's actual return.
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Institutional $1,000.00 $1,061.50 $3.53 $1,021.37 $3.46 0.69%
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June 30,
2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMinvestments.com BBA-INS-2 A I M Distributors, Inc.
[EDELIVERY GO PAPERLESS
AIMINVESTMENTS.COM/EDELIVERY
GRAPHIC]
REGISTER FOR EDELIVERY FUND HOLDINGS AND PROXY VOTING INFORMATION
eDelivery is the process of receiving your fund and account The Fund provides a complete list of its holdings four times in
information via e-mail. Once your quarterly statements, tax each fiscal year, at the quarter-ends. For the second and fourth
forms, fund reports, and prospectuses are available, we will quarters, the lists appear in the Fund's semiannual and annual
send you an e-mail notification containing links to these reports to shareholders. For the first and third quarters, the
documents. For security purposes, you will need to log in to Fund files the lists with the Securities and Exchange Commission
your account to view your statements and tax forms. (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at AIMinvestments.com. From our home page, click on
WHY SIGN UP? Products & Performance, then Mutual Funds, then Fund Overview.
Select your Fund from the drop-down menu and click on Complete
Register for eDelivery to: Quarterly Holdings. Shareholders can also look up the Fund's Forms
N-Q on the SEC Web site at sec.gov. Copies of the Fund's Forms N-Q
o save your Fund the cost of printing and postage. may be reviewed and copied at the SEC Public Reference Room in
Washington, D.C. You can obtain information on the operation of
o reduce the amount of paper you receive. the Public Reference Room, including information about duplicating
fee charges, by calling 202-942-8090 or 800-732-0330, or by
o gain access to your documents faster by not waiting for the electronic request at the following e-mail address:
mail. publicinfo@sec.gov. The SEC file numbers for the Fund are
811-01540 and 002-27334.
o view your documents online anytime at your convenience.
A description of the policies and procedures that the Fund uses to
o save the documents to your personal computer or print them determine how to vote proxies relating to portfolio securities is
out for your records. available without charge, upon request, from our Client Services
department at 800-959-4246 or on the AIM Web site,
HOW DO I SIGN UP? AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC
It's easy. Just follow these simple steps: Web site, sec.gov.
1. Log in to your account. Information regarding how the Fund voted proxies related to its
portfolio securities during the 12 months ended June 30, 2007, is
2. Click on the "Service Center" tab. available at our Web site. Go to AIMinvestments.com, access the
About Us tab, click on Required Notices and then click on Proxy
3. Select "Register for eDelivery" and complete the consent Voting Activity. Next, select the Fund from the drop-down menu.
process. The information is also available on the SEC Web site, sec.gov.
This AIM service is provided by AIM Investment Services, Inc.
BBA-SAR-1 A I M Distributors, Inc. [AIM INVESTMENTS LOGO]
--REGISTERED TRADEMARK--
AIM EUROPEAN SMALL COMPANY FUND
Semiannual Report to Shareholders o June 30, 2007
INTERNATIONAL/GLOBAL EQUITY
International/Global Growth
Table of Contents
Letter to Shareholders ................... 2
Fund Performance ......................... 3
Schedule of Investments .................. 4
Financial Statements ..................... 7
Notes to Financial Statements ............ 10
Financial Highlights ..................... 16
Fund Expenses ............................ 19
Approval of Advisory Agreement ........... 20
For the most current month-end Fund performance and
commentary, please visit AIMinvestments.com.
Unless otherwise noted, all data in this report are
from A I M Management Group Inc.
If used after October 20, 2007, this report must be
accompanied by a Fund Performance & Commentary or
by an AIM Quarterly Performance Review for the most
recent quarter-end.
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.
[AIM INVESTMENTS LOGO]
- --REGISTERED TRADEMARK-- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM EUROPEAN SMALL COMPANY FUND
Dear Fellow Shareholders:
In overseeing the management of the AIM family of funds on your behalf, your Board of
[CROCKETT Trustees of the AIM Funds continues to focus on improved investment performance,
PHOTO] reduced shareholder costs, and high ethical standards. Since my last letter, your Board
has welcomed two new members: Marty Flanagan, President and CEO of INVESCO, AIM's
parent company, and Phil Taylor, who was named CEO of AIM Investments
Bruce L. Crockett --REGISTERED TRADEMARK-- in April 2006. Robert Graham, who has given more than 30 years
of leadership to the company and the mutual fund industry since founding AIM in 1976,
has retired, stepping down in the process from his most recent role as Vice Chairman of
the Board. We thank Bob for his many contributions and wish him a long and happy
future.
Our review of fund performance has shown healthy progress, but the process is
necessarily one of continuous improvement. In general, as of June 30, 2007, we have
seen persistent investment discipline and more consistently good results. While this
statement may not apply to every AIM Fund all the time, as I write this letter, the
overall trend in fund management and performance has been positive.
The investment management talent at AIM has recently been enhanced by the promotion
of Karen Dunn Kelley to Head of INVESCO's Worldwide Fixed Income as well as Director of
AIM Global and Cash Management, with responsibility for all fixed income and money
market funds that serve both institutional and individual investors. Under Karen's
direction, AIM's cash management organization grew to one of the world's largest and
most respected, with top-tier performance. The operations now combined under her charge
represent more than $150 billion in assets, 120 investment professionals, and products
that span the entire yield curve.
In other news, your Board took a more active role in preparing for "proxy season,"
the period when fund managers must vote the shares held by their funds "for" or
"against" various proposals on the ballots of the issuing companies. Beginning in the
2007 proxy season, AIM implemented new proxy voting policies, developed by management
in conjunction with an ad hoc Board committee, which provided a solid framework for
properly evaluating and executing the many decisions the AIM Funds are required to make
to vote shares.
In general, the AIM Funds voted for proposals that would allow shareholders a
greater role in election of directors, proxy access and "say for pay." The AIM Funds
voted against directors who AIM believed failed to govern well in cases of corporate
mismanagement, such as the backdating of options grants, and against "poison pill" and
"take under" proposals that would favor the financial interests of managers at the
expense of investors in the case of a merger or acquisition. You can view the proxy
votes cast for your fund by going to AIMinvestments.com. Click the "About Us" tab, then
go to "Required Notices" and "Proxy Voting Activity."
Additionally, your Board raised the amount its members are recommended to invest in
the AIM Funds within three years of joining the Board, with the goal of aligning our
interests even more closely with yours.
Furthermore, at our June meeting we renewed the investment advisory contracts
between the AIM Funds and AIM for another year, applying the same rigorous evaluation
process that was enhanced and formalized in 2005. For more information on this process,
please visit AIMinvestments.com. Click on the "Products and Performance" tab and go to
"Investment Advisory Agreement Renewals."
Your Board's ability to best represent your interests depends on our knowledge of
your opinions and concerns. Please send me an email (bruce@brucecrockett.com) with your
thoughts on the following:
1) How important is it to you to hear about your Board's decisions and activities in
these letters?
2) What other information (on overall performance, specific funds, managers, etc.)
would make the letters more meaningful to you?
3) Would you prefer that communication from your Board continue to be delivered in
paper form by regular mail or be sent electronically by email?
If you would prefer to communicate through a quick online survey, please go to
AIMinvestments.com and provide your responses there.
We need to hear from you to do our best job, and I look forward to your responses.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Directors
August 10, 2007
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 mutual funds represented by AIM
Investments and the PowerShares Exchange-Traded Fund Trust.
2
AIM EUROPEAN SMALL COMPANY FUND
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/06-6/30/07, excluding applicable sales charges. If
sales charges were included, returns would be lower.
Class A Shares 19.12%
Class B Shares 18.71
Class C Shares 18.66
MSCI EAFE Index(1) (Broad Market Index) 10.74
MSCI Europe Small Cap Index(1) (Style-Specific Index) 13.46
Lipper European Funds Index(1) (Peer Group Index) 14.25
SOURCE: (1)LIPPER INC.
The unmanaged MSCI Europe, Australasia and the Far East Index (the MSCI EAFE
- --REGISTERED TRADEMARK-- Index) is a group of foreign securities tracked by
Morgan Stanley Capital International.
The unmanaged MSCI EUROPE SMALL CAP INDEX is a group of European small-cap
securities tracked by Morgan Stanley Capital International.
The unmanaged LIPPER EUROPEAN FUNDS INDEX represents an average of the performance
of the largest European equity funds tracked by Lipper Inc., an independent mutual fund
performance monitor.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== THE TOTAL ANNUAL FUND OPERATING EXPENSE
FUND PERFORMANCE RATIO SET FORTH IN THE MOST RECENT FUND
PROSPECTUS AS OF THE DATE OF THIS REPORT
As of 6/30/07, including applicable sales FOR CLASS A, CLASS B AND CLASS C SHARES
charges WAS 1.55%, 2.30% AND 2.30%, RESPECTIVELY.
THE EXPENSE RATIOS PRESENTED ABOVE MAY
CLASS A SHARES VARY FROM THE EXPENSE RATIOS PRESENTED IN
Inception (8/31/00) 22.37% OTHER SECTIONS OF THIS REPORT THAT ARE
5 Years 36.56 BASED ON EXPENSES INCURRED DURING THE
1 Year 33.47 PERIOD COVERED BY THIS REPORT.
CLASS B SHARES CLASS A SHARE PERFORMANCE REFLECTS THE
Inception (8/31/00) 22.54% MAXIMUM 5.50% SALES CHARGE, AND CLASS B
5 Years 37.00 AND CLASS C SHARE PERFORMANCE REFLECTS THE
1 Year 35.24 APPLICABLE CONTINGENT DEFERRED SALES
CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
CLASS C SHARES CDSC ON CLASS B SHARES DECLINES FROM 5%
Inception (8/31/00) 22.53% BEGINNING AT THE TIME OF PURCHASE TO 0% AT
5 Years 37.11 THE BEGINNING OF THE SEVENTH YEAR. THE
1 Year 39.18 CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
========================================== YEAR AFTER PURCHASE.
THE PERFORMANCE DATA QUOTED REPRESENT PAST THE PERFORMANCE OF THE FUND'S SHARE
PERFORMANCE AND CANNOT GUARANTEE CLASSES WILL DIFFER PRIMARILY DUE TO
COMPARABLE FUTURE RESULTS; CURRENT DIFFERENT SALES CHARGE STRUCTURES AND
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CLASS EXPENSES.
VISIT AIMINVESTMENTS.COM FOR THE MOST
RECENT MONTH-END PERFORMANCE. PERFORMANCE HAD THE ADVISOR NOT WAIVED FEES AND/OR
FIGURES REFLECT REINVESTED DISTRIBUTIONS, REIMBURSED EXPENSES IN THE PAST,
CHANGES IN NET ASSET VALUE AND THE EFFECT PERFORMANCE WOULD HAVE BEEN LOWER.
OF THE MAXIMUM SALES CHARGE UNLESS
OTHERWISE STATED. PERFORMANCE FIGURES DO A REDEMPTION FEE OF 2% WILL BE IMPOSED
NOT REFLECT DEDUCTION OF TAXES A ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
SHAREHOLDER WOULD PAY ON FUND THE FUND WITHIN 30 DAYS OF PURCHASE.
DISTRIBUTIONS OR SALE OF FUND SHARES. EXCEPTIONS TO THE REDEMPTION FEE ARE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL LISTED IN THE FUND'S PROSPECTUS.
FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES.
3
AIM European Small Company Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ---------------------------------------------------------
Industrials 40.9%
- ---------------------------------------------------------
Consumer Discretionary 20.5
- ---------------------------------------------------------
Materials 7.1
- ---------------------------------------------------------
Energy 6.2
- ---------------------------------------------------------
Financials 5.9
- ---------------------------------------------------------
Information Technology 5.9
- ---------------------------------------------------------
Consumer Staples 3.8
- ---------------------------------------------------------
Health Care 1.2
- ---------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 8.5
_________________________________________________________
=========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-88.88%
AUSTRIA-3.23%
A-TEC Industries A.G. (Construction &
Engineering)(a)(b) 37,000 $ 9,521,518
- ------------------------------------------------------------------------
Andritz A.G. (Industrial Machinery)(a) 147,040 9,696,896
========================================================================
19,218,414
========================================================================
BELGIUM-1.60%
EVS Broadcast Equipment S.A. (Communications
Equipment)(a)(b) 115,500 9,496,561
========================================================================
BRAZIL-0.84%
Ocean Wilson Holdings Ltd. (Marine)(a) 280,000 4,992,367
========================================================================
DENMARK-0.96%
TK Development A/S (Real Estate Management &
Development)(a)(c) 249,500 5,737,700
========================================================================
FINLAND-1.41%
Nokian Renkaat Oyj (Tires & Rubber)(a) 239,600 8,383,412
========================================================================
FRANCE-1.45%
April Group (Insurance Brokers)(a) 82,700 4,356,416
- ------------------------------------------------------------------------
Sword Group (Systems Software)(a) 78,300 4,271,408
========================================================================
8,627,824
========================================================================
GERMANY-4.56%
D+S europe A.G. (Diversified Commercial &
Professional Services)(a)(c) 491,336 6,900,938
- ------------------------------------------------------------------------
Elexis A.G. (Industrial Machinery)(a) 190,500 6,520,661
- ------------------------------------------------------------------------
ElringKlinger A.G. (Auto Parts &
Equipment)(a) 106,900 9,752,652
- ------------------------------------------------------------------------
Takkt A.G. (Catalog Retail)(a) 221,800 3,949,791
========================================================================
27,124,042
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
GREECE-8.71%
Attica Holdings S.A. (Marine) 497,700 $ 3,745,283
- ------------------------------------------------------------------------
Blue Star Maritime S.A. (Marine) 541,600 3,078,720
- ------------------------------------------------------------------------
Intralot S.A. (Casinos & Gaming) 370,846 11,955,770
- ------------------------------------------------------------------------
Jumbo S.A. (Leisure Products) 549,900 19,097,767
- ------------------------------------------------------------------------
Mytilineos Holdings S.A. (Diversified Metals
& Mining) 136,000 6,843,693
- ------------------------------------------------------------------------
Titan Cement Co. (Construction Materials) 122,271 7,082,873
========================================================================
51,804,106
========================================================================
HUNGARY-0.69%
Richter Gedeon Nyrt. (Pharmaceuticals)(a) 20,424 4,088,186
========================================================================
IRELAND-2.17%
CPL Resources PLC (Human Resource &
Employment Services)(a) 540,000 5,243,307
- ------------------------------------------------------------------------
Paddy Power PLC (Casinos & Gaming) 245,700 7,671,759
========================================================================
12,915,066
========================================================================
ISRAEL-0.72%
Advanced Vision Technology Ltd. (Electronic
Equipment Manufacturers)(a)(c) 249,256 4,309,299
========================================================================
ITALY-6.75%
Antichi Pellettieri S.p.A. (Apparel,
Accessories & Luxury Goods)(a) 324,828 4,706,968
- ------------------------------------------------------------------------
Biesse S.p.A. (Industrial Machinery)(a) 548,200 18,062,439
- ------------------------------------------------------------------------
Cementir S.p.A. Cementerie del Tirreno
(Construction Materials)(a) 890,900 12,618,347
- ------------------------------------------------------------------------
Prima Industrie S.p.A. (Industrial
Machinery)(a) 93,300 4,792,458
========================================================================
40,180,212
========================================================================
</Table>
4
AIM European Small Company Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
NETHERLANDS-14.11%
Aalberts Industries N.V. (Industrial
Machinery)(a) 519,336 $ 14,259,577
- ------------------------------------------------------------------------
Accell Group N.V. (Leisure Products)(a) 141,675 5,805,903
- ------------------------------------------------------------------------
Bateman Litwin N.V. (Construction &
Engineering)(a) 1,260,000 6,879,776
- ------------------------------------------------------------------------
Beter Bed Holding N.V. (Homefurnishing
Retail)(a) 323,125 10,930,711
- ------------------------------------------------------------------------
Eriks Group N.V. (Trading Companies &
Distributors)(a) 69,276 5,981,840
- ------------------------------------------------------------------------
Koninklijke BAM Groep N.V. (Construction &
Engineering) (Acquired 12/10/04; Cost
$303,940)(a)(d) 35,000 987,400
- ------------------------------------------------------------------------
Koninklijke BAM Groep N.V. (Construction &
Engineering)(a) 290,594 8,198,074
- ------------------------------------------------------------------------
Smartrac N.V. (Electronic Equipment
Manufacturers)(a)(c) 128,000 4,542,229
- ------------------------------------------------------------------------
Smit Internationale N.V. (Marine Ports &
Services)(a) 162,664 12,728,211
- ------------------------------------------------------------------------
USG People N.V. (Human Resource & Employment
Services)(a) 289,782 13,613,603
========================================================================
83,927,324
========================================================================
NORWAY-14.44%
Acta Holding A.S.A. (Diversified Capital
Markets)(a) 788,100 4,126,465
- ------------------------------------------------------------------------
Arrow Seismic A.S.A. (Oil & Gas Equipment &
Services) (Acquired 02/13/06; Cost
$2,153,007)(c) 410,000 4,639,503
- ------------------------------------------------------------------------
Cermaq A.S.A. (Packaged Foods & Meats)(a) 388,600 6,732,054
- ------------------------------------------------------------------------
DOF Subsea A.S.A. (Construction &
Engineering) (Acquired 06/21/05; Cost
$897,913)(a)(c)(d) 291,000 2,460,938
- ------------------------------------------------------------------------
DOF Subsea A.S.A. (Construction &
Engineering)(a)(b)(c) 279,100 2,360,301
- ------------------------------------------------------------------------
Expert A.S.A. (Computer & Electronics Retail) 199,640 5,381,223
- ------------------------------------------------------------------------
Marine Harvest (Packaged Foods & Meats)
(Acquired 03/07/06; Cost
$5,031,680)(a)(b)(c)(d) 7,653,000 8,232,585
- ------------------------------------------------------------------------
ODIM A.S.A. (Industrial Machinery)(a)(c) 557,800 6,469,949
- ------------------------------------------------------------------------
Petroleum Geo-Services A.S.A. (Oil & Gas
Equipment & Services)(a) 483,900 11,970,146
- ------------------------------------------------------------------------
Prosafe A.S.A. (Oil & Gas Equipment &
Services)(a)(b) 801,335 12,796,524
- ------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A. (Oil & Gas
Equipment & Services)(a)(c) 369,107 7,518,067
- ------------------------------------------------------------------------
Veidekke A.S.A. (Construction &
Engineering)(a) 1,256,000 13,245,910
========================================================================
85,933,665
========================================================================
SWEDEN-3.12%
Hexagon A.B.-Class B (Industrial
Machinery)(a)(b) 461,010 8,841,205
- ------------------------------------------------------------------------
Indutrade A.B. (Trading Companies &
Distributors) (Acquired 10/05/05; Cost
$1,037,210)(a)(d) 124,600 2,810,809
- ------------------------------------------------------------------------
Oriflame Cosmetics S.A.-SDR (Personal
Products)(a) 81,350 3,823,318
- ------------------------------------------------------------------------
Poolia A.B.-Class B (Human Resource &
Employment Services)(a) 396,300 3,118,040
========================================================================
18,593,372
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
SWITZERLAND-8.04%
Banque Cantonale Vaudoise (Diversified
Banks)(a) 12,700 $ 6,532,198
- ------------------------------------------------------------------------
Conzzeta Holding A.G. (Industrial Machinery) 1,655 3,508,710
- ------------------------------------------------------------------------
Daetwyler Holding A.G. (Industrial
Conglomerates) 1,430 9,651,090
- ------------------------------------------------------------------------
Interroll Holding A.G. (Industrial
Machinery)(c) 15,500 7,225,619
- ------------------------------------------------------------------------
Lem Holding S.A. (Electronic Equipment
Manufacturers)(a) 23,065 5,925,704
- ------------------------------------------------------------------------
Mobilezone Holding A.G. (Computer &
Electronics Retail)(a) 1,111,003 7,035,807
- ------------------------------------------------------------------------
Rieter Holding A.G. (Auto Parts &
Equipment)(a) 8,900 4,647,771
- ------------------------------------------------------------------------
Schweiter A.G. (Industrial Machinery) 9,000 3,307,794
========================================================================
47,834,693
========================================================================
UNITED KINGDOM-16.08%
Absolute Capital Management Holdings Ltd.
(Asset Management & Custody Banks)(a) 638,500 5,560,470
- ------------------------------------------------------------------------
Amlin PLC (Multi-Line Insurance)(a) 953,000 5,355,855
- ------------------------------------------------------------------------
Catlin Group Ltd. (Property & Casualty
Insurance)(a) 366,000 3,498,611
- ------------------------------------------------------------------------
Findel PLC (Catalog Retail)(a) 229,400 3,310,699
- ------------------------------------------------------------------------
Homeserve PLC (Diversified Commercial &
Professional Services)(a) 281,500 10,081,444
- ------------------------------------------------------------------------
Informa PLC (Publishing)(a) 450,919 5,013,090
- ------------------------------------------------------------------------
Inspired Gaming Group PLC (Casinos &
Gaming)(c) 1,332,735 7,909,151
- ------------------------------------------------------------------------
Kier Group PLC (Construction &
Engineering)(a) 163,671 6,706,629
- ------------------------------------------------------------------------
Lancashire Holdings Ltd. (Reinsurance)(a)(c) 901,500 6,161,881
- ------------------------------------------------------------------------
Management Consulting Group PLC (Diversified
Commercial & Professional Services)(a) 4,623,900 4,531,549
- ------------------------------------------------------------------------
Mears Group PLC (Diversified Commercial &
Professional Services)(a) 1,030,000 6,705,170
- ------------------------------------------------------------------------
Mitie Group PLC (Environmental & Facilities
Services)(a) 1,405,000 7,398,383
- ------------------------------------------------------------------------
Morgan Sindall PLC (Construction &
Engineering)(a) 171,000 5,159,757
- ------------------------------------------------------------------------
Premier Research Group PLC (Life Sciences
Tools & Services)(a) 993,405 3,041,037
- ------------------------------------------------------------------------
Sci Entertainment Group PLC (Home
Entertainment Software)(a)(c) 637,242 6,531,258
- ------------------------------------------------------------------------
Ultra Electronics Holdings PLC (Aerospace &
Defense)(a) 214,250 4,641,349
- ------------------------------------------------------------------------
Zetar PLC (Packaged Foods & Meats)(c) 356,000 4,039,495
========================================================================
95,645,828
========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $276,045,879) 528,812,071
========================================================================
FOREIGN PREFERRED STOCKS-2.63%
GERMANY-2.63%
Fuchs Petrolub A.G.-Pfd. (Commodity
Chemicals)(b) 168,512 15,622,971
========================================================================
Total Foreign Preferred Stocks (Cost
$7,012,435) 15,622,971
========================================================================
</Table>
5
AIM European Small Company Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------
MONEY MARKET FUNDS-7.87%
Liquid Assets Portfolio-Institutional
Class(e) 23,403,882 $ 23,403,882
- ------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 23,403,882 23,403,882
========================================================================
Total Money Market Funds (Cost
$46,807,764) 46,807,764
========================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities on loan)-99.38% (Cost
$329,866,078) 591,242,806
========================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------
<Caption>
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES ON LOAN
MONEY MARKET FUNDS-5.80%
Liquid Assets Portfolio-Institutional
Class(e)(f) 34,516,029 $ 34,516,029
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities on
loan) (Cost $34,516,029) 34,516,029
========================================================================
TOTAL INVESTMENTS-105.18% (Cost $364,382,107) 625,758,835
========================================================================
OTHER ASSETS LESS LIABILITIES-(5.18)% (30,795,606)
========================================================================
NET ASSETS-100.00% $594,963,229
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
Pfd. - Preferred
SDR - Swedish Depositary Receipt
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(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 June 30, 2007 was $423,673,621, which
represented 71.21% of the Fund's Net Assets. See Note 1A.
(b) All or a portion of this security was out on loan at June 30, 2007.
(c) Non-income producing security.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold 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 June 30, 2007 was $14,491,732,
which represented 2.44% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(f) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 7.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
6
AIM European Small Company Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $283,058,314)* $544,435,042
- -----------------------------------------------------------
Investments in affiliated money market funds
(Cost $81,323,793) 81,323,793
===========================================================
Total investments (Cost $364,382,107) 625,758,835
===========================================================
Foreign currencies, at value (Cost
$5,460,397) 5,514,810
- -----------------------------------------------------------
Receivables for:
Investments sold 2,077,190
- -----------------------------------------------------------
Fund shares sold 483,913
- -----------------------------------------------------------
Dividends 1,941,211
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 27,030
- -----------------------------------------------------------
Other assets 31,998
===========================================================
Total assets 635,834,987
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 5,088,877
- -----------------------------------------------------------
Fund shares reacquired 729,629
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 44,175
- -----------------------------------------------------------
Collateral upon return of securities loaned 34,516,029
- -----------------------------------------------------------
Accrued distribution fees 222,726
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 5,030
- -----------------------------------------------------------
Accrued transfer agent fees 104,193
- -----------------------------------------------------------
Accrued operating expenses 161,099
===========================================================
Total liabilities 40,871,758
===========================================================
Net assets applicable to shares outstanding $594,963,229
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $270,093,598
- -----------------------------------------------------------
Undistributed net investment income 4,472,203
- -----------------------------------------------------------
Undistributed net realized gain 58,952,675
- -----------------------------------------------------------
Unrealized appreciation 261,444,753
===========================================================
$594,963,229
___________________________________________________________
===========================================================
NET ASSETS:
Class A $432,820,275
___________________________________________________________
===========================================================
Class B $ 70,826,510
___________________________________________________________
===========================================================
Class C $ 91,316,444
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 13,108,067
___________________________________________________________
===========================================================
Class B 2,232,549
___________________________________________________________
===========================================================
Class C 2,877,885
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 33.02
- -----------------------------------------------------------
Offering price per share
(Net asset value of $33.02 divided by
94.50%) $ 34.94
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 31.72
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 31.73
___________________________________________________________
===========================================================
</Table>
* At June 30, 2007, securities with an aggregate value of $33,376,913 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
7
AIM European Small Company Fund
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $1,128,787) $ 8,835,578
- -------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $242,283) 1,042,145
- -------------------------------------------------------------------------
Interest 7,286
=========================================================================
Total investment income 9,885,009
=========================================================================
EXPENSES:
Advisory fees 2,631,445
- -------------------------------------------------------------------------
Administrative services fees 73,627
- -------------------------------------------------------------------------
Custodian fees 216,392
- -------------------------------------------------------------------------
Distribution fees:
Class A 500,766
- -------------------------------------------------------------------------
Class B 341,611
- -------------------------------------------------------------------------
Class C 425,268
- -------------------------------------------------------------------------
Transfer agent fees 335,192
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 16,365
- -------------------------------------------------------------------------
Other 106,155
=========================================================================
Total expenses 4,646,821
=========================================================================
Less: Fees waived and expense offset arrangements (100,567)
=========================================================================
Net expenses 4,546,254
=========================================================================
Net investment income 5,338,755
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 47,403,561
- -------------------------------------------------------------------------
Foreign currencies (195,048)
=========================================================================
47,208,513
=========================================================================
Change in net unrealized appreciation of:
Investment securities 42,505,852
- -------------------------------------------------------------------------
Foreign currencies 61,680
=========================================================================
42,567,532
=========================================================================
Net realized and unrealized gain 89,776,045
=========================================================================
Net increase in net assets resulting from operations $95,114,800
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8
AIM European Small Company Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 5,338,755 $ 2,149,280
- ------------------------------------------------------------------------------------------
Net realized gain 47,208,513 72,090,758
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation 42,567,532 100,217,790
==========================================================================================
Net increase in net assets resulting from operations 95,114,800 174,457,828
==========================================================================================
Distributions to shareholders from net investment income:
Class A -- (3,050,109)
- ------------------------------------------------------------------------------------------
Class B -- (124,315)
- ------------------------------------------------------------------------------------------
Class C -- (145,695)
==========================================================================================
Total distributions from net investment income -- (3,320,119)
==========================================================================================
Distributions to shareholders from net realized gains:
Class A -- (45,569,603)
- ------------------------------------------------------------------------------------------
Class B -- (8,443,431)
- ------------------------------------------------------------------------------------------
Class C -- (9,895,549)
==========================================================================================
Total distributions from net realized gains -- (63,908,583)
==========================================================================================
Decrease in net assets resulting from distributions -- (67,228,702)
==========================================================================================
Share transactions-net:
Class A 3,012,648 (3,868,173)
- ------------------------------------------------------------------------------------------
Class B (5,615,341) 3,608
- ------------------------------------------------------------------------------------------
Class C (640,786) 1,807,324
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (3,243,479) (2,057,241)
==========================================================================================
Net increase in net assets 91,871,321 105,171,885
==========================================================================================
NET ASSETS:
Beginning of period 503,091,908 397,920,023
==========================================================================================
End of period (including undistributed net investment
income of $4,472,203 and $(866,552), respectively) $594,963,229 $503,091,908
__________________________________________________________________________________________
==========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9
AIM European Small Company Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM European Small Company Fund (the "Fund") is a series portfolio of AIM Funds
Group (the "Trust"). The Trust is a Delaware statutory trust registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of seven separate portfolios,
each authorized to issue an unlimited number of shares of beneficial interest.
The Fund currently offers multiple classes of shares. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund.
The Fund's primary investment objective is long-term growth of capital.
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
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. 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 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 open-end and closed-end registered
investment companies that trade on an exchange are valued at the 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.
Debt obligations (including convertible bonds) and unlisted equities 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, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
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. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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.
Valuations change in response to many factors including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions and market
liquidity.
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.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
10
AIM European Small Company Fund
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 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. 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.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
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.
Fluctuations in the value of these contracts are recorded as unrealized
11
AIM European Small Company Fund
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. 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 0.95% of the
Fund's average daily net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<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>
Effective July 1, 2007, AIM has contractually agreed through at least June
30, 2008 to waive 100% 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). Prior to July 1, 2007, AIM had
voluntarily agreed to waive 25% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $91,702.
At the request of the Trustees of the Trust, INVESCO PLC ("INVESCO")
(formerly "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. These
expenses along with the related expense reimbursement are included in the
Statement of Operations. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM for certain administrative
costs incurred in providing accounting services, to the Fund. For the six months
ended June 30, 2007, expenses incurred under the agreement are shown in the
Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
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 six months ended June 30,
2007, the expenses incurred under the agreement are shown in the Statement of
Operations as transfer agent fees.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B
and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule
12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C
shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Class A shares and 1.00% of the average daily net assets of each class of
Class B and Class C shares. Of the Plan payments, up to 0.25% of the average
daily net assets of each class of 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. For the six months
ended June 30, 2007, expenses incurred under the Plans are shown in the
Statement of Operations as distribution fees.
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 six
months ended June 30, 2007, ADI advised the Fund that it retained $34,011 in
front-end sales commissions from the sale of Class A shares and $9,817, $19,032
and $8,681 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.
12
AIM European Small Company 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 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 six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $10,962,757 $48,259,015 $(35,817,890) $23,403,882 $401,046
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 10,962,757 48,259,015 (35,817,890) 23,403,882 398,816
=================================================================================================
Subtotal $21,925,514 $96,518,030 $(71,635,780) $46,807,764 $799,862
_________________________________________________________________________________________________
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- --------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $31,663,353 $147,279,192 $(144,426,516) $34,516,029 $ 242,283
==================================================================================================
Total
Investments
in
Affiliates $53,588,867 $243,797,222 $(216,062,296) $81,323,793 $1,042,145
__________________________________________________________________________________________________
==================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the six months ended June 30, 2007,
the Fund received credits from this arrangement, which resulted in the reduction
of the Fund's total expenses of $8,865.
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 certain Trustees and Officers of the Fund. 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, certain 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 six months ended June 30, 2007, the Fund paid legal fees of
$3,204 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 participates 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 six months ended June 30, 2007, 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
13
AIM European Small Company Fund
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--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 June 30, 2007, securities with an aggregate value of $33,376,913 were on
loan to brokers. The loans were secured by cash collateral of $34,516,029
received by the Fund and subsequently invested in an affiliated money market
fund. For the six months ended June 30, 2007, the Fund received dividends on
cash collateral investments of $242,283 for securities lending transactions,
which are net of compensation to counterparties.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 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 six months ended June 30, 2007 was $74,038,324 and
$99,486,594, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $260,665,652
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,042,410)
==============================================================================
Net unrealized appreciation of investment securities $258,623,242
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $367,135,593.
</Table>
14
AIM European Small Company Fund
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A, Class B
and Class C. Class A shares are sold with a front-end sales charge unless
certain waiver criteria are met and under certain circumstances load waiver
shares may be subject to a CDSC. Class B shares and Class C shares are sold with
a 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
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(A) DECEMBER 31, 2006
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,448,557 $44,342,772 3,659,317 $ 98,234,691
- ----------------------------------------------------------------------------------------------------------------------
Class B 99,382 2,942,970 540,886 13,961,512
- ----------------------------------------------------------------------------------------------------------------------
Class C 345,042 10,192,147 731,439 18,872,761
======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 1,549,860 41,644,721
- ----------------------------------------------------------------------------------------------------------------------
Class B -- -- 311,291 8,068,658
- ----------------------------------------------------------------------------------------------------------------------
Class C -- -- 356,203 9,236,342
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 96,796 2,976,506 123,953 3,342,766
- ----------------------------------------------------------------------------------------------------------------------
Class B (100,583) (2,976,506) (128,336) (3,342,766)
======================================================================================================================
Reacquired:(b)
Class A (1,450,408) (44,306,630) (5,553,554) (147,090,351)
- ----------------------------------------------------------------------------------------------------------------------
Class B (191,701) (5,581,805) (729,529) (18,683,796)
- ----------------------------------------------------------------------------------------------------------------------
Class C (368,917) (10,832,933) (1,036,086) (26,301,779)
======================================================================================================================
(121,832) $(3,243,479) (174,556) $ (2,057,241)
______________________________________________________________________________________________________________________
======================================================================================================================
</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 19% 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 $3,336, $569 and $710 for Class A,
Class B and Class C shares, respectively, for the six months ended June
30, 2007 and $35,459, $6,004 and $7,352 for Class A, Class B and Class C
shares, respectively, for the year ended December 31, 2006.
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. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
15
AIM European Small Company 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
--------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2007 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.72 $ 21.68 $ 16.94 $ 12.05 $ 7.37 $ 7.19
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.33(a) 0.21 0.11(a) (0.05)(a) (0.03)(a) (0.04)(a)
- -------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 4.97 10.08 6.03 5.30 4.74 0.22
===============================================================================================================================
Total from investment operations 5.30 10.29 6.14 5.25 4.71 0.18
===============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.27) (0.07) -- (0.03) --
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (3.98) (1.33) (0.36) -- --
===============================================================================================================================
Total distributions -- (4.25) (1.40) (0.36) (0.03) --
===============================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 -- --
===============================================================================================================================
Net asset value, end of period $ 33.02 $ 27.72 $ 21.68 $ 16.94 $ 12.05 $ 7.37
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 19.12% 48.07% 36.48% 43.67% 63.96% 2.50%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $432,820 $360,688 $286,882 $161,014 $42,103 $13,597
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.44%(c) 1.54% 1.63% 2.00% 2.00% 2.01%
- -------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.47%(c) 1.57% 1.68% 2.03% 2.68% 3.05%
===============================================================================================================================
Ratio of net investment income (loss) to
average net assets 2.13%(c) 0.67% 0.57% (0.38)% (0.28)% (0.51)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(d) 14% 35% 72% 71% 130% 119%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
</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 annualized and based on average daily net assets of
$403,932,614.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.73 $ 21.02 $ 16.52 $ 11.84 $ 7.27 $ 7.15
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.20(a) (0.01) (0.03)(a) (0.14)(a) (0.08)(a) (0.09)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 4.79 9.76 5.86 5.18 4.65 0.21
============================================================================================================================
Total from investment operations 4.99 9.75 5.83 5.04 4.57 0.12
============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.06) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (3.98) (1.33) (0.36) -- --
============================================================================================================================
Total distributions -- (4.04) (1.33) (0.36) -- --
============================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 -- --
============================================================================================================================
Net asset value, end of period $ 31.72 $ 26.73 $ 21.02 $ 16.52 $ 11.84 $ 7.27
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 18.67% 46.98% 35.51% 42.67% 62.86% 1.68%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $70,827 $64,827 $51,108 $26,540 $ 9,415 $ 5,689
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.19%(c) 2.29% 2.35% 2.65% 2.65% 2.66%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.22%(c) 2.32% 2.38% 2.68% 3.33% 3.70%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets 1.38%(c) (0.08)% (0.15)% (1.03)% (0.93)% (1.16)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 14% 35% 72% 71% 130% 119%
____________________________________________________________________________________________________________________________
============================================================================================================================
</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 annualized and based on average daily net assets of
$68,888,422.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
16
AIM European Small Company Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
-----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.73 $ 21.03 $ 16.53 $ 11.84 $ 7.27 $ 7.14
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.20(a) (0.01) (0.03)(a) (0.14)(a) (0.09)(a) (0.09)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 4.80 9.75 5.86 5.19 4.66 0.22
============================================================================================================================
Total from investment operations 5.00 9.74 5.83 5.05 4.57 0.13
============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.06) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (3.98) (1.33) (0.36) -- --
============================================================================================================================
Total distributions -- (4.04) (1.33) (0.36) -- --
============================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 -- --
============================================================================================================================
Net asset value, end of period $ 31.73 $ 26.73 $ 21.03 $ 16.53 $ 11.84 $ 7.27
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 18.71% 46.90% 35.49% 42.75% 62.86% 1.82%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $91,316 $77,576 $59,930 $27,983 $ 6,346 $ 2,057
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.19%(c) 2.29% 2.35% 2.65% 2.65% 2.66%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.22%(c) 2.32% 2.38% 2.68% 3.33% 3.70%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets 1.38%(c) (0.08)% (0.15)% (1.03)% (0.93)% (1.16)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 14% 35% 72% 71% 130% 119%
____________________________________________________________________________________________________________________________
============================================================================================================================
</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 annualized and based on average daily net assets of
$85,758,518.
(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.
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 A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("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. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), 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; 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.
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
17
AIM European Small Company Fund
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
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 INVESCO PLC'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 INVESCO 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.
18
AIM EUROPEAN SMALL COMPANY FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE together with the amount you invested, to this information to compare the ongoing
estimate the expenses that you paid over costs of investing in the Fund and other
As a shareholder of the Fund, you incur the period. Simply divide your account funds. To do so, compare this 5%
two types of costs: (1) transaction costs, value by $1,000 (for example, an $8,600 hypothetical example with the 5%
which may include sales charges (loads) on account value divided by $1,000 = 8.6), hypothetical examples that appear in the
purchase payments or contingent deferred then multiply the result by the number in shareholder reports of the other funds.
sales charges on redemptions, and the table under the heading entitled
redemption fees, if any; and (2) ongoing "Actual Expenses Paid During Period" to Please note that the expenses shown in
costs, including management fees; estimate the expenses you paid on your the table are meant to highlight your
distribution and/or service (12b-1) fees; account during this period. ongoing costs only and do not reflect any
and other Fund expenses. This example is transaction costs, such as sales charges
intended to help you understand your HYPOTHETICAL EXAMPLE FOR COMPARISON (loads) on purchase payments, contingent
ongoing costs (in dollars) of investing in PURPOSES deferred sales charges on redemptions, and
the Fund and to compare these costs with redemption fees, if any. Therefore, the
ongoing costs of investing in other mutual The table below also provides information hypothetical information is useful in
funds. The example is based on an about hypothetical account values and comparing ongoing costs only, and will not
investment of $1,000 invested at the hypothetical expenses based on the Fund's help you determine the relative total
beginning of the period and held for the actual expense ratio and an assumed rate costs of owning different funds. In
entire period January 1, 2007, through of return of 5% per year before expenses, addition, if these transaction costs were
June 30, 2007. which is not the Fund's actual return. included, your costs would have been
higher.
ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
The table below provides information about actual ending account balance or expenses
actual account values and actual expenses. you paid for the period. You may use
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
A $1,000.00 $1,191.20 $ 7.82 $1,017.65 $ 7.20 1.44%
B 1,000.00 1,187.10 11.88 1,013.93 10.94 2.19
C 1,000.00 1,186.60 11.87 1,013.93 10.94 2.19
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
19
AIM EUROPEAN SMALL COMPANY FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
recommendations regarding the performance, PROVIDED BY AIM
The Board of Trustees (the Board) of AIM fees and expenses of the AIM Funds to the
Funds Group is required under the full Board. Moreover, the Investments The Board reviewed the advisory services
Investment Company Act of 1940 to approve Committee considers each SubCommittee's provided to the Fund by AIM under the
annually the renewal of the AIM European recommendations in making its annual Fund's advisory agreement, the performance
Small Company Fund (the Fund) investment recommendation to the Board whether to of AIM in providing these services, and
advisory agreement with A I M Advisors, approve the continuance of each AIM Fund's the credentials and experience of the
Inc. (AIM). During contract renewal investment advisory agreement and officers and employees of AIM who provide
meetings held on June 25-27, 2007, the sub-advisory agreement, if applicable these services. The Board's review of the
Board as a whole and the disinterested or (advisory agreements), for another year. qualifications of AIM to provide these
"independent" Trustees, voting separately, services included the Board's
approved the continuance of the Fund's The independent Trustees, as mentioned consideration of AIM's portfolio and
investment advisory agreement for another above, are assisted in their annual product review process, various back
year, effective July 1, 2007.In doing so, evaluation of the advisory agreements by office support functions provided by AIM,
the Board determined that the Fund's the independent Senior Officer. One and AIM's equity and fixed income trading
advisory agreement is in the best responsibility of the Senior Officer is to operations. The Board concluded that the
interests of the Fund and its shareholders manage the process by which the AIM Funds' nature, extent and quality of the advisory
and that the compensation to AIM under the proposed management fees are negotiated services provided to the Fund by AIM were
Fund's advisory agreement is fair and during the annual contract renewal process appropriate and that AIM currently is
reasonable. to ensure that they are negotiated in a providing satisfactory advisory services
manner which is at arms' length and in accordance with the terms of the Fund's
The independent Trustees met separately reasonable. Accordingly, the Senior advisory agreement. In addition, based on
during their evaluation of the Fund's Officer must either supervise a their ongoing meetings throughout the year
investment advisory agreement with competitive bidding process or prepare an with the Fund's portfolio managers, the
independent legal counsel from whom they independent written evaluation. The Senior Board concluded that these individuals are
received independent legal advice, and the Officer has recommended that an competent and able to continue to carry
independent Trustees also received independent written evaluation be provided out their responsibilities under the
assistance during their deliberations from and, upon the direction of the Board, has Fund's advisory agreement.
the independent Senior Officer, a prepared an independent written
full-time officer of the AIM Funds who evaluation. In determining whether to continue the
reports directly to the independent Fund's advisory agreement, the Board
Trustees. The following discussion more During the annual contract renewal considered the prior relationship between
fully describes the process employed by process, the Board considered the factors AIM and the Fund, as well as the Board's
the Board to evaluate the performance of discussed below under the heading "Factors knowledge of AIM's operations, and
the AIM Funds (including the Fund) and Conclusions and Summary of Independent concluded that it was beneficial to
throughout the year and, more Written Fee Evaluation" in evaluating the maintain the current relationship, in
specifically, during the annual contract fairness and reasonableness of the Fund's part, because of such knowledge. The Board
renewal meetings. advisory agreement at the contract renewal also considered the steps that AIM and its
meetings and at their meetings throughout affiliates have taken over the last
THE BOARD'S FUND EVALUATION PROCESS the year as part of their ongoing several years to improve the quality and
oversight of the Fund. The Fund's advisory efficiency of the services they provide to
The Board's Investments Committee has agreement was considered separately, the Funds in the areas of investment
established three Sub-Committees which are although the Board also considered the performance, product line diversification,
responsible for overseeing the management common interests of all of the AIM Funds distribution, fund operations, shareholder
of a number of the series portfolios of in their deliberations. The Board services and com-pliance. The Board
the AIM Funds. This Sub-Committee structure comprehensively considered all of the concluded that the quality and efficiency
permits the Trustees to focus on the information provided to them and did not of the services AIM and its affiliates
performance of the AIM Funds that have identify any particular factor that was provide to the AIM Funds in each of these
been assigned to them. The Sub-Committees controlling.Furthermore, each Trustee may areas have generally improved, and support
meet throughout the year to review the have evaluated the information provided the Board's approval of the continuance of
performance of their assigned funds, and differently from one another and the Fund's advisory agreement.
the Sub-Committees review monthly and attributed different weight to the various
quarterly comparative performance factors. The Trustees recognized that the B. FUND PERFORMANCE
information and periodic asset flow data advisory arrangements and resulting
for their assigned funds. These materials advisory fees for the Fund and the other The Board compared the Fund's performance
are prepared under the direction and AIM Funds are the result of years of during the past one, three and five
supervision of the independent Senior review and negotiation between the calendar years to the performance of funds
Officer. Over the course of each year, the Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
Sub-Committees meet with portfolio focus to a greater extent on certain not managed by AIM, and against the
managers for their assigned funds and aspects of these arrangements in some performance of all funds in the Lipper
other members of management and review years than others, and that the Trustees' European Region Funds Index.The Board also
with these individuals the performance, deliberations and conclusions in a reviewed the methodology used by Lipper to
investment objective(s), policies, particular year may be based in part on identify the Fund's peers. The Board noted
strategies and limitations of these funds. their deliberations and conclusions of that the Fund's performance was above the
these same arrangements throughout the median performance of its peers for the
In addition to their meetings year and in prior years. one, three and five year periods.The Board
throughout the year, the Sub-Committees noted that the Fund's performance was
meet at designated contract renewal FACTORS AND CONCLUSIONS AND SUMMARY OF above the performance of the Index for the
meetings each year to conduct an in-depth INDEPENDENT WRITTEN FEE EVALUATION one, three and five year periods.The Board
review of the performance, fees and also considered the steps AIM has taken
expenses of their assigned funds.During The discussion below serves as a summary over the last several years to improve the
the contract renewal process, the Trustees of the Senior Officer's independent quality and efficiency of the services
receive comparative performance and fee written evaluation, as well as a that AIM provides to the AIM Funds. The
data regarding all the AIM Funds prepared discussion of the material factors and Board concluded that AIM continues to be
by an independent company, Lipper, Inc., related conclusions that formed the basis responsive to the Board's focus on fund
under the direction and supervision of the for the Board's approval of the Fund's performance. Although the independent
independent Senior Officer who also advisory agreement. Unless otherwise written evaluation of the Fund's Senior
prepares a separate analysis of this stated, information set forth below is as Officer (discussed below) only considered
information for the Trustees. Each of June 27, 2007 and does not reflect any Fund performance through the most recent
Sub-Committee then makes recommendations changes that may have occurred since that calendar year, the Board also reviewed
to the Investments Committee regarding the date, including but not limited to changes more recent Fund performance and this
performance, fees and expenses of their to the Fund's performance, advisory fees, review did not change their conclusions.
assigned funds. The Investments Committee expense limitations and/or fee waivers.
considers each Sub-Committee's recom-
(continued)
20
AIM EUROPEAN SMALL COMPANY FUND
C. ADVISORY FEES AND FEE WAIVERS amendment to the Fund's contractual The Board considered the benefits realized
advisory fee schedule. The Board also noted by AIM as a result of portfolio brokerage
The Board compared the Fund's contractual that the Fund shares directly in economies transactions executed through "soft
advisory fee rate to the contractual of scale through lower fees charged by dollar" arrangements. Under these
advisory fee rates of funds in the Fund's third party service providers based on the arrangements, portfolio brokerage
Lipper peer group that are not managed by combined size of all of the AIM Funds and commissions paid by the Fund and/or other
AIM, at a common asset level and as of the affiliates. funds advised by AIM are used to pay for
end of the past calendar year. The Board research and execution services. The Board
noted that the Fund's advisory fee rate E. PROFITABILITY AND FINANCIAL RESOURCES noted that soft dollar arrangements shift
was above the median advisory fee rate of OF AIM the payment obligation for the research
its peers. The Board also reviewed the and executions services from AIM to the
methodology used by Lipper and noted that The Board reviewed information from AIM funds and therefore may reduce AIM's
the contractual fee rates shown by Lipper concerning the costs of the advisory and expenses. The Board also noted that
include any applicable long-term other services that AIM and its affiliates research obtained through soft dollar
contractual fee waivers. The Board also provide to the Fund and the profitability arrangements may be used by AIM in making
compared the Fund's contractual advisory of AIM and its affiliates in providing investment decisions for the Fund and may
fee rate to the contractual advisory fee these services. The Board also reviewed therefore benefit Fund share-holders. The
rates of other clients of AIM and its information concerning the financial Board concluded that AIM's soft dollar
affiliates with investment strategies condition of AIM and its affiliates. The arrangements were appropriate. The Board
comparable to those of the Fund, including Board also reviewed with AIM the also concluded that, based on their review
one mutual fund advised by AIM, two methodology used to prepare the and representations made by AIM, these
Canadian funds advised by an AIM affiliate profitability infor-mation. The Board arrangements were consistent with
and sub-advised by AIM, and one offshore considered the overall profitability of regulatory requirements.
fund advised and sub-advised by AIM AIM, as well as the profitability of AIM
affiliates. The Board noted that the Fund's in connection with managing the Fund. The The Board considered the fact that the
rate was: (i) comparable to the rate for Board noted that AIM continues to operate Fund's uninvested cash and cash collateral
the mutual fund; (ii) above the at a net profit, although increased from any securities lending arrangements
sub-advisory fee rates for the two expenses in recent years have reduced the may be invested in money market funds
Canadian funds, although the advisory fee profitability of AIM and its advised by AIM pursuant to procedures
rates for such Canadian funds were affiliates. The Board concluded that the approved by the Board.The Board noted that
comparable to the Fund's; and (iii) below Fund's advisory fees were fair and AIM will receive advisory fees from these
the advisory fee rate for the offshore reasonable, and that the level of profits affiliated money market funds attributable
fund. realized by AIM and its affiliates from to such investments, although AIM has
providing services to the Fund was not contractually agreed to waive the advisory
The Board noted that AIM has not excessive in light of the nature, quality fees payable by the Fund with respect to
proposed any advisory fee waivers or and extent of the services provided.The its investment of uninvested cash in these
expense limitations for the Fund. However, Board considered whether AIM is affiliated money market funds through at
the Board also noted that AIM has financially sound and has the resources least June 30, 2008.The Board considered
recommended that the Board approve an necessary to perform its obligations under the contractual nature of this fee waiver
amendment to the Fund's contractual the Fund's advisory agreement, and and noted that it remains in effect until
advisory fee schedule that would implement concluded that AIM has the financial at least June 30, 2008. The Board
the contractual advisory fee waiver that resources necessary to fulfill these concluded that the Fund's investment of
had been formerly committed to by AIM, obligations. uninvested cash and cash collateral from
which waiver provided for lower effective any securities lending arrangements in the
fee rates at all asset levels than the F. INDEPENDENT WRITTEN EVALUATION OF THE affiliated money market funds is in the
Fund's current contractual advisory fee FUND'S SENIOR OFFICER best interests of the Fund and its
schedule. The Board noted that AIM's shareholders.
recommendation was made in response to the The Board noted that, upon their
recommendation of the independent Senior direction, the Senior Officer of the Fund,
Officer that AIM consider whether the who is independent of AIM and AIM's
advisory fee waivers for certain equity affiliates, had prepared an independent
AIM Funds, including the Fund, should be written evaluation to assist the Board in
simplified. The Board concluded that it determining the reasonableness of the
would be appropriate to approve the proposed management fees of the AIM Funds,
proposed amendment to the Fund's including the Fund. The Board noted that
contractual advisory fee schedule and that they had relied upon the Senior Officer's
it was not necessary at this time to written evaluation instead of a
discuss with AIM whether to implement any competitive bidding process. In determining
fee waivers or expense limitations for the whether to continue the Fund's advisory
Fund. agreement, the Board considered the Senior
Officer's written evaluation.
After taking account of the Fund's
contractual advisory fee rate, as well as G. COLLATERAL BENEFITS TO AIM AND ITS
the comparative advisory fee information AFFILIATES
discussed above, the Board concluded that
the Fund's advisory fees were fair and The Board considered various other
reasonable. benefits received by AIM and its
affiliates resulting from AIM's
D. ECONOMIES OF SCALE AND BREAKPOINTS relationship with the Fund, including the
fees received by AIM and its affiliates
The Board considered the extent to which for their provision of administrative,
there are economies of scale in AIM's transfer agency and distribution services
provision of advisory services to the to the Fund. The Board considered the
Fund. The Board also considered whether the performance of AIM and its affiliates in
Fund benefits from such economies of scale providing these services and the
through contractual breakpoints in the organizational structure employed by AIM
Fund's advisory fee schedule or through and its affiliates to provide these
advisory fee waivers or expense services. The Board also considered that
limitations. The Board noted that the these services are provided to the Fund
Fund's contractual advisory fee schedule pursuant to written contracts which are
currently does not include any breakpoints reviewed and approved on an annual basis
but that the amendment to the Fund's by the Board.The Board concluded that AIM
contractual advisory fee schedule and its affiliates were providing these
discussed above provides for seven services in a satisfactory manner and in
breakpoints. Based on this information, the accordance with the terms of their
Board concluded that the Fund's advisory contracts, and were qualified to continue
fees will appropriately reflect economies to provide these services to the Fund.
of scale upon the Board's approval of the
21
[EDELIVERY GO PAPERLESS
AIMINVESTMENTS.COM/EDELIVERY
GRAPHIC]
REGISTER FOR EDELIVERY FUND HOLDINGS AND PROXY VOTING INFORMATION
eDelivery is the process of receiving your fund and account The Fund provides a complete list of its holdings four times in
information via e-mail. Once your quarterly statements, tax each fiscal year, at the quarter-ends. For the second and fourth
forms, fund reports, and prospectuses are available, we will quarters, the lists appear in the Fund's semiannual and annual
send you an e-mail notification containing links to these reports to shareholders. For the first and third quarters, the
documents. For security purposes, you will need to log in to Fund files the lists with the Securities and Exchange Commission
your account to view your statements and tax forms. (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at AIMinvestments.com. From our home page, click on
WHY SIGN UP? Products & Performance, then Mutual Funds, then Fund Overview.
Select your Fund from the drop-down menu and click on Complete
Register for eDelivery to: Quarterly Holdings. Shareholders can also look up the Fund's Forms
N-Q on the SEC Web site at sec.gov. Copies of the Fund's Forms N-Q
o save your Fund the cost of printing and postage. may be reviewed and copied at the SEC Public Reference Room in
Washington, D.C. You can obtain information on the operation of
o reduce the amount of paper you receive. the Public Reference Room, including information about duplicating
fee charges, by calling 202-942-8090 or 800-732-0330, or by
o gain access to your documents faster by not waiting for the electronic request at the following e-mail address:
mail. publicinfo@sec.gov. The SEC file numbers for the Fund are
811-01540 and 002-27334.
o view your documents online anytime at your convenience.
A description of the policies and procedures that the Fund uses to
o save the documents to your personal computer or print them determine how to vote proxies relating to portfolio securities is
out for your records. available without charge, upon request, from our Client Services
department at 800-959-4246 or on the AIM Web site,
HOW DO I SIGN UP? AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC
It's easy. Just follow these simple steps: Web site, sec.gov.
1. Log in to your account. Information regarding how the Fund voted proxies related to its
portfolio securities during the 12 months ended June 30, 2007, is
2. Click on the "Service Center" tab. available at our Web site. Go to AIMinvestments.com, access the
About Us tab, click on Required Notices and then click on Proxy
3. Select "Register for eDelivery" and complete the consent Voting Activity. Next, select the Fund from the drop-down menu.
process. The information is also available on the SEC Web site, sec.gov.
This AIM service is provided by AIM Investment Services, Inc.
ESC-SAR-1 A I M Distributors, Inc. [AIM INVESTMENTS LOGO]
--REGISTERED TRADEMARK--
AIM GLOBAL VALUE FUND
Semiannual Report to Shareholders o June 30, 2007
INTERNATIONAL/ GLOBAL EQUITY
International/Global Value
Table of Contents
Letter to Shareholders ................... 2
Fund Performance ......................... 3
Schedule of Investments .................. 4
Financial Statements ..................... 6
Notes to Financial Statements ............ 9
Financial Highlights ..................... 15
Fund Expenses ............................ 20
Approval of Advisory Agreement ........... 21
For the most current month-end Fund performance and
commentary, please visit AIMinvestments.com.
Unless otherwise noted, all data in this report are
from A I M Management Group Inc.
If used after October 20, 2007, this report must be
accompanied by a Fund Performance & Commentary or
by an AIM Quarterly Performance Review for the most
recent quarter-end.
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.
[AIM INVESTMENTS LOGO]
- --REGISTERED TRADEMARK-- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM GLOBAL VALUE FUND
Dear Fellow Shareholders:
In overseeing the management of the AIM family of funds on your behalf, your Board of
Trustees of the AIM Funds continues to focus on improved investment performance,
[CROCKETT reduced shareholder costs, and high ethical standards. Since my last letter, your Board
PHOTO] has welcomed two new members: Marty Flanagan, President and CEO of INVESCO, AIM's
parent company, and Phil Taylor, who was named CEO of AIM Investments --REGISTERED
TRADEMARK-- in April 2006. Robert Graham, who has given more than 30 years of
Bruce L. Crockett leadership to the company and the mutual fund industry since founding AIM in 1976, has
retired, stepping down in the process from his most recent role as Vice Chairman of the
Board. We thank Bob for his many contributions and wish him a long and happy future.
Our review of fund performance has shown healthy progress, but the process is
necessarily one of continuous improvement. In general, as of June 30, 2007, we have
seen persistent investment discipline and more consistently good results. While this
statement may not apply to every AIM Fund all the time, as I write this letter, the
overall trend in fund management and performance has been positive.
The investment management talent at AIM has recently been enhanced by the promotion
of Karen Dunn Kelley to Head of INVESCO's Worldwide Fixed Income as well as Director of
AIM Global and Cash Management, with responsibility for all fixed income and money
market funds that serve both institutional and individual investors. Under Karen's
direction, AIM's cash management organization grew to one of the world's largest and
most respected, with top-tier performance. The operations now combined under her charge
represent more than $150 billion in assets, 120 investment professionals, and products
that span the entire yield curve.
In other news, your Board took a more active role in preparing for "proxy season,"
the period when fund managers must vote the shares held by their funds "for" or
"against" various proposals on the ballots of the issuing companies. Beginning in the
2007 proxy season, AIM implemented new proxy voting policies, developed by management
in conjunction with an ad hoc Board committee, which provided a solid framework for
properly evaluating and executing the many decisions the AIM Funds are required to make
to vote shares.
In general, the AIM Funds voted for proposals that would allow shareholders a
greater role in election of directors, proxy access and "say for pay." The AIM Funds
voted against directors who AIM believed failed to govern well in cases of corporate
mismanagement, such as the backdating of options grants, and against "poison pill" and
"take under" proposals that would favor the financial interests of managers at the
expense of investors in the case of a merger or acquisition. You can view the proxy
votes cast for your fund by going to AIMinvestments.com. Click the "About Us" tab, then
go to "Required Notices" and "Proxy Voting Activity."
Additionally, your Board raised the amount its members are recommended to invest in
the AIM Funds within three years of joining the Board, with the goal of aligning our
interests even more closely with yours.
Furthermore, at our June meeting we renewed the investment advisory contracts
between the AIM Funds and AIM for another year, applying the same rigorous evaluation
process that was enhanced and formalized in 2005. For more information on this process,
please visit AIMinvestments.com. Click on the "Products and Performance" tab and go to
"Investment Advisory Agreement Renewals."
Your Board's ability to best represent your interests depends on our knowledge of
your opinions and concerns. Please send me an email (bruce@brucecrockett.com) with your
thoughts on the following:
1) How important is it to you to hear about your Board's decisions and activities in
these letters?
2) What other information (on overall performance, specific funds, managers, etc.)
would make the letters more meaningful to you?
3) Would you prefer that communication from your Board continue to be delivered in
paper form by regular mail or be sent electronically by email?
If you would prefer to communicate through a quick online survey, please go to
AIMinvestments.com and provide your responses there.
We need to hear from you to do our best job, and I look forward to your responses.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Directors
August 10, 2007
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 mutual funds represented by AIM
Investments and the PowerShares Exchange-Traded Fund Trust.
2
AIM GLOBAL VALUE FUND
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/06-6/30/07, excluding applicable sales charges. If
sales charges were included, returns would be lower.
Class A Shares 5.20%
Class B Shares 4.83
Class C Shares 4.76
MSCI World Index(1) (Broad Market Index) 9.17
MSCI World Value Index(1) (Style-Specific Index) 8.27
Lipper Global Multi-Cap Value Funds Index(1) (Peer Group Index) 10.73
SOURCE: (1)LIPPER INC.
The unmanaged MSCI WORLD INDEX(SM) is a group of global securities tracked by Morgan
Stanley Capital International.
The unmanaged MSCI WORLD VALUE INDEX is a subset of the MSCI World Index, a group
of global securities tracked by Morgan Stanley Capital International; the Value subset
measures performance of companies with lower price/earnings ratios and lower forecasted
growth values. The index represents investable opportunities for global investors,
taking into account the local market restrictions on share ownership by foreign
investors.
The unmanaged LIPPER GLOBAL MULTI-CAP VALUE FUNDS Index represents an average of
the performance of the largest global multi-capitalization value funds tracked by
Lipper Inc., an independent mutual fund performance monitor.
The Fund is not managed to track the performance of any particular index,
including the indexes defined here, and consequently, the performance of the Fund may
deviate significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY HAD THE ADVISOR NOT WAIVED FEES AND/OR
FUND PERFORMANCE ON FUND DISTRIBUTIONS OR SALE OF FUND REIMBURSED EXPENSES IN THE PAST,
SHARES. INVESTMENT RETURN AND PRINCIPAL PERFORMANCE WOULD HAVE BEEN LOWER.
As of 6/30/07, including applicable VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE
sales charges A GAIN OR LOSS WHEN YOU SELL SHARES. A REDEMPTION FEE OF 2% WILL BE IMPOSED
ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
CLASS A SHARES THE TOTAL ANNUAL FUND OPERATING EXPENSE THE FUND WITHIN 30 DAYS OF PURCHASE.
Inception (12/29/00) 10.25% RATIO SET FORTH IN THE MOST RECENT FUND EXCEPTIONS TO THE REDEMPTION FEE ARE
5 Years 14.54 PROSPECTUS AS OF THE DATE OF THIS REPORT LISTED IN THE FUND'S PROSPECTUS.
1 Year 12.00 FOR CLASS A, CLASS B AND CLASS C SHARES
WAS 1.55%, 2.30% AND 2.30%, RESPECTIVELY.
CLASS B SHARES THE EXPENSE RATIOS PRESENTED ABOVE MAY
Inception (12/29/00) 10.46% VARY FROM THE EXPENSE RATIOS PRESENTED IN
5 Years 14.82 OTHER SECTIONS OF THIS REPORT THAT ARE
1 Year 12.56 BASED ON EXPENSES INCURRED DURING THE
PERIOD COVERED BY THIS REPORT.
CLASS C SHARES
Inception (12/29/00) 10.47% CLASS A SHARE PERFORMANCE REFLECTS THE
5 Years 15.06 MAXIMUM 5.50% SALES CHARGE, AND CLASS B
1 Year 16.54 AND CLASS C SHARE PERFORMANCE REFLECTS THE
========================================== APPLICABLE CONTINGENT DEFERRED SALES
CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
THE PERFORMANCE DATA QUOTED REPRESENT PAST CDSC ON CLASS B SHARES DECLINES FROM 5%
PERFORMANCE AND CANNOT GUARANTEE BEGINNING AT THE TIME OF PURCHASE TO 0% AT
COMPARABLE FUTURE RESULTS; CURRENT THE BEGINNING OF THE SEVENTH YEAR. THE
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
VISIT AIMINVESTMENTS.COM FOR THE MOST YEAR AFTER PURCHASE.
RECENT MONTH-END PERFORMANCE. PERFORMANCE
FIGURES REFLECT REINVESTED DISTRIBUTIONS, THE PERFORMANCE OF THE FUND'S SHARE
CHANGES IN NET ASSET VALUE AND THE EFFECT CLASSES WILL DIFFER PRIMARILY DUE TO
OF THE MAXIMUM SALES CHARGE UNLESS DIFFERENT SALES CHARGE STRUCTURES AND
OTHERWISE STATED. PERFORMANCE FIGURES DO CLASS EXPENSES.
NOT REFLECT
3
AIM Global Value Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ---------------------------------------------------------
Financials 24.1%
- ---------------------------------------------------------
Information Technology 16.7
- ---------------------------------------------------------
Consumer Staples 12.3
- ---------------------------------------------------------
Consumer Discretionary 11.9
- ---------------------------------------------------------
Industrials 8.2
- ---------------------------------------------------------
Health Care 7.0
- ---------------------------------------------------------
Telecommunication Services 7.0
- ---------------------------------------------------------
Energy 2.4
- ---------------------------------------------------------
Materials 1.2
- ---------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 9.2
_________________________________________________________
=========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-57.27%
CANADA-5.72%
E-L Financial Corp. Ltd. (Multi-Line
Insurance) 10,228 $ 6,338,479
- ---------------------------------------------------------------------------
Open Text Corp. (Internet Software &
Services)(a) 219,700 4,794,205
- ---------------------------------------------------------------------------
Rothmans, Inc. (Tobacco) 113,200 2,211,917
- ---------------------------------------------------------------------------
Saskatchewan Wheat Pool, Inc. (Agricultural
Products)(a) 406,500 4,190,958
- ---------------------------------------------------------------------------
Suncor Energy, Inc. (Integrated Oil & Gas) 47,400 4,261,549
===========================================================================
21,797,108
===========================================================================
FINLAND-2.55%
Nokia Oyj-ADR (Communications Equipment) 346,500 9,740,115
===========================================================================
FRANCE-4.29%
Business Objects S.A. (Application
Software)(a)(b) 61,700 2,407,761
- ---------------------------------------------------------------------------
Renault S.A. (Automobile Manufacturers)(b) 39,500 6,332,783
- ---------------------------------------------------------------------------
Sanofi-Aventis (Pharmaceuticals)(b) 94,600 7,638,828
===========================================================================
16,379,372
===========================================================================
GERMANY-1.51%
Bayerische Motoren Werke A.G. (Automobile
Manufacturers)(b) 88,500 5,741,717
===========================================================================
HONG KONG-2.14%
Cheung Kong (Holdings) Ltd. (Real Estate
Management & Development) 325,000 4,256,244
- ---------------------------------------------------------------------------
Henderson Land Development Co. Ltd. (Real
Estate Management & Development) 571,000 3,888,651
===========================================================================
8,144,895
===========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
IRELAND-1.88%
Bank of Ireland (Diversified Banks)(b) 353,400 $ 7,161,261
===========================================================================
JAPAN-16.35%
Fujitsu Ltd. (Computer Hardware) 604,000 4,453,366
- ---------------------------------------------------------------------------
Hitachi, Ltd. (Electronic Equipment
Manufacturers)(b) 246,000 1,739,143
- ---------------------------------------------------------------------------
Japan Petroleum Exploration Co., Ltd. (Oil &
Gas Exploration & Production)(b) 71,800 5,064,846
- ---------------------------------------------------------------------------
Meitec Corp. (Diversified Commercial &
Professional Services) 402,400 11,534,486
- ---------------------------------------------------------------------------
NIPPONKOA Insurance Co., Ltd. (Property &
Casualty Insurance)(b) 454,000 4,082,655
- ---------------------------------------------------------------------------
NTT DoCoMo, Inc. (Wireless Telecommunication
Services)(b) 6,284 9,936,593
- ---------------------------------------------------------------------------
Sega Sammy Holdings Inc. (Leisure Products) 404,000 6,544,702
- ---------------------------------------------------------------------------
Shinsei Bank, Ltd. (Regional Banks)(b) 1,416,000 5,689,460
- ---------------------------------------------------------------------------
Sony Corp. (Consumer Electronics) 105,600 5,427,917
- ---------------------------------------------------------------------------
Toyota Industries Corp. (Auto Parts &
Equipment)(b) 169,900 7,876,825
===========================================================================
62,349,993
===========================================================================
NETHERLANDS-4.47%
ABN AMRO Holding N.V. (Diversified Banks)(b) 142,800 6,552,537
- ---------------------------------------------------------------------------
Akzo Nobel N.V. (Diversified Chemicals)(b) 52,600 4,538,230
- ---------------------------------------------------------------------------
Heineken N.V. (Brewers)(b) 101,300 5,950,051
===========================================================================
17,040,818
===========================================================================
NEW ZEALAND-0.75%
Telecom Corp. of New Zealand Ltd. (Integrated
Telecommunication Services)(b) 817,100 2,865,746
===========================================================================
</Table>
4
AIM Global Value Fund
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
SINGAPORE-1.62%
Singapore Airport Terminal Services Ltd.
(Airport Services) 3,043,000 $ 6,162,535
===========================================================================
SOUTH KOREA-1.88%
SK Telecom Co., Ltd.-ADR (Wireless
Telecommunication Services) 262,600 7,182,110
===========================================================================
SWITZERLAND-2.88%
Nestle S.A. (Packaged Foods & Meats)(b) 11,150 4,234,251
- ---------------------------------------------------------------------------
Novartis A.G. (Pharmaceuticals)(b) 119,600 6,731,158
===========================================================================
10,965,409
===========================================================================
UNITED KINGDOM-11.23%
Diageo PLC (Distillers & Vintners)(b) 258,454 5,369,276
- ---------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (Pharmaceuticals) 160,900 8,426,333
- ---------------------------------------------------------------------------
HSBC Holdings PLC (Diversified Banks)(b) 355,200 6,480,306
- ---------------------------------------------------------------------------
Lloyds TSB Group PLC (Diversified Banks)(b) 576,300 6,441,325
- ---------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (Diversified
Banks) 753,800 9,582,712
- ---------------------------------------------------------------------------
Vodafone Group PLC (Wireless
Telecommunication Services)(b) 1,940,237 6,529,441
===========================================================================
42,829,393
===========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $186,060,572) 218,360,472
===========================================================================
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-33.57%
ASSET MANAGEMENT & CUSTODY BANKS-0.78%
Blackstone Group L.P. (The)(a) 102,012 2,985,891
===========================================================================
BREWERS-1.42%
Anheuser-Busch Cos., Inc. 103,900 5,419,424
===========================================================================
BROADCASTING & CABLE TV-1.90%
Liberty Media Corp. Capital-Series A(a) 61,500 7,237,320
===========================================================================
CATALOG RETAIL-1.66%
Liberty Media Corp.-Interactive-Series A(a) 283,000 6,319,390
===========================================================================
COMMUNICATIONS EQUIPMENT-3.41%
Motorola, Inc. 735,200 13,013,040
===========================================================================
COMPUTER HARDWARE-4.17%
Dell Inc.(a) 557,550 15,918,053
===========================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
HYPERMARKETS & SUPER CENTERS-1.79%
Wal-Mart Stores, Inc. 141,999 $ 6,831,572
===========================================================================
INDUSTRIAL CONGLOMERATES-3.60%
Tyco International Ltd.(a) 406,200 13,725,498
===========================================================================
PACKAGED FOODS & MEATS-1.56%
Lancaster Colony Corp. 141,600 5,931,624
===========================================================================
PERSONAL PRODUCTS-1.72%
Avon Products, Inc. 179,000 6,578,250
===========================================================================
PHARMACEUTICALS-1.00%
Merck & Co. Inc. 76,600 3,814,680
===========================================================================
PROPERTY & CASUALTY INSURANCE-4.05%
Berkshire Hathaway Inc.-Class A(a) 79 8,648,525
- ---------------------------------------------------------------------------
Progressive Corp. (The) 283,200 6,776,976
===========================================================================
15,425,501
===========================================================================
SYSTEMS SOFTWARE-3.09%
Microsoft Corp. 399,900 11,785,053
===========================================================================
THRIFTS & MORTGAGE FINANCE-3.42%
Bank Brookline Bancorp, Inc. (The) 431,300 4,964,263
- ---------------------------------------------------------------------------
Washington Mutual, Inc. 189,100 8,063,224
===========================================================================
13,027,487
===========================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $114,448,070) 128,012,783
===========================================================================
MONEY MARKET FUNDS-8.89%
Liquid Assets Portfolio-Institutional
Class(c) 16,939,420 16,939,420
- ---------------------------------------------------------------------------
Premier Portfolio-Institutional Class(c) 16,939,420 16,939,420
===========================================================================
Total Money Market Funds (Cost
$33,878,840) 33,878,840
===========================================================================
TOTAL INVESTMENTS-99.73% (Cost $334,387,482) 380,252,095
===========================================================================
OTHER ASSETS LESS LIABILITIES-0.27% 1,024,482
===========================================================================
NET ASSETS-100.00% $381,276,577
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(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 June 30, 2007 was $119,364,193, which
represented 31.31% 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.
5
AIM Global Value Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $300,508,642) $346,373,255
- -----------------------------------------------------------
Investments in affiliated money market funds
(Cost $33,878,840) 33,878,840
===========================================================
Total investments (Cost $334,387,482) 380,252,095
===========================================================
Foreign currencies, at value (Cost $383,447) 382,625
- -----------------------------------------------------------
Receivables for:
Fund shares sold 1,416,320
- -----------------------------------------------------------
Dividends 713,248
- -----------------------------------------------------------
Foreign currency contracts outstanding 379,557
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 22,684
- -----------------------------------------------------------
Other assets 50,504
===========================================================
Total assets 383,217,033
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 881,846
- -----------------------------------------------------------
Fund shares reacquired 721,069
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 29,958
- -----------------------------------------------------------
Accrued distribution fees 132,536
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,344
- -----------------------------------------------------------
Accrued transfer agent fees 91,600
- -----------------------------------------------------------
Accrued operating expenses 79,103
===========================================================
Total liabilities 1,940,456
===========================================================
Net assets applicable to shares outstanding $381,276,577
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $322,701,751
- -----------------------------------------------------------
Undistributed net investment income (85,507)
- -----------------------------------------------------------
Undistributed net realized gain 12,422,254
- -----------------------------------------------------------
Unrealized appreciation 46,238,079
===========================================================
$381,276,577
___________________________________________________________
===========================================================
NET ASSETS:
Class A $170,158,796
___________________________________________________________
===========================================================
Class B $ 64,140,304
___________________________________________________________
===========================================================
Class C $ 51,931,470
___________________________________________________________
===========================================================
Institutional Class $ 95,046,007
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 10,022,395
___________________________________________________________
===========================================================
Class B 3,889,273
___________________________________________________________
===========================================================
Class C 3,146,819
___________________________________________________________
===========================================================
Institutional Class 5,573,303
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 16.98
- -----------------------------------------------------------
Offering price per share
(Net asset value of $16.98 divided by
94.50%) $ 17.97
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 16.49
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 16.50
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 17.05
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
6
AIM Global Value Fund
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $239,070) $ 3,509,508
- -------------------------------------------------------------------------
Dividends from affiliated money market funds 965,355
=========================================================================
Total investment income 4,474,863
=========================================================================
EXPENSES:
Advisory fees 1,479,334
- -------------------------------------------------------------------------
Administrative services fees 54,906
- -------------------------------------------------------------------------
Custodian fees 46,193
- -------------------------------------------------------------------------
Distribution fees:
Class A 201,607
- -------------------------------------------------------------------------
Class B 329,238
- -------------------------------------------------------------------------
Class C 248,467
- -------------------------------------------------------------------------
Transfer agent fees -- A, B and C 334,445
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 13,363
- -------------------------------------------------------------------------
Other 150,438
=========================================================================
Total expenses 2,857,991
=========================================================================
Less: Fees waived and expense offset arrangements (117,402)
=========================================================================
Net expenses 2,740,589
=========================================================================
Net investment income 1,734,274
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 10,475,012
- -------------------------------------------------------------------------
Foreign currencies (100,043)
- -------------------------------------------------------------------------
Foreign currency contracts (929,136)
=========================================================================
9,445,833
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 5,213,073
- -------------------------------------------------------------------------
Foreign currencies (4,800)
- -------------------------------------------------------------------------
Foreign currency contracts 693,130
=========================================================================
5,901,403
=========================================================================
Net realized and unrealized gain 15,347,236
=========================================================================
Net increase in net assets resulting from operations $17,081,510
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
7
AIM Global Value Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,734,274 $ 1,478,777
- ------------------------------------------------------------------------------------------
Net realized gain 9,445,833 13,890,119
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation 5,901,403 28,371,560
==========================================================================================
Net increase in net assets resulting from operations 17,081,510 43,740,456
==========================================================================================
Distributions to shareholders from net investment income:
Class A -- (1,475,108)
- ------------------------------------------------------------------------------------------
Class B -- (276,442)
- ------------------------------------------------------------------------------------------
Class C -- (186,792)
- ------------------------------------------------------------------------------------------
Institutional Class -- (690,111)
==========================================================================================
Total distributions from net investment income -- (2,628,453)
==========================================================================================
Distributions to shareholders from net realized gains:
Class A -- (5,411,350)
- ------------------------------------------------------------------------------------------
Class B -- (2,453,912)
- ------------------------------------------------------------------------------------------
Class C -- (1,658,114)
- ------------------------------------------------------------------------------------------
Institutional Class -- (1,774,244)
==========================================================================================
Total distributions from net realized gains -- (11,297,620)
==========================================================================================
Decrease in net assets resulting from distributions -- (13,926,073)
==========================================================================================
Share transactions-net:
Class A 12,768,680 40,366,491
- ------------------------------------------------------------------------------------------
Class B (3,999,124) 7,521,135
- ------------------------------------------------------------------------------------------
Class C 4,995,057 15,899,124
- ------------------------------------------------------------------------------------------
Institutional Class 40,542,994 46,238,377
==========================================================================================
Net increase in net assets resulting from share
transactions 54,307,607 110,025,127
==========================================================================================
Net increase in net assets 71,389,117 139,839,510
==========================================================================================
NET ASSETS:
Beginning of period 309,887,460 170,047,950
==========================================================================================
End of period (including undistributed net investment
income of $(85,507) and $(1,819,781), respectively) $381,276,577 $309,887,460
__________________________________________________________________________________________
==========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8
AIM Global Value Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Value Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware statutory trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of seven separate portfolios,
each authorized to issue an unlimited number of shares of beneficial interest.
The Fund currently offers multiple classes of shares. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund.
The Fund's primary investment objective is long-term growth of capital.
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
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. 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 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 open-end and closed-end registered
investment companies that trade on an exchange are valued at the 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.
Debt obligations (including convertible bonds) and unlisted equities 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, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
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. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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.
Valuations change in response to many factors including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions and market
liquidity.
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.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
9
AIM Global Value Fund
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
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.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
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
10
AIM Global Value Fund
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. Fluctuations in the value of these contracts are recorded as
unrealized appreciation (depreciation) until the contracts are closed. When
these contracts are closed, realized gains (losses) are recorded. 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.
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.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $1 billion 0.85%
- -------------------------------------------------------------------
Over $1 billion 0.80%
__________________________________________________________________
===================================================================
</Table>
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<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>
Further, effective July 1, 2007, AIM has contractually agreed through at
least June 30, 2008 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of
$103,425.
At the request of the Trustees of the Trust, INVESCO PLC ("INVESCO")
(formerly "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. These
expenses along with the related expense reimbursement are included in the
Statement of Operations. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM for certain administrative
costs incurred in providing accounting services, to the Fund. For the six months
ended June 30, 2007, expenses incurred under the agreement are shown in the
Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
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 six months ended June 30,
2007, expenses incurred under the agreement are shown in the Statement of
Operations as transfer agent fees.
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 Plan payments, up to 0.25% of the average
daily net assets of each class of 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
11
AIM Global Value Fund
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. For the six months ended June 30, 2007, expenses incurred under the
Plans are shown in the Statement of Operations as distribution fees.
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 six
months ended June 30, 2007, ADI advised the Fund that it retained $41,914 in
front-end sales commissions from the sale of Class A shares and $346, $22,478
and $2,711 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 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 six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE INCOME
FUND 12/31/06 AT COST FROM SALES 06/30/07 DIVIDEND
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $20,450,076 $29,525,896 $(33,036,552) $16,939,420 $483,898
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 20,450,076 29,525,896 (33,036,552) 16,939,420 481,457
=================================================================================================
Total
Investments
in
Affiliates $40,900,152 $59,051,792 $(66,073,104) $33,878,840 $965,355
_________________________________________________________________________________________________
=================================================================================================
</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 six months ended June 30, 2007, the Fund
engaged in securities purchases of $368,878.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the six
months ended June 30, 2007, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $13,977.
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 certain Trustees and Officers of the Fund. 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, certain 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 six months ended June 30, 2007, the Fund paid legal fees of
$2,827 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.
12
AIM Global Value Fund
The Fund participates 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 six months ended June 30, 2007, 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--FOREIGN CURRENCY CONTRACTS
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT --------------------------------------- VALUE UNREALIZED
DATE DELIVER RECEIVE 06/30/07 APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------------------
08/21/07 JPY 4,800,000,000 USD 40,068,450 $39,258,220 $ 810,230
- ---------------------------------------------------------------------------------------------------------------------------------
09/13/07 CAD 14,600,000 USD 13,773,845 13,733,431 40,414
=================================================================================================================================
$ 850,644
=================================================================================================================================
</Table>
<Table>
<Caption>
CONTRACT TO
SETTLEMENT --------------------------------------- VALUE UNREALIZED
DATE DELIVER RECEIVE 06/30/07 (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
07/24/07 NZD 2,350,000 USD 1,739,940 $1,808,174 $ (68,234)
- ---------------------------------------------------------------------------------------------------------------------------------
08/21/07 EUR 21,500,000 USD 29,106,055 29,153,549 (47,494)
- ---------------------------------------------------------------------------------------------------------------------------------
08/21/07 GBP 7,900,000 USD 15,587,885 15,853,663 (265,778)
- ---------------------------------------------------------------------------------------------------------------------------------
08/21/07 GBP 1,000,000 USD 1,964,600 2,006,793 (42,193)
- ---------------------------------------------------------------------------------------------------------------------------------
09/13/07 KRW 4,150,000,000 USD 4,457,573 4,504,961 (47,388)
=================================================================================================================================
$(471,087)
=================================================================================================================================
Total open foreign currency contracts $ 379,557
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
Currency Abbreviations:
<Table>
CAD -- Canadian Dollar
EUR -- Euro
GBP -- British Pound Sterling
JPY -- Japanese Yen
KRW -- South Korean Won
NZD -- New Zealand Dollar
USD -- U.S. Dollar
</Table>
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
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 six months ended June 30, 2007 was $104,683,252 and
$42,107,680, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $53,620,159
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (9,532,535)
===============================================================================
Net unrealized appreciation of investment securities $44,087,624
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $336,164,471.
</Table>
13
AIM Global Value Fund
NOTE 11--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 and under certain circumstances
load waiver shares may be subject to a CDSC. Class B shares and Class C shares
are sold with a CDSC. Institutional Class shares are sold at net asset value.
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
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(A) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,775,188 $ 29,438,790 3,614,347 $ 56,150,941
- ----------------------------------------------------------------------------------------------------------------------
Class B 489,480 7,898,205 1,313,022 19,755,798
- ----------------------------------------------------------------------------------------------------------------------
Class C 693,445 11,164,538 1,410,203 21,146,739
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class 2,419,410 40,547,827 2,874,565 44,573,859
======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 403,499 6,528,600
- ----------------------------------------------------------------------------------------------------------------------
Class B -- -- 159,889 2,523,056
- ----------------------------------------------------------------------------------------------------------------------
Class C -- -- 111,881 1,766,601
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 152,027 2,464,355
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 236,798 3,953,649 260,143 4,002,670
- ----------------------------------------------------------------------------------------------------------------------
Class B (243,473) (3,953,649) (267,099) (4,002,670)
======================================================================================================================
Reacquired:(b)
Class A (1,239,595) (20,623,759) (1,710,987) (26,315,720)
- ----------------------------------------------------------------------------------------------------------------------
Class B (489,131) (7,943,680) (722,448) (10,755,049)
- ----------------------------------------------------------------------------------------------------------------------
Class C (378,631) (6,169,481) (469,541) (7,014,216)
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class (340) (4,833) (54,166) (799,837)
======================================================================================================================
3,263,151 $ 54,307,607 7,075,335 $110,025,127
______________________________________________________________________________________________________________________
======================================================================================================================
</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 20% of the
outstanding shares of the Fund. ADI has an agreement with these entities to
sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to
these entities, which are considered to be related to the Fund, for
providing services to the Fund, AIM and/or AIM affiliates including but not
limited to services such as securities brokerage, distribution, third party
record keeping and account servicing. The Trust has no knowledge as to
whether all or any portion of the shares owned of record by these entities
are also owned beneficially. In addition, 25% 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.
(b) Amount is net of redemption fees of $2,050, $800, $633 and $1,036 for Class
A, Class B, Class C and Institutional Class shares, respectively, for the
six months ended June 30, 2007 and $2,469, $1,191, $700 and $554 for Class
A, Class B, Class C and Institutional Class shares respectively, for the
year ended December 31, 2006.
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. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
14
AIM Global Value 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
----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.14 $ 13.97 $ 13.28 $ 11.74 $ 9.05 $ 9.85
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) 0.09 0.14 0.13 0.01(b) 0.01 (0.11)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.75 2.82 1.38 2.04 2.89 (0.69)
=================================================================================================================================
Total from investment operations 0.84 2.96 1.51 2.05 2.90 (0.80)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.17) (0.16) (0.03) (0.09) (0.00)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.62) (0.66) (0.48) (0.12) --
=================================================================================================================================
Total distributions -- (0.79) (0.82) (0.51) (0.21) (0.00)
=================================================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00 -- --
=================================================================================================================================
Net asset value, end of period $ 16.98 $ 16.14 $ 13.97 $ 13.28 $11.74 $ 9.05
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 5.20% 21.16% 11.35% 17.50% 32.15% (8.08)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $170,159 $149,283 $93,363 $36,092 $9,270 $6,321
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.43%(d) 1.53% 1.62% 2.00% 2.00% 2.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.49%(d) 1.58% 1.67% 2.20% 3.12% 2.75%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 1.14%(d) 0.88% 0.91% 0.10%(b) 0.14% (1.16)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 14% 24% 51% 129% 372% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.02) and (0.14)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$162,622,203.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
15
AIM Global Value Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.73 $ 13.65 $ 13.02 $ 11.57 $ 8.94 $ 9.79
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) 0.03 0.02 0.03 (0.07)(b) (0.05) (0.17)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.73 2.75 1.34 2.00 2.83 (0.68)
=================================================================================================================================
Total from investment operations 0.76 2.77 1.37 1.93 2.78 (0.85)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.07) (0.08) (0.00) (0.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.62) (0.66) (0.48) (0.12) --
=================================================================================================================================
Total distributions -- (0.69) (0.74) (0.48) (0.15) --
=================================================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00 -- --
=================================================================================================================================
Net asset value, end of period $ 16.49 $ 15.73 $ 13.65 $ 13.02 $11.57 $ 8.94
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 4.83% 20.27% 10.51% 16.77% 31.26% (8.68)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $64,140 $65,013 $49,827 $24,675 $7,075 $4,624
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.18%(d) 2.28% 2.33% 2.65% 2.65% 2.65%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.24%(d) 2.33% 2.38% 2.85% 3.77% 3.40%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.39%(d) 0.13% 0.20% (0.55)%(b) (0.51)% (1.81)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 14% 24% 51% 129% 372% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.10) and (0.79)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$66,393,209.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
16
AIM Global Value Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
---------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.74 $ 13.66 $ 13.03 $ 11.58 $ 8.94 $ 9.79
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) 0.03 0.02 0.03 (0.07)(b) (0.05) (0.17)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.73 2.75 1.34 2.00 2.84 (0.68)
=================================================================================================================================
Total from investment operations 0.76 2.77 1.37 1.93 2.79 (0.85)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.07) (0.08) (0.00) (0.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.62) (0.66) (0.48) (0.12) --
=================================================================================================================================
Total distributions -- (0.69) (0.74) (0.48) (0.15) --
=================================================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00 -- --
=================================================================================================================================
Net asset value, end of period $ 16.50 $ 15.74 $ 13.66 $ 13.03 $11.58 $ 8.94
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 4.83% 20.26% 10.50% 16.75% 31.37% (8.68)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $51,931 $44,587 $24,316 $10,021 $2,853 $1,850
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.18%(d) 2.28% 2.33% 2.65% 2.65% 2.65%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.24%(d) 2.33% 2.38% 2.85% 3.77% 3.40%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets 0.39%(d) 0.13% 0.20% (0.55)%(b) (0.51)% (1.81)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 14% 24% 51% 129% 372% 101%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.10) and (0.79)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$50,105,224.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
17
AIM Global Value Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------------
OCTOBER 25, 2005
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
JUNE 30, DECEMBER 31, DECEMBER 31,
2007 2006 2005
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 16.17 $ 13.98 $13.90
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.14 0.22 0.04
- ---------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.74 2.83 0.86
===============================================================================================================
Total from investment operations 0.88 3.05 0.90
===============================================================================================================
Less distributions:
Dividends from net investment income -- (0.24) (0.16)
- ---------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.62) (0.66)
===============================================================================================================
Total distributions -- (0.86) (0.82)
===============================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00
===============================================================================================================
Net asset value, end of period $ 17.05 $ 16.17 $13.98
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 5.44% 21.81% 6.48%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $95,046 $51,005 $2,542
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.94%(c) 0.98% 1.09%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.00%(c) 1.03% 1.14%(d)
===============================================================================================================
Ratio of net investment income to average net assets 1.63%(c) 1.43% 1.44%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(e) 14% 24% 51%
_______________________________________________________________________________________________________________
===============================================================================================================
</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 annualized and based on average daily net assets of
$71,842,607.
(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.
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 A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("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. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), 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; 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.
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.
18
AIM Global Value Fund
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
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 INVESCO PLC'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 INVESCO 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.
19
AIM GLOBAL VALUE FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE together with the amount you invested, to use this information to compare the
estimate the expenses that you paid over ongoing costs of investing in the Fund and
As a shareholder of the Fund, you incur the period. Simply divide your account other funds. To do so, compare this 5%
two types of costs: (1) transaction costs, value by $1,000 (for example, an $8,600 hypothetical example with the 5%
which may include sales charges (loads) on account value divided by $1,000 = 8.6), hypothetical examples that appear in the
purchase payments or contingent deferred then multiply the result by the number in shareholder reports of the other funds.
sales charges on redemptions, and the table under the heading entitled
redemption fees, if any; and (2) ongoing "Actual Expenses Paid During Period" to Please note that the expenses shown in
costs, including management fees; estimate the expenses you paid on your the table are meant to highlight your
distribution and/or service (12b-1) fees; account during this period. ongoing costs only and do not reflect any
and other Fund expenses. This example is transaction costs, such as sales charges
intended to help you understand your HYPOTHETICAL EXAMPLE FOR COMPARISON (loads) on purchase payments, contingent
ongoing costs (in dollars) of investing in PURPOSES deferred sales charges on redemptions, and
the Fund and to compare these costs with redemption fees, if any. Therefore, the
ongoing costs of investing in other mutual The table below also provides information hypothetical information is useful in
funds. The example is based on an about hypothetical account values and comparing ongoing costs only, and will not
investment of $1,000 invested at the hypothetical expenses based on the Fund's help you determine the relative total
beginning of the period and held for the actual expense ratio and an assumed rate costs of owning different funds. In
entire period January 1, 2007, through of return of 5% per year before expenses, addition, if these transaction costs were
June 30, 2007. which is not the Fund's actual return. included, your costs would have been
higher.
ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
The table below provides information about actual ending account balance or expenses
actual account values and actual expenses. you paid for the period. You may
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
A $1,000.00 $1,052.00 $ 7.28 $1,017.70 $ 7.15 1.43%
B 1,000.00 1,048.30 11.07 1,013.98 10.89 2.18
C 1,000.00 1,047.60 11.07 1,013.98 10.89 2.18
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
20
AIM GLOBAL VALUE FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM mendations and makes its own A. NATURE, EXTENT AND QUALITY OF SERVICES
Funds Group is required under the recommendations regarding the performance, PROVIDED BY AIM
Investment Company Act of 1940 to approve fees and expenses of the AIM Funds to the
annually the renewal of the AIM Global full Board. Moreover, the Investments The Board reviewed the advisory services
Value Fund (the Fund) investment advisory Committee considers each SubCommittee's provided to the Fund by AIM under the
agreement with A I M Advisors, Inc. (AIM). recommendations in making its annual Fund's advisory agreement, the performance
During contract renewal meetings held on recommendation to the Board whether to of AIM in providing these services, and
June 25-27, 2007, the Board as a whole and approve the continuance of each AIM Fund's the credentials and experience of the
the disinterested or "independent" investment advisory agreement and officers and employees of AIM who provide
Trustees, voting separately, approved the sub-advisory agreement, if applicable these services. The Board's review of the
continuance of the Fund's investment (advisory agreements), for another year. qualifications of AIM to provide these
advisory agreement for another year, services included the Board's
effective July 1, 2007. In doing so, the The independent Trustees, as mentioned consideration of AIM's portfolio and
Board determined that the Fund's advisory above, are assisted in their annual product review process, various back
agreement is in the best interests of the evaluation of the advisory agreements by office support functions provided by AIM,
Fund and its shareholders and that the the independent Senior Officer. One and AIM's equity and fixed income trading
compensation to AIM under the Fund's responsibility of the Senior Officer is to operations. The Board concluded that the
advisory agreement is fair and reasonable. manage the process by which the AIM Funds' nature, extent and quality of the advisory
proposed management fees are negotiated services provided to the Fund by AIM were
The independent Trustees met during the annual contract renewal process appropriate and that AIM currently is
separately during their evaluation of the to ensure that they are negotiated in a providing satisfactory advisory services
Fund's investment advisory agreement with manner which is at arms' length and in accordance with the terms of the Fund's
independent legal counsel from whom they reasonable. Accordingly, the Senior advisory agreement. In addition, based on
received independent legal advice, and the Officer must either supervise a their ongoing meetings throughout the year
independent Trustees also received competitive bidding process or prepare an with the Fund's portfolio managers, the
assistance during their deliberations from independent written evaluation. The Senior Board concluded that these individuals are
the independent Senior Officer, a Officer has recommended that an competent and able to continue to carry
full-time officer of the AIM Funds who independent written evaluation be provided out their responsibilities under the
reports directly to the independent and, upon the direction of the Board, has Fund's advisory agreement.
Trustees. The following discussion more prepared an independent written
fully describes the process employed by evaluation. In determining whether to continue the
the Board to evaluate the performance of Fund's advisory agreement, the Board
the AIM Funds (including the Fund) During the annual contract renewal considered the prior relationship between
throughout the year and, more process, the Board considered the factors AIM and the Fund, as well as the Board's
specifically, during the annual contract discussed below under the heading "Factors knowledge of AIM's operations, and
renewal meetings. and Conclusions and Summary of Independent concluded that it was beneficial to
Written Fee Evaluation" in evaluating the maintain the current relationship, in
THE BOARD'S FUND EVALUATION PROCESS fairness and reasonableness of the Fund's part, because of such knowledge. The Board
advisory agreement at the contract renewal also considered the steps that AIM and its
The Board's Investments Committee has meetings and at their meetings throughout affiliates have taken over the last
established three Sub-Committees which are the year as part of their ongoing several years to improve the quality and
responsible for overseeing the management oversight of the Fund. The Fund's advisory efficiency of the services they provide to
of a number of the series portfolios of agreement was considered separately, the Funds in the areas of investment
the AIM Funds. This SubCommittee structure although the Board also considered the performance, product line diversification,
permits the Trustees to focus on the common interests of all of the AIM Funds distribution, fund operations, shareholder
performance of the AIM Funds that have in their deliberations. The Board services and compliance. The Board
been assigned to them. The Sub-Committees comprehensively considered all of the concluded that the quality and efficiency
meet throughout the year to review the information provided to them and did not of the services AIM and its affiliates
performance of their assigned funds, and identify any particular factor that was provide to the AIM Funds in each of these
the Sub-Committees review monthly and controlling. Furthermore, each Trustee may areas have generally improved, and support
quarterly comparative performance have evaluated the information provided the Board's approval of the continuance of
information and periodic asset flow data differently from one another and the Fund's advisory agreement.
for their assigned funds. These materials attributed different weight to the various
are prepared under the direction and factors. The Trustees recognized that the B. FUND PERFORMANCE
supervision of the independent Senior advisory arrangements and resulting
Officer. Over the course of each year, the advisory fees for the Fund and the other The Board compared the Fund's performance
SubCommittees meet with portfolio managers AIM Funds are the result of years of during the past one, three and five
for their assigned funds and other members review and negotiation between the calendar years to the performance of funds
of management and review with these Trustees and AIM, that the Trustees may in the Fund's Lipper peer group that are
individuals the performance, investment focus to a greater extent on certain not managed by AIM, and against the
objective(s), policies, strategies and aspects of these arrangements in some performance of all funds in the Lipper
limitations of these funds. years than others, and that the Trustees' Global Multi-Cap Value Funds Index. The
deliberations and conclusions in a Board also reviewed the methodology used
In addition to their meetings particular year may be based in part on by Lipper to identify the Fund's peers.
throughout the year, the Sub-Committees their deliberations and conclusions of The Board noted that the Fund's
meet at designated contract renewal these same arrangements throughout the performance was comparable to the median
meetings each year to conduct an in-depth year and in prior years. performance of its peers for the one and
review of the performance, fees and five year periods, and below such
expenses of their assigned funds. During FACTORS AND CONCLUSIONS AND SUMMARY OF performance for the three year period. The
the contract renewal process, the Trustees INDEPENDENT WRITTEN FEE EVALUATION Board noted that the Fund's performance
receive comparative performance and fee was comparable to the performance of the
data regarding all the AIM Funds prepared The discussion below serves as a summary Index for the one, three and five year
by an independent company, Lipper, Inc., of the Senior Officer's independent periods. The Board also considered the
under the direction and supervision of the written evaluation, as well as a steps AIM has taken over the last several
independent Senior Officer who also discussion of the material factors and years to improve the quality and
prepares a separate analysis of this related conclusions that formed the basis efficiency of the services that AIM
information for the Trustees. Each for the Board's approval of the Fund's provides to the AIM Funds. The Board
Sub-Committee then makes recommendations advisory agreement. Unless otherwise concluded that AIM continues to be
to the Investments Committee regarding the stated, information set forth below is as responsive to the Board's focus on fund
performance, fees and expenses of their of June 27, 2007 and does not reflect any performance. However, due to the Fund's
assigned funds. The Investments Committee changes that may have occurred since that underperformance, the Board also concluded
considers each Sub-Committee's date, including but not limited to changes that it would be appropriate for the Board
recom- to the Fund's performance, advisory fees, to continue to closely monitor and review
expense limitations and/or fee waivers. the per-
(continued)
21
AIM GLOBAL VALUE FUND
formance of the Fund. Although the charged by third party service providers by the Fund and/or other funds advised by
independent written evaluation of the based on the combined size of all of the AIM are used to pay for research and
Fund's Senior Officer (discussed below) AIM Funds and affiliates. execution services. The Board noted that
only considered Fund performance through soft dollar arrangements shift the payment
the most recent calendar year, the Board E. PROFITABILITY AND FINANCIAL RESOURCES obligation for the research and executions
also reviewed more recent Fund performance OF AIM services from AIM to the funds and
and this review did not change their therefore may reduce AIM's expenses. The
conclusions. The Board reviewed information from AIM Board also noted that research obtained
concerning the costs of the advisory and through soft dollar arrangements may be
C. ADVISORY FEES AND FEE WAIVERS other services that AIM and its affiliates used by AIM in making investment decisions
provide to the Fund and the profitability for the Fund and may therefore benefit
The Board compared the Fund's contractual of AIM and its affiliates in providing Fund shareholders. The Board concluded
advisory fee rate to the contractual these services. The Board also reviewed that AIM's soft dollar arrangements were
advisory fee rates of funds in the Fund's information concerning the financial appropriate. The Board also concluded
Lipper peer group that are not managed by condition of AIM and its affiliates. The that, based on their review and
AIM, at a common asset level and as of the Board also reviewed with AIM the representations made by AIM, these
end of the past calendar year. The Board methodology used to prepare the arrangements were consistent with
noted that the Fund's advisory fee rate profitability information. The Board regulatory requirements.
was comparable to the median advisory fee considered the overall profitability of
rate of its peers. The Board also reviewed AIM, as well as the profitability of AIM The Board considered the fact that the
the methodology used by Lipper and noted in connection with managing the Fund. The Fund's uninvested cash and cash collateral
that the contractual fee rates shown by Board noted that AIM continues to operate from any securities lending arrangements
Lipper include any applicable long-term at a net profit, although increased may be invested in money market funds
contractual fee waivers. The Board noted expenses in recent years have reduced the advised by AIM pursuant to procedures
that AIM does not serve as an advisor to profitability of AIM and its affiliates. approved by the Board. The Board noted
other mutual funds or other clients with The Board concluded that the Fund's that AIM will receive advisory fees from
investment strategies comparable to those advisory fees were fair and reasonable, these affiliated money market funds
of the Fund. and that the level of profits realized by attributable to such investments, although
AIM and its affiliates from providing AIM has contractually agreed to waive the
The Board noted that AIM has not services to the Fund was not excessive in advisory fees payable by the Fund with
proposed any advisory fee waivers or light of the nature, quality and extent of respect to its investment of uninvested
expense limitations for the Fund. However, the services provided. The Board cash in these affiliated money market
the Board also noted that AIM has considered whether AIM is financially funds through at least June 30, 2008. The
recommended that the Board approve an sound and has the resources necessary to Board considered the contractual nature of
amendment to the Fund's contractual perform its obligations under the Fund's this fee waiver and noted that it remains
advisory fee schedule that would implement advisory agreement, and concluded that AIM in effect until at least June 30, 2008.
the contractual advisory fee waiver that has the financial resources necessary to The Board concluded that the Fund's
had been formerly committed to by AIM, fulfill these obligations. investment of uninvested cash and cash
which waiver provided for lower effective collateral from any securities lending
fee rates at all asset levels than the F. INDEPENDENT WRITTEN EVALUATION OF THE arrangements in the affiliated money
Fund's current contractual advisory fee FUND'S SENIOR OFFICER market funds is in the best interests of
schedule. The Board noted that AIM's the Fund and its shareholders.
recommendation was made in response to the The Board noted that, upon their
recommendation of the independent Senior direction, the Senior Officer of the Fund,
Officer that AIM consider whether the who is independent of AIM and AIM's
advisory fee waivers for certain equity affiliates, had prepared an independent
AIM Funds, including the Fund, should be written evaluation to assist the Board in
simplified. The Board concluded that it determining the reasonableness of the
would be appropriate to approve the proposed management fees of the AIM Funds,
proposed amendment to the Fund's including the Fund. The Board noted that
contractual advisory fee schedule and that they had relied upon the Senior Officer's
it was not necessary at this time to written evaluation instead of a
discuss with AIM whether to implement any competitive bidding process. In
fee waivers or expense limitations for the determining whether to continue the Fund's
Fund. advisory agreement, the Board considered
the Senior Officer's written evaluation.
After taking account of the Fund's
contractual advisory fee rate, as well as G. COLLATERAL BENEFITS TO AIM AND ITS
the comparative advisory fee information AFFILIATES
discussed above, the Board concluded that
the Fund's advisory fees were fair and The Board considered various other
reasonable. benefits received by AIM and its
affiliates resulting from AIM's
D. ECONOMIES OF SCALE AND BREAKPOINTS relationship with the Fund, including the
fees received by AIM and its affiliates
The Board considered the extent to which for their provision of administrative,
there are economies of scale in AIM's transfer agency and distribution services
provision of advisory services to the to the Fund. The Board considered the
Fund. The Board also considered whether performance of AIM and its affiliates in
the Fund benefits from such economies of providing these services and the
scale through contractual breakpoints in organizational structure employed by AIM
the Fund's advisory fee schedule or and its affiliates to provide these
through advisory fee waivers or expense services. The Board also considered that
limitations. The Board noted that the these services are provided to the Fund
Fund's contractual advisory fee schedule pursuant to written contracts which are
currently includes only one breakpoint but reviewed and approved on an annual basis
that the amendment to the Fund's by the Board. The Board concluded that AIM
contractual advisory fee schedule and its affiliates were providing these
discussed above provides for seven services in a satisfactory manner and in
breakpoints. Based on this information, accordance with the terms of their
the Board concluded that the Fund's contracts, and were qualified to continue
advisory fees will appropriately reflect to provide these services to the Fund.
economies of scale upon the Board's
approval of the amendment to the Fund's The Board considered the benefits
contractual advisory fee schedule. The realized by AIM as a result of portfolio
Board also noted that the Fund shares brokerage transactions executed through
directly in economies of scale through "soft dollar" arrangements. Under these
lower fees arrangements, portfolio brokerage
commissions paid
22
Supplement to Semiannual Report dated 6/30/07
AIM GLOBAL VALUE FUND
INSTITUTIONAL CLASS SHARES ========================================== A REDEMPTION FEE OF 2% WILL BE IMPOSED
AVERAGE ANNUAL TOTAL RETURNS ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
The following information has been THE FUND WITHIN 30 DAYS OF PURCHASE.
prepared to provide Institutional Class For periods ended 6/30/07 EXCEPTIONS TO THE REDEMPTION FEE ARE
shareholders with a performance overview LISTED IN THE FUND'S PROSPECTUS.
specific to their holdings. Institutional Inception 11.36%
Class shares are offered exclusively to 5 Years 16.05 HAD THE ADVISOR NOT WAIVED FEES AND/OR
institutional investors, including defined 1 Year 19.07 REIMBURSED EXPENSES IN THE PAST,
contribution plans that meet certain 6 Months* 5.44 PERFORMANCE WOULD HAVE BEEN LOWER.
criteria.
* Cumulative total return that has not PLEASE NOTE THAT PAST PERFORMANCE IS
been annualized NOT INDICATIVE OF FUTURE RESULTS. MORE
========================================== RECENT RETURNS MAY BE MORE OR LESS THAN
THOSE SHOWN. ALL RETURNS ASSUME
INSTITUTIONAL CLASS SHARES' INCEPTION DATE REINVESTMENT OF DISTRIBUTIONS AT NAV.
IS OCTOBER 25, 2005. RETURNS SINCE THAT INVESTMENT RETURN AND PRINCIPAL VALUE WILL
DATE ARE HISTORICAL RETURNS. ALL OTHER FLUCTUATE SO YOUR SHARES, WHEN REDEEMED,
RETURNS ARE BLENDED RETURNS OF HISTORICAL MAY BE WORTH MORE OR LESS THAN THEIR
INSTITUTIONAL CLASS SHARE PERFORMANCE AND ORIGINAL COST. SEE FULL REPORT FOR
RESTATED CLASS A SHARE PERFORMANCE (FOR INFORMATION ON COMPARATIVE BENCHMARKS.
PERIODS PRIOR TO THE INCEPTION DATE OF PLEASE CONSULT YOUR FUND PROSPECTUS FOR
INSTITUTIONAL CLASS SHARES) AT NET ASSET MORE INFORMATION. FOR THE MOST CURRENT
VALUE (NAV) AND REFLECT THE HIGHER RULE MONTH-END PERFORMANCE, PLEASE CALL
12B-1 FEES APPLICABLE TO CLASS A SHARES. 800-451-4246 OR VISIT AIMINVESTMENTS.COM.
CLASS A SHARES' INCEPTION DATE IS DECEMBER
29, 2000.
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
NASDAQ SYMBOL AWSIX DIFFERING SALES CHARGES AND CLASS
========================================== EXPENSES.
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.
[AIM INVESTMENTS LOGO]
AIMinvestments.com GLV-INS-2 A I M Distributors, Inc. --REGISTERED TRADEMARK--
Information about your Fund's expenses
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE expenses that you paid over the period. The hypothetical account values and
Simply divide your account value by $1,000 expenses may not be used to estimate the
As a shareholder of the Fund, you incur (for example, an $8,600 account value actual ending account balance or expenses
ongoing costs, including management fees divided by $1,000 = 8.6), then multiply you paid for the period. You may use this
and other Fund expenses. This example is the result by the number in the table information to compare the ongoing costs
intended to help you understand your under the heading entitled "Actual of investing in the Fund and other funds.
ongoing costs (in dollars) of investing in Expenses Paid During Period" to estimate To do so, compare this 5% hypothetical
the Fund and to compare these costs with the expenses you paid on your account example with the 5% hypothetical examples
ongoing costs of investing in other mutual during this period. that appear in the shareholder reports of
funds. The example is based on an the other funds.
investment of $1,000 invested at the HYPOTHETICAL EXAMPLE FOR COMPARISON
beginning of the period and held for the PURPOSES Please note that the expenses shown in
entire period January 1, 2007, through the table are meant to highlight your
June 30, 2007. The table below also provides information ongoing costs only. Therefore, the
about hypothetical account values and hypothetical information is useful in
ACTUAL EXPENSES hypothetical expenses based on the Fund's comparing ongoing costs only, and will not
actual expense ratio and an assumed rate help you determine the relative total
The table below provides information about of return of 5% per year before expenses, costs of owning different funds.
actual account values and actual expenses. which is not the Fund's actual return.
You may use the information in this table,
together with the amount you invested, to
estimate the
====================================================================================================================================
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Institutional $1,000.00 $1,054.40 $4.79 $1,020.13 $4.71 0.94%
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June 30,
2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMinvestments.com GLV-INS-2 A I M Distributors, Inc.
[EDELIVERY GO PAPERLESS
AIMINVESTMENTS.COM/EDELIVERY
GRAPHIC]
REGISTER FOR EDELIVERY FUND HOLDINGS AND PROXY VOTING INFORMATION
eDelivery is the process of receiving your fund and account The Fund provides a complete list of its holdings four times in
information via e-mail. Once your quarterly statements, tax each fiscal year, at the quarter-ends. For the second and fourth
forms, fund reports, and prospectuses are available, we will quarters, the lists appear in the Fund's semiannual and annual
send you an e-mail notification containing links to these reports to shareholders. For the first and third quarters, the
documents. For security purposes, you will need to log in to Fund files the lists with the Securities and Exchange Commission
your account to view your statements and tax forms. (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at AIMinvestments.com. From our home page, click on
WHY SIGN UP? Products & Performance, then Mutual Funds, then Fund Overview.
Select your Fund from the drop-down menu and click on Complete
Register for eDelivery to: Quarterly Holdings. Shareholders can also look up the Fund's Forms
N-Q on the SEC Web site at sec.gov. Copies of the Fund's Forms N-Q
o save your Fund the cost of printing and postage. may be reviewed and copied at the SEC Public Reference Room in
Washington, D.C. You can obtain information on the operation of
o reduce the amount of paper you receive. the Public Reference Room, including information about duplicating
fee charges, by calling 202-942-8090 or 800-732-0330, or by
o gain access to your documents faster by not waiting for the electronic request at the following e-mail address:
mail. publicinfo@sec.gov. The SEC file numbers for the Fund are
811-01540 and 002-27334.
o view your documents online anytime at your convenience.
A description of the policies and procedures that the Fund uses to
o save the documents to your personal computer or print them determine how to vote proxies relating to portfolio securities is
out for your records. available without charge, upon request, from our Client Services
department at 800-959-4246 or on the AIM Web site,
HOW DO I SIGN UP? AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC
It's easy. Just follow these simple steps: Web site, sec.gov.
1. Log in to your account. Information regarding how the Fund voted proxies related to its
portfolio securities during the 12 months ended June 30, 2007, is
2. Click on the "Service Center" tab. available at our Web site. Go to AIMinvestments.com, access the
About Us tab, click on Required Notices and then click on Proxy
3. Select "Register for eDelivery" and complete the consent Voting Activity. Next, select the Fund from the drop-down menu.
process. The information is also available on the SEC Web site, sec.gov.
This AIM service is provided by AIM Investment Services, Inc.
GLV-SAR-1 A I M Distributors, Inc. [AIM INVESTMENTS LOGO]
--REGISTERED TRADEMARK--
AIM INTERNATIONAL SMALL COMPANY FUND
Semiannual Report to Shareholders o June 30, 2007
INTERNATIONAL/GLOBAL EQUITY
International/Global Growth
Table of Contents
Letter to Shareholders ................... 2
Fund Performance ......................... 3
Schedule of Investments .................. 4
Financial Statements ..................... 8
Notes to Financial Statements ............ 10
Financial Highlights ..................... 16
Fund Expenses ............................ 21
Approval of Advisory Agreement ........... 22
For the most current month-end Fund performance and
commentary, please visit AIMinvestments.com.
Unless otherwise noted, all data in this report are
from A I M Management Group Inc.
If used after October 20, 2007, this report must be
accompanied by a Fund Performance & Commentary or
by an AIM Quarterly Performance Review for the most
recent quarter-end.
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.
[AIM INVESTMENTS LOGO]
- --REGISTERED TRADEMARK-- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM INTERNATIONAL SMALL COMPANY FUND
Dear Fellow Shareholders:
In overseeing the management of the AIM family of funds on your behalf, your Board of
Trustees of the AIM Funds continues to focus on improved investment performance,
[CROCKETT reduced shareholder costs, and high ethical standards.
PHOTO]
Since my last letter, your Board has welcomed two new members: Marty Flanagan,
President and CEO of INVESCO, AIM's parent company, and Phil Taylor, who was named CEO
Bruce L. Crockett of AIM Investments --REGISTERED TRADEMARK-- in April 2006. Robert Graham, who has given
more than 30 years of leadership to the company and the mutual fund industry since
founding AIM in 1976, has retired, stepping down in the process from his most recent
role as Vice Chairman of the Board. We thank Bob for his many contributions and wish
him a long and happy future.
Our review of fund performance has shown healthy progress, but the process is
necessarily one of continuous improvement. In general, as of June 30, 2007, we have
seen persistent investment discipline and more consistently good
results. While this statement may not apply to every AIM Fund all the time, as I write
this letter, the overall trend in fund management and performance has been positive.
The investment management talent at AIM has recently been enhanced by the promotion
of Karen Dunn Kelley to Head of INVESCO's Worldwide Fixed Income as well as Director of
AIM Global and Cash Management, with responsibility for all fixed income and money
market funds that serve both institutional and individual investors. Under Karen's
direction, AIM's cash management organization grew to one of the world's largest and
most respected, with top-tier performance. The operations now combined under her charge
represent more than $150 billion in assets, 120 investment professionals, and products
that span the entire yield curve.
In other news, your Board took a more active role in preparing for "proxy season,"
the period when fund managers must vote the shares held by their funds "for" or
"against" various proposals on the ballots of the issuing companies. Beginning in the
2007 proxy season, AIM implemented new proxy voting policies, developed by management
in conjunction with an ad hoc Board committee, which provided a solid framework for
properly evaluating and executing the many decisions the AIM Funds are required to make
to vote shares.
In general, the AIM Funds voted for proposals that would allow shareholders a
greater role in election of directors, proxy access and "say for pay." The AIM Funds
voted against directors who AIM believed failed to govern well in cases of corporate
mismanagement, such as the backdating of options grants, and against "poison pill" and
"take under" proposals that would favor the financial interests of managers at the
expense of investors in the case of a merger or acquisition. You can view the proxy
votes cast for your fund by going to AIMinvestments.com. Click the "About Us" tab, then
go to "Required Notices" and "Proxy Voting Activity."
Additionally, your Board raised the amount its members are recommended to invest in
the AIM Funds within three years of joining the Board, with the goal of aligning our
interests even more closely with yours.
Furthermore, at our June meeting we renewed the investment advisory contracts
between the AIM Funds and AIM for another year, applying the same rigorous evaluation
process that was enhanced and formalized in 2005. For more information on this process,
please visit AIMinvestments.com. Click on the "Products and Performance" tab and go to
"Investment Advisory Agreement Renewals."
Your Board's ability to best represent your interests depends on our knowledge of
your opinions and concerns. Please send me an email (bruce@brucecrockett.com) with your
thoughts on the following:
1) How important is it to you to hear about your Board's decisions and activities
in these letters?
2) What other information (on overall performance, specific funds, managers,
etc.) would make the letters more meaningful to you?
3) Would you prefer that communication from your Board continue to be delivered in
paper form by regular mail or be sent electronically by email?
If you would prefer to communicate through a quick online survey, please go to
AIMinvestments.com and provide your responses there.
We need to hear from you to do our best job, and I look forward to your responses.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Directors
August 10, 2007
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 mutual funds represented by AIM
Investments and the PowerShares Exchange-Traded Fund Trust.
2
AIM INTERNATIONAL SMALL COMPANY FUND
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/06-6/30/07, excluding applicable sales
charges. If sales charges were included, returns would be lower.
Class A Shares 19.44%
Class B Shares 19.00
Class C Shares 19.01
MSCI EAFE Index(1) (Broad Market Index) 10.74
MSCI World Ex-US Small Cap Index(1) (Style-Specific Index) 12.81
Lipper International Small/Mid-Cap Growth Funds Index(1) (Peer Group Index) 14.85
SOURCE: (1)LIPPER INC.
The unmanaged MSCI Europe, Australasia and the Far East Index (the MSCI EAFE
- --REGISTERED TRADEMARK-- INDEX) is a group of foreign securities tracked by Morgan
Stanley Capital International.
The MSCI WORLD EX-US SMALL CAP INDEX measures securities in the global developed
markets excluding the United States with market capitalizations between $200
million-$1,500 million. It is compiled by Morgan Stanley Capital International.
The unmanaged LIPPER INTERNATIONAL SMALL/MID-CAP GROWTH FUNDS INDEX represents an
average of the performance of the largest international small/mid-cap growth mutual
funds tracked by Lipper Inc., an independent mutual fund performance monitor.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== CHARGE UNLESS OTHERWISE STATED. HAD THE ADVISOR NOT WAIVED FEES AND/OR
FUND PERFORMANCE REIMBURSED EXPENSES IN THE PAST,
PERFORMANCE FIGURES DO NOT REFLECT PERFORMANCE WOULD HAVE BEEN LOWER.
As of 6/30/07, including applicable DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY
sales charges ON FUND DISTRIBUTIONS OR SALE OF FUND A REDEMPTION FEE OF 2% WILL BE IMPOSED
SHARES. INVESTMENT RETURN AND PRINCIPAL ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
CLASS A SHARES VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE THE FUND WITHIN 30 DAYS OF PURCHASE.
Inception (8/31/00) 19.65% A GAIN OR LOSS WHEN YOU SELL SHARES. EXCEPTIONS TO THE REDEMPTION FEE ARE
5 Years 33.37 LISTED IN THE FUND'S PROSPECTUS.
1 Year 30.75 THE TOTAL ANNUAL FUND OPERATING EXPENSE
RATIO SET FORTH IN THE MOST RECENT FUND
CLASS B SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT
Inception (8/31/00) 19.82% FOR CLASS A, CLASS B AND CLASS C SHARES
5 Years 33.81 WAS 1.55%, 2.30% AND 2.30%, RESPECTIVELY.
1 Year 32.32 THE EXPENSE RATIOS PRESENTED ABOVE MAY
VARY FROM THE EXPENSE RATIOS PRESENTED IN
CLASS C SHARES OTHER SECTIONS OF THIS REPORT THAT ARE
Inception (8/31/00) 19.82% BASED ON EXPENSES INCURRED DURING THE
5 Years 33.96 PERIOD COVERED BY THIS REPORT.
1 Year 36.33
========================================== CLASS A SHARE PERFORMANCE REFLECTS THE
MAXIMUM 5.50% SALES CHARGE, AND CLASS B
THE PERFORMANCE DATA QUOTED REPRESENT PAST AND CLASS C SHARE PERFORMANCE REFLECTS THE
PERFORMANCE AND CANNOT GUARANTEE APPLICABLE CONTINGENT DEFERRED SALES
COMPARABLE FUTURE RESULTS; CURRENT CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CDSC ON CLASS B SHARES DECLINES FROM 5%
VISIT AIMINVESTMENTS.COM FOR THE MOST BEGINNING AT THE TIME OF PURCHASE TO 0% AT
RECENT MONTH-END PERFORMANCE. PERFORMANCE THE BEGINNING OF THE SEVENTH YEAR. THE
FIGURES REFLECT REINVESTED DISTRIBUTIONS, CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
CHANGES IN NET ASSET VALUE AND THE EFFECT YEAR AFTER PURCHASE.
OF THE MAXIMUM SALES
THE PERFORMANCE OF THE FUND'S SHARE
CLASSES WILL DIFFER PRIMARILY DUE TO
DIFFERENT SALES CHARGE STRUCTURES AND
CLASS EXPENSES.
3
AIM International Small Company Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ---------------------------------------------------------
Industrials 22.6%
- ---------------------------------------------------------
Consumer Discretionary 20.3
- ---------------------------------------------------------
Financials 16.0
- ---------------------------------------------------------
Materials 8.9
- ---------------------------------------------------------
Energy 7.1
- ---------------------------------------------------------
Consumer Staples 6.6
- ---------------------------------------------------------
Utilities 4.1
- ---------------------------------------------------------
Health Care 3.8
- ---------------------------------------------------------
Information Technology 1.4
- ---------------------------------------------------------
Telecommunication Services 0.9
- ---------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 8.3
_________________________________________________________
=========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-89.82%
AUSTRALIA-3.84%
Australian Wealth Management Ltd. (Asset
Management & Custody Banks)(a) 4,972,600 $ 11,143,265
- ---------------------------------------------------------------------------
Bradken Ltd. (Construction & Farm Machinery &
Heavy Trucks)(a) 890,969 8,020,726
- ---------------------------------------------------------------------------
MFS Ltd. (Hotels, Resorts & Cruise Lines)(a) 1,957,447 9,572,528
- ---------------------------------------------------------------------------
United Group Ltd. (Construction &
Engineering)(a) 784,500 11,044,282
===========================================================================
39,780,801
===========================================================================
AUSTRIA-1.28%
Andritz A.G. (Industrial Machinery)(a) 201,600 13,294,982
===========================================================================
BELGIUM-0.68%
EVS Broadcast Equipment S.A. (Communications
Equipment)(a) 86,160 7,084,188
===========================================================================
BRAZIL-6.46%
All America Latina Logistica (Railroads)(b) 593,200 8,118,024
- ---------------------------------------------------------------------------
American Banknote S.A. (Commercial Printing)
(Acquired 04/26/06; Cost $2,603,647)(c) 325,900 3,770,716
- ---------------------------------------------------------------------------
American Banknote S.A. (Commercial Printing) 927,200 10,727,854
- ---------------------------------------------------------------------------
Equatorial Energia S.A. (Electric Utilities)
(Acquired 03/31/06; Cost $2,726,949)(c)(d) 411,600 4,111,519
- ---------------------------------------------------------------------------
Equatorial Energia S.A. (Electric
Utilities)(d) 1,197,000 11,956,969
- ---------------------------------------------------------------------------
Gafisa S.A. (Homebuilding) 559,000 8,751,128
- ---------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- ---------------------------------------------------------------------------
<Caption>
BRAZIL-(CONTINUED)
Klabin Segall S.A. (Real Estate Management &
Development) (Acquired 10/06/06; Cost
$4,184,358)(c) 602,980 $ 6,313,927
- ---------------------------------------------------------------------------
Klabin Segall S.A. (Real Estate Management &
Development) 518,500 5,429,319
- ---------------------------------------------------------------------------
OdontoPrev S.A. (Life & Health Insurance)
(Acquired 11/30/06; Cost $1,805,033)(c) 139,600 3,907,729
- ---------------------------------------------------------------------------
OdontoPrev S.A. (Life & Health Insurance) 138,100 3,865,741
===========================================================================
66,952,926
===========================================================================
CANADA-11.78%
Aspreva Pharmaceuticals Corp.
(Pharmaceuticals)(e) 182,329 3,154,292
- ---------------------------------------------------------------------------
Axcan Pharma Inc. (Pharmaceuticals)(e) 701,000 13,559,249
- ---------------------------------------------------------------------------
BMTC Group, Inc.-Class A (Homefurnishing
Retail) 147,564 3,145,261
- ---------------------------------------------------------------------------
Bonnett's Energy Services Trust (Oil & Gas
Equipment & Services)(f) 538,300 6,014,807
- ---------------------------------------------------------------------------
Canam Group Inc. (Steel) (Acquired 03/18/05;
Cost $2,870,694)(c) 600,000 5,915,493
- ---------------------------------------------------------------------------
Canam Group Inc. (Steel) 291,200 2,870,986
- ---------------------------------------------------------------------------
FirstService Corp. (Real Estate Management &
Development)(e) 181,600 6,605,807
- ---------------------------------------------------------------------------
Genesis Land Development Corp. (Real Estate
Management & Development)(e) 909,000 6,486,760
- ---------------------------------------------------------------------------
Home Capital Group Inc. (Thrifts & Mortgage
Finance) 236,500 8,194,225
- ---------------------------------------------------------------------------
</Table>
4
AIM International Small Company Fund
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
CANADA-(CONTINUED)
HudBay Minerals, Inc. (Diversified Metals &
Mining)(e) 355,700 $ 7,434,631
- ---------------------------------------------------------------------------
Kingsway Financial Services Inc. (Property &
Casualty Insurance) 412,000 7,651,981
- ---------------------------------------------------------------------------
Reitmans (Canada) Ltd.-Class A (Apparel
Retail) 555,000 12,001,549
- ---------------------------------------------------------------------------
Sherritt International Corp. (Diversified
Metals & Mining) 661,907 9,179,687
- ---------------------------------------------------------------------------
Stoneham Drilling Trust (Oil & Gas
Drilling)(f) 399,000 7,024,648
- ---------------------------------------------------------------------------
Total Energy Trust Ltd. (Oil & Gas Equipment
& Services) 641,490 6,746,186
- ---------------------------------------------------------------------------
Transat A.T. Inc.-Class A (Airlines)(f) 238,300 7,383,944
- ---------------------------------------------------------------------------
Trican Well Service Ltd. (Oil & Gas Equipment
& Services) 433,180 8,822,229
===========================================================================
122,191,735
===========================================================================
CHINA-3.22%
Century Sunshine Ecological Technology
Holdings Ltd. (Fertilizers & Agricultural
Chemicals) 58,560,000 9,661,265
- ---------------------------------------------------------------------------
Samson Holding Ltd. (Home Furnishings) 13,403,000 6,942,251
- ---------------------------------------------------------------------------
Xinyi Glass Holding Co. Ltd. (Auto Parts &
Equipment) 18,784,000 16,768,211
===========================================================================
33,371,727
===========================================================================
DENMARK-0.94%
TK Development A.S. (Real Estate Management &
Development)(a)(e) 424,200 9,755,240
===========================================================================
FINLAND-1.07%
Nokian Renkaat Oyj (Tires & Rubber)(a) 318,000 11,126,565
===========================================================================
GERMANY-0.81%
MTU Aero Engines Holding A.G. (Aerospace &
Defense)(a) 130,000 8,434,597
===========================================================================
GREECE-5.17%
Intralot S.A. (Casinos & Gaming) 505,300 16,290,457
- ---------------------------------------------------------------------------
Jumbo S.A. (Leisure Products) 459,000 15,940,853
- ---------------------------------------------------------------------------
Mytilineos Holdings S.A. (Diversified Metals
& Mining) 239,000 12,026,784
- ---------------------------------------------------------------------------
Titan Cement Co. (Construction Materials) 161,200 9,337,939
===========================================================================
53,596,033
===========================================================================
HONG KONG-5.49%
AMVIG Holdings Ltd. (Paper Packaging) 3,914,000 5,306,033
- ---------------------------------------------------------------------------
First Pacific Co. Ltd. (Multi-Sector
Holdings) 25,546,000 18,459,273
- ---------------------------------------------------------------------------
Hopewell Holdings Ltd. (Highways &
Railtracks) 2,443,000 9,966,837
- ---------------------------------------------------------------------------
Paliburg Holdings Ltd. (Hotels, Resorts &
Cruise Lines)(a) 169,942,000 7,914,917
- ---------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- ---------------------------------------------------------------------------
<Caption>
HONG KONG-(CONTINUED)
PYI Corp. (Construction & Engineering) 13,748,000 $ 6,417,644
- ---------------------------------------------------------------------------
Regal Hotels International Holdings Ltd.
(Hotels, Resorts & Cruise Lines)(a) 105,126,000 8,888,092
===========================================================================
56,952,796
===========================================================================
HUNGARY-0.65%
Richter Gedeon Nyrt. (Pharmaceuticals)(a) 33,921 6,789,823
===========================================================================
INDONESIA-1.68%
PT Kawasan Industri Jababeka Tbk (Real Estate
Management & Development) 271,308,000 6,463,293
- ---------------------------------------------------------------------------
Total Bangun Persada (Real Estate Management
& Development) 122,332,000 10,979,382
===========================================================================
17,442,675
===========================================================================
IRELAND-1.13%
Paddy Power PLC (Casinos & Gaming) 375,000 11,709,034
===========================================================================
ISRAEL-0.89%
Israel Discount Bank-Class A (Diversified
Banks)(a)(e) 4,483,406 9,218,230
===========================================================================
ITALY-0.85%
Cementir S.p.A. Cementerie del Tirreno
(Construction Materials)(a) 625,000 8,852,247
===========================================================================
JAPAN-3.82%
EXEDY Corp. (Auto Parts & Equipment)(a) 406,600 11,062,076
- ---------------------------------------------------------------------------
Miyano Machinery Inc. (Industrial
Machinery)(a) 1,477,000 4,936,491
- ---------------------------------------------------------------------------
Nippon Ceramic Co., Ltd. (Electronic
Equipment Manufacturers) 575,500 7,654,641
- ---------------------------------------------------------------------------
Nishio Rent All Co., Ltd. (Trading Companies
& Distributors) 285,000 5,820,341
- ---------------------------------------------------------------------------
Noritsu Koki Co., Ltd. (Photographic
Products) 79,800 1,632,935
- ---------------------------------------------------------------------------
Takeuchi Mfg. Co., Ltd. (Construction & Farm
Machinery & Heavy Trucks)(a) 185,000 8,540,422
===========================================================================
39,646,906
===========================================================================
MALAYSIA-3.22%
IGB Corp. Berhad (Real Estate Management &
Development) 18,624,000 14,618,694
- ---------------------------------------------------------------------------
Lion Diversified Holdings Berhad (Department
Stores) 7,806,100 18,766,294
===========================================================================
33,384,988
===========================================================================
MEXICO-1.66%
TV Azteca, S.A. de C.V.-CPO (Broadcasting &
Cable TV) 8,581,500 7,642,547
- ---------------------------------------------------------------------------
Urbi, Desarrollos Urbanos, S.A. de C.V.
(Homebuilding)(e) 2,090,000 9,554,264
===========================================================================
17,196,811
===========================================================================
</Table>
5
AIM International Small Company Fund
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
NETHERLANDS-5.64%
Aalberts Industries N.V. (Industrial
Machinery)(a) 586,484 $ 16,103,282
- ---------------------------------------------------------------------------
Koninklijke BAM Groep N.V. (Construction &
Engineering)(a) 458,564 12,936,749
- ---------------------------------------------------------------------------
Smit Internationale N.V. (Marine Ports &
Services)(a) 130,800 10,234,901
- ---------------------------------------------------------------------------
USG People N.V. (Human Resource & Employment
Services)(a) 408,884 19,208,869
===========================================================================
58,483,801
===========================================================================
NORWAY-7.48%
Acta Holding A.S.A. (Diversified Capital
Markets)(a) 1,350,400 7,070,649
- ---------------------------------------------------------------------------
Cermaq A.S.A. (Packaged Foods & Meats)(a) 715,375 12,393,059
- ---------------------------------------------------------------------------
Marine Harvest (Packaged Foods & Meats)
(Acquired 03/07/06; Cost
$8,014,658)(a)(c)(e) 12,190,000 13,113,186
- ---------------------------------------------------------------------------
Petroleum Geo-Services A.S.A. (Oil & Gas
Equipment & Services)(a) 773,400 19,131,454
- ---------------------------------------------------------------------------
Prosafe A.S.A. (Oil & Gas Equipment &
Services)(a) 1,040,660 16,618,307
- ---------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A. (Oil & Gas
Equipment & Services)(a)(e) 454,623 9,259,879
===========================================================================
77,586,534
===========================================================================
PHILIPPINES-3.48%
First Gen Corp. (Independent Power Producers
& Energy Traders)(a)(e) 8,104,200 11,909,092
- ---------------------------------------------------------------------------
Globe Telecom, Inc. (Wireless
Telecommunication Services) 320,500 9,400,963
- ---------------------------------------------------------------------------
Manila Water Co. (Water Utilities)(a) 36,387,000 9,810,489
- ---------------------------------------------------------------------------
PNOC Energy Development Corp. (Independent
Power Producers & Energy Traders) (Acquired
12/04/06; Cost $287,238)(a)(c) 4,405,000 532,836
- ---------------------------------------------------------------------------
PNOC Energy Development Corp. (Independent
Power Producers & Energy Traders)(a) 36,324,000 4,393,808
===========================================================================
36,047,188
===========================================================================
SINGAPORE-0.30%
Gems TV Holdings Ltd. (Apparel, Accessories &
Luxury Goods) (Acquired 11/03/06; Cost
$1,187,460)(c) 1,699,000 765,840
- ---------------------------------------------------------------------------
Gems TV Holdings Ltd. (Apparel, Accessories &
Luxury Goods) 5,131,000 2,312,847
===========================================================================
3,078,687
===========================================================================
SOUTH AFRICA-0.80%
Massmart Holdings Ltd. (Hypermarkets & Super
Centers)(a) 684,600 8,337,600
===========================================================================
SOUTH KOREA-5.88%
Daegu Bank (Regional Banks) 652,850 11,454,749
- ---------------------------------------------------------------------------
Hyundai Department Store Co., Ltd.
(Department Stores)(a) 79,280 9,337,194
- ---------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- ---------------------------------------------------------------------------
<Caption>
SOUTH KOREA-(CONTINUED)
Hyundai Mipo Dockyard Co., Ltd. (Construction
& Farm Machinery & Heavy Trucks) 22,150 $ 6,165,439
- ---------------------------------------------------------------------------
Joongang Construction Co., Ltd. (Construction
& Engineering)(f) 390,460 6,597,180
- ---------------------------------------------------------------------------
Lotte Confectionery Co., Ltd. (Packaged Foods
& Meats) 7,050 9,391,855
- ---------------------------------------------------------------------------
Qrix Communications Inc. (Broadcasting &
Cable TV) 100,300 10,102,784
- ---------------------------------------------------------------------------
Sung Kwang Bend Co., Ltd. (Building
Products)(a) 269,670 7,977,736
===========================================================================
61,026,937
===========================================================================
SWEDEN-0.61%
Oriflame Cosmetics S.A.-SDR (Personal
Products)(a) 135,400 6,363,581
===========================================================================
SWITZERLAND-0.64%
Banque Cantonale Vaudoise (Diversified
Banks)(a) 12,918 6,644,326
===========================================================================
TAIWAN-3.29%
Feng Tay Enterprise Co., Ltd. (Footwear) 9,474,048 7,733,917
- ---------------------------------------------------------------------------
Huaku Construction Corp. (Real Estate
Management & Development) 3,507,000 8,001,045
- ---------------------------------------------------------------------------
Hung Poo Real Estate Development Corp. (Real
Estate Management & Development) 5,672,000 6,772,537
- ---------------------------------------------------------------------------
Makalot Industrial Co., Ltd. (Textiles) 3,744,000 11,575,266
===========================================================================
34,082,765
===========================================================================
THAILAND-1.67%
Bangkok Expressway PCL (Highways &
Railtracks) 9,336,500 6,380,235
- ---------------------------------------------------------------------------
Siam Commercial Bank PCL (Diversified Banks) 5,167,000 10,921,992
===========================================================================
17,302,227
===========================================================================
UNITED KINGDOM-5.39%
Amlin PLC (Multi-Line Insurance)(a) 1,664,400 9,353,919
- ---------------------------------------------------------------------------
Findel PLC (Catalog Retail)(a) 290,200 4,188,164
- ---------------------------------------------------------------------------
Hikma Pharmaceuticals PLC
(Pharmaceuticals)(a) 601,953 4,593,900
- ---------------------------------------------------------------------------
Hikma Pharmaceuticals PLC (Pharmaceuticals)
(Acquired 11/01/05; Cost $2,377,183)(a)(c) 463,000 3,533,458
- ---------------------------------------------------------------------------
Homeserve PLC (Diversified Commercial &
Professional Services)(a) 350,400 12,548,981
- ---------------------------------------------------------------------------
Informa PLC (Publishing)(a) 782,859 8,703,432
- ---------------------------------------------------------------------------
Mitie Group PLC (Environmental & Facilities
Services)(a) 2,469,500 13,003,777
===========================================================================
55,925,631
===========================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $610,521,016) 931,661,581
===========================================================================
</Table>
6
AIM International Small Company Fund
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
FOREIGN PREFERRED STOCKS-1.93%
BRAZIL-0.98%
Duratex S.A.-Pfd. (Building Products) 355,800 $ 10,236,328
==========================================================================
GERMANY-0.95%
Fuchs Petrolub A.G.-Pfd. (Commodity
Chemicals) 106,100 9,836,671
==========================================================================
Total Foreign Preferred Stocks (Cost
$10,929,598) 20,072,999
==========================================================================
</Table>
<Table>
SHARES VALUE
- --------------------------------------------------------------------------
<Caption>
MONEY MARKET FUNDS-8.10%
Liquid Assets Portfolio-Institutional
Class(g) 41,990,090 $ 41,990,090
- --------------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 41,990,090 41,990,090
==========================================================================
Total Money Market Funds (Cost
$83,980,180) 83,980,180
==========================================================================
TOTAL INVESTMENTS-99.85% (Cost $705,430,794) 1,035,714,760
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.15% 1,574,274
- --------------------------------------------------------------------------
NET ASSETS-100.00% $1,037,289,034
__________________________________________________________________________
==========================================================================
</Table>
Investment Abbreviations:
<Table>
CPO - Certificates of Ordinary Participation
Pfd. - Preferred
SDR - Swedish Depositary Receipt
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(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 June 30, 2007 was $412,981,299, which
represented 39.81% of the Fund's Net Assets. See Note 1A.
(b) Each unit represents one common share and four preferred shares.
(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 June 30, 2007 was $41,964,704,
which represented 4.05% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(d) Each unit represents one ordinary share and two preferred shares.
(e) Non-income producing security.
(f) 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 June 30, 2007 was $27,020,579, which represented 2.60% of the Fund's
Net Assets. See Note 3.
(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.
7
AIM International Small Company Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $590,131,035) $ 924,714,001
- ------------------------------------------------------------
Investments in affiliates (Cost
$115,299,759) 111,000,759
============================================================
Total investments (Cost $705,430,794) 1,035,714,760
============================================================
Foreign currencies, at value (Cost
$4,588,369) 4,579,898
- ------------------------------------------------------------
Receivables for:
Investments sold 1,831,056
- ------------------------------------------------------------
Fund shares sold 1,266,919
- ------------------------------------------------------------
Dividends 3,241,115
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 28,658
- ------------------------------------------------------------
Other assets 90,526
============================================================
Total assets 1,046,752,932
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 6,287,120
- ------------------------------------------------------------
Fund shares reacquired 1,786,004
- ------------------------------------------------------------
Trustee deferred compensation and
retirement plans 56,071
- ------------------------------------------------------------
Accrued distribution fees 350,947
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 5,780
- ------------------------------------------------------------
Accrued transfer agent fees 252,942
- ------------------------------------------------------------
Accrued operating expenses 725,034
============================================================
Total liabilities 9,463,898
============================================================
Net assets applicable to shares outstanding $1,037,289,034
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 558,380,011
- ------------------------------------------------------------
Undistributed net investment income 9,689,810
- ------------------------------------------------------------
Undistributed net realized gain 138,902,867
- ------------------------------------------------------------
Unrealized appreciation 330,316,346
============================================================
$1,037,289,034
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 766,137,341
____________________________________________________________
============================================================
Class B $ 92,101,787
____________________________________________________________
============================================================
Class C $ 144,632,499
____________________________________________________________
============================================================
Institutional Class $ 34,417,407
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 26,581,648
____________________________________________________________
============================================================
Class B 3,311,885
____________________________________________________________
============================================================
Class C 5,202,364
____________________________________________________________
============================================================
Institutional Class 1,191,287
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 28.82
- ------------------------------------------------------------
Offering price per share
(Net asset value of $28.82 divided by
94.50%) $ 30.50
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 27.81
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 27.80
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 28.89
____________________________________________________________
============================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8
AIM International Small Company Fund
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $1,550,864) $ 14,045,753
- --------------------------------------------------------------------------
Dividends from affiliates 1,194,579
- --------------------------------------------------------------------------
Interest 15,300
==========================================================================
Total investment income 15,255,632
==========================================================================
EXPENSES:
Advisory fees 4,444,997
- --------------------------------------------------------------------------
Administrative services fees 122,492
- --------------------------------------------------------------------------
Custodian fees 478,348
- --------------------------------------------------------------------------
Distribution fees:
Class A 857,980
- --------------------------------------------------------------------------
Class B 442,720
- --------------------------------------------------------------------------
Class C 664,733
- --------------------------------------------------------------------------
Transfer agent fees -- A, B and C 691,161
- --------------------------------------------------------------------------
Transfer agent fees -- Institutional 360
- --------------------------------------------------------------------------
Trustees' and officer's fees and benefits 21,531
- --------------------------------------------------------------------------
Other 163,190
==========================================================================
Total expenses 7,887,512
==========================================================================
Less: Fees waived and expense offset arrangements (230,817)
==========================================================================
Net expenses 7,656,695
==========================================================================
Net investment income 7,598,937
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 119,848,044
- --------------------------------------------------------------------------
Foreign currencies (64,038)
==========================================================================
119,784,006
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (net of estimated tax on foreign
investments held of $321,654 -- See Note 1J) 38,641,424
- --------------------------------------------------------------------------
Foreign currencies (8,973)
==========================================================================
38,632,451
==========================================================================
Net realized and unrealized gain 158,416,457
==========================================================================
Net increase in net assets resulting from operations $166,015,394
__________________________________________________________________________
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9
AIM International Small Company Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- -----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 7,598,937 $ 5,811,195
- -----------------------------------------------------------------------------------------------
Net realized gain 119,784,006 133,222,623
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation 38,632,451 102,028,332
===============================================================================================
Net increase in net assets resulting from operations 166,015,394 241,062,150
===============================================================================================
Distributions to shareholders from net investment income:
Class A -- (5,297,354)
- -----------------------------------------------------------------------------------------------
Class B -- (43,484)
- -----------------------------------------------------------------------------------------------
Class C -- (62,515)
- -----------------------------------------------------------------------------------------------
Institutional Class -- (217,022)
===============================================================================================
Total distributions from net investment income -- (5,620,375)
===============================================================================================
Distributions to shareholders from net realized gains:
Class A -- (89,560,807)
- -----------------------------------------------------------------------------------------------
Class B -- (12,573,535)
- -----------------------------------------------------------------------------------------------
Class C -- (18,076,517)
- -----------------------------------------------------------------------------------------------
Institutional Class -- (2,563,644)
===============================================================================================
Total distributions from net realized gains -- (122,774,503)
===============================================================================================
Decrease in net assets resulting from distributions -- (128,394,878)
===============================================================================================
Share transactions-net:
Class A 8,531,691 102,177,107
- -----------------------------------------------------------------------------------------------
Class B (9,606,007) (4,011,685)
- -----------------------------------------------------------------------------------------------
Class C (2,667,609) 3,549,363
- -----------------------------------------------------------------------------------------------
Institutional Class 9,916,955 18,627,116
===============================================================================================
Net increase in net assets resulting from share
transactions 6,175,030 120,341,901
===============================================================================================
Net increase in net assets 172,190,424 233,009,173
===============================================================================================
NET ASSETS:
Beginning of period 865,098,610 632,089,437
===============================================================================================
End of period (including undistributed net investment
income of $9,689,810 and $2,090,873, respectively) $1,037,289,034 $ 865,098,610
_______________________________________________________________________________________________
===============================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM International Small Company Fund (the "Fund") is a series portfolio of AIM
Funds Group (the "Trust"). The Trust is a Delaware statutory trust registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of seven separate
portfolios, each authorized to issue an unlimited number of shares of beneficial
interest. The Fund currently offers multiple classes of shares. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's primary investment objective is long-term growth of capital.
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
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. 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").
10
AIM International Small Company Fund
Investments in open-end 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 open-end and closed-end registered
investment companies that trade on an exchange are valued at the 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.
Debt obligations (including convertible bonds) and unlisted equities 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, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
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. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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.
Valuations change in response to many factors including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions and market
liquidity.
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.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
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.
11
AIM International Small Company Fund
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.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. 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 0.95% the
Fund's average daily net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<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>
Further, effective July 1, 2007, AIM has contractually agreed through at
least June 30, 2008 to waive 100% of the advisory fee AIM receives from the
affiliated money market funds on investments by the Fund in such affiliated
money market funds. Prior to July 1, 2007, AIM had voluntarily agreed to waive
25% of the advisory fee AIM receives from the affiliated money market funds on
investments by the Fund in such affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of
$217,723.
12
AIM International Small Company Fund
At the request of the Trustees of the Trust, INVESCO PLC ("INVESCO")
(formerly "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. These
expenses along with the related expense reimbursement are included in the
Statement of Operations. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM for certain administrative
costs incurred in providing accounting services, to the Fund. For the six months
ended June 30, 2007, expenses incurred under the agreement are shown in the
Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
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 six months ended June 30,
2007, expenses incurred under the agreement are shown in the Statement of
Operations as transfer agent fees.
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 Plan payments, up to 0.25% of the average
daily net assets of each class of 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. For the six months
ended June 30, 2007, expenses incurred under the Plans are shown in the
Statement of Operations as distribution fees.
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 six
months ended June 30, 2007, ADI advised the Fund that it retained $38,121 in
front-end sales commissions from the sale of Class A shares and $4,088, $30,922
and $7,949 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 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 six months ended June 30, 2007. During the period each investment
maintained a $1.00 net asset value, as such there is no realized gain/(loss) and
no change in unrealized appreciation/(depreciation).
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- -----------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $10,576,560 $ 90,653,373 $ (59,239,843) $41,990,090 $ 598,814
- -----------------------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 10,576,560 90,653,373 (59,239,843) 41,990,090 595,765
=================================================================================================================
Subtotal $21,153,120 $181,306,746 $(118,479,686) $83,980,180 $1,194,579
=================================================================================================================
</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 six months
ended June 30, 2007.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
12/31/06 AT COST FROM SALES (DEPRECIATION) 06/30/07 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Bonnett's
Energy
Services
Trust
(Canada) $ 8,597,186 $ -- $ (910,598) $ (325,357) $ 6,014,807 $ -- $(1,346,424)
- -----------------------------------------------------------------------------------------------------------------------------------
Joongang
Construction
Co., Ltd.
(South Korea) -- 2,262,766 -- 4,334,414 6,597,180 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Stoneham
Drilling
Trust
(Canada) 8,514,657 -- (1,715,476) 709,304 7,024,648 -- (483,837)
- -----------------------------------------------------------------------------------------------------------------------------------
Transat A.T.
Inc.-Class A
(Canada) 9,374,842 -- (3,410,060) 115,249 7,383,944 -- 1,303,913
===================================================================================================================================
Subtotal $26,486,685 $ 2,262,766 $ (6,036,134) $4,833,610 $ 27,020,579 $ -- $ (526,348)
===================================================================================================================================
Total
Investments
in
Affiliates $47,639,805 $183,569,512 $(124,515,820) $4,833,610 $111,000,759 $1,194,579 $ (526,348)
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</Table>
13
AIM International Small Company Fund
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 and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the six
months ended June 30, 2007, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $13,094.
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 certain Trustees and Officers of the Fund. 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, certain 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 six months ended June 30, 2007, the Fund paid legal fees of
$3,919 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 participates 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 six months ended June 30, 2007, 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--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
14
AIM International Small Company 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 six months ended June 30, 2007 was $230,328,857 and
$266,908,869, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $343,973,693
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (14,033,435)
==============================================================================
Net unrealized appreciation of investment securities $329,940,258
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $705,774,502.
</Table>
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 and under certain circumstances
load waiver shares may be subject to a CDSC. Class B shares and Class C shares
are sold with a CDSC. Institutional Class shares are sold at net asset value.
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
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(A) DECEMBER 31, 2006
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,693,804 $ 97,851,706 8,559,613 $ 208,963,602
- -----------------------------------------------------------------------------------------------------------------------
Class B 94,940 2,409,153 543,420 12,911,084
- -----------------------------------------------------------------------------------------------------------------------
Class C 493,984 12,540,431 1,046,424 24,956,886
- -----------------------------------------------------------------------------------------------------------------------
Institutional Class 437,351 11,346,603 653,962 16,208,677
=======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 3,511,862 83,547,180
- -----------------------------------------------------------------------------------------------------------------------
Class B -- -- 512,479 11,812,639
- -----------------------------------------------------------------------------------------------------------------------
Class C -- -- 723,391 16,666,945
- -----------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 116,835 2,780,666
=======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 136,107 3,630,349 174,636 4,328,444
- -----------------------------------------------------------------------------------------------------------------------
Class B (140,850) (3,630,349) (180,293) (4,328,444)
=======================================================================================================================
Reacquired:(b)
Class A (3,574,431) (92,950,364) (7,933,240) (194,662,119)
- -----------------------------------------------------------------------------------------------------------------------
Class B (332,240) (8,384,811) (1,026,369) (24,406,964)
- -----------------------------------------------------------------------------------------------------------------------
Class C (605,807) (15,208,040) (1,612,948) (38,074,468)
- -----------------------------------------------------------------------------------------------------------------------
Institutional Class (48,990) (1,429,648) (15,262) (362,227)
=======================================================================================================================
153,868 $ 6,175,030 5,074,510 $ 120,341,901
_______________________________________________________________________________________________________________________
=======================================================================================================================
</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 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 $8,658, $1,094, $1,664 and $378 for
Class A, Class B, Class C and Institutional Class shares, respectively,
for the six months ended June 30, 2007 and $32,386, $4,565, $6,502 and
$638 for Class A, Class B, Class C and Institutional Class shares
respectively, for the year ended December 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. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
15
AIM International Small Company 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
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.13 $ 20.52 $ 16.17 $ 12.08 $ 6.91 $ 7.10
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.23(a) 0.23(a) 0.07 (0.03)(a) (0.04)(a) (0.06)(a)
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 4.46 7.54 5.12 4.34 5.24 (0.13)
======================================================================================================================
Total from investment operations 4.69 7.77 5.19 4.31 5.20 (0.19)
======================================================================================================================
Less distributions:
Dividends from net investment income -- (0.23) (0.05) (0.00) (0.03) --
- ----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (3.93) (0.79) (0.22) -- --
======================================================================================================================
Total distributions -- (4.16) (0.84) (0.22) (0.03) --
======================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 --
======================================================================================================================
Net asset value, end of period $ 28.82 $ 24.13 $ 20.52 $ 16.17 $ 12.08 $ 6.91
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 19.44% 38.18% 32.21% 35.83% 75.10% (2.68)%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $766,137 $635,318 $451,630 $257,579 $87,269 $9,703
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.47%(c) 1.54% 1.61% 1.83% 2.00% 2.01%
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.52%(c) 1.58% 1.64% 1.85% 2.35% 3.03%
======================================================================================================================
Ratio of net investment income (loss) to
average net assets 1.79%(c) 0.93% 0.42% (0.19)% (0.46)% (0.85)%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(d) 26% 69% 60% 87% 93% 118%
______________________________________________________________________________________________________________________
======================================================================================================================
</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 annualized and based on average daily net assets of
$692,072,051.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
16
AIM International Small Company Fund
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.37 $ 19.95 $ 15.81 $ 11.89 $ 6.84 $ 7.07
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.13(a) 0.04(a) (0.05) (0.11)(a) (0.10)(a) (0.11)(a)
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 4.31 7.32 4.98 4.25 5.15 (0.12)
========================================================================================================================
Total from investment operations 4.44 7.36 4.93 4.14 5.05 (0.23)
========================================================================================================================
Less distributions:
Dividends from net investment income -- (0.01) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (3.93) (0.79) (0.22) -- --
========================================================================================================================
Total distributions -- (3.94) (0.79) (0.22) -- --
========================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 --
========================================================================================================================
Net asset value, end of period $ 27.81 $ 23.37 $ 19.95 $ 15.81 $ 11.89 $ 6.84
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 19.00% 37.20% 31.28% 34.94% 73.83% (3.25)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $92,102 $86,236 $76,626 $47,942 $16,543 $3,918
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.22%(c) 2.29% 2.35% 2.48% 2.65% 2.66%
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.27%(c) 2.33% 2.38% 2.50% 3.00% 3.68%
========================================================================================================================
Ratio of net investment income (loss) to
average net assets 1.04%(c) 0.18% (0.32)% (0.84)% (1.11)% (1.50)%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(d) 26% 69% 60% 87% 93% 118%
________________________________________________________________________________________________________________________
========================================================================================================================
</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 annualized and based on average daily net assets of
$89,277,784.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
17
AIM International Small Company Fund
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS C
--------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2007 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.36 $ 19.94 $ 15.81 $ 11.89 $ 6.83 $ 7.07
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.13(a) 0.04(a) (0.05) (0.11)(a) (0.10)(a) (0.11)(a)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 4.31 7.32 4.97 4.25 5.16 (0.13)
=========================================================================================================================
Total from investment operations 4.44 7.36 4.92 4.14 5.06 (0.24)
=========================================================================================================================
Less distributions:
Dividends from net investment income -- (0.01) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (3.93) (0.79) (0.22) -- --
=========================================================================================================================
Total distributions -- (3.94) (0.79) (0.22) -- --
=========================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 --
=========================================================================================================================
Net asset value, end of period $ 27.80 $ 23.36 $ 19.94 $ 15.81 $11.89 $ 6.83
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 19.01% 37.21% 31.22% 34.94% 74.09% (3.39)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $144,632 $124,161 $102,861 $47,818 $9,208 $2,849
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.22%(c) 2.29% 2.35% 2.48% 2.65% 2.66%
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.27%(c) 2.33% 2.38% 2.50% 3.00% 3.68%
=========================================================================================================================
Ratio of net investment income (loss) to
average net assets 1.04%(c) 0.18% (0.32)% (0.84)% (1.11)% (1.50)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(d) 26% 69% 60% 87% 93% 118%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 annualized and based on average daily net assets of
$134,048,440.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
18
AIM International Small Company Fund
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------------
OCTOBER 25, 2005
SIX MONTHS (DATE OPERATIONS
ENDED YEAR ENDED COMMENCED) TO
JUNE 30, DECEMBER 31, DECEMBER 31,
2007 2006 2005
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.14 $ 20.52 $18.73
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.29(a) 0.33(a) 0.03
- ---------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 4.46 7.55 2.61
===============================================================================================================
Total from investment operations 4.75 7.88 2.64
===============================================================================================================
Less distributions:
Dividends from net investment income -- (0.33) (0.06)
- ---------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (3.93) (0.79)
===============================================================================================================
Total distributions -- (4.26) (0.85)
===============================================================================================================
Redemption fees added to shares of beneficial interest 0.00 0.00 0.00
===============================================================================================================
Net asset value, end of period $ 28.89 $ 24.14 $20.52
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 19.68% 38.73% 14.19%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $34,417 $19,384 $ 972
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.07%(c) 1.14% 1.18%(d)
- ---------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.12%(c) 1.18% 1.21%(d)
===============================================================================================================
Ratio of net investment income to average net assets 2.19%(c) 1.33% 0.85%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(e) 26% 69% 60%
_______________________________________________________________________________________________________________
===============================================================================================================
</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 annualized and based on average daily net assets of
$28,145,725.
(d) Annualized.
(e) 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.
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 A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("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. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), 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; 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.
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,
19
AIM International Small Company Fund
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
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 INVESCO PLC'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 INVESCO 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.
20
AIM INTERNATIONAL SMALL COMPANY FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE together with the amount you invested, to use this information to compare the
estimate the expenses that you paid over ongoing costs of investing in the Fund and
As a shareholder of the Fund, you incur the period. Simply divide your account other funds. To do so, compare this 5%
two types of costs: (1) transaction costs, value by $1,000 (for example, an $8,600 hypothetical example with the 5%
which may include sales charges (loads) on account value divided by $1,000 = 8.6), hypothetical examples that appear in the
purchase payments or contingent deferred then multiply the result by the number in shareholder reports of the other funds.
sales charges on redemptions, and the table under the heading entitled
redemption fees, if any; and (2) ongoing "Actual Expenses Paid During Period" to Please note that the expenses shown in
costs, including management fees; estimate the expenses you paid on your the table are meant to highlight your
distribution and/or service (12b-1) fees; account during this period. ongoing costs only and do not reflect any
and other Fund expenses. This example is transaction costs, such as sales charges
intended to help you understand your HYPOTHETICAL EXAMPLE FOR COMPARISON (loads) on purchase payments, contingent
ongoing costs (in dollars) of investing in PURPOSES deferred sales charges on redemptions, and
the Fund and to compare these costs with redemption fees, if any. Therefore, the
ongoing costs of investing in other mutual The table below also provides information hypothetical information is useful in
funds. The example is based on an about hypothetical account values and comparing ongoing costs only, and will not
investment of $1,000 invested at the hypothetical expenses based on the Fund's help you determine the relative total
beginning of the period and held for the actual expense ratio and an assumed rate costs of owning different funds. In
entire period January 1, 2007, through of return of 5% per year before expenses, addition, if these transaction costs were
June 30, 2007. which is not the Fund's actual return. included, your costs would have been
higher.
ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
The table below provides information about actual ending account balance or expenses
actual account values and actual expenses. you paid for the period. You may
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
A $1,000.00 $1,194.40 $ 8.00 $1,017.50 $ 7.35 1.47%
B 1,000.00 1,190.00 12.05 1,013.79 11.08 2.22
C 1,000.00 1,190.10 12.06 1,013.79 11.08 2.22
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
21
AIM INTERNATIONAL SMALL COMPANY FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM expenses of their assigned funds. The June 27, 2007 and does not reflect any
Funds Group is required under the Investments Committee considers each changes that may have occurred since that
Investment Company Act of 1940 to approve Sub-Committee's recommendations and makes date, including but not limited to changes
annually the renewal of the AIM its own recommendations regarding the to the Fund's performance, advisory fees,
International Small Company Fund (the performance, fees and expenses of the AIM expense limitations and/or fee waivers.
Fund) investment advisory agreement with A Funds to the full Board. Moreover, the
I M Advisors, Inc. (AIM). During contract Investments Committee considers each A. NATURE, EXTENT AND QUALITY OF SERVICES
renewal meetings held on June 25-27, 2007, SubCommittee's recommendations in making PROVIDED BY AIM
the Board as a whole and the disinterested its annual recommendation to the Board
or "independent" Trustees, voting whether to approve the continuance of each The Board reviewed the advisory services
separately, approved the continuance of AIM Fund's investment advisory agreement provided to the Fund by AIM under the
the Fund's investment advisory agreement and sub-advisory agreement, if applicable Fund's advisory agreement, the performance
for another year, effective July 1, 2007. (advisory agreements), for another year. of AIM in providing these services, and
In doing so, the Board determined that the the credentials and experience of the
Fund's advisory agreement is in the best The independent Trustees, as mentioned officers and employees of AIM who provide
interests of the Fund and its shareholders above, are assisted in their annual these services. The Board's review of the
and that the compensation to AIM under the evaluation of the advisory agreements by qualifications of AIM to provide these
Fund's advisory agreement is fair and the independent Senior Officer. One services included the Board's
reasonable. responsibility of the Senior Officer is to consideration of AIM's portfolio and
manage the process by which the AIM Funds' product review process, various back
The independent Trustees met separately proposed management fees are negotiated office support functions provided by AIM,
during their evaluation of the Fund's during the annual contract renewal process and AIM's equity and fixed income trading
investment advisory agreement with to ensure that they are negotiated in a operations. The Board concluded that the
independent legal counsel from whom they manner which is at arms' length and nature, extent and quality of the advisory
received independent legal advice, and the reasonable. Accordingly, the Senior services provided to the Fund by AIM were
independent Trustees also received Officer must either supervise a appropriate and that AIM currently is
assistance during their deliberations from competitive bidding process or prepare an providing satisfactory advisory services
the independent Senior Officer, a independent written evaluation. The Senior in accordance with the terms of the Fund's
full-time officer of the AIM Funds who Officer has recommended that an advisory agreement. In addition, based on
reports directly to the independent independent written evaluation be provided their ongoing meetings throughout the year
Trustees. The following discussion more and, upon the direction of the Board, has with the Fund's portfolio managers, the
fully describes the process employed by prepared an independent written Board concluded that these individuals are
the Board to evaluate the performance of evaluation. competent and able to continue to carry
the AIM Funds (including the Fund) out their responsibilities under the
throughout the year and, more During the annual contract renewal Fund's advisory agreement.
specifically, during the annual contract process, the Board considered the factors
renewal meetings. discussed below under the heading "Factors In determining whether to continue the
and Conclusions and Summary of Independent Fund's advisory agreement, the Board
THE BOARD'S FUND EVALUATION PROCESS Written Fee Evaluation" in evaluating the considered the prior relationship between
fairness and reasonableness of the Fund's AIM and the Fund, as well as the Board's
The Board's Investments Committee has advisory agreement at the contract renewal knowledge of AIM's operations, and
established three Sub-Committees which are meetings and at their meetings throughout concluded that it was beneficial to
responsible for overseeing the management the year as part of their ongoing maintain the current relationship, in
of a number of the series portfolios of oversight of the Fund. The Fund's advisory part, because of such knowledge. The Board
the AIM Funds. This Sub-Committee agreement was considered separately, also considered the steps that AIM and its
structure permits the Trustees to focus on although the Board also considered the affiliates have taken over the last
the performance of the AIM Funds that have common interests of all of the AIM Funds several years to improve the quality and
been assigned to them. The Sub-Committees in their deliberations. The Board efficiency of the services they provide to
meet throughout the year to review the comprehensively considered all of the the Funds in the areas of investment
performance of their assigned funds, and information provided to them and did not performance, product line diversification,
the Sub-Committees review monthly and identify any particular factor that was distribution, fund operations, shareholder
quarterly comparative performance controlling. Furthermore, each Trustee may services and compliance. The Board
information and periodic asset flow data have evaluated the information provided concluded that the quality and efficiency
for their assigned funds. These materials differently from one another and of the services AIM and its affiliates
are prepared under the direction and attributed different weight to the various provide to the AIM Funds in each of these
supervision of the independent Senior factors. The Trustees recognized that the areas have generally improved, and support
Officer. Over the course of each year, the advisory arrangements and resulting the Board's approval of the continuance of
Sub-Committees meet with portfolio advisory fees for the Fund and the other the Fund's advisory agreement.
managers for their assigned funds and AIM Funds are the result of years of
other members of management and review review and negotiation between the B. FUND PERFORMANCE
with these individuals the performance, Trustees and AIM, that the Trustees may
investment objective(s), policies, focus to a greater extent on certain The Board compared the Fund's performance
strategies and limitations of these funds. aspects of these arrangements in some during the past one, three and five
years than others, and that the Trustees' calendar years to the performance of funds
In addition to their meetings deliberations and conclusions in a in the Fund's Lipper peer group that are
throughout the year, the Sub-Committees particular year may be based in part on not managed by AIM, and against the
meet at designated contract renewal their deliberations and conclusions of performance of all funds in the Lipper
meetings each year to conduct an in-depth these same arrangements throughout the International Small/Mid-Cap Growth Funds
review of the performance, fees and year and in prior years. Index. The Board also reviewed the
expenses of their assigned funds. During methodology used by Lipper to identify the
the contract renewal process, the Trustees FACTORS AND CONCLUSIONS AND SUMMARY OF Fund's peers. The Board noted that the
receive comparative performance and fee INDEPENDENT WRITTEN FEE EVALUATION Fund's performance was above the median
data regarding all the AIM Funds prepared performance of its peers for the one,
by an independent company, Lipper, Inc., The discussion below serves as a three and five year periods. The Board
under the direction and supervision of the summary of the Senior Officer's noted that the Fund's performance was
independent Senior Officer who also independent written evaluation, as well as above the performance of the Index for the
prepares a separate analysis of this a discussion of the material factors and one, three and five year periods. The
information for the Trustees. Each related conclusions that formed the basis Board also considered the steps AIM has
Sub-Committee then makes recommendations for the Board's approval of the Fund's taken over the last several years to
to the Investments Committee regarding the advisory agreement. Unless otherwise improve the quality and efficiency of the
performance, fees and stated, information set forth below is as services that AIM provides to the AIM
of Funds. The Board concluded that
(continued)
22
AIM INTERNATIONAL SMALL COMPANY FUND
AIM continues to be responsive to the noted that the Fund shares directly in The Board considered the benefits
Board's focus on fund performance. economies of scale through lower fees realized by AIM as a result of portfolio
Although the independent written charged by third party service providers brokerage transactions executed through
evaluation of the Fund's Senior Officer based on the combined size of all of the "soft dollar" arrangements. Under these
(discussed below) only considered Fund AIM Funds and affiliates. arrangements, portfolio brokerage
performance through the most recent commissions paid by the Fund and/or other
calendar year, the Board also reviewed E. PROFITABILITY AND FINANCIAL RESOURCES funds advised by AIM are used to pay for
more recent Fund performance and this OF AIM research and execution services. The Board
review did not change their conclusions. noted that soft dollar arrangements shift
The Board reviewed information from AIM the payment obligation for the research
C. ADVISORY FEES AND FEE WAIVERS concerning the costs of the advisory and and executions services from AIM to the
other services that AIM and its affiliates funds and therefore may reduce AIM's
The Board compared the Fund's contractual provide to the Fund and the profitability expenses. The Board also noted that
advisory fee rate to the contractual of AIM and its affiliates in providing research obtained through soft dollar
advisory fee rates of funds in the Fund's these services. The Board also reviewed arrangements may be used by AIM in making
Lipper peer group that are not managed by information concerning the financial investment decisions for the Fund and may
AIM, at a common asset level and as of the condition of AIM and its affiliates. The therefore benefit Fund shareholders. The
end of the past calendar year. The Board Board also reviewed with AIM the Board concluded that AIM's soft dollar
noted that the Fund's advisory fee rate methodology used to prepare the arrangements were appropriate. The Board
was comparable to the median advisory fee profitability information. The Board also concluded that, based on their review
rate of its peers. The Board also reviewed considered the overall profitability of and representations made by AIM, these
the methodology used by Lipper and noted AIM, as well as the profitability of AIM arrangements were consistent with
that the contractual fee rates shown by in connection with managing the Fund. The regulatory requirements.
Lipper include any applicable long-term Board noted that AIM continues to operate
contractual fee waivers. The Board noted at a net profit, although increased The Board considered the fact that the
that AIM does not serve as an advisor to expenses in recent years have reduced the Fund's uninvested cash and cash collateral
other mutual funds or other clients with profitability of AIM and its affiliates. from any securities lending arrangements
investment strategies comparable to those The Board concluded that the Fund's may be invested in money market funds
of the Fund. advisory fees were fair and reasonable, advised by AIM pursuant to procedures
and that the level of profits realized by approved by the Board. The Board noted
The Board noted that AIM has not AIM and its affiliates from providing that AIM will receive advisory fees from
proposed any advisory fee waivers or services to the Fund was not excessive in these affiliated money market funds
expense limitations for the Fund. However, light of the nature, quality and extent of attributable to such investments, although
the Board also noted that AIM has the services provided. The Board AIM has contractually agreed to waive the
recommended that the Board approve an considered whether AIM is financially advisory fees payable by the Fund with
amendment to the Fund's contractual sound and has the resources necessary to respect to its investment of uninvested
advisory fee schedule that would implement perform its obligations under the Fund's cash in these affiliated money market
the contractual advisory fee waiver that advisory agreement, and concluded that AIM funds through at least June 30, 2008. The
had been formerly committed to by AIM, has the financial resources necessary to Board considered the contractual nature of
which waiver provided for lower effective fulfill these obligations. this fee waiver and noted that it remains
fee rates at all asset levels than the in effect until at least June 30, 2008.
Fund's current contractual advisory fee F. INDEPENDENT WRITTEN EVALUATION OF THE The Board concluded that the Fund's
schedule. The Board noted that AIM's FUND'S SENIOR OFFICER investment of uninvested cash and cash
recommendation was made in response to the collateral from any securities lending
recommendation of the independent Senior The Board noted that, upon their arrangements in the affiliated money
Officer that AIM consider whether the direction, the Senior Officer of the Fund, market funds is in the best interests of
advisory fee waivers for certain equity who is independent of AIM and AIM's the Fund and its shareholders.
AIM Funds, including the Fund, should be affiliates, had prepared an independent
simplified. The Board concluded that it written evaluation to assist the Board in
would be appropriate to approve the determining the reasonableness of the
proposed amendment to the Fund's proposed management fees of the AIM Funds,
contractual advisory fee schedule and that including the Fund. The Board noted that
it was not necessary at this time to they had relied upon the Senior Officer's
discuss with AIM whether to implement any written evaluation instead of a
fee waivers or expense limitations for the competitive bidding process. In
Fund. determining whether to continue the Fund's
advisory agreement, the Board considered
After taking account of the Fund's the Senior Officer's written evaluation.
contractual advisory fee rate, as well as
the comparative advisory fee information G. COLLATERAL BENEFITS TO AIM AND ITS
discussed above, the Board concluded that AFFILIATES
the Fund's advisory fees were fair and
reasonable. The Board considered various other
benefits received by AIM and its
D. ECONOMIES OF SCALE AND BREAKPOINTS affiliates resulting from AIM's
relationship with the Fund, including the
The Board considered the extent to which fees received by AIM and its affiliates
there are economies of scale in AIM's for their provision of administrative,
provision of advisory services to the transfer agency and distribution services
Fund. The Board also considered whether to the Fund. The Board considered the
the Fund benefits from such economies of performance of AIM and its affiliates in
scale through contractual breakpoints in providing these services and the
the Fund's advisory fee schedule or organizational structure employed by AIM
through advisory fee waivers or expense and its affiliates to provide these
limitations. The Board noted that the services. The Board also considered that
Fund's contractual advisory fee schedule these services are provided to the Fund
currently does not include any breakpoints pursuant to written contracts which are
but that the amendment to the Fund's reviewed and approved on an annual basis
contractual advisory fee schedule by the Board. The Board concluded that AIM
discussed above provides for seven and its affiliates were providing these
breakpoints. Based on this information, services in a satisfactory manner and in
the Board concluded that the Fund's accordance with the terms of their
advisory fees will appropriately reflect contracts, and were qualified to continue
economies of scale upon the Board's to provide these services to the Fund.
approval of the amendment to the Fund's
contractual advisory fee schedule. The
Board also
23
Supplement to Semiannual Report dated 6/30/07
AIM INTERNATIONAL SMALL COMPANY FUND
INSTITUTIONAL CLASS SHARES ========================================== HAD THE ADVISOR NOT WAIVED FEES AND/OR
AVERAGE ANNUAL TOTAL RETURNS REIMBURSED EXPENSES IN THE PAST,
The following information has been PERFORMANCE WOULD HAVE BEEN LOWER.
prepared to provide Institutional Class For periods ended 6/30/07
shareholders with a performance overview PLEASE NOTE THAT PAST PERFORMANCE IS
specific to their holdings. Institutional Inception 20.77% NOT INDICATIVE OF FUTURE RESULTS. MORE
Class shares are offered exclusively to 5 Years 35.08 RECENT RETURNS MAY BE MORE OR LESS THAN
institutional investors, including defined 1 Year 38.94 THOSE SHOWN. ALL RETURNS ASSUME
contribution plans that meet certain 6 Months* 19.68 REINVESTMENT OF DISTRIBUTIONS AT NAV.
criteria. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
* Cumulative total return that has not FLUCTUATE SO YOUR SHARES, WHEN REDEEMED,
been annualized MAY BE WORTH MORE OR LESS THAN THEIR
========================================== ORIGINAL COST. SEE FULL REPORT FOR
INFORMATION ON COMPARATIVE BENCHMARKS.
INSTITUTIONAL CLASS SHARES' INCEPTION DATE PLEASE CONSULT YOUR FUND PROSPECTUS FOR
IS OCTOBER 25, 2005. RETURNS SINCE THAT MORE INFORMATION. FOR THE MOST CURRENT
DATE ARE HISTORICAL RETURNS. ALL OTHER MONTH-END PERFORMANCE, PLEASE CALL
RETURNS ARE BLENDED RETURNS OF HISTORICAL 800-451-4246 OR VISIT AIMINVESTMENTS.COM.
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 RULE 12B-1
FEES APPLICABLE TO CLASS A SHARES. CLASS A
SHARES' INCEPTION DATE IS AUGUST 31, 2000.
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.
A REDEMPTION FEE OF 2% WILL BE IMPOSED
ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
========================================== THE FUND WITHIN 30 DAYS OF PURCHASE.
NASDAQ SYMBOL IEGIX EXCEPTIONS TO THE REDEMPTION FEE ARE
========================================== LISTED IN THE FUND'S PROSPECTUS.
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.
[AIM INVESTMENTS LOGO]
AIMinvestments.com ISC-INS-2 A I M Distributors, Inc. --REGISTERED TRADEMARK--
Information about your Fund's expenses
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
ongoing costs, including management fees value divided by $1,000 = 8.6), then you paid for the period. You may use this
and other Fund expenses. This example is multiply the result by the number in the information to compare the ongoing costs
intended to help you understand your table under the heading entitled "Actual of investing in the Fund and other funds.
ongoing costs (in dollars) of investing in Expenses Paid During Period" to estimate To do so, compare this 5% hypothetical
the Fund and to compare these costs with the expenses you paid on your account example with the 5% hypothetical examples
ongoing costs of investing in other mutual during this period. that appear in the shareholder reports of
funds. The example is based on an the other funds.
investment of $1,000 invested at the HYPOTHETICAL EXAMPLE FOR COMPARISON
beginning of the period and held for the PURPOSES Please note that the expenses shown in
entire period January 1, 2007, through the table are meant to highlight your
June 30, 2007. The table below also provides information ongoing costs only. Therefore, the
about hypothetical account values and hypothetical information is useful in
ACTUAL EXPENSES hypothetical expenses based on the Fund's comparing ongoing costs only, and will not
actual expense ratio and an assumed rate help you determine the relative total
The table below provides information about of return of 5% per year before expenses, costs of owning different funds.
actual account values and actual expenses. which is not the Fund's actual return.
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Institutional $1,000.00 $1,196.80 $5.83 $1,019.49 $5.36 1.07%
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June 30,
2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMinvestments.com ISC-INS-2 A I M Distributors, Inc.
[EDELIVERY
GO PAPERLESS
AIMINVESTMENTS.COM/EDELIVERY
GRAPHIC]
REGISTER FOR EDELIVERY FUND HOLDINGS AND PROXY VOTING INFORMATION
eDelivery is the process of receiving your fund and account The Fund provides a complete list of its holdings four times in
information via e-mail. Once your quarterly statements, tax each fiscal year, at the quarter-ends. For the second and fourth
forms, fund reports, and prospectuses are available, we will quarters, the lists appear in the Fund's semiannual and annual
send you an e-mail notification containing links to these reports to shareholders. For the first and third quarters, the
documents. For security purposes, you will need to log in to Fund files the lists with the Securities and Exchange Commission
your account to view your statements and tax forms. (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at AIMinvestments.com. From our home page, click on
WHY SIGN UP? Products & Performance, then Mutual Funds, then Fund Overview.
Select your Fund from the drop-down menu and click on Complete
Register for eDelivery to: Quarterly Holdings. Shareholders can also look up the Fund's Forms
N-Q on the SEC Web site at sec.gov. Copies of the Fund's Forms N-Q
o save your Fund the cost of printing and postage. may be reviewed and copied at the SEC Public Reference Room in
Washington, D.C. You can obtain information on the operation of
o reduce the amount of paper you receive. the Public Reference Room, including information about duplicating
fee charges, by calling 202-942-8090 or 800-732-0330, or by
o gain access to your documents faster by not waiting for the electronic request at the following e-mail address:
mail. publicinfo@sec.gov. The SEC file numbers for the Fund are
811-01540 and 002-27334.
o view your documents online anytime at your convenience.
A description of the policies and procedures that the Fund uses to
o save the documents to your personal computer or print them determine how to vote proxies relating to portfolio securities is
out for your records. available without charge, upon request, from our Client Services
department at 800-959-4246 or on the AIM Web site,
HOW DO I SIGN UP? AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC
It's easy. Just follow these simple steps: Web site, sec.gov.
1. Log in to your account. Information regarding how the Fund voted proxies related to its
portfolio securities during the 12 months ended June 30, 2007, is
2. Click on the "Service Center" tab. available at our Web site. Go to AIMinvestments.com, access the
About Us tab, click on Required Notices and then click on Proxy
3. Select "Register for eDelivery" and complete the consent Voting Activity. Next, select the Fund from the drop-down menu.
process. The information is also available on the SEC Web site, sec.gov.
This AIM service is provided by AIM Investment Services, Inc.
ISC-SAR-1 A I M Distributors, Inc. [AIM INVESTMENTS LOGO]
--REGISTERED TRADEMARK--
AIM MID CAP BASIC VALUE FUND
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Mid-Cap Value
Table of Contents
Letter to Shareholders ................... 2
Fund Performance ......................... 3
Schedule of Investments .................. 4
Financial Statements ..................... 6
Notes to Financial Statements ............ 9
Financial Highlights ..................... 15
Fund Expenses ............................ 20
Approval of Advisory Agreement ........... 21
For the most current month-end Fund performance and
commentary, please visit AIMinvestments.com.
Unless otherwise noted, all data in this report are
from A I M Management Group Inc.
If used after October 20, 2007, this report must be
accompanied by a Fund Performance & Commentary or
by an AIM Quarterly Performance Review for the most
recent quarter-end.
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.
[AIM INVESTMENTS LOGO]
- --REGISTERED TRADEMARK-- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM MID CAP BASIC VALUE FUND
Dear Fellow Shareholders:
In overseeing the management of the AIM family of funds on your behalf, your Board of
Trustees of the AIM Funds continues to focus on improved investment performance,
[CROCKETT reduced shareholder costs, and high ethical standards. Since my last letter, your Board
PHOTO] has welcomed two new members: Marty Flanagan, President and CEO of INVESCO, AIM's
parent company, and Phil Taylor, who was named CEO of AIM Investments
--REGISTERED TRADEMARK-- in April 2006. Robert Graham, who has given more than 30 years
Bruce L. Crockett of leadership to the company and the mutual fund industry since founding AIM in 1976,
has retired, stepping down in the process from his most recent role as Vice Chairman of
the Board. We thank Bob for his many contributions and wish him a long and happy
future.
Our review of fund performance has shown healthy progress, but the process is
necessarily one of continuous improvement. In general, as of June 30, 2007, we have
seen persistent investment discipline and more consistently good results. While this
statement may not apply to every AIM Fund all the time, as I write this letter, the
overall trend in fund management and performance has been positive.
The investment management talent at AIM has recently been enhanced by the promotion
of Karen Dunn Kelley to Head of INVESCO's Worldwide Fixed Income as well as Director of
AIM Global and Cash Management, with responsibility for all fixed income and money
market funds that serve both institutional and individual investors. Under Karen's
direction, AIM's cash management organization grew to one of the world's largest and
most respected, with top-tier performance. The operations now combined under her charge
represent more than $150 billion in assets, 120 investment professionals, and products
that span the entire yield curve.
In other news, your Board took a more active role in preparing for "proxy season,"
the period when fund managers must vote the shares held by their funds "for" or
"against" various proposals on the ballots of the issuing companies. Beginning in the
2007 proxy season, AIM implemented new proxy voting policies, developed by management
in conjunction with an ad hoc Board committee, which provided a solid framework for
properly evaluating and executing the many decisions the AIM Funds are required to make
to vote shares.
In general, the AIM Funds voted for proposals that would allow shareholders a
greater role in election of directors, proxy access and "say for pay." The AIM Funds
voted against directors who AIM believed failed to govern well in cases of corporate
mismanagement, such as the backdating of options grants, and against "poison pill" and
"take under" proposals that would favor the financial interests of managers at the
expense of investors in the case of a merger or acquisition. You can view the proxy
votes cast for your fund by going to AIMinvestments.com. Click the "About Us" tab, then
go to "Required Notices" and "Proxy Voting Activity."
Additionally, your Board raised the amount its members are recommended to invest in
the AIM Funds within three years of joining the Board, with the goal of aligning our
interests even more closely with yours.
Furthermore, at our June meeting we renewed the investment advisory contracts
between the AIM Funds and AIM for another year, applying the same rigorous evaluation
process that was enhanced and formalized in 2005. For more information on this process,
please visit AIMinvestments.com. Click on the "Products and Performance" tab and go to
"Investment Advisory Agreement Renewals."
Your Board's ability to best represent your interests depends on our knowledge of
your opinions and concerns. Please send me an email (bruce@brucecrockett.com) with your
thoughts on the following:
1) How important is it to you to hear about your Board's decisions and activities in
these letters?
2) What other information (on overall performance, specific funds, managers, etc.)
would make the letters more meaningful to you?
3) Would you prefer that communication from your Board continue to be delivered in
paper form by regular mail or be sent electronically by email?
If you would prefer to communicate through a quick online survey, please go to
AIMinvestments.com and provide your responses there.
We need to hear from you to do our best job, and I look forward to your responses.
Sincerely,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Directors
August 10, 2007
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 mutual funds represented by AIM
Investments and the PowerShares Exchange-Traded Fund Trust.
2
AIM MID CAP BASIC VALUE FUND
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/06-6/30/07, excluding applicable sales charges. If
sales charges were included, returns would be lower.
Class A Shares 16.20%
Class B Shares 15.86
Class C Shares 15.79
Class R Shares 16.07
S&P 500 Index(1) (Broad Market Index) 6.96
Russell Midcap Value Index(1) (Style-Specific Index) 8.69
Lipper Mid-Cap Value Funds Index(1) (Peer Group Index) 11.34
SOURCE: (1)LIPPER INC.
The unmanaged S&P 500 --REGISTERED TRADEMARK-- Index is an index of common stocks
frequently used as a general measure of U.S. stock market performance.
The unmanaged Russell Midcap --REGISTERED TRADEMARK-- Value Index is a subset of the
Russell Midcap --REGISTERED TRADEMARK-- Index, which represents the performance of the
stocks of domestic mid-capitalization companies; the Value subset measures the
performance of Russell Midcap companies with lower price/book ratios and lower
forecasted growth values.
The Russell Midcap Value Index and the Russell Midcap Index are trademarks/service
marks of the Frank Russell Company. Russell --REGISTERED TRADEMARK-- is a trademark of
the Frank Russell Company.
The unmanaged Lipper Mid-Cap Value Funds Index represents an average of the
performance of the largest mid-capitalization value funds tracked by Lipper Inc., an
independent mutual fund performance monitor.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== THE INCEPTION DATE OF CLASS R SHARES) AT CLASS A SHARE PERFORMANCE REFLECTS THE
FUND PERFORMANCE NET ASSET VALUE, ADJUSTED TO REFLECT THE MAXIMUM 5.50% SALES CHARGE, AND CLASS B
HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS AND CLASS C SHARE PERFORMANCE REFLECTS THE
As of 6/30/07, including applicable sales R SHARES. CLASS A SHARES' INCEPTION DATE APPLICABLE CONTINGENT DEFERRED SALES
charges IS DECEMBER 31, 2001. CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
CDSC ON CLASS B SHARES DECLINES FROM 5%
CLASS A SHARES THE PERFORMANCE DATA QUOTED REPRESENT BEGINNING AT THE TIME OF PURCHASE TO 0% AT
Inception (12/31/01) 10.43% PAST PERFORMANCE AND CANNOT GUARANTEE THE BEGINNING OF THE SEVENTH YEAR. THE
5 Years 12.36 COMPARABLE FUTURE RESULTS; CURRENT CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
1 Year 22.40 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE YEAR AFTER PURCHASE. CLASS R SHARES DO NOT
VISIT AIMINVESTMENTS.COM FOR THE MOST HAVE A FRONT-END SALES CHARGE; RETURNS
CLASS B SHARES RECENT MONTH-END PERFORMANCE. PERFORMANCE SHOWN ARE AT NET ASSET VALUE AND DO NOT
Inception (12/31/01) 10.70% FIGURES REFLECT REINVESTED DISTRIBUTIONS, REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
5 Years 12.62 CHANGES IN NET ASSET VALUE AND THE EFFECT ON A TOTAL REDEMPTION OF RETIREMENT PLAN
1 Year 23.63 OF THE MAXIMUM SALES CHARGE UNLESS ASSETS WITHIN THE FIRST YEAR.
OTHERWISE STATED. PERFORMANCE FIGURES DO
CLASS C SHARES NOT REFLECT DEDUCTION OF TAXES A THE PERFORMANCE OF THE FUND'S SHARE
Inception (12/31/01) 10.80% SHAREHOLDER WOULD PAY ON FUND CLASSES WILL DIFFER PRIMARILY DUE TO
5 Years 12.85 DISTRIBUTIONS OR SALE OF FUND SHARES. DIFFERENT SALES CHARGE STRUCTURES AND
1 Year 27.63 INVESTMENT RETURN AND PRINCIPAL VALUE WILL CLASS EXPENSES.
FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR
CLASS R SHARES LOSS WHEN YOU SELL SHARES.
Inception 11.37%
5 Years 13.44 THE TOTAL ANNUAL FUND OPERATING EXPENSE
1 Year 29.28 RATIO SET FORTH IN THE MOST RECENT FUND
========================================== PROSPECTUS AS OF THE DATE OF THIS REPORT
FOR CLASS A, CLASS B, CLASS C AND CLASS R
CLASS R SHARES' INCEPTION DATE IS APRIL SHARES WAS 1.53%, 2.28%, 2.28% AND 1.78%,
30, 2004. RETURNS SINCE THAT DATE ARE RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
HISTORICAL RETURNS. ALL OTHER RETURNS ARE ABOVE MAY VARY FROM THE EXPENSE RATIOS
BLENDED RETURNS OF HISTORICAL CLASS R PRESENTED IN OTHER SECTIONS OF THIS REPORT
SHARE PERFORMANCE AND RESTATED CLASS A THAT ARE BASED ON EXPENSES INCURRED DURING
SHARE PERFORMANCE (FOR PERIODS PRIOR TO THE PERIOD COVERED BY THIS REPORT.
3
AIM Mid Cap Basic Value Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ---------------------------------------------------------
Consumer Discretionary 22.1%
- ---------------------------------------------------------
Information Technology 20.4
- ---------------------------------------------------------
Financials 18.1
- ---------------------------------------------------------
Industrials 13.9
- ---------------------------------------------------------
Health Care 11.8
- ---------------------------------------------------------
Consumer Staples 5.6
- ---------------------------------------------------------
Materials 4.6
- ---------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 3.5
_________________________________________________________
=========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.50%
ADVERTISING-3.16%
Interpublic Group of Cos., Inc. (The)(a) 782,801 $ 8,923,931
=======================================================================
APPAREL RETAIL-4.33%
Gap, Inc. (The) 302,476 5,777,292
- -----------------------------------------------------------------------
TJX Cos., Inc. (The) 235,380 6,472,950
=======================================================================
12,250,242
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-3.29%
Liz Claiborne, Inc. 249,276 9,297,995
=======================================================================
APPLICATION SOFTWARE-1.01%
Epicor Software Corp.(a) 191,187 2,842,951
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-3.39%
FBR Capital Markets Corp.(a) 177,612 3,001,643
- -----------------------------------------------------------------------
Waddell & Reed Financial, Inc.-Class A 252,565 6,569,215
=======================================================================
9,570,858
=======================================================================
BREWERS-3.37%
Molson Coors Brewing Co.-Class B 102,949 9,518,665
=======================================================================
BUILDING PRODUCTS-1.99%
American Standard Cos., Inc. 95,154 5,612,183
=======================================================================
COMMUNICATIONS EQUIPMENT-2.97%
Plantronics, Inc. 320,356 8,399,734
=======================================================================
COMPUTER HARDWARE-2.55%
Dell Inc.(a) 252,429 7,206,848
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
CONSTRUCTION & ENGINEERING-6.57%
Chicago Bridge & Iron Co. N.V.-New York
Shares 228,828 $ 8,635,969
- -----------------------------------------------------------------------
Shaw Group Inc. (The)(a) 214,251 9,917,679
=======================================================================
18,553,648
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.50%
Navistar International Corp.(a) 64,414 4,251,324
=======================================================================
CONSTRUCTION MATERIALS-2.59%
Cemex S.A.B. de C.V.-ADR (Mexico)(a) 198,145 7,311,550
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-5.82%
DST Systems, Inc.(a) 123,014 9,743,939
- -----------------------------------------------------------------------
Fidelity National Information Services, Inc. 123,250 6,690,010
=======================================================================
16,433,949
=======================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-2.47%
ChoicePoint Inc.(a) 164,679 6,990,624
=======================================================================
EDUCATION SERVICES-3.61%
Apollo Group, Inc.-Class A(a) 174,449 10,193,055
=======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.46%
Cognex Corp. 183,186 4,123,517
=======================================================================
HEALTH CARE DISTRIBUTORS-2.43%
McKesson Corp. 115,104 6,864,803
=======================================================================
HEALTH CARE EQUIPMENT-1.83%
Symmetry Medical Inc.(a) 322,713 5,166,635
=======================================================================
</Table>
4
AIM Mid Cap Basic Value Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
HOUSEHOLD APPLIANCES-2.18%
Whirlpool Corp. 55,501 $ 6,171,711
=======================================================================
INSURANCE BROKERS-4.47%
AON Corp. 199,398 8,496,349
- -----------------------------------------------------------------------
National Financial Partners Corp. 89,407 4,140,438
=======================================================================
12,636,787
=======================================================================
LEISURE PRODUCTS-2.70%
Brunswick Corp. 233,460 7,617,800
=======================================================================
LIFE & HEALTH INSURANCE-1.91%
Protective Life Corp. 112,919 5,398,657
=======================================================================
LIFE SCIENCES TOOLS & SERVICES-3.07%
Waters Corp.(a) 146,397 8,690,126
=======================================================================
MANAGED HEALTH CARE-4.48%
Aetna Inc. 97,116 4,797,530
- -----------------------------------------------------------------------
UnitedHealth Group Inc. 153,754 7,862,980
=======================================================================
12,660,510
=======================================================================
PACKAGED FOODS & MEATS-2.22%
Cadbury Schweppes PLC-ADR (United Kingdom) 115,568 6,275,342
=======================================================================
PAPER PACKAGING-2.03%
Smurfit-Stone Container Corp.(a) 432,019 5,750,173
=======================================================================
PROPERTY & CASUALTY INSURANCE-1.72%
Security Capital Assurance Ltd. 157,039 4,847,794
=======================================================================
PUBLISHING-2.81%
Valassis Communications, Inc.(a) 461,321 7,930,108
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
REGIONAL BANKS-3.32%
Popular, Inc. 377,580 $ 6,067,711
- -----------------------------------------------------------------------
Zions Bancorp 42,994 3,306,668
=======================================================================
9,374,379
=======================================================================
REINSURANCE-2.16%
Max Re Capital Ltd. 215,341 6,094,150
=======================================================================
SEMICONDUCTOR EQUIPMENT-3.81%
Brooks Automation, Inc.(a) 250,457 4,545,795
- -----------------------------------------------------------------------
KLA-Tencor Corp. 113,139 6,216,988
=======================================================================
10,762,783
=======================================================================
SYSTEMS SOFTWARE-2.83%
CA Inc. 309,316 7,989,632
=======================================================================
THRIFTS & MORTGAGE FINANCE-1.09%
Fannie Mae 47,259 3,087,430
=======================================================================
TRUCKING-1.36%
Heartland Express, Inc. 236,176 3,849,669
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $203,464,662) 272,649,563
=======================================================================
MONEY MARKET FUNDS-1.98%
Liquid Assets Portfolio-Institutional
Class(b) 2,799,936 2,799,936
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(b) 2,799,936 2,799,936
=======================================================================
Total Money Market Funds (Cost
$5,599,872) 5,599,872
=======================================================================
TOTAL INVESTMENTS-98.48% (Cost $209,064,534) 278,249,435
=======================================================================
OTHER ASSETS LESS LIABILITIES-1.52% 4,293,743
=======================================================================
NET ASSETS-100.00% $282,543,178
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) 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.
5
AIM Mid Cap Basic Value Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $203,464,662) $272,649,563
- -----------------------------------------------------------
Investments in affiliated money market funds
(Cost $5,599,872) 5,599,872
===========================================================
Total investments (Cost $209,064,534) 278,249,435
===========================================================
Foreign currencies, at value (Cost $109) 112
===========================================================
Receivables for:
Investments sold 4,855,666
- -----------------------------------------------------------
Fund shares sold 314,779
- -----------------------------------------------------------
Dividends 146,621
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 17,960
- -----------------------------------------------------------
Other assets 24,568
===========================================================
Total assets 283,609,141
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 466,253
- -----------------------------------------------------------
Fund shares reacquired 306,850
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 29,639
- -----------------------------------------------------------
Accrued distribution fees 95,382
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,390
- -----------------------------------------------------------
Accrued transfer agent fees 103,966
- -----------------------------------------------------------
Accrued operating expenses 59,483
===========================================================
Total liabilities 1,065,963
===========================================================
Net assets applicable to shares outstanding $282,543,178
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $196,253,293
- -----------------------------------------------------------
Undistributed net investment income 1,773,040
- -----------------------------------------------------------
Undistributed net realized gain 15,331,942
- -----------------------------------------------------------
Unrealized appreciation 69,184,903
===========================================================
$282,543,178
___________________________________________________________
===========================================================
NET ASSETS:
Class A $133,882,566
___________________________________________________________
===========================================================
Class B $ 52,949,587
___________________________________________________________
===========================================================
Class C $ 29,190,932
___________________________________________________________
===========================================================
Class R $ 791,536
___________________________________________________________
===========================================================
Institutional Class $ 65,728,557
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 8,329,910
___________________________________________________________
===========================================================
Class B 3,436,621
___________________________________________________________
===========================================================
Class C 1,895,598
___________________________________________________________
===========================================================
Class R 49,583
___________________________________________________________
===========================================================
Institutional Class 4,005,076
___________________________________________________________
===========================================================
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 $ 15.41
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 15.40
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 15.96
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 16.41
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
6
AIM Mid Cap Basic Value Fund
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 3,631,220
- -------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $2,513) 176,465
=========================================================================
Total investment income 3,807,685
=========================================================================
EXPENSES:
Advisory fees 1,040,787
- -------------------------------------------------------------------------
Administrative services fees 49,758
- -------------------------------------------------------------------------
Custodian fees 4,600
- -------------------------------------------------------------------------
Distribution fees:
Class A 152,450
- -------------------------------------------------------------------------
Class B 262,597
- -------------------------------------------------------------------------
Class C 138,369
- -------------------------------------------------------------------------
Class R 1,453
- -------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 331,866
- -------------------------------------------------------------------------
Transfer agent fees -- Institutional 288
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 12,702
- -------------------------------------------------------------------------
Other 101,074
=========================================================================
Total expenses 2,095,944
=========================================================================
Less: Fees waived and expense offset arrangements (84,089)
=========================================================================
Net expenses 2,011,855
=========================================================================
Net investment income 1,795,830
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from investment securities 11,754,644
=========================================================================
Change in net unrealized appreciation of:
Investment securities 25,658,869
- -------------------------------------------------------------------------
Foreign currencies 3
=========================================================================
25,658,872
=========================================================================
Net realized and unrealized gain 37,413,516
=========================================================================
Net increase in net assets resulting from operations $39,209,346
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
7
AIM Mid Cap Basic Value Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,795,830 $ (1,185,371)
- ------------------------------------------------------------------------------------------
Net realized gain 11,754,644 34,113,815
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation 25,658,872 (14,983,172)
==========================================================================================
Net increase in net assets resulting from operations 39,209,346 17,945,272
==========================================================================================
Distributions to shareholders from net realized gains:
Class A -- (13,617,000)
- ------------------------------------------------------------------------------------------
Class B -- (6,511,768)
- ------------------------------------------------------------------------------------------
Class C -- (3,286,412)
- ------------------------------------------------------------------------------------------
Class R -- (51,729)
- ------------------------------------------------------------------------------------------
Institutional Class -- (5,072,768)
==========================================================================================
Decrease in net assets resulting from distributions -- (28,539,677)
==========================================================================================
Share transactions-net:
Class A 1,808,258 (9,269,776)
- ------------------------------------------------------------------------------------------
Class B (6,798,962) (14,926,594)
- ------------------------------------------------------------------------------------------
Class C (1,314,479) (2,097,247)
- ------------------------------------------------------------------------------------------
Class R 255,729 296,385
- ------------------------------------------------------------------------------------------
Institutional Class 12,843,452 20,466,955
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions 6,793,998 (5,530,277)
==========================================================================================
Net increase (decrease) in net assets 46,003,344 (16,124,682)
==========================================================================================
NET ASSETS:
Beginning of period 236,539,834 252,664,516
==========================================================================================
End of period (including undistributed net investment
income (loss) of $1,773,040 and $(22,790), respectively) $282,543,178 $236,539,834
__________________________________________________________________________________________
==========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8
AIM Mid Cap Basic Value Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Basic Value Fund (the "Fund") is a series portfolio of AIM Funds
Group (the "Trust"). The Trust is a Delaware statutory trust registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of seven separate portfolios,
each authorized to issue an unlimited number of shares of beneficial interest.
The Fund currently offers multiple classes of shares. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund.
The Fund's primary investment objective is long-term growth of capital.
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
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. 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 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 open-end and closed-end registered
investment companies that trade on an exchange are valued at the 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.
Debt obligations (including convertible bonds) and unlisted equities 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, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
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. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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.
Valuations change in response to many factors including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions and market
liquidity.
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.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
9
AIM Mid Cap Basic Value Fund
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
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.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. 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
10
AIM Mid Cap Basic Value Fund
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. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $1 billion 0.80%
- -------------------------------------------------------------------
Next $4 billion 0.75%
- -------------------------------------------------------------------
Over $5 billion 0.70%
__________________________________________________________________
===================================================================
</Table>
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rates of the Fund's average daily net assets:
<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>
Further, effective July 1, 2007, AIM has contractually agreed through at
least June 30, 2008 to waive 100% 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). Prior to July 1, 2007,
AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives from
the affiliated money market funds on investments by the Fund in such affiliated
money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $73,465.
At the request of the Trustees of the Trust, INVESCO PLC ("INVESCO")
(formerly "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. These
expenses along with the related expense reimbursement are included in the
Statement of Operations. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM for certain administrative
costs incurred in providing accounting services, to the Fund. For the six months
ended June 30, 2007, expenses incurred under the agreement are shown in the
Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
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 six months ended June 30,
2007, expenses incurred under the agreement are shown in the Statement of
Operations as transfer agent fees.
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 Plan payments, up to 0.25% of the
average daily net assets of each class of 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.
For the six months ended June 30, 2007, expenses incurred under the Plans are
shown in the Statement of Operations as distribution fees.
11
AIM Mid Cap Basic Value Fund
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 six
months ended June 30, 2007, ADI advised the Fund that it retained $23,909 in
front-end sales commissions from the sale of Class A shares and $1,368, $22,235,
$1,044 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 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 six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $1,765,125 $32,784,382 $(31,749,571) $2,799,936 $ 87,184
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Portfolio-Institutional Class 1,765,125 32,784,382 (31,749,571) 2,799,936 86,768
=================================================================================================================================
Subtotal $3,530,250 $65,568,764 $(63,499,142) $5,599,872 $173,952
=================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- ---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-Institutional Class $ 7,718,100 $ 36,659,555 $ (44,377,655) $ -- $ 2,513
=================================================================================================================================
Total Investments in Affiliates $11,248,350 $102,228,319 $(107,876,797) $5,599,872 $176,465
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
* Net of compensation to counterparties.
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 used to offset custodian fees. For the six months ended
June 30, 2007, the Fund received credits from these arrangements, which resulted
in the reduction of the Fund's total expenses of $10,624.
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 certain Trustees and Officers of the Fund. 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, certain 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 six months ended June 30, 2007, the Fund paid legal fees of
$2,674 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.
12
AIM Mid Cap Basic Value Fund
The Fund participates 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 six months ended June 30, 2007, 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--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 June 30, 2007, there were no securities out on loan. For the six months
ended June 30, 2007, the Fund received dividends on cash collateral investments
of $2,513 for securities lending transactions, which are net of compensation to
counterparties.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 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 six months ended June 30, 2007 was $64,470,799 and
$60,565,538, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $68,543,689
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (849,271)
===============================================================================
Net unrealized appreciation of investment securities $67,694,418
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $210,555,017.
</Table>
13
AIM Mid Cap Basic Value 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 and under certain
circumstances load waiver shares may be subject to a CDSC. Class B shares and
Class C shares are sold with a CDSC. Class R shares and Institutional Class
shares are sold at net asset value. Under certain circumstances, Class R shares
are subject to a 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
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,300,867 $ 19,613,735 1,904,423 $ 27,969,183
- ----------------------------------------------------------------------------------------------------------------------
Class B 291,002 4,158,594 553,749 7,875,513
- ----------------------------------------------------------------------------------------------------------------------
Class C 252,284 3,603,742 346,553 4,923,116
- ----------------------------------------------------------------------------------------------------------------------
Class R 19,317 292,787 21,100 309,171
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class 1,237,147 18,690,250 1,082,906 15,996,988
======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 949,174 13,003,685
- ----------------------------------------------------------------------------------------------------------------------
Class B -- -- 463,363 6,107,119
- ----------------------------------------------------------------------------------------------------------------------
Class C -- -- 242,476 3,195,833
- ----------------------------------------------------------------------------------------------------------------------
Class R -- -- 3,798 51,728
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 363,900 5,072,768
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 189,224 2,860,807 319,661 4,625,122
- ----------------------------------------------------------------------------------------------------------------------
Class B (197,079) (2,860,807) (329,478) (4,625,122)
======================================================================================================================
Reacquired:
Class A (1,382,333) (20,666,284) (3,776,685) (54,867,766)
- ----------------------------------------------------------------------------------------------------------------------
Class B (564,229) (8,096,749) (1,715,734) (24,284,104)
- ----------------------------------------------------------------------------------------------------------------------
Class C (345,019) (4,918,221) (725,525) (10,216,196)
- ----------------------------------------------------------------------------------------------------------------------
Class R (2,383) (37,058) (4,371) (64,514)
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class (358,838) (5,846,798) (41,552) (602,801)
======================================================================================================================
439,960 $ 6,793,998 (342,242) $ (5,530,277)
______________________________________________________________________________________________________________________
======================================================================================================================
</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 8% 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, 21% 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.
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. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
14
AIM Mid Cap Basic Value 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
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.83 $ 14.48 $ 13.12 $ 11.28 $ 8.23 $ 9.99
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.11(a) (0.04)(a) (0.07) (0.10)(a) (0.08) (0.06)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.13 1.25 1.43 1.93 3.13 (1.70)
- ----------------------------------------------------------------------------------------------------------------------------
Increase from payments by affiliates -- -- -- 0.01 -- --
============================================================================================================================
Total from investment operations 2.24 1.21 1.36 1.84 3.05 (1.76)
============================================================================================================================
Less distributions:
Distributions from net realized gains -- (1.86) -- -- -- --
============================================================================================================================
Net asset value, end of period $ 16.07 $ 13.83 $ 14.48 $ 13.12 $ 11.28 $ 8.23
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 16.20% 8.47% 10.37% 16.31%(c) 37.06% (17.62)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $133,883 $113,672 $127,775 $115,164 $55,372 $39,130
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.45%(d) 1.52% 1.51% 1.67% 1.80% 1.80%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.51%(d) 1.58% 1.57% 1.69% 1.92% 1.93%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets 1.48%(d) (0.30)% (0.51)% (0.85)% (1.00)% (0.70)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(e) 24% 46% 29% 34% 52% 41%
____________________________________________________________________________________________________________________________
============================================================================================================================
</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 charge and is not
annualized for periods less than one year.
(c) Total return is after reimbursement the advisor has agreed to pay for an
economic loss due to trading error. Total return before reimbursement by
the advisor was 16.22%.
(d) Ratios are annualized and based on average daily net assets of
$122,970,380.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
15
AIM Mid Cap Basic Value Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
--------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2007 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.30 $ 14.10 $ 12.87 $ 11.14 $ 8.18 $ 9.99
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.05(a) (0.15)(a) (0.16) (0.18)(a) (0.13) (0.12)(a)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.06 1.21 1.39 1.90 3.09 (1.69)
- -------------------------------------------------------------------------------------------------------------------------
Increase from payments by affiliates -- -- -- 0.01 -- --
=========================================================================================================================
Total from investment operations 2.11 1.06 1.23 1.73 2.96 (1.81)
=========================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- -- (0.00)
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (1.86) -- -- -- --
=========================================================================================================================
Total distributions -- (1.86) -- -- -- (0.00)
=========================================================================================================================
Net asset value, end of period $ 15.41 $ 13.30 $ 14.10 $ 12.87 $ 11.14 $ 8.18
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 15.86% 7.63% 9.56% 15.53%(c) 36.19% (18.12)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $52,950 $51,970 $69,594 $63,374 $38,165 $21,204
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.20%(d) 2.27% 2.21% 2.32% 2.45% 2.45%
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.26%(d) 2.33% 2.27% 2.34% 2.57% 2.58%
=========================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.73%(d) (1.05)% (1.21)% (1.50)% (1.65)% (1.35)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(e) 24% 46% 29% 34% 52% 41%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 charge and is not
annualized for periods less than one year.
(c) Total return is after reimbursement the advisor has agreed to pay for an
economic loss due to trading error. Total return before reimbursement by
the advisor was 15.44%.
(d) Ratios are annualized and based on average daily net assets of
$52,954,689.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
16
AIM Mid Cap Basic Value Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
--------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2007 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.30 $ 14.09 $ 12.86 $ 11.13 $ 8.18 $ 9.99
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.05(a) (0.15)(a) (0.16) (0.18)(a) (0.12) (0.12)(a)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.05 1.22 1.39 1.90 3.07 (1.69)
- -------------------------------------------------------------------------------------------------------------------------
Increase from payments by affiliates -- -- -- 0.01 -- --
=========================================================================================================================
Total from investment operations 2.10 1.07 1.23 1.73 2.95 (1.81)
=========================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- -- (0.00)
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (1.86) -- -- -- --
=========================================================================================================================
Total distributions -- (1.86) -- -- -- (0.00)
=========================================================================================================================
Net asset value, end of period $ 15.40 $ 13.30 $ 14.09 $ 12.86 $ 11.13 $ 8.18
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 15.79% 7.70% 9.56% 15.54%(c) 36.06% (18.12)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $29,191 $26,435 $29,946 $27,601 $13,422 $ 8,059
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.20%(d) 2.27% 2.21% 2.32% 2.45% 2.45%
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.26%(d) 2.33% 2.27% 2.34% 2.57% 2.58%
=========================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.73%(d) (1.05)% (1.21)% (1.50)% (1.65)% (1.35)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(e) 24% 46% 29% 34% 52% 41%
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 charge and is not
annualized for periods less than one year.
(c) Total return is after reimbursement the advisor has agreed to pay for an
economic loss due to trading error. Total return before reimbursement by
the advisor was 15.45%.
(d) Ratios are annualized and based on average daily net assets of
$27,903,141.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
17
AIM Mid Cap Basic Value Fund
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS R
------------------------------------------------------
APRIL 30, 2004
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------- DECEMBER 31,
2007 2006 2005 2004
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.75 $14.44 $13.11 $11.88
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09(a) (0.08)(a) (0.05) (0.08)(a)
- --------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.12 1.25 1.38 1.30
- --------------------------------------------------------------------------------------------------------------------
Increase from payments by affiliates -- -- -- 0.01
====================================================================================================================
Total from investment operations 2.21 1.17 1.33 1.23
====================================================================================================================
Less distributions from net realized gain -- (1.86) -- --
====================================================================================================================
Net asset value, end of period $15.96 $13.75 $14.44 $13.11
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 16.07% 8.22% 10.15% 10.35%(c)
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 792 $ 449 $ 175 $ 33
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.70%(d) 1.77% 1.71% 1.78%(e)
- --------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.76%(d) 1.83% 1.77% 1.80%(e)
====================================================================================================================
Ratio of net investment income (loss) to average net assets 1.23%(d) (0.55)% (0.71)% (0.96)%(e)
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(f) 24% 46% 29% 34%
____________________________________________________________________________________________________________________
====================================================================================================================
</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) Total return is after reimbursement the advisor has agreed to pay for an
economic loss due to trading error. Total return before reimbursement by
the advisor was 10.27%.
(d) Ratios are annualized and based on average daily net assets of $585,806.
(e) Annualized.
(f) 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
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, --------------------- DECEMBER 31,
2007 2006 2005 2004
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.08 $ 14.62 $ 13.17 $11.88
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.16(a) 0.05(a) 0.01 (0.02)(a)
- ----------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.17 1.27 1.44 1.30
- ----------------------------------------------------------------------------------------------------------------------
Increase from payments by affiliates -- -- -- 0.01
======================================================================================================================
Total from investment operations 2.33 1.32 1.45 1.29
======================================================================================================================
Less distributions from net realized gains -- (1.86) -- --
======================================================================================================================
Net asset value, end of period $ 16.41 $ 14.08 $ 14.62 $13.17
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 16.55% 9.15% 11.01% 10.86(c)
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $65,729 $44,013 $25,174 $7,530
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.87%(d) 0.92% 0.92% 1.03%(e)
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.93%(d) 0.98% 0.98% 1.05%(e)
======================================================================================================================
Ratio of net investment income (loss) to average net assets 2.06%(d) 0.30% (0.08)% (0.21)%(e)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(f) 24% 46% 29% 34%
______________________________________________________________________________________________________________________
======================================================================================================================
</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) Total return is after reimbursement the advisor has agreed to pay for an
economic loss due to trading error. Total return before reimbursement by
the advisor was 10.77%
(d) Ratios are annualized and based on average daily net assets of
$57,939,139.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
18
AIM Mid Cap Basic Value Fund
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
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 A I M Advisors, Inc. ("AIM") and AIM Distributors, Inc.
("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. By agreement with the Commissioner of Securities, AIM's time
to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), 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; 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.
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 INVESCO PLC'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 INVESCO 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.
19
AIM MID CAP BASIC VALUE FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE together with the amount you invested, to use this information to compare the
estimate the expenses that you paid over ongoing costs of investing in the Fund and
As a shareholder of the Fund, you incur the period. Simply divide your account other funds. To do so, compare this 5%
two types of costs: (1) transaction costs, value by $1,000 (for example, an $8,600 hypothetical example with the 5%
which may include sales charges (loads) on account value divided by $1,000 = 8.6), hypothetical examples that appear in the
purchase payments or contingent deferred then multiply the result by the number in shareholder reports of the other funds.
sales charges on redemptions, and the table under the heading entitled
redemption fees, if any; and (2) ongoing "Actual Expenses Paid During Period" to Please note that the expenses shown in
costs, including management fees; estimate the expenses you paid on your the table are meant to highlight your
distribution and/or service (12b-1) fees; account during this period. ongoing costs only and do not reflect any
and other Fund expenses. This example is transaction costs, such as sales charges
intended to help you understand your HYPOTHETICAL EXAMPLE FOR COMPARISON (loads) on purchase payments, contingent
ongoing costs (in dollars) of investing in PURPOSES deferred sales charges on redemptions, and
the Fund and to compare these costs with redemption fees, if any. Therefore, the
ongoing costs of investing in other mutual The table below also provides information hypothetical information is useful in
funds. The example is based on an about hypothetical account values and comparing ongoing costs only, and will not
investment of $1,000 invested at the hypothetical expenses based on the Fund's help you determine the relative total
beginning of the period and held for the actual expense ratio and an assumed rate costs of owning different funds. In
entire period January 1, 2007, through of return of 5% per year before expenses, addition, if these transaction costs were
June 30, 2007. which is not the Fund's actual return. included, your costs would have been
higher.
ACTUAL EXPENSES The hypothetical account values and
expenses may not be used to estimate the
The table below provides information about actual ending account balance or expenses
actual account values and actual expenses. you paid for the period. You may
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
A $1,000.00 $1,162.00 $ 7.77 $1,017.60 $ 7.25 1.45%
B 1,000.00 1,158.60 11.77 1,013.88 10.99 2.20
C 1,000.00 1,157.90 11.77 1,013.88 10.99 2.20
R 1,000.00 1,160.70 9.11 1,016.36 8.50 1.70
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June 30,
2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
20
AIM MID CAP BASIC VALUE FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM expenses of their assigned funds. The may have occurred since that date,
Funds Group is required under the Investments Committee considers each including but not limited to changes to
Investment Company Act of 1940 to approve Sub-Committee's recommendations and makes the Fund's performance, advisory fees,
annually the renewal of the AIM Mid Cap its own recommendations regarding the expense limitations and/or fee waivers.
Basic Value Fund (the Fund) investment performance, fees and expenses of the AIM
advisory agreement with A I M Advisors, Funds to the full Board. Moreover, the A. NATURE, EXTENT AND QUALITY OF SERVICES
Inc. (AIM). During contract renewal Investments Committee considers each PROVIDED BY AIM
meetings held on June 25-27, 2007, the Sub-Committee's recommendations in making
Board as a whole and the disinterested or its annual recommendation to the Board The Board reviewed the advisory services
"independent" Trustees, voting separately, whether to approve the continuance of each provided to the Fund by AIM under the
approved the continuance of the Fund's AIM Fund's investment advisory agreement Fund's advisory agreement, the performance
investment advisory agreement for another and sub-advisory agreement, if applicable of AIM in providing these services, and
year, effective July 1, 2007. In doing so, (advisory agreements), for another year. the credentials and experience of the
the Board determined that the Fund's officers and employees of AIM who provide
advisory agreement is in the best The independent Trustees, as mentioned these services. The Board's review of the
interests of the Fund and its shareholders above, are assisted in their annual qualifications of AIM to provide these
and that the compensation to AIM under the evaluation of the advisory agreements by services included the Board's
Fund's advisory agreement is fair and the independent Senior Officer. One consideration of AIM's portfolio and
reasonable. responsibility of the Senior Officer is to product review process, various back
manage the process by which the AIM Funds' office support functions provided by AIM,
The independent Trustees met separately proposed management fees are negotiated and AIM's equity and fixed income trading
during their evaluation of the Fund's during the annual contract renewal process operations. The Board concluded that the
investment advisory agreement with to ensure that they are negotiated in a nature, extent and quality of the advisory
independent legal counsel from whom they manner which is at arms' length and services provided to the Fund by AIM were
received independent legal advice, and the reasonable. Accordingly, the Senior appropriate and that AIM currently is
independent Trustees also received Officer must either supervise a providing satisfactory advisory services
assistance during their deliberations from competitive bidding process or prepare an in accordance with the terms of the Fund's
the independent Senior Officer, a independent written evaluation. The Senior advisory agreement. In addition, based on
full-time officer of the AIM Funds who Officer has recommended that an their ongoing meetings throughout the year
reports directly to the independent independent written evaluation be provided with the Fund's portfolio managers, the
Trustees. The following discussion more and, upon the direction of the Board, has Board concluded that these individuals are
fully describes the process employed by prepared an independent written competent and able to continue to carry
the Board to evaluate the performance of evaluation. out their responsibilities under the
the AIM Funds (including the Fund) Fund's advisory agreement.
throughout the year and, more During the annual contract renewal
specifically, during the annual contract process, the Board considered the factors In determining whether to continue the
renewal meetings. discussed below under the heading "Factors Fund's advisory agreement, the Board
and Conclusions and Summary of Independent considered the prior relationship between
THE BOARD'S FUND EVALUATION PROCESS Written Fee Evaluation" in evaluating the AIM and the Fund, as well as the Board's
fairness and reasonableness of the Fund's knowledge of AIM's operations, and
The Board's Investments Committee has advisory agreement at the contract renewal concluded that it was beneficial to
established three Sub-Committees which are meetings and at their meetings throughout maintain the current relationship, in
responsible for overseeing the management the year as part of their ongoing part, because of such knowledge. The Board
of a number of the series portfolios of oversight of the Fund. The Fund's advisory also considered the steps that AIM and its
the AIM Funds. This Sub-Committee agreement was considered separately, affiliates have taken over the last
structure permits the Trustees to focus on although the Board also considered the several years to improve the quality and
the performance of the AIM Funds that have common interests of all of the AIM Funds efficiency of the services they provide to
been assigned to them. The Sub-Committees in their deliberations. The Board the Funds in the areas of investment
meet throughout the year to review the comprehensively considered all of the performance, product line diversification,
performance of their assigned funds, and information provided to them and did not distribution, fund operations, shareholder
the Sub-Committees review monthly and identify any particular factor that was services and compliance. The Board
quarterly comparative performance controlling. Furthermore, each Trustee may concluded that the quality and efficiency
information and periodic asset flow data have evaluated the information provided of the services AIM and its affiliates
for their assigned funds. These materials differently from one another and provide to the AIM Funds in each of these
are prepared under the direction and attributed different weight to the various areas have generally improved, and support
supervision of the independent Senior factors. The Trustees recognized that the the Board's approval of the continuance of
Officer. Over the course of each year, the advisory arrangements and resulting the Fund's advisory agreement.
Sub-Committees meet with portfolio advisory fees for the Fund and the other
managers for their assigned funds and AIM Funds are the result of years of B. FUND PERFORMANCE
other members of management and review review and negotiation between the
with these individuals the performance, Trustees and AIM, that the Trustees may The Board compared the Fund's performance
investment objective(s), policies, focus to a greater extent on certain during the past one, three and five
strategies and limitations of these funds. aspects of these arrangements in some calendar years to the performance of funds
years than others, and that the Trustees' in the Fund's Lipper peer group that are
In addition to their meetings deliberations and conclusions in a not managed by AIM, and against the
throughout the year, the Sub-Committees particular year may be based in part on performance of all funds in the Lipper
meet at designated contract renewal their deliberations and conclusions of Mid-Cap Value Funds Index. The Board also
meetings each year to conduct an in-depth these same arrangements throughout the reviewed the methodology used by Lipper to
review of the performance, fees and year and in prior years. identify the Fund's peers. The Board noted
expenses of their assigned funds. During that the Fund's performance was below the
the contract renewal process, the Trustees FACTORS AND CONCLUSIONS AND SUMMARY OF median performance of its peers for the
receive comparative performance and fee INDEPENDENT WRITTEN FEE EVALUATION past one, three and five year periods. The
data regarding all the AIM Funds prepared Board noted that the Fund's performance
by an independent company, Lipper, Inc., The discussion below serves as a summary was below the performance of the Index for
under the direction and supervision of the of the Senior Officer's independent the one, three and five year periods. The
independent Senior Officer who also written evaluation, as well as a Board noted that AIM made changes to the
prepares a separate analysis of this discussion of the material factors and Fund's portfolio management team in 2006,
information for the Trustees. Each related conclusions that formed the basis which need more time to be evaluated
Sub-Committee then makes recommendations for the Board's approval of the Fund's before a conclusion can be reached that
to the Investments Committee regarding the advisory agreement. Unless otherwise the changes have adequately addressed the
performance, fees and stated, information set forth below is as Fund's underperformance. The Board also
of June 27, 2007 and does not reflect any considered the steps AIM has taken over
changes that the last
(continued)
21
AIM MID CAP BASIC VALUE FUND
several years to improve the quality and discussed above provides for seven ates were providing these services in a
efficiency of the services that AIM breakpoints. Based on this information, satisfactory manner and in accordance with
provides to the AIM Funds. The Board the Board concluded that the Fund's the terms of their contracts, and were
concluded that AIM continues to be advisory fees will appropriately reflect qualified to continue to provide these
responsive to the Board's focus on fund economies of scale upon the Board's services to the Fund.
performance. However, due to the Fund's approval of the amendment to the Fund's
underperformance, the Board also concluded contractual advisory fee schedule. The The Board considered the benefits
that it would be appropriate for the Board Board also noted that the Fund shares realized by AIM as a result of portfolio
to continue to closely monitor and review directly in economies of scale through brokerage transactions executed through
the performance of the Fund. Although the lower fees charged by third party service "soft dollar" arrangements. Under these
independent written evaluation of the providers based on the combined size of arrangements, portfolio brokerage
Fund's Senior Officer (discussed below) all of the AIM Funds and affiliates. commissions paid by the Fund and/or other
only considered Fund performance through funds advised by AIM are used to pay for
the most recent calendar year, the Board E. PROFITABILITY AND FINANCIAL RESOURCES research and execution services. The Board
also reviewed more recent Fund performance OF AIM noted that soft dollar arrangements shift
and this review did not change their the payment obligation for the research
conclusions. The Board reviewed information from AIM and executions services from AIM to the
concerning the costs of the advisory and funds and therefore may reduce AIM's
C. ADVISORY FEES AND FEE WAIVERS other services that AIM and its affiliates expenses. The Board also noted that
provide to the Fund and the profitability research obtained through soft dollar
The Board compared the Fund's contractual of AIM and its affiliates in providing arrangements may be used by AIM in making
advisory fee rate to the contractual these services. The Board also reviewed investment decisions for the Fund and may
advisory fee rates of funds in the Fund's information concerning the financial therefore benefit Fund shareholders. The
Lipper peer group that are not managed by condition of AIM and its affiliates. The Board concluded that AIM's soft dollar
AIM, at a common asset level and as of the Board also reviewed with AIM the arrangements were appropriate. The Board
end of the past calendar year. The Board methodology used to prepare the also concluded that, based on their review
noted that the Fund's advisory fee rate profitability information. The Board and representations made by AIM, these
was comparable to the median advisory fee considered the overall profitability of arrangements were consistent with
rate of its peers. The Board also reviewed AIM, as well as the profitability of AIM regulatory requirements.
the methodology used by Lipper and noted in connection with managing the Fund. The
that the contractual fee rates shown by Board noted that AIM continues to operate The Board considered the fact that the
Lipper include any applicable long-term at a net profit, although increased Fund's uninvested cash and cash collateral
contractual fee waivers. The Board noted expenses in recent years have reduced the from any securities lending arrangements
that AIM does not serve as an advisor to profitability of AIM and its affiliates. may be invested in money market funds
other mutual funds or other clients with The Board concluded that the Fund's advised by AIM pursuant to procedures
investment strategies comparable to those advisory fees were fair and reasonable, approved by the Board. The Board noted
of the Fund. and that the level of profits realized by that AIM will receive advisory fees from
AIM and its affiliates from providing these affiliated money market funds
The Board noted that AIM has not services to the Fund was not excessive in attributable to such investments, although
proposed any advisory fee waivers or light of the nature, quality and extent of AIM has contractually agreed to waive the
expense limitations for the Fund. However, the services provided. The Board advisory fees payable by the Fund with
the Board also noted that AIM has considered whether AIM is financially respect to its investment of uninvested
recommended that the Board approve an sound and has the resources necessary to cash in these affiliated money market
amendment to the Fund's contractual perform its obligations under the Fund's funds through at least June 30, 2008. The
advisory fee schedule that would implement advisory agreement, and concluded that AIM Board considered the contractual nature of
the contractual advisory fee waiver that has the financial resources necessary to this fee waiver and noted that it remains
had been formerly committed to by AIM, fulfill these obligations. in effect until at least June 30, 2008.
which waiver provided for lower effective The Board concluded that the Fund's
fee rates at all asset levels than the F. INDEPENDENT WRITTEN EVALUATION OF THE investment of uninvested cash and cash
Fund's current contractual advisory fee FUND'S SENIOR OFFICER collateral from any securities lending
schedule. The Board noted that AIM's arrangements in the affiliated money
recommendation was made in response to the The Board noted that, upon their market funds is in the best interests of
recommendation of the independent Senior direction, the Senior Officer of the Fund, the Fund and its shareholders.
Officer that AIM consider whether the who is independent of AIM and AIM's
advisory fee waivers for certain equity affiliates, had prepared an independent
AIM Funds, including the Fund, should be written evaluation to assist the Board in
simplified. The Board concluded that it determining the reasonableness of the
would be appropriate to approve the proposed management fees of the AIM Funds,
proposed amendment to the Fund's including the Fund. The Board noted that
contractual advisory fee schedule and that they had relied upon the Senior Officer's
it was not necessary at this time to written evaluation instead of a
discuss with AIM whether to implement any competitive bidding process. In
fee waivers or expense limitations for the determining whether to continue the Fund's
Fund. advisory agreement, the Board considered
the Senior Officer's written evaluation.
After taking account of the Fund's
contractual advisory fee rate, as well as G. COLLATERAL BENEFITS TO AIM AND ITS
the comparative advisory fee information AFFILIATES
discussed above, the Board concluded that
the Fund's advisory fees were fair and The Board considered various other
reasonable. benefits received by AIM and its
affiliates resulting from AIM's
D. ECONOMIES OF SCALE AND BREAKPOINTS relationship with the Fund, including the
fees received by AIM and its affiliates
The Board considered the extent to which for their provision of administrative,
there are economies of scale in AIM's transfer agency and distribution services
provision of advisory services to the to the Fund. The Board considered the
Fund. The Board also considered whether performance of AIM and its affiliates in
the Fund benefits from such economies of providing these services and the
scale through contractual breakpoints in organizational structure employed by AIM
the Fund's advisory fee schedule or and its affiliates to provide these
through advisory fee waivers or expense services. The Board also considered that
limitations. The Board noted that the these services are provided to the Fund
Fund's contractual advisory fee schedule pursuant to written contracts which are
currently includes only two breakpoints reviewed and approved on an annual basis
but that the amendment to the Fund's by the Board. The Board concluded that AIM
contractual advisory fee schedule and its affili-
22
Supplement to Semiannual Report dated 6/30/07
AIM MID CAP BASIC VALUE FUND
INSTITUTIONAL CLASS SHARES ========================================== PLEASE NOTE THAT PAST PERFORMANCE IS
AVERAGE ANNUAL TOTAL RETURNS NOT 31, 2001. INDICATIVE OF FUTURE
The following information has been RESULTS. MORE RECENT RETURNS MAY BE MORE
prepared to provide Institutional Class For periods ended 6/30/07 OR LESS THAN THOSE SHOWN. ALL RETURNS
shareholders with a performance overview ASSUME REINVESTMENT OF DISTRIBUTIONS AT
specific to their holdings. Institutional Inception 11.95% NAV. INVESTMENT RETURN AND PRINCIPAL VALUE
Class shares are offered exclusively to 5 Years 14.07 WILL FLUCTUATE SO YOUR SHARES, WHEN
institutional investors, including defined 1 Year 30.33 REDEEMED, MAY BE WORTH MORE OR LESS THAN
contribution plans that meet certain 6 Months* 16.55 THEIR ORIGINAL COST. SEE FULL REPORT FOR
criteria. INFORMATION ON COMPARATIVE BENCHMARKS.
* Cumulative total return that has not PLEASE CONSULT YOUR FUND PROSPECTUS FOR
been annualized MORE INFORMATION. FOR THE MOST CURRENT
========================================== MONTH-END PERFORMANCE, PLEASE CALL
800-451-4246 OR VISIT AIMINVESTMENTS.COM.
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 DECEMBER
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
NASDAQ SYMBOL MDICX DIFFERING SALES CHARGES AND CLASS
========================================== EXPENSES.
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.
[AIM INVESTMENTS LOGO]
AIMinvestments.com MCBV-INS-2 A I M Distributors, Inc. --REGISTERED TRADEMARK--
Information about your Fund's expenses
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur mate the expenses that you paid over the The hypothetical account values and
ongoing costs, including management fees period. Simply divide your account value expenses may not be used to estimate the
and other Fund expenses. This example is by $1,000 (for example, an $8,600 account actual ending account balance or expenses
intended to help you understand your value divided by $1,000 = 8.6), then you paid for the period. You may use this
ongoing costs (in dollars) of investing in multiply the result by the number in the information to compare the ongoing costs
the Fund and to compare these costs with table under the heading entitled "Actual of investing in the Fund and other funds.
ongoing costs of investing in other mutual Expenses Paid During Period" to estimate To do so, compare this 5% hypothetical
funds. The example is based on an the expenses you paid on your account example with the 5% hypothetical examples
investment of $1,000 invested at the during this period. that appear in the shareholder reports of
beginning of the period and held for the the other funds.
entire period January 1, 2007, through HYPOTHETICAL EXAMPLE FOR COMPARISON
June 30, 2007. PURPOSES Please note that the expenses shown
in the table are meant to highlight your
ACTUAL EXPENSES The table below also provides information ongoing costs only. Therefore, the
about hypothetical account values and hypothetical information is useful in
The table below provides information about hypothetical expenses based on the Fund's comparing ongoing costs only, and will not
actual account values and actual expenses. actual expense ratio and an assumed rate help you determine the relative total
You may use the information in this table, of return of 5% per year before expenses, costs of owning different funds.
together with the amount you invested, to which is not the Fund's actual return.
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Institutional $1,000.00 $1,165.50 $4.67 $1,020.48 $4.36 0.87%
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMinvestments.com MCBV-INS-2 A I M Distributors, Inc.
[EDELIVERY
GO PAPERLESS
AIMINVESTMENTS.COM/EDELIVERY
GRAPHIC]
REGISTER FOR EDELIVERY FUND HOLDINGS AND PROXY VOTING INFORMATION
eDelivery is the process of receiving your fund and account The Fund provides a complete list of its holdings four times in
information via e-mail. Once your quarterly statements, tax each fiscal year, at the quarter-ends. For the second and fourth
forms, fund reports, and prospectuses are available, we will quarters, the lists appear in the Fund's semiannual and annual
send you an e-mail notification containing links to these reports to shareholders. For the first and third quarters, the
documents. For security purposes, you will need to log in to Fund files the lists with the Securities and Exchange Commission
your account to view your statements and tax forms. (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at AIMinvestments.com. From our home page, click on
WHY SIGN UP? Products & Performance, then Mutual Funds, then Fund Overview.
Select your Fund from the drop-down menu and click on Complete
Register for eDelivery to: Quarterly Holdings. Shareholders can also look up the Fund's Forms
N-Q on the SEC Web site at sec.gov. Copies of the Fund's Forms N-Q
o save your Fund the cost of printing and postage. may be reviewed and copied at the SEC Public Reference Room in
Washington, D.C. You can obtain information on the operation of
o reduce the amount of paper you receive. the Public Reference Room, including information about duplicating
fee charges, by calling 202-942-8090 or 800-732-0330, or by
o gain access to your documents faster by not waiting for the electronic request at the following e-mail address:
mail. publicinfo@sec.gov. The SEC file numbers for the Fund are
811-01540 and 002-27334.
o view your documents online anytime at your convenience.
A description of the policies and procedures that the Fund uses to
o save the documents to your personal computer or print them determine how to vote proxies relating to portfolio securities is
out for your records. available without charge, upon request, from our Client Services
department at 800-959-4246 or on the AIM Web site,
HOW DO I SIGN UP? AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy. The information is also available on the SEC
It's easy. Just follow these simple steps: Web site, sec.gov.
1. Log in to your account. Information regarding how the Fund voted proxies related to its
portfolio securities during the 12 months ended June 30, 2007, is
2. Click on the "Service Center" tab. available at our Web site. Go to AIMinvestments.com, access the
About Us tab, click on Required Notices and then click on Proxy
3. Select "Register for eDelivery" and complete the consent Voting Activity. Next, select the Fund from the drop-down menu.
process. The information is also available on the SEC Web site, sec.gov.
This AIM service is provided by AIM Investment Services, Inc.
MCBV-SAR-1 A I M Distributors, Inc. [AIM INVESTMENTS LOGO]
--REGISTERED TRADEMARK--
AIM SELECT EQUITY FUND
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Large-Cap Blend
Table of Contents
Letter to Shareholders ................... 2
Fund Performance ......................... 3
Schedule of Investments .................. 4
Financial Statements ..................... 9
Notes to Financial Statements ............ 11
Financial Highlights ..................... 18
Fund Expenses ............................ 21
Approval of Advisory Agreement ........... 22
For the most current month-end Fund performance and
commentary, please visit AIMinvestments.com.
Unless otherwise noted, all data in this report are
from A I M Management Group Inc.
If used after October 20, 2007, this report must be
accompanied by a Fund Performance & Commentary or
by an AIM Quarterly Performance Review for the most
recent quarter-end.
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.
[AIM INVESTMENTS LOGO]
- --REGISTERED TRADEMARK-- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM Select Equity Fund
Dear Fellow Shareholders:
In overseeing the management of the AIM family of funds on your behalf, your
[CROCKETT Board of Trustees of the AIM Funds continues to focus on improved investment
PHOTO] performance, reduced shareholder costs, and high ethical standards. Since my
last letter, your Board has welcomed two new members: Marty Flanagan, President
and CEO of INVESCO, AIM's parent company, and Phil Taylor, who was named CEO of
Bruce L. Crockett AIM Investments --REGISTERED TRADEMARK-- in April 2006. Robert Graham, who has
given more than 30 years of leadership to the company and the mutual fund
industry since founding AIM in 1976, has retired, stepping down in the process
from his most recent role as Vice Chairman of the Board. We thank Bob for his
many contributions and wish him a long and happy future.
Our review of fund performance has shown healthy progress, but the process is
necessarily one of continuous improvement. In general, as of June 30, 2007, we
have seen persistent investment discipline and more consistently good results.
While this statement may not apply to every AIM Fund all the time, as I write
this letter, the overall trend in fund management and performance has been
positive.
The investment management talent at AIM has recently been enhanced by the
promotion of Karen Dunn Kelley to Head of INVESCO's Worldwide Fixed Income as
well as Director of AIM Global and Cash Management, with responsibility for all
fixed income and money market funds that serve both institutional and individual
investors. Under Karen's direction, AIM's cash management organization grew to
one of the world's largest and most respected, with top-tier performance. The
operations now combined under her charge represent more than $150 billion in
assets, 120 investment professionals, and products that span the entire yield
curve.
In other news, your Board took a more active role in preparing for "proxy
season," the period when fund managers must vote the shares held by their funds
"for" or "against" various proposals on the ballots of the issuing companies.
Beginning in the 2007 proxy season, AIM implemented new proxy voting policies,
developed by management in conjunction with an ad hoc Board committee, which
provided a solid framework for properly evaluating and executing the many
decisions the AIM Funds are required to make to vote shares.
In general, the AIM Funds voted for proposals that would allow shareholders a
greater role in election of directors, proxy access and "say for pay." The AIM
Funds voted against directors who AIM believed failed to govern well in cases of
corporate mismanagement, such as the backdating of options grants, and against
"poison pill" and "take under" proposals that would favor the financial
interests of managers at the expense of investors in the case of a merger or
acquisition. You can view the proxy votes cast for your fund by going to
AIMinvestments.com. Click the "About Us" tab, then go to "Required Notices" and
"Proxy Voting Activity."
Additionally, your Board raised the amount its members are recommended to invest
in the AIM Funds within three years of joining the Board, with the goal of
aligning our interests even more closely with yours.
Furthermore, at our June meeting we renewed the investment advisory contracts
between the AIM Funds and AIM for another year, applying the same rigorous
evaluation process that was enhanced and formalized in 2005. For more
information on this process, please visit AIMinvestments.com. Click on the
"Products and Performance" tab and go to "Investment Advisory Agreement
Renewals."
Your Board's ability to best represent your interests depends on our knowledge
of your opinions and concerns. Please send me an email (bruce@brucecrockett.com)
with your thoughts on the following:
1) How important is it to you to hear about your Board's decisions and
activities in these letters?
2) What other information (on overall performance, specific funds, managers,
etc.) would make the letters more meaningful to you?
3) Would you prefer that communication from your Board continue to be
delivered in paper form by regular mail or be sent electronically by email?
If you would prefer to communicate through a quick online survey, please go
to AIMinvestments.com and provide your responses there.
We need to hear from you to do our best job, and I look forward to your
responses. Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Directors
August 10, 2007
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 mutual funds
represented by AIM Investments and the PowerShares Exchange-Traded Fund Trust.
2
AIM Select Equity Fund
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/06-6/30/07, excluding applicable sales charges. If
sales charges were included, returns would be lower.
Class A Shares 6.21%
Class B Shares 5.81
Class C Shares 5.82
S&P 500 Index(1) (Broad Market Index) 6.96
Russell 3000 Index(1) (Style-Specific Index) 7.11
Lipper Multi-Cap Core Funds Index(1) (Peer Group Index) 8.87
SOURCE: (1)LIPPER INC.
The unmanaged S&P 500 --REGISTERED TRADEMARK-- Index is an index of common stocks
frequently used as a general measure of U.S. stock market performance.
The Russell 3000 --REGISTERED TRADEMARK-- Index measures the performance of the
3,000 largest U.S. companies based on total market capitalization, which
represents approximately 98% of the investable U.S. equity market. The Russell
3000 Index is a trademark/service mark of the Frank Russell Company. Russell
- --REGISTERED TRADEMARK-- is a trademark of the Frank Russell Company.
The Lipper Multi-Cap Core Funds Index is an equally weighted representation of
the largest funds in the Lipper Multi-Cap Core Funds category. These funds
typically have an average price-to-earnings ratio, price-to-book ratio, and
three-year sales-per-share growth value, compared to the S&P SuperComposite 1500
Index.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== THE PERFORMANCE DATA QUOTED REPRESENT PAST CLASS A SHARE PERFORMANCE REFLECTS THE
FUND PERFORMANCE PERFORMANCE AND CANNOT GUARANTEE MAXIMUM 5.50% SALES CHARGE, AND CLASS B
COMPARABLE FUTURE RESULTS; CURRENT AND CLASS C SHARE PERFORMANCE REFLECTS THE
As of 6/30/07, including applicable sales PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE APPLICABLE CONTINGENT DEFERRED SALES
charges VISIT AIMINVESTMENTS.COM FOR THE MOST CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
RECENT MONTH-END PERFORMANCE. PERFORMANCE CDSC ON CLASS B SHARES DECLINES FROM 5%
CLASS A SHARES FIGURES REFLECT REINVESTED DISTRIBUTIONS, BEGINNING AT THE TIME OF PURCHASE TO 0% AT
Inception (12/4/67) 8.61% CHANGES IN NET ASSET VALUE AND THE EFFECT THE BEGINNING OF THE SEVENTH YEAR. THE
10 Years OF THE MAXIMUM SALES CHARGE UNLESS CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
5 Years 8.00 OTHERWISE STATED. PERFORMANCE FIGURES DO YEAR AFTER PURCHASE.
1 Year 11.77 NOT REFLECT DEDUCTION OF TAXES A
SHAREHOLDER WOULD PAY ON FUND THE PERFORMANCE OF THE FUND'S SHARE
CLASS B SHARES DISTRIBUTIONS OR SALE OF FUND SHARES. CLASSES WILL DIFFER PRIMARILY DUE TO
Inception (9/1/93) 8.02% INVESTMENT RETURN AND PRINCIPAL VALUE WILL DIFFERENT SALES CHARGE STRUCTURES AND
10 Years 5.64 FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR CLASS EXPENSES.
5 Years 8.13 LOSS WHEN YOU SELL SHARES.
1 Year 12.44
THE TOTAL ANNUAL FUND OPERATING EXPENSE
CLASS C SHARES RATIO SET FORTH IN THE MOST RECENT FUND
Inception (8/4/97) 4.50% PROSPECTUS AS OF THE DATE OF THIS REPORT
5 Years 8.43 FOR CLASS A, CLASS B AND CLASS C SHARES
1 Year 16.41 WAS 1.41%, 2.16% AND 2.16%, RESPECTIVELY.
========================================== THE EXPENSE RATIOS PRESENTED ABOVE MAY
VARY FROM THE EXPENSE RATIOS PRESENTED IN
OTHER SECTIONS OF THIS REPORT THAT ARE
BASED ON EXPENSES INCURRED DURING THE
PERIOD COVERED BY THIS REPORT.
3
AIM Select Equity Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ---------------------------------------------------------
Financials 24.2%
- ---------------------------------------------------------
Consumer Discretionary 14.4
- ---------------------------------------------------------
Health Care 13.2
- ---------------------------------------------------------
Information Technology 12.2
- ---------------------------------------------------------
Industrials 11.3
- ---------------------------------------------------------
Energy 9.9
- ---------------------------------------------------------
Consumer Staples 2.7
- ---------------------------------------------------------
Telecommunication Services 1.7
- ---------------------------------------------------------
Materials 1.2
- ---------------------------------------------------------
Utilities 0.6
- ---------------------------------------------------------
Unknown 0.3
- ---------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 8.3
_________________________________________________________
=========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-91.39%
ADVERTISING-0.32%
Omnicom Group Inc. 28,232 $ 1,494,037
=========================================================================
AEROSPACE & DEFENSE-4.88%
Boeing Co. (The) 36,610 3,520,418
- -------------------------------------------------------------------------
General Dynamics Corp. 22,987 1,798,043
- -------------------------------------------------------------------------
Honeywell International Inc. 27,900 1,570,212
- -------------------------------------------------------------------------
Lockheed Martin Corp. 93,405 8,792,213
- -------------------------------------------------------------------------
Northrop Grumman Corp. 29,420 2,290,935
- -------------------------------------------------------------------------
Raytheon Co. 17,470 941,458
- -------------------------------------------------------------------------
United Technologies Corp. 53,980 3,828,802
=========================================================================
22,742,081
=========================================================================
AIR FREIGHT & LOGISTICS-0.11%
Hub Group, Inc.-Class A(a) 15,160 533,026
=========================================================================
AIRLINES-0.43%
AMR Corp.(a) 6,974 183,765
- -------------------------------------------------------------------------
Continental Airlines, Inc.-Class B(a) 35,647 1,207,364
- -------------------------------------------------------------------------
World Air Holdings, Inc.(a) 52,900 634,800
=========================================================================
2,025,929
=========================================================================
APPAREL RETAIL-0.94%
American Eagle Outfitters, Inc. 52,841 1,355,900
- -------------------------------------------------------------------------
Gymboree Corp. (The)(a) 16,244 640,176
- -------------------------------------------------------------------------
Men's Wearhouse, Inc. (The) 3,427 175,017
- -------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- -------------------------------------------------------------------------
<Caption>
APPAREL RETAIL-(CONTINUED)
Payless ShoeSource, Inc.(a) 37,210 $ 1,173,976
- -------------------------------------------------------------------------
TJX Cos., Inc. (The) 37,960 1,043,900
=========================================================================
4,388,969
=========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.57%
Phillips-Van Heusen 6,765 409,756
- -------------------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 22,900 2,246,719
=========================================================================
2,656,475
=========================================================================
APPLICATION SOFTWARE-0.58%
FactSet Research Systems Inc. 39,749 2,716,844
=========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.79%
Affiliated Managers Group, Inc.(a) 20,740 2,670,482
- -------------------------------------------------------------------------
Ameriprise Financial, Inc. 9,540 606,458
- -------------------------------------------------------------------------
Franklin Resources, Inc. 38,150 5,053,731
=========================================================================
8,330,671
=========================================================================
AUTO PARTS & EQUIPMENT-0.24%
BorgWarner, Inc. 12,880 1,108,195
=========================================================================
AUTOMOTIVE RETAIL-0.50%
Asbury Automotive Group Inc. 19,103 476,620
- -------------------------------------------------------------------------
AutoZone, Inc.(a) 13,710 1,873,060
=========================================================================
2,349,680
=========================================================================
</Table>
4
AIM Select Equity Fund
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
BROADCASTING & CABLE TV-0.21%
Citadel Broadcasting Corp. 8,209 $ 52,949
- -------------------------------------------------------------------------
EchoStar Communications Corp.-Class A(a) 21,910 950,237
=========================================================================
1,003,186
=========================================================================
COMMERCIAL PRINTING-0.18%
Consolidated Graphics, Inc.(a) 2,123 147,082
- -------------------------------------------------------------------------
Ennis Inc. 28,537 671,190
=========================================================================
818,272
=========================================================================
COMMODITY CHEMICALS-0.20%
Methanex Corp. (Canada) 37,700 947,778
=========================================================================
COMMUNICATIONS EQUIPMENT-1.64%
Cisco Systems, Inc.(a) 268,943 7,490,063
- -------------------------------------------------------------------------
Utstarcom, Inc.(a) 29,149 163,526
=========================================================================
7,653,589
=========================================================================
COMPUTER HARDWARE-4.53%
Hewlett-Packard Co. 160,336 7,154,192
- -------------------------------------------------------------------------
International Business Machines Corp. 132,880 13,985,620
=========================================================================
21,139,812
=========================================================================
COMPUTER STORAGE & PERIPHERALS-0.61%
Komag, Inc.(a) 15,278 487,215
- -------------------------------------------------------------------------
Lexmark International, Inc.-Class A(a) 40,638 2,003,860
- -------------------------------------------------------------------------
Western Digital Corp.(a) 19,540 378,099
=========================================================================
2,869,174
=========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-2.34%
Cummins Inc. 76,154 7,707,546
- -------------------------------------------------------------------------
Freightcar America Inc. 7,501 358,848
- -------------------------------------------------------------------------
Paccar Inc. 24,283 2,113,592
- -------------------------------------------------------------------------
Wabtec Corp. 19,837 724,646
=========================================================================
10,904,632
=========================================================================
CONSTRUCTION MATERIALS-0.18%
Eagle Materials Inc. 17,407 853,813
=========================================================================
CONSUMER FINANCE-0.04%
AmeriCredit Corp.(a) 6,682 177,407
=========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-0.39%
Convergys Corp.(a) 14,080 341,299
- -------------------------------------------------------------------------
Electronic Data Systems Corp. 24,910 690,755
- -------------------------------------------------------------------------
Fiserv, Inc.(a) 13,660 775,888
=========================================================================
1,807,942
=========================================================================
DEPARTMENT STORES-1.98%
JCPenney Co., Inc. 7,939 574,625
- -------------------------------------------------------------------------
Kohl's Corp.(a) 49,650 3,526,640
- -------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- -------------------------------------------------------------------------
<Caption>
DEPARTMENT STORES-(CONTINUED)
Macy's Inc. 20,930 $ 832,595
- -------------------------------------------------------------------------
Nordstrom, Inc. 84,037 4,295,971
=========================================================================
9,229,831
=========================================================================
DIVERSIFIED BANKS-0.45%
Wells Fargo & Co. 59,560 2,094,725
=========================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-0.18%
Amrep Corp. 2,340 111,267
- -------------------------------------------------------------------------
Equifax Inc. 16,710 742,258
=========================================================================
853,525
=========================================================================
EDUCATION SERVICES-0.31%
ITT Educational Services, Inc.(a) 12,282 1,441,661
=========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.71%
Acuity Brands, Inc. 26,330 1,587,173
- -------------------------------------------------------------------------
Cooper Industries, Ltd.-Class A(a) 29,902 1,707,105
=========================================================================
3,294,278
=========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.20%
Amphenol Corp.-Class A 81,200 2,894,780
- -------------------------------------------------------------------------
Mettler-Toledo International Inc.(a) 28,510 2,722,990
=========================================================================
5,617,770
=========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.13%
Trimble Navigation Ltd.(a) 18,720 602,784
=========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.09%
Monsanto Co. 6,030 407,266
=========================================================================
FOOD RETAIL-0.37%
Kroger Co. (The) 61,000 1,715,930
=========================================================================
FOOTWEAR-1.96%
Deckers Outdoor Corp.(a) 18,600 1,876,740
- -------------------------------------------------------------------------
Nike, Inc.-Class B 125,056 7,289,514
=========================================================================
9,166,254
=========================================================================
GAS UTILITIES-0.37%
Energen Corp. 31,153 1,711,546
=========================================================================
HEALTH CARE DISTRIBUTORS-1.42%
AmerisourceBergen Corp. 66,110 3,270,462
- -------------------------------------------------------------------------
McKesson Corp. 56,420 3,364,889
=========================================================================
6,635,351
=========================================================================
HEALTH CARE EQUIPMENT-1.05%
Baxter International Inc. 9,510 535,793
- -------------------------------------------------------------------------
IdexxLaboratories, Inc.(a) 3,142 297,327
- -------------------------------------------------------------------------
</Table>
5
AIM Select Equity Fund
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-(CONTINUED)
Mentor Corp. 32,431 $ 1,319,293
- -------------------------------------------------------------------------
Meridian Bioscience, Inc. 12,133 262,801
- -------------------------------------------------------------------------
SurModics, Inc.(a) 26,546 1,327,300
- -------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 13,550 1,150,260
=========================================================================
4,892,774
=========================================================================
HEALTH CARE FACILITIES-0.25%
Amsurg Corp.(a) 47,500 1,146,650
=========================================================================
HEALTH CARE SERVICES-1.21%
Express Scripts, Inc.(a) 26,460 1,323,265
- -------------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 43,172 3,378,641
- -------------------------------------------------------------------------
Medco Health Solutions, Inc.(a) 7,570 590,384
- -------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 6,146 338,952
=========================================================================
5,631,242
=========================================================================
HOME FURNISHINGS-0.76%
Ethan Allen Interiors Inc. 30,630 1,049,078
- -------------------------------------------------------------------------
Mohawk Industries, Inc.(a) 5,360 540,234
- -------------------------------------------------------------------------
Tempur-Pedic International Inc. 75,810 1,963,479
=========================================================================
3,552,791
=========================================================================
HOME IMPROVEMENT RETAIL-1.51%
Sherwin-Williams Co. (The) 106,081 7,051,204
=========================================================================
HOTELS, RESORTS & CRUISE LINES-0.31%
Ambassadors Group, Inc. 40,586 1,442,021
=========================================================================
HOUSEHOLD APPLIANCES-0.68%
Black & Decker Corp. (The) 35,940 3,173,861
=========================================================================
HYPERMARKETS & SUPER CENTERS-0.69%
Wal-Mart Stores, Inc. 66,856 3,216,442
=========================================================================
INDUSTRIAL CONGLOMERATES-0.03%
Tyco International Ltd.(a) 4,166 140,769
=========================================================================
INDUSTRIAL MACHINERY-1.39%
Danaher Corp. 20,400 1,540,200
- -------------------------------------------------------------------------
Eaton Corp. 4,787 445,191
- -------------------------------------------------------------------------
Gardner Denver Inc.(a) 3,658 155,648
- -------------------------------------------------------------------------
Illinois Tool Works Inc. 12,050 652,989
- -------------------------------------------------------------------------
Ingersoll-Rand Co. Ltd.-Class A 34,628 1,898,307
- -------------------------------------------------------------------------
Parker Hannifin Corp. 18,370 1,798,607
=========================================================================
6,490,942
=========================================================================
INSURANCE BROKERS-0.14%
AON Corp. 15,056 641,536
=========================================================================
INTEGRATED OIL & GAS-7.65%
Chevron Corp. 88,975 7,495,254
- -------------------------------------------------------------------------
ConocoPhillips 19,260 1,511,910
- -------------------------------------------------------------------------
Exxon Mobil Corp. 253,027 21,223,905
- -------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- -------------------------------------------------------------------------
<Caption>
INTEGRATED OIL & GAS-(CONTINUED)
Marathon Oil Corp. 69,606 $ 4,173,576
- -------------------------------------------------------------------------
Occidental Petroleum Corp. 22,073 1,277,585
=========================================================================
35,682,230
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.63%
Atlantic Tele-Network, Inc. 6,227 178,341
- -------------------------------------------------------------------------
CenturyTel, Inc. 144,216 7,073,795
- -------------------------------------------------------------------------
Verizon Communications Inc. 8,650 356,121
=========================================================================
7,608,257
=========================================================================
INTERNET RETAIL-0.21%
Expedia, Inc.(a) 22,140 648,480
- -------------------------------------------------------------------------
IAC/InterActiveCorp(a) 8,980 310,798
=========================================================================
959,278
=========================================================================
INTERNET SOFTWARE & SERVICES-0.12%
United Online, Inc. 35,341 582,773
=========================================================================
INVESTMENT BANKING & BROKERAGE-6.35%
Goldman Sachs Group, Inc. (The) 50,575 10,962,131
- -------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 59,993 4,470,679
- -------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 87,578 7,319,769
- -------------------------------------------------------------------------
Morgan Stanley 82,033 6,880,928
=========================================================================
29,633,507
=========================================================================
IT CONSULTING & OTHER SERVICES-0.41%
Accenture Ltd.-Class A 34,551 1,481,892
- -------------------------------------------------------------------------
Covansys Corp.(a) 12,217 414,523
=========================================================================
1,896,415
=========================================================================
LIFE & HEALTH INSURANCE-1.67%
Lincoln National Corp. 19,790 1,404,100
- -------------------------------------------------------------------------
Prudential Financial, Inc. 60,133 5,846,732
- -------------------------------------------------------------------------
Torchmark Corp. 7,990 535,330
=========================================================================
7,786,162
=========================================================================
LIFE SCIENCES TOOLS & SERVICES-0.14%
Pharmanet Development Group, Inc.(a) 20,465 652,424
=========================================================================
MANAGED HEALTH CARE-4.84%
Aetna Inc. 141,356 6,982,986
- -------------------------------------------------------------------------
Cigna Corp. 17,670 922,727
- -------------------------------------------------------------------------
Coventry Health Care, Inc.(a) 51,640 2,977,046
- -------------------------------------------------------------------------
Humana Inc.(a) 2,079 126,632
- -------------------------------------------------------------------------
Molina Healthcare Inc.(a) 2,657 81,092
- -------------------------------------------------------------------------
UnitedHealth Group Inc. 136,120 6,961,177
- -------------------------------------------------------------------------
WellCare Health Plans Inc.(a) 4,465 404,127
- -------------------------------------------------------------------------
WellPoint Inc.(a) 51,350 4,099,271
=========================================================================
22,555,058
=========================================================================
</Table>
6
AIM Select Equity Fund
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
MARINE-0.08%
Overseas Shipholding Group 4,738 $ 385,673
=========================================================================
MOVIES & ENTERTAINMENT-0.90%
Marvel Entertainment, Inc.(a) 22,000 560,560
- -------------------------------------------------------------------------
Walt Disney Co. (The) 106,902 3,649,634
=========================================================================
4,210,194
=========================================================================
MULTI-LINE INSURANCE-2.03%
Genworth Financial Inc.-Class A 129,610 4,458,584
- -------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 30,310 2,985,838
- -------------------------------------------------------------------------
Loews Corp. 39,500 2,013,710
=========================================================================
9,458,132
=========================================================================
MULTI-UTILITIES-0.29%
Alliant Energy Corp. 35,273 1,370,356
=========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.02%
Core Laboratories N.V. (Netherlands)(a) 16,800 1,708,392
- -------------------------------------------------------------------------
Grant Prideco, Inc.(a) 6,770 364,429
- -------------------------------------------------------------------------
SEACOR Holdings Inc.(a) 24,850 2,319,996
- -------------------------------------------------------------------------
Tidewater Inc. 64,187 4,549,574
- -------------------------------------------------------------------------
Trico Marine Services, Inc.(a) 11,995 490,356
=========================================================================
9,432,747
=========================================================================
OIL & GAS REFINING & MARKETING-0.19%
Holly Corp. 4,867 361,083
- -------------------------------------------------------------------------
Valero Energy Corp. 7,100 524,406
=========================================================================
885,489
=========================================================================
OIL & GAS STORAGE & TRANSPORTATION-0.09%
Magellan Midstream Partners, L.P. 3,497 162,890
- -------------------------------------------------------------------------
Tsakos Energy Navigation Ltd. (Bermuda) 3,363 235,108
=========================================================================
397,998
=========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.68%
Bank of America Corp. 86,864 4,246,781
- -------------------------------------------------------------------------
Citigroup Inc. 97,223 4,986,567
- -------------------------------------------------------------------------
JPMorgan Chase & Co. 67,886 3,289,077
=========================================================================
12,522,425
=========================================================================
PACKAGED FOODS & MEATS-0.47%
General Mills, Inc. 18,190 1,062,660
- -------------------------------------------------------------------------
Imperial Sugar Co. 16,952 521,952
- -------------------------------------------------------------------------
Seaboard Corp. 257 602,665
=========================================================================
2,187,277
=========================================================================
PERSONAL PRODUCTS-0.07%
NBTY, Inc.(a) 7,170 309,744
=========================================================================
</Table>
<Table>
SHARES VALUE
- -------------------------------------------------------------------------
<Caption>
PHARMACEUTICALS-4.29%
AstraZeneca PLC-ADR (United Kingdom) 13,770 $ 736,420
- -------------------------------------------------------------------------
Bradley Pharmaceuticals, Inc.(a) 18,782 407,757
- -------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 31,076 1,418,619
- -------------------------------------------------------------------------
Johnson & Johnson 122,258 7,533,538
- -------------------------------------------------------------------------
King Pharmaceuticals, Inc.(a) 37,040 757,838
- -------------------------------------------------------------------------
Merck & Co. Inc. 110,181 5,487,014
- -------------------------------------------------------------------------
Pfizer Inc. 143,040 3,657,533
=========================================================================
19,998,719
=========================================================================
PROPERTY & CASUALTY INSURANCE-8.34%
ACE Ltd. 88,970 5,562,404
- -------------------------------------------------------------------------
Allstate Corp. (The) 54,890 3,376,284
- -------------------------------------------------------------------------
AMBAC Financial Group, Inc. 27,266 2,377,323
- -------------------------------------------------------------------------
Chubb Corp. (The) 156,110 8,451,795
- -------------------------------------------------------------------------
Fpic Insurance Group, Inc.(a) 22,171 903,912
- -------------------------------------------------------------------------
Harleysville Group Inc. 26,780 893,381
- -------------------------------------------------------------------------
Meadowbrook Insurance Group, Inc.(a) 27,034 296,293
- -------------------------------------------------------------------------
Progressive Corp. (The) 64,320 1,539,178
- -------------------------------------------------------------------------
Safeco Corp. 33,890 2,109,991
- -------------------------------------------------------------------------
Safety Insurance Group, Inc. 51,910 2,149,074
- -------------------------------------------------------------------------
Travelers Cos., Inc. (The) 106,548 5,700,318
- -------------------------------------------------------------------------
United America Indemnity, Ltd.- Class A(a) 4,371 108,707
- -------------------------------------------------------------------------
W. R. Berkley Corp. 18,410 599,061
- -------------------------------------------------------------------------
XL Capital Ltd.-Class A 43,560 3,671,672
- -------------------------------------------------------------------------
Zenith National Insurance Corp. 24,420 1,149,938
=========================================================================
38,889,331
=========================================================================
PUBLISHING-1.09%
McGraw-Hill Cos., Inc. (The) 74,353 5,061,952
=========================================================================
RESTAURANTS-1.62%
Darden Restaurants, Inc. 16,700 734,633
- -------------------------------------------------------------------------
Jack in the Box Inc.(a) 40,940 2,904,284
- -------------------------------------------------------------------------
McDonald's Corp. 33,994 1,725,535
- -------------------------------------------------------------------------
Yum! Brands, Inc. 66,860 2,187,659
=========================================================================
7,552,111
=========================================================================
SEMICONDUCTOR EQUIPMENT-0.30%
Lam Research Corp.(a) 4,354 223,796
- -------------------------------------------------------------------------
MEMC Electronic Materials, Inc.(a) 19,277 1,178,210
=========================================================================
1,402,006
=========================================================================
SEMICONDUCTORS-0.14%
National Semiconductor Corp. 9,426 266,473
- -------------------------------------------------------------------------
Texas Instruments Inc. 10,783 405,764
=========================================================================
672,237
=========================================================================
</Table>
7
AIM Select Equity Fund
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------
SPECIALIZED CONSUMER SERVICES-0.25%
Jackson Hewitt Tax Service Inc. 5,790 $ 162,757
- -------------------------------------------------------------------------
Steiner Leisure Ltd.(a) 20,410 1,002,539
=========================================================================
1,165,296
=========================================================================
SPECIALIZED FINANCE-0.42%
ASTA Funding, Inc. 7,690 295,527
- -------------------------------------------------------------------------
CIT Group, Inc. 30,246 1,658,388
=========================================================================
1,953,915
=========================================================================
SPECIALTY STORES-0.02%
Books-A-Million, Inc. 4,435 75,129
=========================================================================
STEEL-0.73%
Chaparral Steel Co.(a) 2,481 178,309
- -------------------------------------------------------------------------
Commercial Metals Co. 7,111 240,139
- -------------------------------------------------------------------------
Nucor Corp. 39,020 2,288,523
- -------------------------------------------------------------------------
Steel Dynamics, Inc. 16,720 700,735
=========================================================================
3,407,706
=========================================================================
SYSTEMS SOFTWARE-2.06%
BMC Software, Inc.(a) 28,051 849,945
- -------------------------------------------------------------------------
Micros Systems, Inc.(a) 10,700 582,080
- -------------------------------------------------------------------------
Microsoft Corp. 196,230 5,782,898
- -------------------------------------------------------------------------
Oracle Corp.(a) 121,404 2,392,873
=========================================================================
9,607,796
=========================================================================
TECHNOLOGY DISTRIBUTORS-0.09%
CDW Corp. 4,892 415,673
=========================================================================
THRIFTS & MORTGAGE FINANCE-0.29%
PMI Group, Inc. (The) 30,658 1,369,493
=========================================================================
</Table>
<Table>
SHARES VALUE
- -------------------------------------------------------------------------
<Caption>
TOBACCO-1.08%
Loews Corp-Carolina Group 16,570 $ 1,280,364
- -------------------------------------------------------------------------
Reynolds American Inc. 49,993 3,259,543
- -------------------------------------------------------------------------
Vector Group Ltd. 21,939 494,286
=========================================================================
5,034,193
=========================================================================
TRUCKING-0.93%
Con-way Inc. 34,790 1,747,850
- -------------------------------------------------------------------------
Hunt (J.B.) Transport Services, Inc. 88,660 2,599,511
=========================================================================
4,347,361
=========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.03%
USA Mobility, Inc. 5,296 141,721
=========================================================================
Total Common Stocks & Other Equity
Interests (Cost $332,914,120) 426,283,443
=========================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-0.29%
4.81%, 07/05/07(b)(Cost $1,349,098) $ 1,350,000(c) 1,349,098
=========================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-8.49%
Liquid Assets Portfolio-Institutional
Class(d) 19,793,677 19,793,677
- -------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 19,793,677 19,793,677
=========================================================================
Total Money Market Funds (Cost
$39,587,354) 39,587,354
=========================================================================
TOTAL INVESTMENTS-100.17% (Cost $373,850,572) 467,219,895
=========================================================================
OTHER ASSETS LESS LIABILITIES-(0.17)% (802,483)
=========================================================================
NET ASSETS-100.00% $466,417,412
_________________________________________________________________________
=========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) Non-income producing security.
(b) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(c) All or a portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 1J and Note 9.
(d) 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.
8
AIM Select Equity Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $334,263,218) $427,632,541
- -----------------------------------------------------------
Investments in affiliated money market funds
(Cost $39,587,354) 39,587,354
===========================================================
Total investments (Cost $373,850,572) 467,219,895
===========================================================
Cash 28,463
- -----------------------------------------------------------
Foreign currencies, at value (Cost $3,139) 3,147
- -----------------------------------------------------------
Receivables for:
Fund shares sold 222,046
- -----------------------------------------------------------
Dividends 511,038
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 144,534
- -----------------------------------------------------------
Other assets 28,675
===========================================================
Total assets 468,157,798
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 916,023
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 214,606
- -----------------------------------------------------------
Variation margin 35,100
- -----------------------------------------------------------
Accrued distribution fees 195,036
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 4,718
- -----------------------------------------------------------
Accrued transfer agent fees 200,860
- -----------------------------------------------------------
Accrued operating expenses 174,043
- -----------------------------------------------------------
Total liabilities 1,740,386
___________________________________________________________
===========================================================
Net assets applicable to shares outstanding $466,417,412
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $421,823,201
- -----------------------------------------------------------
Undistributed net investment income (loss) (82,473)
- -----------------------------------------------------------
Undistributed net realized gain (loss) (48,842,602)
- -----------------------------------------------------------
Unrealized appreciation 93,519,286
===========================================================
$466,417,412
___________________________________________________________
===========================================================
NET ASSETS:
Class A $311,770,879
___________________________________________________________
===========================================================
Class B $119,123,260
___________________________________________________________
===========================================================
Class C $ 35,523,273
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 13,912,453
___________________________________________________________
===========================================================
Class B 6,059,201
___________________________________________________________
===========================================================
Class C 1,810,090
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 22.41
- -----------------------------------------------------------
Offering price per share
(Net asset value of $22.41 divided by
94.50%) $ 23.71
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 19.66
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 19.63
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9
AIM Select Equity Fund
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $1,518) $ 2,590,053
- -------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $16,516) 592,332
- -------------------------------------------------------------------------
Interest 12,224
=========================================================================
Total investment income 3,194,609
=========================================================================
EXPENSES:
Advisory fees 1,379,940
- -------------------------------------------------------------------------
Administrative services fees 55,909
- -------------------------------------------------------------------------
Custodian fees 12,771
- -------------------------------------------------------------------------
Distribution fees:
Class A 346,204
- -------------------------------------------------------------------------
Class B 485,956
- -------------------------------------------------------------------------
Class C 128,858
- -------------------------------------------------------------------------
Transfer agent fees 633,289
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 12,630
- -------------------------------------------------------------------------
Other 138,894
=========================================================================
Total expenses 3,194,451
=========================================================================
Less: Fees waived and expense offset arrangements (32,231)
=========================================================================
Net expenses 3,162,220
=========================================================================
Net investment income 32,389
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains from securities
sold to affiliates of $14,590) 16,357,051
- -------------------------------------------------------------------------
Foreign currencies (9)
- -------------------------------------------------------------------------
Futures contracts (160,140)
=========================================================================
16,196,902
=========================================================================
Change in net unrealized appreciation of:
Investment securities 6,377,425
- -------------------------------------------------------------------------
Foreign currencies 8
- -------------------------------------------------------------------------
Futures contracts 149,955
=========================================================================
6,527,388
=========================================================================
Net realized and unrealized gain 22,724,290
=========================================================================
Net increase in net assets resulting from operations $22,756,679
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10
AIM Select Equity Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- ---------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 32,389 $ (353,538)
- ---------------------------------------------------------------------------------------------
Net realized gain 16,196,902 37,802,440
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation 6,527,388 8,594,908
=============================================================================================
Net increase in net assets resulting from operations 22,756,679 46,043,810
=============================================================================================
Share transactions-net:
Class A 35,731,421 (32,579,637)
- ---------------------------------------------------------------------------------------------
Class B 28,403,773 (31,693,986)
- ---------------------------------------------------------------------------------------------
Class C 14,221,914 (5,368,932)
=============================================================================================
Net increase (decrease) in net assets resulting from
share transactions 78,357,108 (69,642,555)
=============================================================================================
Net increase (decrease) in net assets 101,113,787 (23,598,745)
=============================================================================================
NET ASSETS:
Beginning of period 365,303,625 388,902,370
=============================================================================================
End of period (including undistributed net investment
income (loss) of $(82,473) and $(114,862), respectively) $466,417,412 $365,303,625
_____________________________________________________________________________________________
=============================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Select Equity Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware statutory trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of seven separate portfolios,
each authorized to issue an unlimited number of shares of beneficial interest.
The Fund currently offers multiple classes of shares. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
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
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. 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 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 open-end and closed-end registered
investment companies that trade on an exchange are valued at the 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.
Debt obligations (including convertible bonds) and unlisted equities 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, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
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
11
AIM Select Equity Fund
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. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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.
Valuations change in response to many factors including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions and market
liquidity.
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.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
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 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
12
AIM Select Equity 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. 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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. 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.
J. 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.
K. COVERED CALL OPTIONS WRITTEN -- 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. 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.
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 $150 million 0.80%
- --------------------------------------------------------------------
Over $150 million 0.625%
___________________________________________________________________
====================================================================
</Table>
Through June 30, 2007, AIM had 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 0.695%
- --------------------------------------------------------------------
Next $250 million 0.67%
- --------------------------------------------------------------------
Next $500 million 0.645%
- --------------------------------------------------------------------
Next $1.5 billion 0.62%
- --------------------------------------------------------------------
Next $2.5 billion 0.595%
- --------------------------------------------------------------------
Next $2.5 billion 0.57%
- --------------------------------------------------------------------
Next $2.5 billion 0.545%
- --------------------------------------------------------------------
Over $10 billion 0.52%
___________________________________________________________________
====================================================================
</Table>
Further, effective July 1, 2007, AIM has contractually agreed through at
least June 30, 2008 to waive 100% 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
13
AIM Select Equity Fund
funds with cash collateral from securities loaned by the fund). Prior to July 1,
2007, AIM had voluntarily agreed to waive 25% of the advisory fee AIM receives
from the affiliated money market funds on investments by the Fund in such
affiliated money market funds.
For the six months ended June 30, 2007, AIM waived advisory fees of $12,177.
At the request of the Trustees of the Trust, INVESCO PLC ("INVESCO")
(formerly "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. These
expenses along with the related expense reimbursement are included in the
Statement of Operations. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM for certain administrative
costs incurred in providing accounting services, to the Fund. For the six months
ended June 30, 2007, expenses incurred under the agreement are shown in the
Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
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 six months ended June 30,
2007, the expenses incurred under the agreement are shown in the Statement of
Operations as transfer agent fees.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B
and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule
12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C
shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Class A shares and 1.00% of the average daily net assets of each class of
Class B and Class C shares. Of the Plan payments, up to 0.25% of the average
daily net assets of each class of 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. For the six months
ended June 30, 2007, expenses incurred under the Plans are shown in the
Statement of Operations as distribution fees.
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 six
months ended June 30, 2007, ADI advised the Fund that it retained $16,271 in
front-end sales commissions from the sale of Class A shares and $536, $27,894
and $502 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 six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 7,367,459 $39,790,420 $(27,364,202) $19,793,677 $287,194
- -------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 7,367,459 39,790,420 (27,364,202) 19,793,677 288,622
=================================================================================================
Subtotal $14,734,918 $79,580,840 $(54,728,404) $39,587,354 $575,816
=================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- -------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 3,767,100 $ 21,745,513 $(25,512,613) $ -- $ 16,516
=================================================================================================
Total
Investments
in
Affiliates $18,502,018 $101,326,353 $(80,241,017) $39,587,354 $592,332
_________________________________________________________________________________________________
=================================================================================================
</Table>
* Net of compensation to counterparties.
14
AIM Select Equity Fund
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 six months ended June 30, 2007, the Fund
engaged in securities sales of $232,089, which resulted in net realized gains of
$14,590.
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 used to offset custodian fees. For the six months ended
June 30, 2007, the Fund received credits from these arrangements, which resulted
in the reduction of the Fund's total expenses of $20,054.
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 certain Trustees and Officers of the Fund. 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, certain 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 six months ended June 30, 2007, the Fund paid legal fees of
$2,902 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 participates 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 six months ended June 30, 2007, 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.
15
AIM Select Equity Fund
At June 30, 2007, there were no securities out on loan. For the six months
ended June 30, 2007, the Fund received dividends on cash collateral investments
of $16,516 for securities lending transactions during the period, which are net
of compensation to counterparties.
NOTE 9--FUTURES CONTRACTS
On June 30, 2007, $1,350,000 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 06/30/07 APPRECIATION
- --------------------------------------------------------------------------------------------------------------------------
S&P 500: Euroswiss Future 390 Sept. -07/Long $29,550,300 $149,955
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
NOTE 10--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
TRANSACTIONS DURING THE PERIOD
- -----------------------------------------------------------------------------------
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- -----------------------------------------------------------------------------------
Beginning of period -- $ --
- -----------------------------------------------------------------------------------
Written 33 5,511
- -----------------------------------------------------------------------------------
Exercised (33) (5,511)
===================================================================================
End of period -- $ --
___________________________________________________________________________________
===================================================================================
</Table>
NOTE 11--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
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 had a capital loss carryforward as of December 31, 2006 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2010 $17,786,201
- -----------------------------------------------------------------------------
December 31, 2011 46,792,314
=============================================================================
Total capital loss carryforward $64,578,515
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code. To
the extent that unrealized gains as of April 23, 2007, the date of the
reorganization of AIM Opportunities II Fund and AIM Opportunities III Fund
into the Fund are realized on securities held in each Fund at such date, the
capital loss carryforward may be further limited for up to five years from the
date of the reorganization.
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 six months ended June 30, 2007 was $94,230,510 and
$129,545,923, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $94,994,516
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,112,505)
===============================================================================
Net unrealized appreciation of investment securities $92,882,011
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $374,337,884.
</Table>
16
AIM Select Equity Fund
NOTE 13--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A, Class B
and Class C. Class A shares are sold with a front-end sales charge unless
certain waiver criteria are met and under certain circumstances load waiver
shares may be subject to a CDSC. Class B shares and Class C shares are sold with
a 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
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(A) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 300,182 $ 6,366,386 911,141 $ 18,233,072
- ----------------------------------------------------------------------------------------------------------------------
Class B 113,432 2,216,609 324,950 5,630,460
- ----------------------------------------------------------------------------------------------------------------------
Class C 88,756 1,717,107 152,658 2,632,956
======================================================================================================================
Issued in connection with acquisitions:(b)
Class A 3,084,610 67,940,846 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class B 2,456,047 47,525,997 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class C 879,427 16,989,942 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 289,313 6,315,031 641,457 12,530,727
- ----------------------------------------------------------------------------------------------------------------------
Class B (329,277) (6,315,031) (725,646) (12,530,727)
======================================================================================================================
Reacquired:
Class A (2,076,005) (44,890,842) (3,252,189) (63,343,436)
- ----------------------------------------------------------------------------------------------------------------------
Class B (784,484) (15,023,802) (1,443,232) (24,793,719)
- ----------------------------------------------------------------------------------------------------------------------
Class C (234,465) (4,485,135) (467,646) (8,001,888)
======================================================================================================================
3,787,536 $ 78,357,108 (3,858,507) $(69,642,555)
______________________________________________________________________________________________________________________
======================================================================================================================
</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.
(b) As of the open of business on April 23, 2007, the Fund acquired all the
net assets of AIM Opportunities II Fund and AIM Opportunities III Fund
pursuant to a plan of reorganization approved by the Trustees of the
Fund on November 8, 2006 and by the shareholders of AIM Opportunities II
Fund and AIM Opportunities III Fund on April 12, 2007. The acquisition
was accomplished by a tax-free exchange of 6,420,084 shares of the Fund
for 3,316,682 shares outstanding of AIM Opportunities II Fund and
5,463,228 shares outstanding of AIM Opportunities III Fund as of the
close of business on April 20, 2007. AIM Opportunities II Fund's net
assets at that date of $78,902,797 including $8,801,527 of unrealized
appreciation and AIM Opportunities III Fund's net assets at that date of
$53,553,988 including $7,852,880 of unrealized appreciation, were
combined with those of the Fund. The aggregate net assets of the Fund
immediately before the acquisition were $350,064,699. The combined
aggregate net assets of the Fund immediately following the
reorganizations were $482,521,483.
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. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
17
AIM Select Equity Fund
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.10 $ 18.55 $ 17.65 $ 15.50 $ 11.97 $ 17.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) 0.03 0.03 (0.04) (0.06)(b) (0.09) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 1.28 2.52 0.94 2.21 3.62 (4.97)
=================================================================================================================================
Total from investment operations 1.31 2.55 0.90 2.15 3.53 (5.03)
=================================================================================================================================
Net asset value, end of period $ 22.41 $ 21.10 $ 18.55 $ 17.65 $ 15.50 $ 11.97
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 6.21% 13.75% 5.10% 13.87% 29.49% (29.59)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $311,771 $259,817 $259,946 $292,681 $288,976 $250,666
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.36%(d) 1.40% 1.39% 1.38% 1.47% 1.32%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.37%(d) 1.41% 1.39% 1.40% 1.47% 1.32%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.24%(d) 0.14% (0.21)% (0.40)%(b) (0.65)% (0.45)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 27% 72% 91% 38% 69% 86%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.08) and (0.51)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$279,258,275.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $116,070,354 and sold of $30,259,505 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
Opportunities II Fund and AIM Opportunities III Fund into the Fund.
18
AIM Select Equity Fund
NOTE 15--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.58 $ 16.46 $ 15.78 $ 13.96 $ 10.86 $ 15.54
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.05) (0.11) (0.15) (0.17)(b) (0.17) (0.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 1.13 2.23 0.83 1.99 3.27 (4.52)
=================================================================================================================================
Total from investment operations 1.08 2.12 0.68 1.82 3.10 (4.68)
=================================================================================================================================
Net asset value, end of period $ 19.66 $ 18.58 $ 16.46 $ 15.78 $ 13.96 $ 10.86
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 5.81% 12.88% 4.31% 13.04% 28.55% (30.12)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $119,123 $85,521 $106,097 $148,300 $198,148 $214,709
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.11%(d) 2.15% 2.14% 2.13% 2.22% 2.07%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.12%(d) 2.16% 2.14% 2.15% 2.22% 2.07%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.51)%(d) (0.61)% (0.96)% (1.15)%(b) (1.40)% (1.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 27% 72% 91% 38% 69% 86%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.19) and (1.26)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$97,996,694.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $116,070,354 and sold of $30,259,505 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
Opportunities II Fund and AIM Opportunities III Fund into the Fund.
<Table>
<Caption>
CLASS C
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.55 $ 16.43 $ 15.75 $ 13.94 $ 10.84 $ 15.52
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.05) (0.11) (0.15) (0.17)(b) (0.17) (0.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.13 2.23 0.83 1.98 3.27 (4.52)
=================================================================================================================================
Total from investment operations 1.08 2.12 0.68 1.81 3.10 (4.68)
=================================================================================================================================
Net asset value, end of period $ 19.63 $ 18.55 $ 16.43 $ 15.75 $ 13.94 $ 10.84
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 5.82% 12.90% 4.32% 12.98% 28.60% (30.15)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $35,523 $19,966 $22,860 $29,710 $33,585 $32,558
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.11%(d) 2.15% 2.14% 2.13% 2.22% 2.07%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.12%(d) 2.16% 2.14% 2.15% 2.22% 2.07%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.51)%(d) (0.61)% (0.96)% (1.15)%(b) (1.40)% (1.20)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 27% 72% 91% 38% 69% 86%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.19) and (1.26)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$25,985,218.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $116,070,354 and sold of $30,259,505 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
Opportunities II Fund and AIM Opportunities III Fund into the Fund.
19
AIM Select Equity Fund
NOTE 16--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
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 A I M Advisors, Inc. ("AIM") and AIM
Distributors, Inc. ("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. By agreement with the Commissioner of
Securities, AIM's time to respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, INVESCO Funds Group,
Inc. ("IFG") (the former investment advisor to certain AIM Funds), 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; 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.
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 INVESCO PLC'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 INVESCO 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.
20
AIM Select Equity Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur together with the amount you invested, to this information to compare the ongoing
two types of costs: (1) transaction costs, estimate the expenses that you paid over costs of investing in the Fund and other
which may include sales charges (loads) on the period. Simply divide your account funds. To do so, compare this 5%
purchase payments or contingent deferred value by $1,000 (for example, an $8,600 hypothetical example with the 5%
sales charges on redemptions, and account value divided by $1,000 = 8.6), hypothetical examples that appear in the
redemption fees, if any; and (2) ongoing then multiply the result by the number in shareholder reports of the other funds.
costs, including management fees; the table under the heading entitled
distribution and/or service (12b-1) fees; "Actual Expenses Paid During Period" to Please note that the expenses shown in
and other Fund expenses. This example is estimate the expenses you paid on your the table are meant to highlight your
intended to help you understand your account during this period. ongoing costs only and do not reflect any
ongoing costs (in dollars) of investing in transaction costs, such as sales charges
the Fund and to compare these costs with HYPOTHETICAL EXAMPLE FOR COMPARISON (loads) on purchase payments, contingent
ongoing costs of investing in other mutual PURPOSES deferred sales charges on redemptions, and
funds. The example is based on an redemption fees, if any. Therefore, the
investment of $1,000 invested at the The table below also provides information hypothetical information is useful in
beginning of the period and held for the about hypothetical account values and comparing ongoing costs only, and will not
entire period January 1, 2007, through hypothetical expenses based on the Fund's help you determine the relative total
June 30, 2007. actual expense ratio and an assumed rate costs of owning different funds. In
of return of 5% per year before expenses, addition, if these transaction costs were
ACTUAL EXPENSES which is not the Fund's actual return. included, your costs would have been
higher.
The table below provides information about The hypothetical account values and
actual account values and actual expenses. expenses may not be used to estimate the
You may use the information in this table, actual ending account balance or expenses
you paid for the period. You may use
====================================================================================================================================
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
A $1,000.00 $1,062.10 $ 6.95 $1,018.05 $ 6.80 1.36%
B 1,000.00 1,058.10 10.77 1,014.33 10.54 2.11
C 1,000.00 1,058.20 10.77 1,014.33 10.54 2.11
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June
30, 2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
21
AIM Select Equity Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM Committee considers each Sub-Committee's limited to changes to the Fund's
Funds Group is required under the recommendations and makes its own performance, advisory fees, expense
Investment Company Act of 1940 to approve recommendations regarding the performance, limitations and/or fee waivers.
annually the renewal of the AIM Select fees and expenses of the AIM Funds to the
Equity Fund (the Fund) investment advisory full Board. Moreover, the Investments A. NATURE, EXTENT AND QUALITY OF SERVICES
agreement with A I M Advisors, Inc. (AIM). Committee considers each Sub-Committee's PROVIDED BY AIM
During contract renewal meetings held on recommendations in making its annual
June 25-27, 2007, the Board as a whole and recommendation to the Board whether to The Board reviewed the advisory services
the disinterested or "independent" approve the continuance of each AIM Fund's provided to the Fund by AIM under the
Trustees, voting separately, approved the investment advisory agreement and Fund's advisory agreement, the performance
continuance of the Fund's investment sub-advisory agreement, if applicable of AIM in providing these services, and
advisory agreement for another year, (advisory agreements), for another year. the credentials and experience of the
effective July 1, 2007. In doing so, the officers and employees of AIM who provide
Board determined that the Fund's advisory The independent Trustees, as mentioned these services. The Board's review of the
agreement is in the best interests of the above, are assisted in their annual qualifications of AIM to provide these
Fund and its shareholders and that the evaluation of the advisory agreements by services included the Board's
compensation to AIM under the Fund's the independent Senior Officer. One consideration of AIM's portfolio and
advisory agreement is fair and reasonable. responsibility of the Senior Officer is to product review process, various back
manage the process by which the AIM Funds' office support functions provided by AIM,
The independent Trustees met separately proposed management fees are negotiated and AIM's equity and fixed income trading
during their evaluation of the Fund's during the annual contract renewal process operations. The Board concluded that the
investment advisory agreement with to ensure that they are negotiated in a nature, extent and quality of the advisory
independent legal counsel from whom they manner which is at arms' length and services provided to the Fund by AIM were
received independent legal advice, and the reasonable. Accordingly, the Senior appropriate and that AIM currently is
independent Trustees also received Officer must either supervise a providing satisfactory advisory services
assistance during their deliberations from competitive bidding process or prepare an in accordance with the terms of the Fund's
the independent Senior Officer, a independent written evaluation. The Senior advisory agreement. In addition, based on
full-time officer of the AIM Funds who Officer has recommended that an their ongoing meetings throughout the year
reports directly to the independent independent written evaluation be provided with the Fund's portfolio managers, the
Trustees. The following discussion more and, upon the direction of the Board, has Board concluded that these individuals are
fully describes the process employed by prepared an independent written competent and able to continue to carry
the Board to evaluate the performance of evaluation. out their responsibilities under the
the AIM Funds (including the Fund) Fund's advisory agreement.
throughout the year and, more During the annual contract renewal
specifically, during the annual contract process, the Board considered the factors In determining whether to continue the
renewal meetings. discussed below under the heading "Factors Fund's advisory agreement, the Board
and Conclusions and Summary of Independent considered the prior relationship between
THE BOARD'S FUND EVALUATION PROCESS Written Fee Evaluation" in evaluating the AIM and the Fund, as well as the Board's
fairness and reasonableness of the Fund's knowledge of AIM's operations, and
The Board's Investments Committee has advisory agreement at the contract renewal concluded that it was beneficial to
established three Sub-Committees which are meetings and at their meetings throughout maintain the current relationship, in
responsible for overseeing the management the year as part of their ongoing part, because of such knowledge. The Board
of a number of the series portfolios of oversight of the Fund. The Fund's advisory also considered the steps that AIM and its
the AIM Funds. This Sub-Committee agreement was considered separately, affiliates have taken over the last
structure permits the Trustees to focus on although the Board also considered the several years to improve the quality and
the performance of the AIM Funds that have common interests of all of the AIM Funds efficiency of the services they provide to
been assigned to them. The Sub-Committees in their deliberations. The Board the Funds in the areas of investment
meet throughout the year to review the comprehensively considered all of the performance, product line diversification,
performance of their assigned funds, and information provided to them and did not distribution, fund operations, shareholder
the Sub-Committees review monthly and identify any particular factor that was services and compliance. The Board
quarterly comparative performance controlling. Furthermore, each Trustee may concluded that the quality and efficiency
information and periodic asset flow data have evaluated the information provided of the services AIM and its affiliates
for their assigned funds. These materials differently from one another and provide to the AIM Funds in each of these
are prepared under the direction and attributed different weight to the various areas generally have improved, and support
supervision of the independent Senior factors. The Trustees recognized that the the Board's approval of the continuance of
Officer. Over the course of each year, the advisory arrangements and resulting the Fund's advisory agreement.
Sub-Committees meet with portfolio advisory fees for the Fund and the other
managers for their assigned funds and AIM Funds are the result of years of B. FUND PERFORMANCE
other members of management and review review and negotiation between the
with these individuals the performance, Trustees and AIM, that the Trustees may The Board compared the Fund's performance
investment objective(s), policies, focus to a greater extent on certain during the past one, three and five
strategies and limitations of these funds. aspects of these arrangements in some calendar years to the performance of funds
years than others, and that the Trustees' in the Fund's Lipper peer group that are
In addition to their meetings deliberations and conclusions in a not managed by AIM, and against the
throughout the year, the Sub-Committees particular year may be based in part on performance of all funds in the Lipper
meet at designated contract renewal their deliberations and conclusions of Multi-Cap Core Funds Index. The Board also
meetings each year to conduct an in-depth these same arrangements throughout the reviewed the methodology used by Lipper to
review of the performance, fees and year and in prior years. identify the Fund's peers. The Board noted
expenses of their assigned funds. During that the Fund's performance was comparable
the contract renewal process, the Trustees FACTORS AND CONCLUSIONS AND SUMMARY OF to the median performance of its peers for
receive comparative performance and fee INDEPENDENT WRITTEN FEE EVALUATION the one and three year periods, and below
data regarding all the AIM Funds prepared such performance for the five year period.
by an independent company, Lipper, Inc., The discussion below serves as a summary The Board noted that the Fund's
under the direction and supervision of the of the Senior Officer's independent performance was comparable to the
independent Senior Officer who also written evaluation, as well as a performance of the Index for the one and
prepares a separate analysis of this discussion of the material factors and three year periods, and below such Index
information for the Trustees. Each related conclusions that formed the basis for the five year period. The Board also
Sub-Committee then makes recommendations for the Board's approval of the Fund's considered the steps AIM has taken over
to the Investments Committee regarding the advisory agreement. Unless otherwise the last several years to improve the
performance, fees and expenses of their stated, information set forth below is as quality and efficiency of the services
assigned funds. The Investments of June 27, 2007 and does not reflect any that AIM provides to the AIM Funds. The
changes that may have occurred since that Board concluded that AIM continues to be
date, including but not responsive to the Board's focus on fund
(continued)
22
AIM Select Equity Fund
performance. Although the independent breakpoint. Based on this information, the contracts, and were qualified to continue
written evaluation of the Fund's Senior Board concluded that the Fund's advisory to provide these services to the Fund.
Officer (discussed below) only considered fees appropriately reflect economies of
Fund performance through the most recent scale at current asset levels. The Board The Board considered the benefits
calendar year, the Board also reviewed also noted that the Fund shares directly realized by AIM as a result of portfolio
more recent Fund performance and this in economies of scale through lower fees brokerage transactions executed through
review did not change their conclusions. charged by third party service providers "soft dollar" arrangements. Under these
based on the combined size of all of the arrangements, portfolio brokerage
C. ADVISORY FEES AND FEE WAIVERS AIM Funds and affiliates. commissions paid by the Fund and/or other
funds advised by AIM are used to pay for
The Board compared the Fund's contractual E. PROFITABILITY AND FINANCIAL RESOURCES research and execution services. The Board
advisory fee rate to the contractual OF AIM noted that soft dollar arrangements shift
advisory fee rates of funds in the Fund's the payment obligation for the research
Lipper peer group that are not managed by The Board reviewed information from AIM and executions services from AIM to the
AIM, at a common asset level and as of the concerning the costs of the advisory and funds and therefore may reduce AIM's
end of the past calendar year. The Board other services that AIM and its affiliates expenses. The Board also noted that
noted that the Fund's advisory fee rate provide to the Fund and the profitability research obtained through soft dollar
was below the median advisory fee rate of of AIM and its affiliates in providing arrangements may be used by AIM in making
its peers. The Board also reviewed the these services. The Board also reviewed investment decisions for the Fund and may
methodology used by Lipper and noted that information concerning the financial therefore benefit Fund shareholders. The
the contractual fee rates shown by Lipper condition of AIM and its affiliates. The Board concluded that AIM's soft dollar
include any applicable long-term Board also reviewed with AIM the arrangements were appropriate. The Board
contractual fee waivers. The Board also methodology used to prepare the also concluded that, based on their review
compared the Fund's contractual advisory profitability information. The Board and representations made by AIM, these
fee rate to the contractual advisory fee considered the overall profitability of arrangements were consistent with
rates of other clients of AIM and its AIM, as well as the profitability of AIM regulatory requirements.
affiliates with investment strategies in connection with managing the Fund. The
comparable to those of the Fund, including Board noted that AIM continues to operate The Board considered the fact that the
two mutual funds advised by AIM. The Board at a net profit, although increased Fund's uninvested cash and cash collateral
noted that the Fund's rate was below the expenses in recent years have reduced the from any securities lending arrangements
rate for one of the mutual funds and that profitability of AIM and its affiliates. may be invested in money market funds
the other mutual fund is an asset The Board concluded that the Fund's advised by AIM pursuant to procedures
allocation fund which is not charged any advisory fees were fair and reasonable, approved by the Board. The Board noted
advisory fees by AIM pursuant to that and that the level of profits realized by that AIM will receive advisory fees from
fund's advisory agreement. AIM and its affiliates from providing these affiliated money market funds
services to the Fund was not excessive in attributable to such investments, although
The Board noted that AIM has proposed light of the nature, quality and extent of AIM has contractually agreed to waive the
that the contractual advisory fee waiver the services provided. The Board advisory fees payable by the Fund with
that had been formerly committed to by AIM considered whether AIM is financially respect to its investment of uninvested
through at least June 30, 2007 expire on sound and has the resources necessary to cash in these affiliated money market
such date and that AIM has not proposed perform its obligations under the Fund's funds through at least June 30, 2008. The
any fee waivers or expense limitations for advisory agreement, and concluded that AIM Board considered the contractual nature of
the Fund. However, the Board also noted has the financial resources necessary to this fee waiver and noted that it remains
that at its current asset level the Fund fulfill these obligations. in effect until at least June 30, 2008.
has an effective fee rate under its The Board concluded that the Fund's
contractual advisory fee schedule that is F. INDEPENDENT WRITTEN EVALUATION OF THE investment of uninvested cash and cash
lower than the fee rate under the FUND'S SENIOR OFFICER collateral from any securities lending
contractual advisory fee waiver and that arrangements in the affiliated money
AIM therefore is not currently waiving any The Board noted that, upon their market funds is in the best interests of
of the Fund's advisory fees. The Board direction, the Senior Officer of the Fund, the Fund and its shareholders.
noted that AIM's recommendation was made who is independent of AIM and AIM's
in response to the recommendation of the affiliates, had prepared an independent
independent Senior Officer that AIM written evaluation to assist the Board in
consider whether the advisory fee waivers determining the reasonableness of the
for certain equity AIM Funds, including proposed management fees of the AIM Funds,
the Fund, should be simplified. The Board including the Fund. The Board noted that
concluded that it was not necessary at they had relied upon the Senior Officer's
this time to discuss with AIM whether to written evaluation instead of a
implement any such waivers or expense competitive bidding process. In
limitations. determining whether to continue the Fund's
advisory agreement, the Board considered
After taking account of the Fund's the Senior Officer's written evaluation.
contractual advisory fee rate, as well as
the comparative advisory fee information G. COLLATERAL BENEFITS TO AIM AND ITS
discussed above, the Board concluded that AFFILIATES
the Fund's advisory fees were fair and
reasonable. The Board considered various other
benefits received by AIM and its
D. ECONOMIES OF SCALE AND BREAKPOINTS affiliates resulting from AIM's
relationship with the Fund, including the
The Board considered the extent to which fees received by AIM and its affiliates
there are economies of scale in AIM's for their provision of administrative,
provision of advisory services to the transfer agency and distribution services
Fund. The Board also considered whether to the Fund. The Board considered the
the Fund benefits from such economies of performance of AIM and its affiliates in
scale through contractual breakpoints in providing these services and the
the Fund's advisory fee schedule or organizational structure employed by AIM
through advisory fee waivers or expense and its affiliates to provide these
limitations. The Board noted that the services. The Board also considered that
Fund's contractual advisory fee schedule these services are provided to the Fund
includes one breakpoint and that the level pursuant to written contracts which are
of the Fund's advisory fees, as a reviewed and approved on an annual basis
percentage of the Fund's net assets, has by the Board. The Board concluded that AIM
decreased as net assets increased because and its affiliates were providing these
of the services in a satisfactory manner and in
accordance with the terms of their
23
[EDELIVERY GO PAPERLESS
AIMINVESTMENTS.COM/EDELIVERY
GRAPHIC]
REGISTER FOR EDELIVERY FUND HOLDINGS AND PROXY VOTING INFORMATION
eDelivery is the process of receiving your fund The Fund provides a complete list of its holdings four times in each fiscal
and account information via e-mail. Once your year, at the quarter-ends. For the second and fourth quarters, the lists appear
quarterly statements, tax forms, fund reports, in the Fund's semiannual and annual reports to shareholders. For the first and
and prospectuses are available, we will send you third quarters, the Fund files the lists with the Securities and Exchange
an e-mail notification containing links to these Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is
documents. For security purposes, you will need available at AIMinvestments.com. From our home page, click on Products &
to log in to your account to view your statements Performance, then Mutual Funds, then Fund Overview. Select your Fund from the
and tax forms. drop-down menu and click on Complete Quarterly Holdings. Shareholders can also
look up the Fund's Forms N-Q on the SEC Web site at sec.gov. Copies of the
WHY SIGN UP? Fund's Forms N-Q may be reviewed and copied at the SEC Public Reference Room in
Washington, D.C. You can obtain information on the operation of the Public
Register for eDelivery to: Reference Room, including information about duplicating fee charges, by calling
202-942-8090 or 800-732-0330, or by electronic request at the following e-mail
- - save your Fund the cost of printing and address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-01540 and
postage. 002-27334.
- - reduce the amount of paper you receive. A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
- - gain access to your documents faster by not upon request, from our Client Services department at 800-959-4246 or on the AIM
waiting for the mail. Web site, AIMinvestments.com. On the home page, scroll down and click on AIM
Funds Proxy Policy.
- - view your documents online anytime at your
convenience. 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
- - save the documents to your personal computer the 12 months ended June 30, 2007, is available at our Web site. Go to
or print them out for your records. 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.
HOW DO I SIGN UP? The information is also available on the SEC Web site, sec.gov.
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.
[AIM INVESTMENTS LOGO]
SEQ-SAR-1 A I M Distributors,Inc. --REGISTERED TRADEMARK--
AIM Small Cap Equity Fund
Semiannual Report to Shareholders o June 30, 2007
DOMESTIC EQUITY
Small Cap
Table of Contents
Letter to Shareholders.................... 2
Fund Performance.......................... 3
Schedule of Investments................... 4
Financial Statements...................... 8
Notes to Financial Statements............. 11
Financial Highlights...................... 17
Fund Expenses............................. 21
Approval of Advisory Agreement............ 22
For the most current month-end Fund performance
and commentary, please visit AIMinvestments.com.
Unless otherwise noted, all data in this report are
from A I M Management Group Inc.
If used after October 20, 2007, this report must be
accompanied by a Fund Performance & Commentary or
[AIM INVESTMENTS LOGO] by an AIM Quarterly Performance Review for the most
- - REGISTERED TRADEMARK - recent quarter-end.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A
CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS
MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES
AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY
BEFORE INVESTING.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
AIM Small Cap Equity Fund
Dear Fellow Shareholders:
In overseeing the management of the AIM family of funds on your behalf, your
Board of Trustees of the AIM Funds continues to focus on improved investment
performance, reduced shareholder costs, and high ethical standards. Since my
[CROCKETT last letter, your Board has welcomed two new members: Marty Flanagan, President
PHOTO] and CEO of INVESCO, AIM's parent company, and Phil Taylor, who was named CEO of
AIM Investments --REGISTERED TREADEMARK-- in April 2006. Robert Graham, who has
given more than 30 years of leadership to the company and the mutual fund
Bruce L. Crockett industry since founding AIM in 1976, has retired, stepping down in the process
from his most recent role as Vice Chairman of the Board. We thank Bob for his
many contributions and wish him a long and happy future.
Our review of fund performance has shown healthy progress, but the process is
necessarily one of continuous improvement. In general, as of June 30, 2007, we
have seen persistent investment discipline and more consistently good results.
While this statement may not apply to every AIM Fund all the time, as I write
this letter, the overall trend in fund management and performance has been
positive.
The investment management talent at AIM has recently been enhanced by the
promotion of Karen Dunn Kelley to Head of INVESCO's Worldwide Fixed Income as
well as Director of AIM Global and Cash Management, with responsibility for all
fixed income and money market funds that serve both institutional and individual
investors. Under Karen's direction, AIM's cash management organization grew to
one of the world's largest and most respected, with top-tier performance. The
operations now combined under her charge represent more than $150 billion in
assets, 120 investment professionals, and products that span the entire yield
curve.
In other news, your Board took a more active role in preparing for "proxy
season," the period when fund managers must vote the shares held by their funds
"for" or "against" various proposals on the ballots of the issuing companies.
Beginning in the 2007 proxy season, AIM implemented new proxy voting policies,
developed by management in conjunction with an ad hoc Board committee, which
provided a solid framework for properly evaluating and executing the many
decisions the AIM Funds are required to make to vote shares.
In general, the AIM Funds voted for proposals that would allow shareholders a
greater role in election of directors, proxy access and "say for pay." The AIM
Funds voted against directors who AIM believed failed to govern well in cases of
corporate mismanagement, such as the backdating of options grants, and against
"poison pill" and "take under" proposals that would favor the financial
interests of managers at the expense of investors in the case of a merger or
acquisition. You can view the proxy votes cast for your fund by going to
AIMinvestments.com. Click the "About Us" tab, then go to "Required Notices" and
"Proxy Voting Activity."
Additionally, your Board raised the amount its members are recommended to
invest in the AIM Funds within three years of joining the Board, with the goal
of aligning our interests even more closely with yours.
Furthermore, at our June meeting we renewed the investment advisory contracts
between the AIM Funds and AIM for another year, applying the same rigorous
evaluation process that was enhanced and formalized in 2005. For more
information on this process, please visit AIMinvestments.com. Click on the
"Products and Performance" tab and go to "Investment Advisory Agreement
Renewals."
Your Board's ability to best represent your interests depends on our
knowledge of your opinions and concerns.
Please send me an email (bruce@brucecrockett.com) with your thoughts on the
following:
1) How important is it to you to hear about your Board's decisions and
activities in these letters?
2) What other information (on overall performance, specific funds, managers,
etc.) would make the letters more meaningful to you?
3) Would you prefer that communication from your Board continue to be
delivered in paper form by regular mail or be sent electronically by
email?
If you would prefer to communicate through a quick online survey, please go
to AIMinvestments.com and provide your responses there.
We need to hear from you to do our best job, and I look forward to your
responses.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Directors
August 10, 2007
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 mutual funds
represented by AIM Investments and the PowerShares Exchange-Traded Fund Trust.
2
AIM Small Cap Equity Fund
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/06-6/30/07, excluding applicable sales charges. If
sales charges were included, returns would be lower.
Class A Shares 8.82%
Class B Shares 8.39
Class C Shares 8.39
Class R Shares 8.70
S&P 500 Index1 (Broad Market Index) 6.96
Russell 2000 Index(1) (Style-Specific Index) 6.45
Lipper Small-Cap Core Funds (Peer Group Index) Index(1) 9.54
Source: (1)Lipper Inc.
The unmanaged S&P 500 --REGISTERED TREADEMARK-- Index is an index of common stocks
frequently used as a general measure of U.S. stock market performance.
The Russell 2000 --REGISTERED TREADEMARK-- Growth Index measures the performance of
those Russell 2000 companies with higher price-to-book ratios and higher forecasted
growth values. The Russell 2000 Growth Index is a trademark/service mark of the Frank
Russell Company. Russell --REGISTERED TREADEMARK-- is a trademark of the Frank Russell
Company.
The LIPPER SMALL-CAP CORE FUNDS INDEX is an equally weighted representation of the
largest funds in the Lipper Small-Cap Core Funds category. These funds typically have
an average price-to-earnings ratio, price-to- book ratio, and three-year
sales-per-share growth value, compared to the S&P SmallCap 600 Index.
The Fund is not managed to track the performance of any particular index, including
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes.
A direct investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
========================================== NET ASSET VALUE, ADJUSTED TO REFLECT THE B AND CLASS C SHARE PERFORMANCE REFLECTS
FUND PERFORMANCE HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS THE APPLICABLE CONTINGENT DEFERRED SALES
R SHARES. CLASS A SHARES' INCEPTION DATE CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
As of 6/30/07, including applicable IS AUGUST 31, 2000. CDSC ON CLASS B SHARES DECLINES FROM 5%
sales charges BEGINNING AT THE TIME OF PURCHASE TO 0% AT
THE PERFORMANCE DATA QUOTED REPRESENT THE BEGINNING OF THE SEVENTH YEAR. THE
CLASS A SHARES PAST PERFORMANCE AND CANNOT GUARANTEE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
Inception (8/31/00) 7.96% COMPARABLE FUTURE RESULTS; CURRENT YEAR AFTER PURCHASE. CLASS R SHARES DO NOT
5 Years 10.60 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE HAVE A FRONT-END SALES CHARGE; RETURNS
1 Year 9.92 VISIT AIMINVESTMENTS.COM FOR THE MOST SHOWN ARE AT NET ASSET VALUE AND DO NOT
RECENT MONTH-END PERFORMANCE. PERFORMANCE REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
CLASS B SHARES FIGURES REFLECT REINVESTED DISTRIBUTIONS, ON A TOTAL REDEMPTION OF RETIREMENT PLAN
Inception (8/31/00) 8.09% CHANGES IN NET ASSET VALUE AND THE EFFECT ASSETS WITHIN THE FIRST YEAR.
5 Years 10.79 OF THE MAXIMUM SALES CHARGE UNLESS
1 Year 10.54 OTHERWISE STATED. PERFORMANCE FIGURES DO THE PERFORMANCE OF THE FUND'S SHARE
NOT REFLECT DEDUCTION OF TAXES A CLASSES WILL DIFFER PRIMARILY DUE TO
CLASS C SHARES SHAREHOLDER WOULD PAY ON FUND DIFFERENT SALES CHARGE STRUCTURES AND
Inception (8/31/00) 8.09% DISTRIBUTIONS OR SALE OF FUND SHARES. CLASS EXPENSES.
5 Years 11.06 INVESTMENT RETURN AND PRINCIPAL VALUE WILL
1 Year 14.45 FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES.
CLASS R SHARES
Inception 8.62% THE TOTAL ANNUAL FUND OPERATING EXPENSE
5 Years 11.58 RATIO SET FORTH IN THE MOST RECENT FUND
1 Year 16.00 PROSPECTUS AS OF THE DATE OF THIS REPORT
========================================== FOR CLASS A, CLASS B, CLASS C AND CLASS R
CLASS R SHARES' INCEPTION DATE IS JUNE 3, SHARES WAS 1.49%, 2.24%, 2.24% AND 1.74%,
2002. RETURNS SINCE THAT DATE ARE RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
HISTORICAL RETURNS. ALL OTHER RETURNS ARE ABOVE MAY VARY FROM THE EXPENSE RATIOS
BLENDED RETURNS OF HISTORICAL CLASS R PRESENTED IN OTHER SECTIONS OF THIS REPORT
SHARE PERFORMANCE AND RESTATED CLASS A THAT ARE BASED ON EXPENSES INCURRED DURING
SHARE PERFORMANCE (FOR PERIODS PRIOR TO THE PERIOD COVERED BY THIS REPORT.
THE INCEPTION DATE OF CLASS R SHARES) AT
CLASS A SHARE PERFORMANCE REFLECTS THE
MAXIMUM 5.50% SALES CHARGE, AND CLASS
3
AIM Small Cap Equity Fund
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2007
<Table>
<Caption>
- ---------------------------------------------------------
Information Technology 19.0%
- ---------------------------------------------------------
Industrials 18.5
- ---------------------------------------------------------
Financials 13.4
- ---------------------------------------------------------
Consumer Discretionary 13.2
- ---------------------------------------------------------
Health Care 12.3
- ---------------------------------------------------------
Materials 7.1
- ---------------------------------------------------------
Energy 5.7
- ---------------------------------------------------------
Consumer Staples 4.7
- ---------------------------------------------------------
Telecommunication Services 3.0
- ---------------------------------------------------------
Utilities 1.4
- ---------------------------------------------------------
Money Market Funds Plus Other Assets Less
Liabilities 1.7
_________________________________________________________
=========================================================
</Table>
SCHEDULE OF INVESTMENTS*
June 30, 2007
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.34%
AEROSPACE & DEFENSE-1.21%
Aeroviroment, Inc.(a)(b) 85,684 $ 1,765,947
- -----------------------------------------------------------------------
Curtiss-Wright Corp. 122,807 5,724,035
=======================================================================
7,489,982
=======================================================================
AIRLINES-0.94%
Allegiant Travel Co.(b) 188,539 5,795,689
=======================================================================
APPAREL RETAIL-2.93%
Cache, Inc.(b) 237,423 3,150,603
- -----------------------------------------------------------------------
Charming Shoppes, Inc.(b) 476,142 5,156,618
- -----------------------------------------------------------------------
Gymboree Corp. (The)(b) 100,266 3,951,483
- -----------------------------------------------------------------------
Wet Seal, Inc. (The)-Class A(b) 967,376 5,813,930
=======================================================================
18,072,634
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.52%
Fossil, Inc.(b) 109,291 3,222,992
=======================================================================
APPLICATION SOFTWARE-2.51%
Blackbaud, Inc. 169,045 3,732,514
- -----------------------------------------------------------------------
Epicor Software Corp.(b) 339,655 5,050,670
- -----------------------------------------------------------------------
Transaction Systems Architects, Inc.(b) 198,069 6,667,002
=======================================================================
15,450,186
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.96%
Affiliated Managers Group, Inc.(a)(b) 45,914 5,911,887
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
BIOTECHNOLOGY-0.46%
InterMune, Inc.(b) 108,519 $ 2,814,983
=======================================================================
BUILDING PRODUCTS-2.35%
Goodman Global, Inc.(b) 365,399 8,119,166
- -----------------------------------------------------------------------
NCI Building Systems, Inc.(b) 129,167 6,371,808
=======================================================================
14,490,974
=======================================================================
COMMUNICATIONS EQUIPMENT-2.18%
Comtech Telecommunications Corp.(b) 151,334 7,024,924
- -----------------------------------------------------------------------
OpNext, Inc.(b) 324,461 4,295,864
- -----------------------------------------------------------------------
Starent Networks Corp.(b) 144,846 2,129,236
=======================================================================
13,450,024
=======================================================================
COMPUTER STORAGE & PERIPHERALS-1.09%
Emulex Corp.(b) 306,718 6,698,721
=======================================================================
CONSTRUCTION & ENGINEERING-0.91%
Infrasource Services Inc.(b) 150,843 5,596,275
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.91%
Euronet Worldwide, Inc.(b) 175,381 5,114,110
- -----------------------------------------------------------------------
Wright Express Corp.(b) 193,789 6,641,149
=======================================================================
11,755,259
=======================================================================
DIVERSIFIED CHEMICALS-1.22%
FMC Corp. 84,092 7,516,984
=======================================================================
DIVERSIFIED METALS & MINING-1.09%
Compass Minerals International, Inc. 193,352 6,701,580
=======================================================================
</Table>
4
AIM Small Cap Equity Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
EDUCATION SERVICES-0.53%
Capella Education Co.(b) 43,574 $ 2,005,711
- -----------------------------------------------------------------------
Universal Technical Institute Inc.(b) 49,526 1,257,465
=======================================================================
3,263,176
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.00%
Genlyte Group Inc. (The)(b) 78,830 6,191,308
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-3.08%
Benchmark Electronics, Inc.(b) 283,325 6,408,812
- -----------------------------------------------------------------------
Methode Electronics, Inc. 418,152 6,544,079
- -----------------------------------------------------------------------
Park Electrochemical Corp. 215,352 6,068,619
=======================================================================
19,021,510
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.81%
Waste Connections, Inc.(b) 166,085 5,022,410
=======================================================================
FOOD RETAIL-0.98%
Ruddick Corp. 200,020 6,024,602
=======================================================================
GAS UTILITIES-1.01%
Energen Corp. 113,543 6,238,052
=======================================================================
HEALTH CARE DISTRIBUTORS-0.99%
Owens & Minor, Inc. 175,623 6,136,268
=======================================================================
HEALTH CARE EQUIPMENT-1.86%
ev3 Inc.(b) 249,736 4,215,544
- -----------------------------------------------------------------------
STERIS Corp. 238,159 7,287,665
=======================================================================
11,503,209
=======================================================================
HEALTH CARE FACILITIES-1.54%
LCA-Vision Inc.(a) 104,890 4,957,101
- -----------------------------------------------------------------------
Skilled Healthcare Group Inc.-Class A(b) 293,160 4,546,912
- -----------------------------------------------------------------------
9,504,013
=======================================================================
HEALTH CARE SERVICES-0.86%
Cross Country Healthcare, Inc.(b) 317,425 5,294,649
=======================================================================
HEALTH CARE SUPPLIES-2.71%
DJO Inc.(b) 137,227 5,663,358
- -----------------------------------------------------------------------
Haemonetics Corp.(b) 132,426 6,966,932
- -----------------------------------------------------------------------
Medical Action Industries Inc.(b) 225,086 4,065,053
=======================================================================
16,695,343
=======================================================================
HEALTH CARE TECHNOLOGY-0.39%
Omnicell, Inc.(b) 116,026 2,411,020
=======================================================================
HOTELS, RESORTS & CRUISE LINES-1.49%
Ambassadors Group, Inc. 71,470 2,539,329
- -----------------------------------------------------------------------
Red Lion Hotels Corp.(b) 518,900 6,667,865
=======================================================================
9,207,194
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
HOUSEHOLD APPLIANCES-1.08%
Snap-on Inc. 132,367 $ 6,685,857
=======================================================================
HOUSEHOLD PRODUCTS-0.55%
Central Garden & Pet Co.(b) 119,596 1,466,247
- -----------------------------------------------------------------------
Central Garden & Pet Co.-Class A(b) 165,874 1,945,702
=======================================================================
3,411,949
=======================================================================
HOUSEWARES & SPECIALTIES-1.16%
Tupperware Brands Corp. 248,203 7,133,354
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-1.77%
Heidrick & Struggles International, Inc.(b) 73,729 3,777,874
- -----------------------------------------------------------------------
Kforce Inc.(b) 446,956 7,142,357
=======================================================================
10,920,231
=======================================================================
INDUSTRIAL MACHINERY-4.96%
Chart Industries, Inc.(b) 317,056 9,017,072
- -----------------------------------------------------------------------
Kadant Inc.(b) 244,374 7,624,469
- -----------------------------------------------------------------------
RBC Bearings Inc.(b) 168,735 6,960,319
- -----------------------------------------------------------------------
Valmont Industries, Inc. 96,079 6,990,708
=======================================================================
30,592,568
=======================================================================
INSURANCE BROKERS-0.88%
Hilb Rogal and Hobbs Co. 126,204 5,409,104
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.99%
Alaska Communications Systems Group Inc. 294,983 4,672,531
- -----------------------------------------------------------------------
Cincinnati Bell Inc.(b) 896,625 5,182,492
- -----------------------------------------------------------------------
NTELOS Holdings Corp.(a) 309,833 8,563,784
=======================================================================
18,418,807
=======================================================================
INTERNET SOFTWARE & SERVICES-2.50%
Ariba, Inc.(b) 653,579 6,476,968
- -----------------------------------------------------------------------
CyberSource Corp.(b) 462,479 5,577,497
- -----------------------------------------------------------------------
DealerTrack Holdings Inc.(b) 90,827 3,346,066
=======================================================================
15,400,531
=======================================================================
INVESTMENT BANKING & BROKERAGE-0.93%
CMET Finance Holdings, Inc. (Acquired
12/08/03; Cost $4,4800,000)(b)(c)(d) 44,800 762,496
- -----------------------------------------------------------------------
Thomas Weisel Partners Group, Inc.(b) 300,101 4,996,682
=======================================================================
5,759,178
=======================================================================
IT CONSULTING & OTHER SERVICES-0.18%
EnerNOC, Inc.(b) 29,085 1,109,011
=======================================================================
LEISURE PRODUCTS-0.65%
Smith & Wesson Holding Corp.(a)(b) 238,851 4,000,754
=======================================================================
</Table>
5
AIM Small Cap Equity Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES-1.86%
Bio-Rad Laboratories, Inc.-Class A(b) 90,213 $ 6,817,396
- -----------------------------------------------------------------------
Dionex Corp.(b) 65,629 4,659,003
=======================================================================
11,476,399
=======================================================================
MANAGED HEALTH CARE-0.81%
Healthspring, Inc.(b) 261,100 4,976,566
=======================================================================
METAL & GLASS CONTAINERS-1.82%
AptarGroup, Inc. 177,876 6,325,270
- -----------------------------------------------------------------------
Bway Holding Co.(b) 330,681 4,894,079
=======================================================================
11,219,349
=======================================================================
MOVIES & ENTERTAINMENT-0.97%
World Wrestling Entertainment, Inc. 372,459 5,955,619
=======================================================================
MULTI-UTILITIES-0.43%
Avista Corp. 124,064 2,673,579
=======================================================================
OFFICE REIT'S-0.71%
Alexandria Real Estate Equities, Inc. 45,033 4,360,095
=======================================================================
OFFICE SERVICES & SUPPLIES-0.32%
PeopleSupport Inc.(b) 175,478 1,991,675
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-2.42%
NATCO Group Inc.-Class A(b) 169,167 7,788,449
- -----------------------------------------------------------------------
Oceaneering International, Inc.(b) 135,920 7,154,829
=======================================================================
14,943,278
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.11%
Comstock Resources, Inc.(b) 217,445 6,516,827
- -----------------------------------------------------------------------
Penn Virginia Corp. 161,400 6,488,280
=======================================================================
13,005,107
=======================================================================
OIL & GAS REFINING & MARKETING-1.21%
Alon USA Energy, Inc. 169,155 7,444,512
=======================================================================
PACKAGED FOODS & MEATS-3.16%
Flowers Foods, Inc. 202,363 6,750,830
- -----------------------------------------------------------------------
Imperial Sugar Co. 34,927 1,075,402
- -----------------------------------------------------------------------
J & J Snack Foods Corp. 161,461 6,093,538
- -----------------------------------------------------------------------
TreeHouse Foods, Inc.(b) 209,284 5,569,047
=======================================================================
19,488,817
=======================================================================
PHARMACEUTICALS-1.94%
Axcan Pharma Inc. (Canada)(b) 370,873 7,168,975
- -----------------------------------------------------------------------
ViroPharma Inc.(b) 348,863 4,814,310
=======================================================================
11,983,285
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
PROPERTY & CASUALTY INSURANCE-2.96%
Assured Guaranty Ltd. 243,806 $ 7,206,905
- -----------------------------------------------------------------------
Fpic Insurance Group, Inc.(b) 151,883 6,192,270
- -----------------------------------------------------------------------
Philadelphia Consolidated Holding Corp.(b) 115,456 4,826,061
=======================================================================
18,225,236
=======================================================================
PUBLISHING-0.87%
GateHouse Media, Inc.(a) 288,293 5,347,835
=======================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.89%
Jones Lang LaSalle Inc. 48,614 5,517,689
=======================================================================
REGIONAL BANKS-4.35%
Alabama National BanCorp. 72,393 4,476,783
- -----------------------------------------------------------------------
Columbia Banking System, Inc. 129,730 3,794,602
- -----------------------------------------------------------------------
First Financial Bankshares, Inc.(a) 77,551 3,009,754
- -----------------------------------------------------------------------
Provident Bankshares Corp. 121,112 3,970,051
- -----------------------------------------------------------------------
Sterling Bancshares, Inc. 366,531 4,145,466
- -----------------------------------------------------------------------
Sterling Financial Corp. 128,818 3,727,993
- -----------------------------------------------------------------------
United Community Banks, Inc. 142,004 3,676,484
=======================================================================
26,801,133
=======================================================================
RESTAURANTS-1.90%
IHOP Corp. 105,727 5,754,721
- -----------------------------------------------------------------------
Papa John's International, Inc.(b) 208,149 5,986,365
=======================================================================
11,741,086
=======================================================================
SEMICONDUCTOR EQUIPMENT-1.54%
ATMI, Inc.(b) 203,270 6,098,100
- -----------------------------------------------------------------------
Nextest Systems Corp.(b) 249,447 3,409,941
=======================================================================
9,508,041
=======================================================================
SEMICONDUCTORS-3.11%
DSP Group, Inc.(b) 305,043 6,244,230
- -----------------------------------------------------------------------
Power Integrations, Inc.(b) 168,305 4,409,591
- -----------------------------------------------------------------------
Semtech Corp.(b) 329,709 5,713,857
- -----------------------------------------------------------------------
Supertex, Inc.(a)(b) 89,156 2,794,149
=======================================================================
19,161,827
=======================================================================
SPECIALIZED REIT'S-1.23%
LaSalle Hotel Properties 106,697 4,632,784
- -----------------------------------------------------------------------
Universal Health Realty Income Trust 88,232 2,938,125
=======================================================================
7,570,909
=======================================================================
SPECIALTY CHEMICALS-1.90%
A. Schulman, Inc. 202,416 4,924,782
- -----------------------------------------------------------------------
H.B. Fuller Co. 227,543 6,801,260
=======================================================================
11,726,042
=======================================================================
STEEL-1.04%
Carpenter Technology Corp. 49,329 6,428,062
=======================================================================
</Table>
6
AIM Small Cap Equity Fund
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
TECHNOLOGY DISTRIBUTORS-0.90%
Agilysys, Inc. 246,531 $ 5,546,948
=======================================================================
THRIFTS & MORTGAGE FINANCE-0.54%
FirstFed Financial Corp.(b) 58,383 3,312,068
=======================================================================
TRADING COMPANIES & DISTRIBUTORS-2.38%
UAP Holding Corp. 260,975 7,865,787
- -----------------------------------------------------------------------
Williams Scotsman International Inc.(b) 285,072 6,787,564
=======================================================================
14,653,351
=======================================================================
TRUCKING-1.79%
Landstar System, Inc. 96,894 4,675,136
- -----------------------------------------------------------------------
Marten Transport, Ltd.(b) 353,408 6,364,878
=======================================================================
11,040,014
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $500,709,855) 606,420,790
=======================================================================
</Table>
<Table>
SHARES VALUE
- -----------------------------------------------------------------------
<Caption>
MONEY MARKET FUNDS-1.49%
Liquid Assets Portfolio-Institutional
Class(e) 4,585,520 $ 4,585,520
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 4,585,520 4,585,520
=======================================================================
Total Money Market Funds (Cost
$9,171,040) 9,171,040
=======================================================================
TOTAL INVESTMENTS-99.83% (Cost $509,880,895) 615,591,830
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.17% 1,024,219
=======================================================================
NET ASSETS-100.00% $616,616,049
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
* Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
(a) All or a portion of this security was out on loan at June 30, 2007.
(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 June 30, 2007 represented 0.12% of the Fund's
Net Assets. This security is considered to be illiquid. The Fund is limited
to investing 15% of net assets in illiquid securities at the time of
purchase.
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at June 30,
2007 represented 0.12% of the Fund's Net Assets. See Note 1A.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
7
AIM Small Cap Equity Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost $500,709,855) $606,420,790
- -----------------------------------------------------------
Investments in affiliated money market funds
(Cost $9,171,040) 9,171,040
===========================================================
Total investments (Cost $509,880,895) 615,591,830
===========================================================
Cash 14,752
- -----------------------------------------------------------
Receivables for:
Investments sold 8,077,503
- -----------------------------------------------------------
Fund shares sold 421,418
- -----------------------------------------------------------
Dividends 536,427
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 71,795
- -----------------------------------------------------------
Other assets 48,187
===========================================================
Total assets 624,761,912
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 6,548,396
- -----------------------------------------------------------
Fund shares reacquired 759,135
- -----------------------------------------------------------
Dividends 11
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 128,310
- -----------------------------------------------------------
Accrued interest expense 80,214
- -----------------------------------------------------------
Accrued distribution fees 251,987
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 5,005
- -----------------------------------------------------------
Accrued transfer agent fees 274,193
- -----------------------------------------------------------
Accrued operating expenses 98,612
===========================================================
Total liabilities 8,145,863
===========================================================
Net assets applicable to shares outstanding $616,616,049
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $464,165,848
- -----------------------------------------------------------
Undistributed net investment income (loss) (3,519,157)
- -----------------------------------------------------------
Undistributed net realized gain 50,258,423
- -----------------------------------------------------------
Unrealized appreciation 105,710,935
===========================================================
$616,616,049
___________________________________________________________
===========================================================
NET ASSETS:
Class A $352,410,314
___________________________________________________________
===========================================================
Class B $137,657,625
___________________________________________________________
===========================================================
Class C $ 62,194,055
___________________________________________________________
===========================================================
Class R $ 27,570,978
___________________________________________________________
===========================================================
Institutional Class $ 36,783,077
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 26,462,055
___________________________________________________________
===========================================================
Class B 10,982,726
___________________________________________________________
===========================================================
Class C 4,963,501
___________________________________________________________
===========================================================
Class R 2,101,604
___________________________________________________________
===========================================================
Institutional Class 2,718,272
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 13.32
- -----------------------------------------------------------
Offering price per share
(Net asset value of $13.32 divided by
94.50%) $ 14.10
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 12.53
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 12.53
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 13.12
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 13.53
___________________________________________________________
===========================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8
AIM Small Cap Equity Fund
STATEMENT OF OPERATIONS
For the six months ended June 30, 2007
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 1,924,435
- -------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $45,252) 292,645
=========================================================================
Total investment income 2,217,080
=========================================================================
EXPENSES:
Advisory fees 2,237,424
- -------------------------------------------------------------------------
Administrative services fees 80,378
- -------------------------------------------------------------------------
Custodian fees 16,841
- -------------------------------------------------------------------------
Distribution fees:
Class A 354,492
- -------------------------------------------------------------------------
Class B 648,832
- -------------------------------------------------------------------------
Class C 290,383
- -------------------------------------------------------------------------
Class R 69,611
- -------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 725,939
- -------------------------------------------------------------------------
Transfer agent fees -- Institutional 245
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 15,140
- -------------------------------------------------------------------------
Other 137,634
=========================================================================
Total expenses 4,576,919
=========================================================================
Less: Fees waived and expense offset arrangements (327,609)
=========================================================================
Net expenses 4,249,310
=========================================================================
Net investment income (loss) (2,032,230)
=========================================================================
REALIZED AND UNREALIZED GAIN FROM:
Net realized gain (includes net gains from securities sold
to affiliates of $153,017) 44,280,145
=========================================================================
Change in net unrealized appreciation 769,650
=========================================================================
Net realized and unrealized gain 45,049,795
=========================================================================
Net increase in net assets resulting from operations $43,017,565
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9
AIM Small Cap Equity Fund
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2007 and the year ended December 31, 2006
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2007 2006
- --------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (2,032,230) $ (3,914,439)
- --------------------------------------------------------------------------
Net realized gain 44,280,145 75,649,095
- --------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) 769,650 (2,727,353)
==========================================================================
Net increase in net assets resulting
from operations 43,017,565 69,007,303
==========================================================================
Distributions to shareholders from net
realized gains:
Class A -- (36,462,500)
- --------------------------------------------------------------------------
Class B -- (19,731,723)
- --------------------------------------------------------------------------
Class C -- (8,937,506)
- --------------------------------------------------------------------------
Class R -- (4,122,500)
- --------------------------------------------------------------------------
Institutional Class -- (2,432,755)
==========================================================================
Decrease in net assets resulting from
distributions -- (71,686,984)
==========================================================================
Share transactions-net:
Class A 83,230,737 27,183,520
- --------------------------------------------------------------------------
Class B 1,212,936 (5,223,138)
- --------------------------------------------------------------------------
Class C 415,243 2,793,822
- --------------------------------------------------------------------------
Class R (2,682,668) 10,834,095
- --------------------------------------------------------------------------
Institutional Class 17,152,683 13,316,914
==========================================================================
Net increase in net assets resulting
from share transactions 99,328,931 48,905,213
==========================================================================
Net increase in net assets 142,346,496 46,225,532
==========================================================================
NET ASSETS:
Beginning of period 474,269,553 428,044,021
==========================================================================
End of period (including undistributed net
investment income (loss) of $(3,519,157)
and $(1,486,927), respectively) $616,616,049 $474,269,553
__________________________________________________________________________
==========================================================================
</Table>
10
AIM Small Cap Equity Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Equity Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware statutory trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of seven separate portfolios,
each authorized to issue an unlimited number of shares of beneficial interest.
The Fund currently offers multiple classes of shares. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund.
The Fund's primary investment objective is long-term growth of capital.
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
prices furnished by independent pricing services or market makers. When
such securities are valued by an independent pricing service they may be
considered fair valued. 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 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 open-end and closed-end registered
investment companies that trade on an exchange are valued at the 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.
Debt obligations (including convertible bonds) and unlisted equities 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, including commercial paper,
having 60 days or less to maturity are recorded at amortized cost which
approximates value. Debt securities are subject to interest rate and credit
risks in addition, all debt securities involve some risk of default with
respect to interest and/or principal payments.
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. Foreign securities may have additional risks including exchange
rate changes, potential for sharply devalued currencies and high inflation,
political and economical upheaval, the relative lack of issuer information,
relatively low market liquidity and the potential lack of strict financial
and accounting controls and standards.
Securities for which market prices are not provided by any of the above
methods may be 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.
Valuations change in response to many factors including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions and market
liquidity.
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.
The Fund may receive proceeds from litigation settlements involving Fund
investments. Any proceeds received are included in the Statement of
Operations as realized gain/loss for investments no longer held and as
unrealized gain/loss for investments still held.
11
AIM Small Cap Equity Fund
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
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.
The Fund may invest in foreign securities which may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion
of which may be recoverable. Taxes are accrued based on the Fund's current
interpretation of tax regulations and rates that exist in the foreign
markets in which the Fund invests.
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.
Fluctuations in the value of these contracts are recorded as unrealized
appreciation (depreciation) until the contracts are closed. When these
contracts are closed, realized gains (losses) are recorded. 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.
12
AIM Small Cap Equity 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 0.85% of the
Fund's average daily net assets.
Effective July 1, 2007, the Trustees approved a reduced contractual advisory
fee schedule for the Fund. Prior to July 1, 2007 AIM had contractually waived
advisory fees to the same reduced advisory fee schedule. Under the terms of the
investment advisory agreement, the Fund will pay an advisory fee to AIM based on
the following annual rate of the Fund's average daily net assets as follows:
<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>
Effective July 1, 2007, AIM has contractually agreed through at least June
30, 2008 to waive 100% 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). Prior to July 1, 2007 AIM had
voluntarily agreed to waive 25% of the advisory fee AIM receives from affiliated
money market funds on investments by the Fund in such affiliated Money Market
funds.
For the six months ended June 30, 2007, AIM waived advisory fees of
$301,152.
At the request of the Trustees of the Trust, INVESCO PLC ("INVESCO")
(formerly "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. These
expenses along with the related expense reimbursement are included in the
Statement of Operations. For the six months ended June 30, 2007, INVESCO did not
reimburse any expenses of the Fund.
The Trust has entered into a master administrative services agreement with
AIM pursuant to which the Fund has agreed to pay AIM for certain administrative
costs incurred in providing accounting services, to the Fund. For the six months
ended June 30, 2007, expenses incurred under the agreement are shown in the
Statement of Operations as administrative services fees.
The Trust has entered into a transfer agency and service agreement with AIM
Investment Services, Inc. ("AIS") pursuant to which the Fund has agreed to pay
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 six months ended June 30,
2007, expenses incurred under the agreement are shown in the Statement of
Operations as transfer agent fees.
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 Plan payments, up to 0.25% of the
average daily net assets of each class of 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.
For the six months ended June 30, 2007, expenses incurred under the Plans are
shown in the Statement of Operations as distribution fees.
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 six
months ended June 30, 2007, ADI advised the Fund that it retained $30,148 in
front-end sales commissions from the sale of Class A shares and $191, $39,554,
$3,102 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.
13
AIM Small Cap Equity 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 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 six months
ended June 30, 2007. During the period each investment maintained a $1.00 net
asset value, as such there is no realized gain/(loss) and no change in
unrealized appreciation/(depreciation).
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME
- ----------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 6,551,842 $ 42,328,261 $ (44,294,583) $4,585,520 $124,001
- ----------------------------------------------------------------------------------------------------------------
Premier
Portfolio-Institutional
Class 6,551,842 42,328,261 (44,294,583) 4,585,520 123,392
================================================================================================================
Subtotal $13,103,684 $ 84,656,522 $ (88,589,166) $9,171,040 $247,393
================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
VALUE PURCHASES PROCEEDS VALUE DIVIDEND
FUND 12/31/06 AT COST FROM SALES 06/30/07 INCOME*
- ----------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 3,799,849 $ 29,203,146 $ (33,002,995) $ -- $ 22,620
- ----------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 3,799,849 29,203,146 (33,002,995) -- 22,632
================================================================================================================
Subtotal $ 7,599,698 $ 58,406,292 $ (66,005,990) $ -- $ 45,252
================================================================================================================
Total Investments in
Affiliates $20,703,382 $143,062,814 $(154,595,156) $9,171,040 $292,645
________________________________________________________________________________________________________________
================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2007, the Fund
engaged in securities sales of $2,106,225, which resulted in net realized gains
of $153,017, and securities purchases of $629,694.
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 used to offset custodian fees. For the six months ended
June 30, 2007, the Fund received credits from these arrangements, which resulted
in the reduction of the Fund's total expenses of $26,457.
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 certain Trustees and Officers of the Fund. 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, certain 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 six months ended June 30, 2007, the Fund paid legal fees of
$3,134 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.
14
AIM Small Cap Equity Fund
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 participates 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 six months ended June 30, 2007, 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 June 30, 2007, there were no securities on loan to brokers. For the six
months ended June 30, 2007, the Fund received dividends on cash collateral
investments of $45,252 for securities lending transactions, which are net of
compensation to counterparties.
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2006.
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 six months ended June 30, 2007 was $218,618,323 and
$133,662,761, respectively. For interim reporting periods, the cost of
investments for tax purposes includes reversals of certain tax items, such as
wash sales, that have occurred since the prior fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $122,857,856
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (17,217,603)
==============================================================================
Net unrealized appreciation of investment securities $105,640,253
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $509,951,577.
</Table>
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 and under certain
circumstances load waiver shares may be subject to a CDSC. Class B shares and
Class C shares
15
AIM Small Cap Equity Fund
are sold with a CDSC. Class R shares and Institutional Class shares are sold at
net asset value. Under certain circumstances, Class R shares are subject to a
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
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007(a) DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,281,573 $ 16,181,764 4,794,651 $ 64,276,733
- ----------------------------------------------------------------------------------------------------------------------
Class B 255,759 3,105,900 1,279,476 16,202,198
- ----------------------------------------------------------------------------------------------------------------------
Class C 245,327 2,969,602 859,764 11,071,910
- ----------------------------------------------------------------------------------------------------------------------
Class R 302,789 3,754,356 1,190,165 15,898,736
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class 1,344,954 17,246,944 839,404 11,343,836
======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 2,802,700 34,753,476
- ----------------------------------------------------------------------------------------------------------------------
Class B -- -- 1,609,455 18,862,808
- ----------------------------------------------------------------------------------------------------------------------
Class C -- -- 714,847 8,378,003
- ----------------------------------------------------------------------------------------------------------------------
Class R -- -- 336,500 4,118,765
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 193,536 2,432,755
======================================================================================================================
Issued in connection with acquisitions:(b)
Class A 9,152,387 118,894,223 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class B 1,921,059 23,515,193 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class C 818,718 10,022,526 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class R -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 474,566 6,141,108 444,500 5,927,010
- ----------------------------------------------------------------------------------------------------------------------
Class B (503,547) (6,141,108) (465,030) (5,927,010)
======================================================================================================================
Reacquired:
Class A (4,536,005) (57,986,358) (5,808,551) (77,773,699)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,597,881) (19,267,049) (2,694,084) (34,361,134)
- ----------------------------------------------------------------------------------------------------------------------
Class C (1,051,366) (12,576,885) (1,300,311) (16,656,091)
- ----------------------------------------------------------------------------------------------------------------------
Class R (516,184) (6,437,024) (682,383) (9,183,406)
- ----------------------------------------------------------------------------------------------------------------------
Institutional Class (6,970) (94,261) (34,877) (459,677)
======================================================================================================================
7,585,179 $ 99,328,931 4,079,762 $ 48,905,213
______________________________________________________________________________________________________________________
======================================================================================================================
</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 17% of
the outstanding shares of the Fund. ADI has an agreement with these
entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may
make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, AIM and/or AIM affiliates
including but not limited to services such as securities brokerage,
distribution, third party record keeping and account servicing. The
Trust has no knowledge as to whether all or any portion of the shares
owned of record by these entities are also owned beneficially. In
addition, 6% 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.
(b) As of the opening of business on April 23, 2007, the Fund acquired all
the net assets of AIM Opportunities I Fund pursuant to a plan of
reorganization approved by the Trustees of the Fund on November 8, 2006
and by the shareholders of AIM Opportunities I Fund on April 12, 2007.
The acquisition was accomplished by a tax-free exchange of 11,892,164
shares of the Fund for 11,952,567 shares outstanding of AIM
Opportunities I Fund as of the close of business on April 20, 2007. Each
class of shares of AIM Opportunities I Fund was exchanged for the like
class of shares of the Fund based on the relative net asset value of AIM
Small Cap Equity as of the close of business, April 20, 2007. AIM
Opportunities I Fund's net assets at that date of $152,431,942 including
$24,404,550 of unrealized appreciation, were combined with those of the
Fund. The net assets of the Fund immediately before the acquisition were
$480,206,915. The net assets of the Fund immediately following the
acquisition were $632,638,857.
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. As required the Fund adopted FIN 48
provisions during the fiscal half year ending June 30, 2007. The adoption of
these provisions has no impact on these financial statements.
16
AIM Small Cap Equity 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
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.24 $ 12.26 $ 12.80 $ 12.03 $ 8.23 $ 10.19
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.07)(a) (0.10) (0.09)(a) (0.09)(a) (0.05)(a)
- ------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.11 2.16 0.96 1.22 3.89 (1.91)
========================================================================================================================
Total from investment operations 1.08 2.09 0.86 1.13 3.80 (1.96)
========================================================================================================================
Less distributions from net realized
gains -- (2.11) (1.40) (0.36) -- --
========================================================================================================================
Net asset value, end of period $ 13.32 $ 12.24 $ 12.26 $ 12.80 $ 12.03 $ 8.23
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 8.82% 16.83% 6.58% 9.45% 46.17% (19.23)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $352,410 $245,868 $218,915 $247,581 $266,284 $140,652
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.37%(c) 1.49% 1.51% 1.53% 1.77% 1.67%
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.48%(c) 1.60% 1.62% 1.64% 1.77% 1.67%
========================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.53)%(c) (0.55)% (0.84)% (0.77)% (0.89)% (0.54)%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(d) 26% 56% 52% 124% 112% 117%
________________________________________________________________________________________________________________________
========================================================================================================================
</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 annualized and based on average daily net assets of
$285,943,845.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $138,473,024 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
Opportunities I Fund into the Fund.
<Table>
<Caption>
CLASS B
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.56 $ 11.77 $ 12.42 $ 11.77 $ 8.11 $ 10.11
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.17)(a) (0.19) (0.18)(a) (0.15)(a) (0.11)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.05 2.07 0.94 1.19 3.81 (1.89)
=======================================================================================================================
Total from investment operations 0.97 1.90 0.75 1.01 3.66 (2.00)
=======================================================================================================================
Less distributions from net realized
gains -- (2.11) (1.40) (0.36) -- --
=======================================================================================================================
Net asset value, end of period $ 12.53 $ 11.56 $ 11.77 $ 12.42 $ 11.77 $ 8.11
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 8.39% 15.90% 5.89% 8.64% 45.13% (19.78)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $137,658 $126,111 $131,547 $156,450 $177,811 $99,551
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 2.12%(c) 2.24% 2.21% 2.27% 2.42% 2.32%
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.23%(c) 2.35% 2.32% 2.29% 2.42% 2.32%
=======================================================================================================================
Ratio of net investment income
(loss) to average net assets (1.28)%(c) (1.30)% (1.54)% (1.51)% (1.54)% (1.19)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(d) 26% 56% 52% 124% 112% 117%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</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 annualized and based on average daily net assets of
$130,841,762.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $138,473,024 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
Opportunities I Fund into the Fund.
17
AIM Small Cap Equity Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------
2007 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.56 $ 11.76 $ 12.42 $ 11.77 $ 8.11 $ 10.10
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.17)(a) (0.19) (0.18)(a) (0.15)(a) (0.11)(a)
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.05 2.08 0.93 1.19 3.81 (1.88)
===================================================================================================================
Total from investment operations 0.97 1.91 0.74 1.01 3.66 (1.99)
===================================================================================================================
Less distributions from net realized
gains -- (2.11) (1.40) (0.36) -- --
===================================================================================================================
Net asset value, end of period $ 12.53 $ 11.56 $ 11.76 $ 12.42 $ 11.77 $ 8.11
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) 8.39% 16.00% 5.81% 8.64% 45.13% (19.70)%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $62,194 $57,221 $55,009 $65,792 $75,763 $41,132
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 2.12%(c) 2.24% 2.21% 2.27% 2.42% 2.32%
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.23%(c) 2.35% 2.32% 2.29% 2.42% 2.32%
===================================================================================================================
Ratio of net investment income
(loss) to average net assets (1.28)%(c) (1.30)% (1.54)% (1.51)% (1.54)% (1.19)%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate(d) 26% 56% 52% 124% 112% 117%
___________________________________________________________________________________________________________________
===================================================================================================================
</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 annualized and based on average daily net assets of
$58,557,927.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $138,473,024 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
Opportunities I Fund into the Fund.
<Table>
<Caption>
CLASS R
----------------------------------------------------------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED YEAR ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, --------------------------------------------- DECEMBER 31,
2007 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.07 $ 12.15 $ 12.71 $ 11.99 $ 8.22 10.58
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.11)(a) (0.10) (0.12)(a) (0.11)(a) (0.04)(a)
- ------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both
realized and unrealized) 1.10 2.14 0.94 1.20 3.88 (2.32)
========================================================================================================================
Total from investment operations 1.05 2.03 0.84 1.08 3.77 (2.36)
========================================================================================================================
Less distributions from net realized
gains -- (2.11) (1.40) (0.36) -- --
========================================================================================================================
Net asset value, end of period $ 13.12 $ 12.07 $ 12.15 $ 12.71 $11.99 $ 8.22
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 8.70% 16.47% 6.48% 9.06% 45.86% 22.31%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $27,571 $27,946 $17,862 $11,817 $2,502 $ 55
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.62%(c) 1.74% 1.71% 1.77% 1.92% 1.92%(d)
- ------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.73%(c) 1.85% 1.82% 1.79% 1.92% 1.92%(d)
========================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.78)%(c) (0.80)% (1.04)% (1.01)% (1.04)% (0.78)%(d)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(e) 26% 56% 52% 124% 112% 117%
________________________________________________________________________________________________________________________
========================================================================================================================
</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 annualized and based on average daily net assets of
$28,075,178.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $138,473,024 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
Opportunities I Fund into the Fund.
18
AIM Small Cap Equity Fund
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
-----------------------------------------------
APRIL 29, 2005
SIX MONTHS (DATE SALES
ENDED YEAR ENDED COMMENCED) TO
JUNE 30, DECEMBER 31, DECEMBER 31,
2007 2006 2005
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.40 $ 12.33 $11.69
- -------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00(a) 0.01(a) (0.01)
- -------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.13 2.17 2.05
=============================================================================================================
Total from investment operations 1.13 2.18 2.04
=============================================================================================================
Less distributions from net realized gains -- (2.11) (1.40)
=============================================================================================================
Net asset value, end of period $ 13.53 $ 12.40 $12.33
_____________________________________________________________________________________________________________
=============================================================================================================
Total return(b) 9.11% 17.45% 17.31%
_____________________________________________________________________________________________________________
=============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $36,783 $17,122 $4,712
_____________________________________________________________________________________________________________
=============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.83%(c) 0.90% 0.87%(d)
- -------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.94%(c) 1.01% 0.98%(d)
=============================================================================================================
Ratio of net investment income (loss) to average net assets 0.01%(c) 0.04% (0.20)%(d)
_____________________________________________________________________________________________________________
=============================================================================================================
Portfolio turnover rate(e) 26% 56% 52%
_____________________________________________________________________________________________________________
=============================================================================================================
</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 annualized and based on average daily net assets of
$27,396,979.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending June 30, 2007, the
portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $138,473,024 in the effort to
realign the Fund's portfolio holdings after the reorganization of AIM
Opportunities I Fund into the Fund.
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 July 6, 2007, the Securities and Exchange Commission ("SEC") published notice
of two proposed distribution plans ("Distribution Plans") for the distribution
of monies placed into two separate Fair Funds created pursuant to a settlement
reached on October 8, 2004 between Invesco Funds Group, Inc. ("IFG"), A I M
Advisors, Inc. ("AIM") and A I M Distributors, Inc. and the SEC (the "Order").
One of the Fair Funds consists of $325 million, plus interest and any
contributions by other settling parties, for distribution to shareholders of
certain mutual funds formerly advised by IFG who may have been harmed by market
timing and related activity. The second Fair Fund consists of $50 million, plus
interest and any contributions by other settling parties, for distribution to
shareholders of mutual funds advised by AIM who may have been harmed by market
timing and related activity. Comments on the Distribution Plans are due no later
than August 6, 2007. After such comment period, the Distribution Plans will be
submitted to the SEC for final approval. Distributions from the Fair Funds will
begin after the SEC finally approves the Distribution Plans. The proposed
Distribution Plans provide for distribution to all eligible investors, for the
periods spanning January 1, 2000 through July 31, 2003 (for the IFG Fair Fund)
and January 1, 2001 through September 30, 2003 (for the AIM Fair Fund), their
proportionate share of the applicable Fair Fund to compensate such investors for
injury they may have suffered as a result of market timing in the affected
funds. The Distribution Plans include a provision for any residual amounts in
the Fair Funds to be distributed in the future to the affected funds. Because
the Distribution Plans have not received final approval from the SEC and
distribution of the Fair Funds has not yet commenced, management of AIM and the
Fund are unable to estimate the amount of distribution to be made to the Fund,
if any.
At the request of the trustees of the AIM Funds, INVESCO PLC ("INVESCO")
(formerly AMVESCAP PLC), 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
19
AIM Small Cap Equity Fund
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
and an "administrative assessment," to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. By agreement with the Commissioner of Securities, AIM's time to respond
to that Order has been indefinitely suspended.
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; 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.
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 INVESCO'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 INVESCO 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.
20
AIM Small Cap Equity Fund
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur together with the amount you invested, to this information to compare the ongoing
two types of costs: (1) transaction costs, estimate the expenses that you paid over costs of investing in the Fund and other
which may include sales charges (loads) on the period. Simply divide your account funds. To do so, compare this 5%
purchase payments or contingent deferred value by $1,000 (for example, an $8,600 hypothetical example with the 5%
sales charges on redemptions, and account value divided by $1,000 = 8.6), hypothetical examples that appear in the
redemption fees, if any; and (2) ongoing then multiply the result by the number in shareholder reports of the other funds.
costs, including management fees; the table under the heading entitled
distribution and/or service (12b-1) fees; "Actual Expenses Paid During Period" to Please note that the expenses shown in
and other Fund expenses. This example is estimate the expenses you paid on your the table are meant to highlight your
intended to help you understand your account during this period. ongoing costs only and do not reflect any
ongoing costs (in dollars) of investing in transaction costs, such as sales charges
the Fund and to compare these costs with HYPOTHETICAL EXAMPLE FOR COMPARISON (loads) on purchase payments, contingent
ongoing costs of investing in other mutual PURPOSES deferred sales charges on redemptions, and
funds. The example is based on an redemption fees, if any. Therefore, the
investment of $1,000 invested at the The table below also provides information hypothetical information is useful in
beginning of the period and held for the about hypothetical account values and comparing ongoing costs only, and will not
entire period January 1, 2007, through hypothetical expenses based on the Fund's help you determine the relative total
June 30, 2007. actual expense ratio and an assumed rate costs of owning different funds. In
of return of 5% per year before expenses, addition, if these transaction costs were
ACTUAL EXPENSES which is not the Fund's actual return. included, your costs would have been
higher.
The table below provides information about The hypothetical account values and
actual account values and actual expenses. expenses may not be used to estimate the
You may use the information in this table, actual ending account balance or expenses
you paid for the period. You may use
====================================================================================================================================
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
A $1,000.00 $1,088.20 $ 7.09 $1,018.00 $ 6.85 1.37%
B 1,000.00 1,083.90 10.95 1,014.28 10.59 2.12
C 1,000.00 1,083.90 10.95 1,014.28 10.59 2.12
R 1,000.00 1,087.00 8.38 1,016.76 8.10 1.62
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June 30,
2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
21
AIM Small Cap Equity Fund
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM Committee considers each Sub-Committee's limited to changes to the Fund's
Funds Group is required under the recommendations and makes its own performance, advisory fees, expense
Investment Company Act of 1940 to approve recommendations regarding the performance, limitations and/or fee waivers.
annually the renewal of the AIM Small Cap fees and expenses of the AIM Funds to the
Equity Fund (the Fund) investment advisory full Board. Moreover, the Investments A. NATURE, EXTENT AND QUALITY OF SERVICES
agreement with A I M Advisors, Inc. (AIM). Committee considers each SubCommittee's PROVIDED BY AIM
During contract renewal meetings held on recommendations in making its annual
June 25-27, 2007, the Board as a whole and recommendation to the Board whether to The Board reviewed the advisory services
the disinterested or "independent" approve the continuance of each AIM Fund's provided to the Fund by AIM under the
Trustees, voting separately, approved the investment advisory agreement and Fund's advisory agreement, the performance
continuance of the Fund's investment sub-advisory agreement, if applicable of AIM in providing these services, and
advisory agreement for another year, (advisory agreements), for another year. the credentials and experience of the
effective July 1, 2007. In doing so, the officers and employees of AIM who provide
Board determined that the Fund's advisory The independent Trustees, as mentioned these services. The Board's review of the
agreement is in the best interests of the above, are assisted in their annual qualifications of AIM to provide these
Fund and its shareholders and that the evaluation of the advisory agreements by services included the Board's
compensation to AIM under the Fund's the independent Senior Officer. One consideration of AIM's portfolio and
advisory agreement is fair and reasonable. responsibility of the Senior Officer is to product review process, various back
manage the process by which the AIM Funds' office support functions provided by AIM,
The independent Trustees met separately proposed management fees are negotiated and AIM's equity and fixed income trading
during their evaluation of the Fund's during the annual contract renewal process operations. The Board concluded that the
investment advisory agreement with to ensure that they are negotiated in a nature, extent and quality of the advisory
independent legal counsel from whom they manner which is at arms' length and services provided to the Fund by AIM were
received independent legal advice, and the reasonable. Accordingly, the Senior appropriate and that AIM currently is
independent Trustees also received Officer must either supervise a providing satisfactory advisory services
assistance during their deliberations from competitive bidding process or prepare an in accordance with the terms of the Fund's
the independent Senior Officer, a independent written evaluation. The Senior advisory agreement. In addition, based on
full-time officer of the AIM Funds who Officer has recommended that an their ongoing meetings throughout the year
reports directly to the independent independent written evaluation be provided with the Fund's portfolio managers, the
Trustees. The following discussion more and, upon the direction of the Board, has Board concluded that these individuals are
fully describes the process employed by prepared an independent written competent and able to continue to carry
the Board to evaluate the performance of evaluation. out their responsibilities under the
the AIM Funds (including the Fund) Fund's advisory agreement.
throughout the year and, more During the annual contract renewal
specifically, during the annual contract process, the Board considered the factors In determining whether to continue the
renewal meetings. discussed below under the heading "Factors Fund's advisory agreement, the Board
and Conclusions and Summary of Independent considered the prior relationship between
THE BOARD'S FUND EVALUATION PROCESS Written Fee Evaluation" in evaluating the AIM and the Fund, as well as the Board's
fairness and reasonableness of the Fund's knowledge of AIM's operations, and
The Board's Investments Committee has advisory agreement at the contract renewal concluded that it was beneficial to
established three Sub-Committees which are meetings and at their meetings throughout maintain the current relationship, in
responsible for overseeing the management the year as part of their ongoing part, because of such knowledge. The Board
of a number of the series portfolios of oversight of the Fund. The Fund's advisory also considered the steps that AIM and its
the AIM Funds. This SubCommittee structure agreement was considered separately, affiliates have taken over the last
permits the Trustees to focus on the although the Board also considered the several years to improve the quality and
performance of the AIM Funds that have common interests of all of the AIM Funds efficiency of the services they provide to
been assigned to them. The Sub-Committees in their deliberations. The Board the Funds in the areas of investment
meet throughout the year to review the comprehensively considered all of the performance, product line diversification,
performance of their assigned funds, and information provided to them and did not distribution, fund operations, shareholder
the Sub-Committees review monthly and identify any particular factor that was services and compliance. The Board
quarterly comparative performance controlling. Furthermore, each Trustee may concluded that the quality and efficiency
information and periodic asset flow data have evaluated the information provided of the services AIM and its affiliates
for their assigned funds. These materials differently from one another and provide to the AIM Funds in each of these
are prepared under the direction and attributed different weight to the various areas have generally improved, and support
supervision of the independent Senior factors. The Trustees recognized that the the Board's approval of the continuance of
Officer. Over the course of each year, the advisory arrangements and resulting the Fund's advisory agreement.
SubCommittees meet with portfolio managers advisory fees for the Fund and the other
for their assigned funds and other members AIM Funds are the result of years of B. FUND PERFORMANCE
of management and review with these review and negotiation between the
individuals the performance, investment Trustees and AIM, that the Trustees may The Board compared the Fund's performance
objective(s), policies, strategies and focus to a greater extent on certain during the past one, three and five
limitations of these funds. aspects of these arrangements in some calendar years to the performance of funds
years than others, and that the Trustees' in the Fund's Lipper peer group that are
In addition to their meetings deliberations and conclusions in a not managed by AIM, and against the
throughout the year, the Sub-Committees particular year may be based in part on performance of all funds in the Lipper
meet at designated contract renewal their deliberations and conclusions of Small-Cap Core Funds Index. The Board also
meetings each year to conduct an in-depth these same arrangements throughout the reviewed the methodology used by Lipper to
review of the performance, fees and year and in prior years. identify the Fund's peers. The Board noted
expenses of their assigned funds. During that the Fund's performance was above the
the contract renewal process, the Trustees FACTORS AND CONCLUSIONS AND SUMMARY OF median performance of its peers for the
receive comparative performance and fee INDEPENDENT WRITTEN FEE EVALUATION one year period, and below such
data regarding all the AIM Funds prepared performance for the three and five year
by an independent company, Lipper, Inc., The discussion below serves as a summary periods. The Board noted that the Fund's
under the direction and supervision of the of the Senior Officer's independent performance was above the performance of
independent Senior Officer who also written evaluation, as well as a the Index for the one year period, below
prepares a separate analysis of this discussion of the material factors and such performance for the three year period
information for the Trustees. Each related conclusions that formed the basis and comparable to such performance for the
Sub-Committee then makes recommendations for the Board's approval of the Fund's five year period. The Board noted that AIM
to the Investments Committee regarding the advisory agreement. Unless otherwise made changes to the Fund's portfolio
performance, fees and expenses of their stated, information set forth below is as management team in 2004, which appear to
assigned funds. The Investments of June 27, 2007 and does not reflect any be producing encouraging results but need
changes that may have occurred since that more time to be evaluated before a
date, including but not conclusion can be reached that the
(continued)
22
AIM Small Cap Equity Fund
changes have adequately addressed the whether the Fund benefits from such AIM and its affiliates in providing these
Fund's under-performance. The Board also economies of scale through contractual services and the organizational structure
considered the steps AIM has taken over breakpoints in the Fund's advisory fee employed by AIM and its affiliates to
the last several years to improve the schedule or through advisory fee waivers provide these services. The Board also
quality and efficiency of the services or expense limitations. The Board noted considered that these services are
that AIM provides to the AIM Funds. The that the Fund's contractual advisory fee provided to the Fund pursuant to written
Board concluded that AIM continues to be schedule currently does not include any contracts which are reviewed and approved
responsive to the Board's focus on fund breakpoints but that the amendment to the on an annual basis by the Board. The Board
performance. Although the independent Fund's contractual advisory fee schedule concluded that AIM and its affiliates were
written evaluation of the Fund's Senior discussed above provides for seven providing these services in a satisfactory
Officer (discussed below) only considered breakpoints. Based on this information, manner and in accordance with the terms of
Fund performance through the most recent the Board concluded that the Fund's their contracts, and were qualified to
calendar year, the Board also reviewed advisory fees will appropriately reflect continue to provide these services to the
more recent Fund performance and this economies of scale upon the Board's Fund.
review did not change their conclusions. approval of the amendment to the Fund's
contractual advisory fee schedule. The The Board considered the benefits
C. ADVISORY FEES AND FEE WAIVERS Board also noted that the Fund shares realized by AIM as a result of portfolio
directly in economies of scale through brokerage transactions executed through
The Board compared the Fund's contractual lower fees charged by third party service "soft dollar" arrangements. Under these
advisory fee rate to the contractual providers based on the combined size of arrangements, portfolio brokerage
advisory fee rates of funds in the Fund's all of the AIM Funds and affiliates. commissions paid by the Fund and/or other
Lipper peer group that are not managed by funds advised by AIM are used to pay for
AIM, at a common asset level and as of the E. PROFITABILITY AND FINANCIAL RESOURCES research and execution services. The Board
end of the past calendar year. The Board OF AIM noted that soft dollar arrangements shift
noted that the Fund's advisory fee rate the payment obligation for the research
was below the median advisory fee rate of The Board reviewed information from AIM and executions services from AIM to the
its peers. The Board also reviewed the concerning the costs of the advisory and funds and therefore may reduce AIM's
methodology used by Lipper and noted that other services that AIM and its affiliates expenses. The Board also noted that
the contractual fee rates shown by Lipper provide to the Fund and the profitability research obtained through soft dollar
include any applicable long-term of AIM and its affiliates in providing arrangements may be used by AIM in making
contractual fee waivers. The Board also these services. The Board also reviewed investment decisions for the Fund and may
compared the Fund's contractual advisory information concerning the financial therefore benefit Fund shareholders. The
fee rate to the contractual advisory fee condition of AIM and its affiliates. The Board concluded that AIM's soft dollar
rates of other clients of AIM and its Board also reviewed with AIM the arrangements were appropriate. The Board
affiliates with investment strategies methodology used to prepare the also concluded that, based on their review
comparable to those of the Fund, including profitability information. The Board and representations made by AIM, these
two mutual funds advised by AIM and one considered the overall profitability of arrangements were consistent with
mutual fund sub-advised by an AIM AIM, as well as the profitability of AIM regulatory requirements.
affiliate. The Board noted that the Fund's in connection with managing the Fund. The
rate was: (i) the same as the rate for one Board noted that AIM continues to operate The Board considered the fact that the
mutual fund and above the rate for the at a net profit, although increased Fund's uninvested cash and cash collateral
second mutual fund; and (ii) above the expenses in recent years have reduced the from any securities lending arrangements
sub-advisory fee rate for the sub-advised profitability of AIM and its affiliates. may be invested in money market funds
mutual fund. The Board concluded that the Fund's advised by AIM pursuant to procedures
advisory fees were fair and reasonable, approved by the Board. The Board noted
The Board noted that AIM has not and that the level of profits realized by that AIM will receive advisory fees from
proposed any advisory fee waivers or AIM and its affiliates from providing these affiliated money market funds
expense limitations for the Fund. However, services to the Fund was not excessive in attributable to such investments, although
the Board also noted that AIM has light of the nature, quality and extent of AIM has contractually agreed to waive the
recommended that the Board approve an the services provided. The Board advisory fees payable by the Fund with
amendment to the Fund's contractual considered whether AIM is financially respect to its investment of uninvested
advisory fee schedule that would implement sound and has the resources necessary to cash in these affiliated money market
the contractual advisory fee waiver that perform its obligations under the Fund's funds through at least June 30, 2008. The
had been formerly committed to by AIM, advisory agreement, and concluded that AIM Board considered the contractual nature of
which waiver provided for lower effective has the financial resources necessary to this fee waiver and noted that it remains
fee rates at all asset levels than the fulfill these obligations. in effect until at least June 30, 2008.
Fund's current contractual advisory fee The Board concluded that the Fund's
schedule. The Board noted that AIM's F. INDEPENDENT WRITTEN EVALUATION OF THE investment of uninvested cash and cash
recommendation was made in response to the FUND'S SENIOR OFFICER collateral from any securities lending
recommendation of the independent Senior arrangements in the affiliated money
Officer that AIM consider whether the The Board noted that, upon their market funds is in the best interests of
advisory fee waivers for certain equity direction, the Senior Officer of the Fund, the Fund and its shareholders.
AIM Funds, including the Fund, should be who is independent of AIM and AIM's
simplified. The Board concluded that it affiliates, had prepared an independent
would be appropriate to approve the written evaluation to assist the Board in
proposed amendment to the Fund's determining the reasonableness of the
contractual advisory fee schedule and that proposed management fees of the AIM Funds,
it was not necessary at this time to including the Fund. The Board noted that
discuss with AIM whether to implement any they had relied upon the Senior Officer's
fee waivers or expense limitations for the written evaluation instead of a
Fund. competitive bidding process. In
determining whether to continue the Fund's
After taking account of the Fund's advisory agreement, the Board considered
contractual advisory fee rate, as well as the Senior Officer's written evaluation.
the comparative advisory fee information
discussed above, the Board concluded that G. COLLATERAL BENEFITS TO AIM AND ITS
the Fund's advisory fees were fair and AFFILIATES
reasonable.
The Board considered various other
D. ECONOMIES OF SCALE AND BREAKPOINTS benefits received by AIM and its
affiliates resulting from AIM's
The Board considered the extent to which relationship with the Fund, including the
there are economies of scale in AIM's fees received by AIM and its affiliates
provision of advisory services to the for their provision of administrative,
Fund. The Board also considered transfer agency and distribution services
to the Fund. The Board considered the
performance of
23
Supplement to Semiannual Report dated 6/30/07
AIM SMALL CAP EQUITY FUND
INSTITUTIONAL CLASS SHARES ========================================== PLEASE NOTE THAT PAST PERFORMANCE IS
AVERAGE ANNUAL TOTAL RETURNS NOT INDICATIVE OF FUTURE RESULTS. MORE
The following information has been RECENT RETURNS MAY BE MORE OR LESS THAN
prepared to provide Institutional Class For periods ended 6/30/07 THOSE SHOWN. ALL RETURNS ASSUME
shareholders with a performance overview REINVESTMENT OF DISTRIBUTIONS AT NAV.
specific to their holdings. Institutional Inception 9.08% INVESTMENT RETURN AND PRINCIPAL VALUE WILL
Class shares are offered exclusively to 5 Years 12.17 FLUCTUATE SO YOUR SHARES, WHEN REDEEMED,
institutional investors, including defined 1 Year 16.87 MAY BE WORTH MORE OR LESS THAN THEIR
contribution plans that meet certain 6 Months* 9.02 ORIGINAL COST. SEE FULL REPORT FOR
criteria. INFORMATION ON COMPARATIVE BENCHMARKS.
* Cumulative total return that has not PLEASE CONSULT YOUR FUND PROSPECTUS FOR
been annualized MORE INFORMATION. FOR THE MOST CURRENT
========================================== MONTH-END PERFORMANCE, PLEASE CALL
800-451-4246 OR VISIT AIMINVESTMENTS.COM.
INSTITUTIONAL CLASS SHARES' INCEPTION DATE
IS APRIL 29, 2005. 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 AUGUST
31, 2000.
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
NASDAQ Symbol SMEIX DIFFERING SALES CHARGES AND CLASS
========================================== EXPENSES.
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.
[AIM INVESTMENTS LOGO]
AIMinvestments.com SCE-INS-2 A I M Distributors, Inc. --REGISTERED TRADEMARK--
Information about your Fund's expenses
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
ongoing costs, including management fees value divided by $1,000 = 8.6), then you paid for the period. You may use this
and other Fund expenses. This example is multiply the result by the number in the information to compare the ongoing costs
intended to help you understand your table under the heading entitled "Actual of investing in the Fund and other funds.
ongoing costs (in dollars) of investing in Expenses Paid During Period" to estimate To do so, compare this 5% hypothetical
the Fund and to compare these costs with the expenses you paid on your account example with the 5% hypothetical examples
ongoing costs of investing in other mutual during this period. that appear in the shareholder reports of
funds. The example is based on an the other funds.
investment of $1,000 invested at the HYPOTHETICAL EXAMPLE FOR COMPARISON
beginning of the period and held for the PURPOSES Please note that the expenses shown in
entire period January 1, 2007, through the table are meant to highlight your
June 30, 2007. The table below also provides information ongoing costs only. Therefore, the
about hypothetical account values and hypothetical information is useful in
ACTUAL EXPENSES hypothetical expenses based on the Fund's comparing ongoing costs only, and will not
actual expense ratio and an assumed rate help you determine the relative total
The table below provides information about of return of 5% per year before expenses, costs of owning different funds.
actual account values and actual expenses. which is not the Fund's actual return.
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 (1/1/07) (6/30/07)(1) PERIOD(2) (6/30/07) PERIOD(2) RATIO
Institutional $1,000.00 $1,090.20 $4.30 $1,020.68 $4.16 0.83%
(1) The actual ending account value is based on the actual total return of the Fund for the period January 1, 2007, through June 30,
2007, 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.
(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 181/365 to reflect the most recent fiscal half year.
====================================================================================================================================
AIMinvestments.com SCE-INS-2 A I M Distributors, Inc.
[EDELIVERY Fund holdings and proxy voting information
GO PAPERLESS
AIMINVESTMENTS.COM/EDELIVERY The Fund provides a complete list of its holdings four times in
GRAPHIC] each fiscal year, at the quarter-ends. For the second and fourth
quarters, the lists appear in the Fund's semiannual and annual
REGISTER FOR EDELIVERY reports to shareholders. For the first and third quarters, the
Fund files the lists with the Securities and Exchange Commission
eDelivery is the process of receiving your fund and account (SEC) on Form N-Q. The most recent list of portfolio holdings is
information via e-mail. Once your quarterly statements, tax available at AIMinvestments.com. From our home page, click on
forms, fund reports, and prospectuses are available, we will send Products & Performance, then Mutual Funds, then Fund Overview.
you an e-mail notification containing links to these documents. Select your Fund from the drop-down menu and click on Complete
For security purposes, you will need to log in to your account to Quarterly Holdings. Shareholders can also look up the Fund's
view your statements and tax forms. Forms N-Q on the SEC Web site at sec.gov. Copies of the Fund's
Forms N-Q may be reviewed and copied at the SEC Public Reference
WHY SIGN UP? Room in Washington, D.C. You can obtain information on the
operation of the Public Reference Room, including information
Register for eDelivery to: about duplicating fee charges, by calling 202-942-8090 or
800-732-0330, or by electronic request at the following e-mail
o save your Fund the cost of printing and postage. address: publicinfo@sec.gov. The SEC file numbers for the Fund
are 811-01540 and 002-27334.
o reduce the amount of paper you receive.
A description of the policies and procedures that the Fund uses
o gain access to your documents faster by not waiting for the to determine how to vote proxies relating to portfolio
mail. securities is available without charge, upon request, from our
Client Services department at 800-959-4246 or on the AIM Web
o view your documents online anytime at your convenience. site, AIMinvestments.com. On the home page, scroll down and
click on AIM Funds Proxy Policy. The information is also
o save the documents to your personal computer or print them out available on the SEC Web site, sec.gov.
for your records.
Information regarding how the Fund voted proxies related to its
HOW DO I SIGN UP? portfolio securities during the 12 months ended June 30, 2007,
is available at our Web site. Go to AIMinvestments.com, access
It's easy. Just follow these simple steps: the About Us tab, click on Required Notices and then click on
Proxy Voting Activity. Next, select the Fund from the drop-down
1. Log in to your account. menu. The information is also available on the SEC Web site,
sec.gov.
2. Click on the "Service Center" tab.
[AIM
3. Select "Register for eDelivery" and complete the consent SCE-SAR-1 A I M Distributors, Inc. INVESTMENTS
process. LOGO]
- REGISTERED TRADEMARK -
This AIM service is provided by AIM Investment Services, Inc.
ITEM 2. CODE OF ETHICS.
There were no amendments to the Code of Ethics (the "Code") that applies to
the Registrant's Principal Executive Officer ("PEO") and Principal
Financial Officer ("PFO") during the period covered by the report. The
Registrant did not grant any waivers, including implicit waivers, from any
provisions of the Code to the PEO or PFO during the period covered by this
report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Investments in securities of unaffiliated issuers is included as part of
the reports to stockholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) As of June 14, 2007, an evaluation was performed under the supervision and
with the participation of the officers of the Registrant, including the
Principal Executive Officer ("PEO") and Principal Financial Officer
("PFO"), to assess the effectiveness of the Registrant's disclosure
controls and procedures, as that term is defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act"), as amended. Based on that
evaluation, the Registrant's officers, including the PEO and PFO, concluded
that, as of June 14, 2007, the Registrant's disclosure controls and
procedures were reasonably designed to ensure: (1) that information
required to be disclosed by the Registrant on Form N-CSR is recorded,
processed, summarized and reported within the time periods specified by the
rules and forms of the Securities and Exchange Commission; and (2) that
material information relating to the Registrant is made known to the PEO
and PFO as appropriate to allow timely decisions regarding required
disclosure.
(b) There have been no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act) that
occurred during the second fiscal quarter of the period covered by the
report that has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
12(a)(1) Not applicable.
12(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act
of 1940.
12(a)(3) Not applicable.
12(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act
of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AIM Funds Group
By: /s/ Philip A. Taylor
---------------------------------
Philip A. Taylor
Principal Executive Officer
Date: September 7, 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: September 7, 2007
By: /s/ Sidney M. Dilgren
---------------------------------
Sidney M. Dilgren
Principal Financial Officer
Date: September 7, 2007
EXHIBIT INDEX
12(a)(1) Not applicable.
12(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act
of 1940.
12(a)(3) Not applicable.
12(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act
of 1940.