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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-01540
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: 6/30/08
Item 1. Reports to Stockholders.
[INVESCO AIM LOGO] AIM BASIC BALANCED FUND
- SERVICE MARK - Semiannual Report to Shareholders - June 30, 2008
[MOUNTAIN GRAPHIC]
AIM Investments 2 Fund Performance
became INVESCO AIM 3 Letter to Shareholders
on March 31, 2008. 4 Schedule of Investments
13 Financial Statements
For more details, go to 16 Notes to Financial Statements
invescoaim.com 24 Financial Highlights
30 Fund Expenses
31 Approval of Investment Advisory Agreement
34 Results of Proxy
For the most current month-end Fund performance and commentary, please visit
invescoaim.com.
Unless otherwise noted, all data provided by Invesco Aim.
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
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/07 to 6/30/08, at net asset value (NAV).
Performance shown does not include applicable contingent deferred sales charges
(CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares -11.96%
Class B Shares -12.33
Class C Shares -12.32
Class R Shares -12.08
Investor Class Shares -11.96
S&P 500 Index(triangle) (Broad Market Index) -11.90
Custom Basic Balanced Index(square) (Style-Specific Index) -7.75
Lipper Mixed-Asset Target Allocation Moderate Funds Index
(triangle) (Peer Group Index) -6.04
(triangle)Lipper Inc.; (square)Invesco Aim, Lipper Inc.
The S&P 500--REGISTERED TRADEMARK-- Index is a market capitalization-weighted index
covering all major areas of the U.S. economy. It is not the 500 largest companies, but
rather the most widely held 500 companies chosen with respect to market size,
liquidity, and their industry.
The CUSTOM BASIC BALANCED INDEX is an index created by Invesco Aim to benchmark the
Fund. The index consists of the following indexes: 60% Russell 1000--REGISTERED
TRADEMARK-- Value Index and 40% Lehman Brothers U.S. Aggregate Bond Index. The Russell
1000--REGISTERED TRADEMARK-- Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values. The
Russell 1000 Value Index is a trademark/service mark of the Frank Russell Company.
Russell--REGISTERED TRADEMARK-- is a trademark of the Frank Russell Company. The Lehman
Brothers U.S. Aggregate Bond Index covers U.S. investment-grade fixed-rate bonds with
components for government and corporate securities, mortgage pass-throughs, and
asset-backed securities.
The LIPPER MIXED-ASSET TARGET ALLOCATION MODERATE FUNDS INDEX is an equally weighted
representation of the largest funds in the Lipper Mixed-Asset Target Allocation
Moderate Funds category. These funds, by portfolio practice, maintain a mix of between
40% to 60% equity securities, with the remainder invested in bonds, cash, and cash
equivalents.
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.
=======================================================================================
==========================================
AVERAGE ANNUAL TOTAL RETURNS TO CLASS A SHARES FOR THE PERIOD USING THIS REPORT FOR CLASS A, CLASS B, CLASS C,
BLENDED RETURNS. CLASS A SHARES' INCEPTION CLASS R AND INVESTOR CLASS SHARES WAS
As of 6/30/08, including maximum DATE IS SEPTEMBER 28, 2001. 1.08%, 1.83%, 1.83%, 1.33% AND 1.08%,
applicable sales charges RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
THE PERFORMANCE DATA QUOTED REPRESENT ABOVE MAY VARY FROM THE EXPENSE RATIOS
CLASS A SHARES PAST PERFORMANCE AND CANNOT GUARANTEE PRESENTED IN OTHER SECTIONS OF THIS REPORT
Inception (9/28/01) 3.28% COMPARABLE FUTURE RESULTS; CURRENT THAT ARE BASED ON EXPENSES INCURRED DURING
5 Years 3.41 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE THE PERIOD COVERED BY THIS REPORT.
1 Year -19.53 VISIT INVESCOAIM.COM FOR THE MOST RECENT
MONTH-END PERFORMANCE. PERFORMANCE FIGURES CLASS A SHARE PERFORMANCE REFLECTS THE
CLASS B SHARES REFLECT REINVESTED DISTRIBUTIONS, CHANGES MAXIMUM 5.50% SALES CHARGE, AND CLASS B
Inception (9/28/01) 3.40% IN NET ASSET VALUE AND THE EFFECT OF THE AND CLASS C SHARE PERFORMANCE REFLECTS THE
5 Years 3.48 MAXIMUM SALES CHARGE UNLESS OTHERWISE APPLICABLE CONTINGENT DEFERRED SALES
1 Year -19.67 STATED. PERFORMANCE FIGURES DO NOT REFLECT CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY CDSC ON CLASS B SHARES DECLINES FROM 5%
CLASS C SHARES ON FUND DISTRIBUTIONS OR SALE OF FUND BEGINNING AT THE TIME OF PURCHASE TO 0% AT
Inception (9/28/01) 3.41% SHARES. INVESTMENT RETURN AND PRINCIPAL THE BEGINNING OF THE SEVENTH YEAR. THE
5 Years 3.82 VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
1 Year -16.34 A GAIN OR LOSS WHEN YOU SELL SHARES. YEAR AFTER PURCHASE. CLASS R SHARES DO NOT
HAVE A FRONT-END SALES CHARGE; RETURNS
CLASS R SHARES THE TOTAL ANNUAL FUND OPERATING EXPENSE SHOWN ARE AT NET ASSET VALUE AND DO NOT
Inception 3.92% RATIO SET FORTH IN THE MOST RECENT FUND REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
5 Years 4.34 PROSPECTUS AS OF THE DATE OF ON A TOTAL REDEMPTION OF RETIREMENT PLAN
1 Year -15.07 ASSETS WITHIN THE FIRST YEAR. INVESTOR
CLASS SHARES DO NOT HAVE A FRONT-END SALES
INVESTOR CLASS SHARES CHARGE OR A CDSC; THEREFORE, PERFORMANCE
Inception 4.14% IS AT NET ASSET VALUE.
5 Years 4.58
1 Year -14.84 THE PERFORMANCE OF THE FUND'S SHARE
CLASSES WILL DIFFER PRIMARILY DUE TO
CLASS R SHARES' INCEPTION DATE IS APRIL DIFFERENT SALES CHARGE STRUCTURES AND
30, 2004. RETURNS SINCE THAT DATE ARE CLASS EXPENSES.
HISTORICAL RETURNS. ALL OTHER RETURNS ARE
BLENDED RETURNS OF HISTORICAL CLASS R
SHARE PERFORMANCE AND RESTATED CLASS A
SHARE PERFORMANCE (FOR PERIODS PRIOR TO
THE INCEPTION DATE OF CLASS R SHARES) AT
NET ASSET VALUE, ADJUSTED TO REFLECT THE
HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS
R SHARES. CLASS A SHARES' INCEPTION DATE
IS SEPTEMBER 28, 2001.
INVESTOR CLASS SHARES' INCEPTION DATE
IS JULY 15, 2005. RETURNS SINCE THAT DATE
ARE HISTORICAL RETURNS. ALL OTHER RETURNS
ARE BLENDED RETURNS OF HISTORICAL INVESTOR
CLASS SHARE PERFORMANCE AND RESTATED CLASS
A SHARE PERFORMANCE. (FOR PERIODS PRIOR TO
THE INCEPTION DATE OF INVESTOR CLASS
SHARES) AT NET ASSET VALUE, WHICH RESTATED
PERFORMANCE WILL REFLECT THE RULE 12B-1
FEES APPLICABLE
2 AIM BASIC BALANCED FUND
Dear Fellow Shareholders:
As I write this letter in July 2008, turbulent financial markets are causing
[CROCKETT PHOTO] considerable investor anxiety, reminding us again that markets are cyclical and the
correction of excess is often painful, at least in the short-term. Your Board of
Trustees believes in the wisdom of a long-term perspective and consistent investment
discipline. We continue to put your interests first in the effort to improve investment
performance, contain shareholder costs and uphold the highest ethical standards.
We remain enthusiastic about the global reach and investment expertise that Invesco,
a leading independent global investment management company, brings to the management of
Bruce Crockett AIM Funds as the parent company of the advisors. The diverse investment strategies
deployed throughout the worldwide network of Invesco investment centers has helped
strengthen the management of many AIM Funds. The rebranding of the Funds' management
company as Invesco Aim was followed by the launch of an upgraded, investor-friendly Web
site (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize
stability, endurance, strength and longevity; and a new ad campaign. Emphasizing
Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and Investment News
through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim
Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click
on "Investment Advisory Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes
in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the
movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be
interested to hear your thoughts on this policy.
As always, you are welcome to e-mail your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been
established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund
annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured
that your comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
August 11, 2008
3 AIM BASIC BALANCED FUND
PORTFOLIO COMPOSITION
By security type, based on Net Assets
as of June 30, 2008
<Table>
- -------------------------------------------------------------------------
Common Stocks & Other Equity Interests 61.8%
- -------------------------------------------------------------------------
Bonds & Notes 24.0
- -------------------------------------------------------------------------
U.S. Government Sponsored Mortgage-Backed Securities 15.4
- -------------------------------------------------------------------------
Asset-Backed Securities 3.4
- -------------------------------------------------------------------------
Preferred Stocks 3.2
- -------------------------------------------------------------------------
U.S. Government Sponsored Agency Securities 0.8
- -------------------------------------------------------------------------
Municipal Obligations 0.7
- -------------------------------------------------------------------------
U.S. Treasury Securities 0.4
- -------------------------------------------------------------------------
Money Market Funds Plus Other Assets Less Liabilities (9.7)
_________________________________________________________________________
=========================================================================
</Table>
SCHEDULE OF INVESTMENTS(a)
June 30, 2008
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-61.84%
ADVERTISING-3.24%
Interpublic Group of Cos., Inc. (The)(b) 1,870,944 $ 16,090,118
- ----------------------------------------------------------------------------------
Omnicom Group Inc. 368,160 16,523,021
==================================================================================
32,613,139
==================================================================================
AEROSPACE & DEFENSE-0.26%
Honeywell International Inc. 51,722 2,600,582
==================================================================================
APPAREL RETAIL-0.87%
Gap, Inc. (The) 528,593 8,811,645
==================================================================================
BREWERS-1.63%
Molson Coors Brewing Co.-Class B 301,537 16,382,505
==================================================================================
COMPUTER HARDWARE-2.18%
Dell Inc.(b) 1,005,129 21,992,223
==================================================================================
CONSTRUCTION MATERIALS-1.76%
Cemex S.A.B. de C.V.-ADR (Mexico)(b)(c) 717,012 17,710,196
==================================================================================
CONSUMER FINANCE-1.24%
SLM Corp.(b) 648,045 12,539,671
==================================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.17%
Western Union Co. 886,492 21,914,082
==================================================================================
DEPARTMENT STORES-1.02%
Kohl's Corp.(b) 256,500 10,270,260
==================================================================================
DIVERSIFIED BANKS-0.54%
Wachovia Corp.(c) 353,104 5,483,705
==================================================================================
EDUCATION SERVICES-1.05%
Apollo Group Inc.-Class A(b) 238,700 10,564,862
==================================================================================
ELECTRONIC MANUFACTURING SERVICES-0.64%
Tyco Electronics Ltd. 178,970 6,410,705
==================================================================================
GENERAL MERCHANDISE STORES-1.39%
Target Corp. 302,225 14,050,440
==================================================================================
HEALTH CARE DISTRIBUTORS-1.54%
Cardinal Health, Inc. 300,306 15,489,784
==================================================================================
HEALTH CARE EQUIPMENT-1.14%
Baxter International Inc. 179,412 11,471,603
==================================================================================
HOME IMPROVEMENT RETAIL-1.46%
Home Depot, Inc. (The) 627,394 14,693,567
==================================================================================
HOUSEHOLD APPLIANCES-1.02%
Whirlpool Corp.(c) 165,800 10,234,834
==================================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-1.88%
Robert Half International, Inc.(c) 790,404 18,945,984
==================================================================================
INDUSTRIAL CONGLOMERATES-2.03%
General Electric Co. 348,006 9,288,280
- ----------------------------------------------------------------------------------
Tyco International Ltd. 279,439 11,188,738
==================================================================================
20,477,018
==================================================================================
INDUSTRIAL MACHINERY-1.52%
Illinois Tool Works Inc. 323,024 15,346,870
==================================================================================
INSURANCE BROKERS-1.25%
Marsh & McLennan Cos., Inc. 473,165 12,562,531
==================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
4 AIM BASIC BALANCED FUND
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-2.07%
Merrill Lynch & Co., Inc. 322,150 $ 10,215,377
- ----------------------------------------------------------------------------------
Morgan Stanley 293,703 10,593,867
==================================================================================
20,809,244
==================================================================================
MANAGED HEALTH CARE-1.99%
UnitedHealth Group Inc. 764,938 20,079,623
==================================================================================
MOVIES & ENTERTAINMENT-0.89%
Walt Disney Co. (The) 288,088 8,988,346
==================================================================================
MULTI-LINE INSURANCE-1.34%
American International Group, Inc. 385,340 10,196,097
- ----------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 50,948 3,289,712
==================================================================================
13,485,809
==================================================================================
OIL & GAS DRILLING-0.98%
Transocean Inc. 64,866 9,884,930
==================================================================================
OIL & GAS EQUIPMENT & SERVICES-3.99%
Halliburton Co. 423,889 22,495,789
- ----------------------------------------------------------------------------------
Schlumberger Ltd. 164,650 17,688,350
==================================================================================
40,184,139
==================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.70%
Citigroup Inc. 873,925 14,646,983
- ----------------------------------------------------------------------------------
JPMorgan Chase & Co. 367,226 12,599,524
==================================================================================
27,246,507
==================================================================================
PACKAGED FOODS & MEATS-0.86%
Unilever N.V. (Netherlands) 303,876 8,626,229
==================================================================================
PHARMACEUTICALS-2.13%
Sanofi-Aventis (France)(c)(d) 162,651 10,820,435
- ----------------------------------------------------------------------------------
Wyeth 221,012 10,599,736
==================================================================================
21,420,171
==================================================================================
PROPERTY & CASUALTY INSURANCE-0.97%
XL Capital Ltd.-Class A 476,120 9,789,027
==================================================================================
PUBLISHING-1.39%
McGraw-Hill Cos., Inc. (The) 350,200 14,050,024
==================================================================================
SEMICONDUCTOR EQUIPMENT-3.98%
ASML Holding N.V. (Netherlands)(d) 720,031 17,536,449
- ----------------------------------------------------------------------------------
KLA-Tencor Corp.(c) 554,890 22,589,572
==================================================================================
40,126,021
==================================================================================
SEMICONDUCTORS-1.75%
Maxim Integrated Products, Inc. 833,789 17,634,637
==================================================================================
SPECIALIZED FINANCE-2.29%
Moody's Corp.(c) 669,555 23,059,474
==================================================================================
SYSTEMS SOFTWARE-2.34%
CA Inc. 516,214 11,919,381
- ----------------------------------------------------------------------------------
Microsoft Corp. 423,794 11,658,573
==================================================================================
23,577,954
==================================================================================
THRIFTS & MORTGAGE FINANCE-2.34%
Fannie Mae 909,134 17,737,204
- ----------------------------------------------------------------------------------
Washington Mutual, Inc.(c) 1,193,779 5,885,331
==================================================================================
23,622,535
==================================================================================
Total Common Stocks & Other Equity Interests
(Cost $639,133,322) 623,150,876
==================================================================================
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES-23.99%
AEROSPACE & DEFENSE-0.26%
Systems 2001 Asset Trust LLC (United
Kingdom)-Series 2001, Class G, Jr. Sec. Pass
Through Ctfs., (INS-MBIA Insurance Corp.) 6.66%,
09/15/13(e)(f)(g) $ 2,567,605 2,638,086
==================================================================================
BROADCASTING & CABLE TV-1.38%
Comcast Cable Communications Holdings Inc., Sr.
Unsec. Gtd. Global Notes,
9.46%, 11/15/22(e) 3,135,000 3,816,173
- ----------------------------------------------------------------------------------
Comcast Holdings Corp., Sr. Gtd. Sub. Notes,
10.63%, 07/15/12(e) 2,175,000 2,526,023
- ----------------------------------------------------------------------------------
Cox Communications Inc., Sr. Unsec. Notes, 6.40%,
08/01/08(e) 1,300,000 1,303,289
- ----------------------------------------------------------------------------------
Cox Enterprises, Inc., Sr. Unsec. Notes, 7.88%,
09/15/10(e)(g) 645,000 681,178
- ----------------------------------------------------------------------------------
Time Warner Entertainment Co. L.P., Sr. Unsec.
Gtd. Notes,
10.15%, 05/01/12(e) 4,970,000 5,615,056
==================================================================================
13,941,719
==================================================================================
CONSUMER FINANCE-0.79%
American Express Credit Corp., Series C, Sr.
Unsec. Floating Rate Medium-Term Notes, 3.88%,
05/27/10(e)(h) 820,000 820,418
- ----------------------------------------------------------------------------------
Sr. Unsec. Medium-Term Notes, 5.88%, 05/02/13(e) 1,150,000 1,146,159
- ----------------------------------------------------------------------------------
Capital One Capital III, Jr. Gtd. Sub. Notes,
7.69%, 08/15/36(e) 900,000 748,521
- ----------------------------------------------------------------------------------
MBNA Capital-Series A, Jr. Gtd. Sub. Trust Pfd.
Capital Securities,
8.28%, 12/01/26(e) 1,492,000 1,524,257
- ----------------------------------------------------------------------------------
SLM Corp., Sr. Unsec. Floating Rate Medium-Term
Notes,
2.88%, 03/16/09(e)(g)(h) 2,200,000 2,093,459
- ----------------------------------------------------------------------------------
Series A, Sr. Unsec. Unsub. Medium-Term Notes,
3.95%, 08/15/08(e) 1,630,000 1,627,571
==================================================================================
7,960,385
==================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
5 AIM BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------
DIVERSIFIED BANKS-3.53%
Bangkok Bank PCL (Hong Kong), Unsec. Sub. Notes,
9.03%, 03/15/29(e)(g) $ 1,175,000 $ 1,288,622
- ----------------------------------------------------------------------------------
BankAmerica Institutional-Series A, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities, 8.07%,
12/31/26(e)(g) 1,790,000 1,845,293
- ----------------------------------------------------------------------------------
BBVA International Preferred S.A. Unipersonal
(Spain), Jr. Unsec. Gtd. Sub. Notes,
5.92%(e)(i) 2,730,000 2,239,938
- ----------------------------------------------------------------------------------
Centura Capital Trust I, Gtd. Trust Pfd. Capital
Securities,
8.85%, 06/01/27(e)(g) 1,460,000 1,506,895
- ----------------------------------------------------------------------------------
First Union Capital I-Series A, Jr. Unsec. Gtd.
Sub. Trust Pfd. Capital Securities,
7.94%, 01/15/27(e) 14,525,000 14,096,077
- ----------------------------------------------------------------------------------
First Union Institutional Capital I, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities, 8.04%,
12/01/26(e) 540,000 523,460
- ----------------------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)-Series 1,
Unsec. Sub. Floating Rate Euro Notes,
3.50%(e)(h)(i) 4,010,000 2,630,079
- ----------------------------------------------------------------------------------
Mizuho Financial Group Cayman Ltd. (Cayman
Islands), Jr. Unsec. Gtd. Sub. Second Tier Euro
Bonds,
8.38%(e)(i) 550,000 551,192
- ----------------------------------------------------------------------------------
National Bank of Canada (Canada), Unsec. Sub.
Floating Rate Euro Deb.,
3.19%, 08/29/87(h)(j) 1,580,000 1,019,100
- ----------------------------------------------------------------------------------
National Westminster Bank PLC (United
Kingdom)-Series B, Unsec. Sub. Floating Rate
Euro Notes,
3.25%(e)(h)(i) 1,150,000 753,250
- ----------------------------------------------------------------------------------
RBD Capital S.A. (Luxembourg), Euro Notes, 6.50%,
08/11/08(e) 1,220,000 1,219,661
- ----------------------------------------------------------------------------------
RBS Capital Trust III, Jr. Unsec. Gtd. Sub. Trust
Pfd. Global Notes,
5.51%(e)(i) 1,140,000 979,203
- ----------------------------------------------------------------------------------
Skandinaviska Enskilda Banken AB (Sweden), Jr.
Unsec. Sub. Notes,
7.50%(e)(g)(i) 900,000 902,034
- ----------------------------------------------------------------------------------
Sovereign Bankcorp Inc., Sr. Unsec, Floating Rate
Global Notes,
2.96%, 03/01/09(e)(h) 1,230,000 1,182,940
- ----------------------------------------------------------------------------------
Sumitomo Mitsui Banking Corp. (Japan), Sub. Second
Tier Euro Notes,
8.15%(e)(i) 1,675,000 1,685,820
- ----------------------------------------------------------------------------------
Wachovia Capital Trust V, Jr. Unsec. Gtd. Sub.
Trust Pfd. Capital Securities, 7.97%,
06/01/27(e)(g) 3,145,000 3,179,941
==================================================================================
35,603,505
==================================================================================
DIVERSIFIED CAPITAL MARKETS-0.05%
UBS A.G. (Switzerland), Sr. Unsec. Medium-Term
Notes,
5.75%, 04/25/18(e) 520,000 508,420
==================================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES-0.41%
Erac USA Finance Co., Sr. Unsec. Gtd. Notes,
7.00%, 10/15/37(e)(g) 2,460,000 2,077,495
- ----------------------------------------------------------------------------------
Unsec. Gtd. Notes,
5.80%, 10/15/12(e)(g) 2,240,000 2,105,398
==================================================================================
4,182,893
==================================================================================
DIVERSIFIED METALS & MINING-0.05%
Reynolds Metals Co., Sr. Unsec. Unsub. Medium-Term
Notes,
7.00%, 05/15/09(e) 509,000 521,318
==================================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.13%
Waste Management Inc., Sr. Unsec. Unsub. Notes,
6.50%, 11/15/08(e) 1,265,000 1,276,221
==================================================================================
GAS UTILITIES-0.11%
Southern Union Co., Unsec. Unsub. Notes, 6.15%,
08/16/08(e) 1,065,000 1,067,162
==================================================================================
HOMEBUILDING-0.28%
D.R. Horton Inc., Sr. Unsec. Gtd. Unsub. Notes,
5.00%, 01/15/09(e) 2,865,000 2,825,606
==================================================================================
HOUSEWARES & SPECIALTIES-0.07%
Newell Rubbermaid Inc.-Series A, Sr. Unsec. Unsub.
Medium-Term Notes,
6.35%, 07/15/28(e) 660,000 661,967
==================================================================================
INDUSTRIAL CONGLOMERATES-0.08%
General Electric Capital Corp., Sr. Unsec. Medium-
Term Global Notes,
5.88%, 01/14/38(e) 880,000 799,911
==================================================================================
INTEGRATED OIL & GAS-0.69%
Husky Oil Ltd. (Canada), Unsec. Sub. Yankee
Capital Securities,
8.90%, 08/15/28(e) 6,944,000 6,976,012
==================================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.18%
AT&T Inc., Sr. Unsec. Global Notes, 4.95%,
01/15/13(e) 1,110,000 1,107,081
- ----------------------------------------------------------------------------------
Sr. Unsec. Unsub. Global Notes, 6.40%,
05/15/38(e) 1,460,000 1,403,892
- ----------------------------------------------------------------------------------
Southwestern Bell Telephone L.P., Sr. Unsec. Gtd.
Unsub. Deb.,
7.20%, 10/15/26(e) 1,926,000 1,950,576
- ----------------------------------------------------------------------------------
Verizon New York Inc., Sr. Unsec. Bonds, 7.00%,
12/01/33(e) 2,070,000 2,052,550
- ----------------------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Sr. Unsec. Global
Bonds,
4.63%, 03/15/13(e) 3,400,000 3,310,172
- ----------------------------------------------------------------------------------
Windstream Georgia Communications Corp., Sr.
Unsec. Deb.,
6.50%, 11/15/13(e) 2,014,000 2,031,179
==================================================================================
11,855,450
==================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
6 AIM BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------
INTERNET RETAIL-0.10%
Expedia, Inc., Sr. Unsec. Gtd. Putable Global
Notes, 7.46%, 08/15/13(e) $ 1,065,000 $ 1,017,075
==================================================================================
INVESTMENT BANKING & BROKERAGE-1.25%
Bear Stearns Cos. Inc., (The), Floating Rate
Notes, 3.22%, 07/19/10(e)(h) 3,070,000 3,020,389
- ----------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Sr. Unsec. Global
Notes,
6.15%, 04/01/18(e) 585,000 569,819
- ----------------------------------------------------------------------------------
Unsec. Sub. Global Notes,
6.75%, 10/01/37(e) 1,700,000 1,580,184
- ----------------------------------------------------------------------------------
Jefferies Group, Inc., Sr. Unsec. Notes, 5.88%,
06/08/14(e) 4,060,000 3,735,200
- ----------------------------------------------------------------------------------
6.45%, 06/08/27(e) 900,000 707,067
- ----------------------------------------------------------------------------------
Lehman Brothers Holdings Inc., Series I, Sr.
Floating Rate Medium-Term Notes, 2.53%,
11/24/08(e)(h) 630,000 620,884
- ----------------------------------------------------------------------------------
Merrill Lynch & Co Inc., Sr. Unsec. Medium-Term
Notes,
6.88%, 04/25/18(e) 860,000 818,978
- ----------------------------------------------------------------------------------
Morgan Stanley, Series F, Sr. Unsec. Medium-Term
Global Notes,
5.95%, 12/28/17(e) 1,660,000 1,519,166
==================================================================================
12,571,687
==================================================================================
LIFE & HEALTH INSURANCE-0.51%
John Hancock Financial Services Inc., Sr. Unsec.
Unsub. Notes,
5.63%, 12/01/08(e) 250,000 252,417
- ----------------------------------------------------------------------------------
Prudential Holdings, LLC-Series B, Sr. Sec. Bonds,
(INS-Financial Security Assurance Inc.) 7.25%,
12/18/23(e)(f)(g) 3,240,000 3,466,768
- ----------------------------------------------------------------------------------
Prudential Financial, Inc., Jr. Unsec. Sub. Global
Notes,
8.88%, 06/15/38(e) 1,470,000 1,460,592
==================================================================================
5,179,777
==================================================================================
MORTGAGE BACKED SECURITIES-0.28%
U.S. Bank N.A., Sr. Unsec. Medium-Term Notes,
5.92%, 05/25/12(e) 2,685,962 2,812,820
==================================================================================
MORTGAGE REIT'S-0.14%
iStar Financial Inc., Sr. Unsec. Notes, 8.75%,
08/15/08(e) 1,430,000 1,412,840
==================================================================================
MOVIES & ENTERTAINMENT-0.06%
Time Warner Cable, Inc., Sr. Unsec. Gtd. Global
Notes,
6.75%, 07/01/18(e) 590,000 594,142
==================================================================================
MULTI-LINE INSURANCE-0.17%
American International Group, Inc., Jr. Sub. Deb.,
8.18%, 05/15/58(e)(g) 880,000 863,641
- ----------------------------------------------------------------------------------
Liberty Mutual Group, Jr. Gtd. Sub. Notes, 10.75%,
06/15/58(e)(g) 890,000 871,443
==================================================================================
1,735,084
==================================================================================
MULTI-SECTOR HOLDINGS-0.37%
Capmark Financial Group, Inc., Sr. Unsec. Gtd.
Floating Rate Global Notes, 3.37%,
05/10/10(e)(h) 4,840,000 3,729,220
==================================================================================
MULTI-UTILITIES-0.34%
Dominion Capital Trust I, Jr. Unsec. Gtd. Sub.
Trust Pfd. Capital Securities,
7.83%, 12/01/27(e) 2,490,000 2,572,892
- ----------------------------------------------------------------------------------
Public Service Co. of New Mexico, Sr. Unsec.
Notes, 4.40%, 09/15/08(e) 615,000 614,416
- ----------------------------------------------------------------------------------
Xcel Energy Inc., Sr. Unsec. Unsub. Global Notes,
3.40%, 07/01/08(c)(e) 250,000 249,990
==================================================================================
3,437,298
==================================================================================
OFFICE ELECTRONICS-0.10%
Xerox Corp., Sr. Unsec. Notes,
5.65%, 05/15/13(e) 1,020,000 1,012,360
==================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-3.49%
BankAmerica Capital II-Series 2, Jr. Unsec. Gtd.
Sub. Trust Pfd. Capital Securities, 8.00%,
12/15/26(e) 1,420,000 1,440,505
- ----------------------------------------------------------------------------------
BankAmerica Capital III, Jr. Unsec. Gtd. Sub.
Floating Rate Trust Pfd. Capital Securities,
3.28%, 01/15/27(c)(e)(h) 2,210,000 1,754,900
- ----------------------------------------------------------------------------------
Citigroup Inc., Series E, Jr. Sub. Notes,
8.40%(e)(i) 1,470,000 1,365,733
- ----------------------------------------------------------------------------------
JPMorgan Chase & Co., Sr. Unsec. Notes, 4.75%,
05/01/13(e) 1,280,000 1,233,626
- ----------------------------------------------------------------------------------
6.40%, 05/15/38(e) 2,960,000 2,791,458
- ----------------------------------------------------------------------------------
Series 1, Jr. Unsec. Sub. Notes,
7.90%(e)(i) 1,520,000 1,424,954
- ----------------------------------------------------------------------------------
Lazard Group, Sr. Unsec. Global Notes, 6.85%,
06/15/17(e) 1,270,000 1,115,936
- ----------------------------------------------------------------------------------
Mantis Reef Ltd. (Cayman Islands), Notes, 4.69%,
11/14/08(e)(g) 4,525,000 4,542,195
- ----------------------------------------------------------------------------------
NB Capital Trust II, Jr. Unsec. Gtd. Sub. Trust
Pfd. Capital Securities,
7.83%, 12/15/26(e) 3,775,000 3,749,556
- ----------------------------------------------------------------------------------
NB Capital Trust IV, Jr. Unsec. Gtd. Sub. Trust
Pfd. Capital Securities,
8.25%, 04/15/27(e) 4,110,000 4,136,838
- ----------------------------------------------------------------------------------
North Fork Capital Trust II, Jr. Gtd. Sub. Trust
Pfd. Capital Pass Through Securities, 8.00%,
12/15/27(e) 1,100,000 934,263
- ----------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
7 AIM BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Old Mutual Capital Funding L.P. (United Kingdom), Gtd. Euro Bonds,
8.00%(e)(i)
$2,320,000 $ 2,209,800
- ----------------------------------------------------------------------------------
Pemex Finance Ltd. (Mexico)-Series 1999-2, Class
A1, Global Bonds,
9.69%, 08/15/09(e) 2,585,000 2,639,052
- ----------------------------------------------------------------------------------
Regional Diversified Funding, Sr. Notes, 9.25%,
03/15/30(e)(g) 2,962,222 3,329,686
- ----------------------------------------------------------------------------------
Regional Diversified Funding (Cayman
Islands)-Class A-1a, Sr. Sec. Floating Rate
Notes, 3.25%, 01/25/36 (Acquired 03/21/05; Cost
$609,004)(e)(g)(h)(j) 642,315 482,780
- ----------------------------------------------------------------------------------
Twin Reefs Pass-Through Trust, Floating Rate Pass
Through Ctfs.,
3.45% (Acquired 12/07/04-10/23/06; Cost
$1,609,000)(e)(g)(h)(i)(j) 1,610,000 59,167
- ----------------------------------------------------------------------------------
Two-Rock Pass-Through Trust (Bermuda), Floating
Rate Pass Through Ctfs.,
3.66% (Acquired 11/10/06; Cost
$1,596,882)(e)(g)(h)(i)(j) 1,595,000 58,616
- ----------------------------------------------------------------------------------
UFJ Finance Aruba AEC (Japan), Unsec. Gtd. Sub.
Euro Bonds,
8.75%(e)(i) 1,020,000 1,021,254
- ----------------------------------------------------------------------------------
Windsor Financing LLC, Sr. Sec. Gtd. Notes, 5.88%,
07/15/17(e)(g) 932,438 901,323
==================================================================================
35,191,642
==================================================================================
PACKAGED FOODS & MEATS-0.29%
Kraft Foods Inc., Notes,
6.13%, 08/23/18(e) 1,485,000 1,439,024
- ----------------------------------------------------------------------------------
Sr. Unsec. Notes,
6.88%, 01/26/39(e) 1,485,000 1,457,825
==================================================================================
2,896,849
==================================================================================
PAPER PRODUCTS-0.05%
International Paper Co., Sr. Unsec. Unsub. Notes,
5.13%, 11/15/12(e) 540,000 497,707
==================================================================================
PROPERTY & CASUALTY INSURANCE-1.87%
Chubb Corp. (The), Sr. Notes,
5.75%, 05/15/18(e) 590,000 572,548
- ----------------------------------------------------------------------------------
Series 1, Sr. Notes,
6.50%, 05/15/38(e) 590,000 574,861
- ----------------------------------------------------------------------------------
CNA Financial Corp., Sr. Unsec. Unsub. Notes,
6.60%, 12/15/08(e) 2,145,000 2,157,720
- ----------------------------------------------------------------------------------
First American Capital Trust I, Gtd. Trust Pfd.
Capital Securities,
8.50%, 04/15/12(e) 4,705,000 4,552,464
- ----------------------------------------------------------------------------------
North Front Pass-Through Trust, Sec. Pass Through
Ctfs.,
5.81%, 12/15/24(e)(g) 2,350,000 2,183,902
- ----------------------------------------------------------------------------------
Oil Casualty Insurance Ltd. (Bermuda), Unsec. Gtd.
Bonds,
8.00%, 09/15/34(e)(g) 3,495,000 3,069,588
- ----------------------------------------------------------------------------------
Oil Insurance Ltd., Notes,
7.56%(e)(g)(i) 6,280,000 5,453,489
- ----------------------------------------------------------------------------------
QBE Capital Funding II L.P. (Australia), Gtd. Sub.
Bonds,
6.80%(e)(g)(i) 350,000 299,302
==================================================================================
18,863,874
==================================================================================
REGIONAL BANKS-1.54%
Cullen/Frost Capital Trust I, Jr. Unsec. Gtd. Sub.
Floating Rate Notes,
4.23%, 03/01/34(e)(h) 4,050,000 3,775,329
- ----------------------------------------------------------------------------------
PNC Capital Trust C, Unsec. Gtd. Sub. Floating
Rate Trust Pfd. Capital Securities, 3.25%,
06/01/28(e)(h) 1,175,000 981,572
- ----------------------------------------------------------------------------------
Silicon Valley Bank, Unsec. Sub. Notes, 6.05%,
06/01/17(e) 2,020,000 1,776,933
- ----------------------------------------------------------------------------------
TCF National Bank, Sub. Notes,
5.00%, 06/15/14(e) 1,500,000 1,500,255
- ----------------------------------------------------------------------------------
US AgBank FCB-Series 1, Notes,
6.11%(e)(g)(i) 1,405,000 1,004,954
- ----------------------------------------------------------------------------------
Western Financial Bank, Unsec. Sub. Capital Deb.,
9.63%, 05/15/12(e) 6,240,000 6,436,311
==================================================================================
15,475,354
==================================================================================
REINSURANCE-0.05%
Stingray Pass-Through Trust, Pass Through Ctfs.,
5.90%, 01/12/15 (Acquired 01/07/05-07/19/07;
Cost $2,927,640)(e)(g)(j) 3,000,000 525,000
==================================================================================
RESIDENTIAL REIT'S-0.05%
AvalonBay Communities Inc., Sr. Unsec. Medium-Term
Notes,
8.25%, 07/15/08(e) 550,000 550,671
==================================================================================
SPECIALIZED FINANCE-0.23%
CIT Group Inc., Sr. Unsec. Unsub. Medium-Term
Notes,
4.75%, 08/15/08(e) 2,290,000 2,273,054
==================================================================================
SPECIALIZED REIT'S-0.57%
HCP, Inc., Sr. Unsec. Floating Rate Medium-Term
Notes,
3.23%, 09/15/08(e)(h) 2,540,000 2,531,135
- ----------------------------------------------------------------------------------
Sr. Unsec. Medium-Term Notes, 6.70%, 01/30/18(e) 1,680,000 1,513,058
- ----------------------------------------------------------------------------------
Health Care REIT Inc., Sr. Unsec. Notes, 5.88%,
05/15/15(e) 1,905,000 1,745,609
==================================================================================
5,789,802
==================================================================================
SPECIALTY CHEMICALS-0.10%
Valspar Corp., Sr. Unsec. Unsub. Notes, 5.63%,
05/01/12(e) 500,000 492,355
- ----------------------------------------------------------------------------------
6.05%, 05/01/17(e) 500,000 471,495
==================================================================================
963,850
==================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8 AIM BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------
STEEL-0.18%
United States Steel Corp., Sr. Unsec. Unsub.
Notes, 5.65%, 06/01/13(e) $ 1,900,000 $ 1,844,102
==================================================================================
THRIFTS & MORTGAGE FINANCE-0.79%
Countrywide Financial Corp., Unsec. Gtd. Unsub.
Medium-Term
Global Notes,
5.80%, 06/07/12(e) 1,790,000 1,691,550
- ----------------------------------------------------------------------------------
Series B, Sr. Unsec. Gtd. Conv. Putable Floating
Rate Global Notes,
0.43%, 05/15/09(e)(h) 2,950,000 2,784,213
- ----------------------------------------------------------------------------------
Series B, Sr. Unsec. Gtd. Unsub. Floating Rate
Medium-Term Notes,
2.80%, 09/02/08(c)(e)(h) 2,160,000 2,135,916
- ----------------------------------------------------------------------------------
PMI Group Inc. (The), Sr. Unsec. Notes, 5.57%,
11/15/08(e) 415,000 403,907
- ----------------------------------------------------------------------------------
Washington Mutual, Inc., Sr. Unsec. Global Notes,
4.50%, 08/25/08(e) 900,000 896,886
==================================================================================
7,912,472
==================================================================================
TOBACCO-0.20%
Philip Morris International Inc., Sr. Unsec.
Unsub. Global Notes,
5.65%, 05/16/18(e) 2,050,000 2,000,984
==================================================================================
TRADING COMPANIES & DISTRIBUTORS-0.10%
Western Power Distribution Holdings Ltd. (United
Kingdom), Sr. Unsec. Unsub. Notes, 7.38%,
12/15/28(e)(g) 900,000 1,022,130
==================================================================================
TRUCKING-0.65%
Roadway Corp., Sr. Sec. Gtd. Global Notes, 8.25%,
12/01/08(c)(e) 4,077,000 4,089,353
- ----------------------------------------------------------------------------------
Stagecoach Transport Holdings PLC (United
Kingdom), Unsec. Unsub. Yankee Notes, 8.63%,
11/15/09(e) 2,300,000 2,423,464
==================================================================================
6,512,817
==================================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.50%
Alamosa Delaware Inc., Sr. Unsec. Gtd. Global
Notes,
8.50%, 01/31/12(e) 5,825,000 5,788,069
- ----------------------------------------------------------------------------------
Nextel Communications, Inc.-Series D, Sr. Unsec.
Gtd. Notes,
7.38%, 08/01/15(e) 5,090,000 4,243,431
- ----------------------------------------------------------------------------------
Sprint Nextel Corp., Sr. Unsec. Bonds, 9.25%,
04/15/22(e) 2,900,000 2,790,873
- ----------------------------------------------------------------------------------
US Unwired Inc.-Series B, Sec. Gtd. Unsub. Second
Priority Global Notes,
10.00%, 06/15/12(e) 2,220,000 2,276,477
==================================================================================
15,098,850
==================================================================================
Total Bonds & Notes (Cost $262,540,219) 241,740,116
==================================================================================
U.S. GOVERNMENT SPONSORED MORTGAGE-BACKED SECURITIES-15.42%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-4.84%
Pass Through Ctfs.,
5.50%, 05/01/13 to 02/01/37(e) 1,863,270 1,869,128
- ----------------------------------------------------------------------------------
7.00%, 06/01/15 to 06/01/32(e) 3,366,777 3,555,915
- ----------------------------------------------------------------------------------
6.50%, 01/01/16 to 01/01/35(e) 2,152,329 2,227,731
- ----------------------------------------------------------------------------------
6.00%, 03/01/17 to 01/01/34(e) 3,907,972 3,999,215
- ----------------------------------------------------------------------------------
4.50%, 10/01/18(e) 218,220 213,405
- ----------------------------------------------------------------------------------
8.00%, 01/01/27(e) 631,392 684,320
- ----------------------------------------------------------------------------------
7.50%, 11/01/30 to 03/01/32(e) 290,573 313,881
- ----------------------------------------------------------------------------------
5.00%, 10/01/33(e) 245,514 236,811
- ----------------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 07/01/38(e)(k) 11,832,000 11,338,381
- ----------------------------------------------------------------------------------
5.50%, 07/01/38(e)(k) 14,150,000 13,939,957
- ----------------------------------------------------------------------------------
6.00%, 07/01/38(e)(k) 10,320,000 10,424,810
==================================================================================
48,803,554
==================================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-8.79%
Pass Through Ctfs.,
8.50%, 03/01/10 to 10/01/28(e)(l) 988,429 1,079,650
- ----------------------------------------------------------------------------------
6.50%, 04/01/14 to 01/01/37(e) 2,098,488 2,186,313
- ----------------------------------------------------------------------------------
7.50%, 11/01/15 to 05/01/32(e) 2,147,883 2,310,017
- ----------------------------------------------------------------------------------
7.00%, 12/01/15 to 09/01/32(e) 2,133,895 2,248,824
- ----------------------------------------------------------------------------------
5.00%, 11/01/17 to 11/01/18(e) 1,506,513 1,504,940
- ----------------------------------------------------------------------------------
5.50%, 07/01/19 to 10/01/34(e) 8,045,309 8,034,942
- ----------------------------------------------------------------------------------
8.00%, 08/01/21 to 10/01/30(e) 450,269 488,889
- ----------------------------------------------------------------------------------
6.00%, 03/01/22 to 03/01/37(e) 154,024 155,452
- ----------------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.50%, 07/01/23 to 07/01/38(e)(k) 22,551,000 22,339,581
- ----------------------------------------------------------------------------------
6.00%, 07/01/23 to 08/01/38(e)(k) 18,264,000 18,448,041
- ----------------------------------------------------------------------------------
5.00%, 07/01/38(e)(k) 14,400,000 13,803,754
- ----------------------------------------------------------------------------------
6.50%, 07/01/38(e)(k) 8,428,000 8,676,887
- ----------------------------------------------------------------------------------
7.00%, 07/01/38(e)(k) 6,914,000 7,248,900
==================================================================================
88,526,190
==================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)-1.79%
Pass Through Ctfs.,
6.50%, 10/15/08 to 04/15/37(e) $ 4,265,234 $ 4,432,334
- ----------------------------------------------------------------------------------
7.00%, 10/15/08 to 06/15/37(e) 2,578,941 2,722,278
- ----------------------------------------------------------------------------------
6.00%, 11/15/08 to 10/15/33(e) 5,196,340 5,302,137
- ----------------------------------------------------------------------------------
5.00%, 03/15/18(e) 1,162,851 1,168,833
- ----------------------------------------------------------------------------------
8.00%, 08/15/22 to 01/20/31(e) 369,491 403,838
- ----------------------------------------------------------------------------------
7.50%, 06/15/23 to 05/15/32(e) 808,347 869,861
- ----------------------------------------------------------------------------------
8.50%, 11/15/24 to 02/15/25(e) 90,771 100,360
- ----------------------------------------------------------------------------------
5.50%, 12/15/31 to 05/15/35(e) 3,018,650 3,017,083
==================================================================================
18,016,724
==================================================================================
Total U.S. Government Sponsored Mortgage-
Backed Securities (Cost $155,820,234) 155,346,468
==================================================================================
ASSET-BACKED SECURITIES-3.43%
COLLATERALIZED MORTGAGE OBLIGATIONS-2.27%
Accredited Mortgage Loan Trust-Series 2003-3,
Class A3, Floating Rate Pass Through Ctfs.,
3.24%, 01/25/34(e)(h) 156,003 126,280
- ----------------------------------------------------------------------------------
Banc of America Mortgage Securities Inc.-Series
2003-D, Class 2AI, Floating Rate Pass Through
Ctfs.,
5.18%, 05/25/33(e)(h) 585,827 560,861
- ----------------------------------------------------------------------------------
Capital One Multi-Asset Execution Trust-Series
2003-B4, Class B4, Floating Rate Pass Through
Ctfs.,
3.27%, 07/15/11(e)(h) 2,230,000 2,232,793
- ----------------------------------------------------------------------------------
Countrywide Asset-Backed Ctfs.-Series 2004-6,
Class 2A5, Floating Rate Pass Through Ctfs.,
2.87%, 11/25/34(e)(h) 434,323 385,474
- ----------------------------------------------------------------------------------
Countrywide Home Loans-Series 2004-HYB7, Class
1A2, Pass Through Ctfs., 4.69%, 11/20/34(e)(h) 896,286 870,664
- ----------------------------------------------------------------------------------
Credit Suisse First Boston Mortgage Securities
Corp., Series 2004-AR3, Class 5A1, Pass Through
Ctfs.,
4.73%, 04/25/34(e)(h) 751,795 731,772
- ----------------------------------------------------------------------------------
Series 2004-AR7, Class 2A1, Pass Through Ctfs.,
4.62%, 11/25/34(e)(h) 1,016,911 980,231
- ----------------------------------------------------------------------------------
Series 2004-C4, Class A6, Pass Through Ctfs.,
4.69%, 10/15/39(e) 2,850,000 2,699,040
- ----------------------------------------------------------------------------------
Federal Home Loan Bank-Series TQ-2015, Class A,
Pass Through Ctfs.,
5.07%, 10/20/15(e) 2,134,901 2,139,320
- ----------------------------------------------------------------------------------
GSR Mortgage Loan Trust-Series 2004-5, Class 2A1,
Pass Through Ctfs., 4.49%, 05/25/34(e)(h) 561,516 550,899
- ----------------------------------------------------------------------------------
Master Asset Securitization Trust-Series 2003-8,
Class 1A1, Pass Through Ctfs., 5.50%,
09/25/33(e) 2,530,774 2,397,042
- ----------------------------------------------------------------------------------
MLCC Mortgage Investors, Inc.-Series 2003-G, Class
A1, Floating Rate Pass Through Ctfs., 2.80%,
01/25/29(e)(h) 552,175 538,668
- ----------------------------------------------------------------------------------
Morgan Stanley Capital I-Series 2008-T29, Class
A1, Pass Through Ctfs., 6.23%, 01/11/43(e)(j) 1,189,283 1,197,625
- ----------------------------------------------------------------------------------
Morgan Stanley Mortgage Loan Trust-Series 2004-
6AR, Class 2A2, Pass Through Ctfs., 5.47%,
08/25/34(e)(h) 405,197 373,652
- ----------------------------------------------------------------------------------
Nomura Asset Acceptance Corp.-Series 2005-AR1,
Class 2A1, Floating Rate Pass Through Ctfs.,
2.76%, 02/25/35(e)(h) 103,523 80,540
- ----------------------------------------------------------------------------------
Option One Mortgage Securities Corp.-Series 2007-
4A, Floating Rate Notes, 2.58%, 04/25/12
(Acquired 05/11/07; Cost $839,596)(g)(h)(j) 839,196 738,493
- ----------------------------------------------------------------------------------
Specialty Underwriting & Residential
Finance-Series 2003-BC3, Class A, Floating Rate
Pass Through Ctfs.,
2.83%, 08/25/34(e)(h) 8,370 7,066
- ----------------------------------------------------------------------------------
Structured Adjustable Rate Mortgage Loan Trust,
Series 2004-3AC, Class A1, Floating Rate Pass
Through Ctfs.,
4.94%, 03/25/34(e)(h) 924,265 843,671
- ----------------------------------------------------------------------------------
Series 2005-1, Class 1A1, Pass Through Ctfs.,
6.65%, 02/25/35(e)(h) 410,705 346,405
- ----------------------------------------------------------------------------------
Structured Asset Securities Corp., Series 2003-
37A, Class 7A, Pass Through Ctfs., 6.23%,
12/25/33(e)(h) 256,967 258,403
- ----------------------------------------------------------------------------------
Series 2004-2AC, Class A1, Floating Rate Pass
Through Ctfs.,
5.00%, 02/25/34(e)(h) 1,674,724 1,634,693
- ----------------------------------------------------------------------------------
Series 2007-OSI, Class A2, Floating Rate Pass
Through Ctfs.,
2.57%, 06/25/37(e)(h) 2,230,687 2,024,455
- ----------------------------------------------------------------------------------
Vanderbilt Mortgage Finance-Series 2002-B, Class
A4,
5.84%, 02/07/26(e) 1,175,000 1,157,264
==================================================================================
22,875,311
==================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.16%
Citicorp Lease Pass-Through Trust-Series 1999-1,
Class A2, Pass Through Ctfs., 8.04%,
12/15/19(e)(g) 6,085,000 6,323,246
- ----------------------------------------------------------------------------------
LILACS Repackaging 2005-I-Series A, Sr. Sec.
Notes,
5.14%, 04/15/15 (Acquired 07/14/05; Cost
$4,356,217)(g)(j) 4,356,217 2,208,602
- ----------------------------------------------------------------------------------
Patron's Legacy 2003-III-LILACS-III-Series A,
Ctfs., 5.65%, 04/17/18 (Acquired 11/04/04; Cost
$487,214)(g)(j) 475,141 377,499
- ----------------------------------------------------------------------------------
Patron's Legacy 2004-I-LILACS-I-Series A, Ctfs.,
6.67%, 05/14/18 (Acquired 04/30/04-07/14/05;
Cost $3,346,569)(g)(j) 3,305,193 2,779,667
==================================================================================
11,689,014
==================================================================================
Total Asset-Backed Securities (Cost
$38,971,433) 34,564,325
==================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM BASIC BALANCED FUND
<Table>
<Caption>
SHARES VALUE
- ----------------------------------------------------------------------------------
PREFERRED STOCKS-3.15%
OFFICE SERVICES & SUPPLIES-0.99%
Pitney Bowes International Holdings Inc.,-Series
D, 4.85% Pfd.(e)(h) 102 $ 9,957,873
==================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.06%
Auction Pass Through Trust, Series 2007-T2, Class
A,
7.78% Pfd. (Acquired 12/14/07; Cost
$12,525,000)(g)(h)(j) 167 12,525,083
- ----------------------------------------------------------------------------------
Series 2007-T3, Class A,
8.40% Pfd. (Acquired 10/22/07-02/22/08; Cost
$8,250,000)(g)(h)(j) 110 8,250,055
==================================================================================
20,775,138
==================================================================================
SPECIALIZED FINANCE-0.10%
Agfirst Farm Credit Bank-Class B
6.59% Pfd.(e)(g) 1,485,000 1,052,182
==================================================================================
Total Preferred Stocks (Cost $32,093,737) 31,785,193
==================================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. GOVERNMENT SPONSORED AGENCY SECURITIES-0.83%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-0.39%
Sr. Unsec. Floating Rate Global Notes, 5.12%,
02/17/09(e)(h)(m) $ 3,860,000 3,906,938
==================================================================================
STUDENT LOAN MARKETING ASSOCIATION-0.44%
Sr. Unsec. Unsub. Floating Rate Medium-Term Notes,
2.49%, 12/15/08(e)(h) 1,520,000 1,456,813
- ----------------------------------------------------------------------------------
Series A, Sr. Unsec. Unsub. Medium-Term Notes,
4.00%, 01/15/09(e) 2,000,000 1,980,900
- ----------------------------------------------------------------------------------
Sr. Unsec. Unsub. Medium-Term Notes, 5.05%,
11/14/14(e) 1,230,000 1,015,107
==================================================================================
4,452,820
==================================================================================
Total U.S. Government Sponsored Agency
Securities (Cost $8,441,260) 8,359,758
==================================================================================
MUNICIPAL OBLIGATIONS-0.71%
Denver (City & County of) Colorado; Airport Series
2000 C, Ref. VRD RB, (INS-MBIA Insurance Corp.)
10.00%, 11/15/25(f)(n)(o)(p) 3,800,000 3,800,000
- ----------------------------------------------------------------------------------
Detroit (City of), Michigan; Series 2005 A-1,
Taxable Capital Improvement Limited Tax GO,
(INS-Ambac Assurance Corp.) 4.96%,
04/01/20(e)(f) 1,550,000 1,375,826
- ----------------------------------------------------------------------------------
Industry (City of), California Urban Development
Agency (Project No. 3); Series 2003, Taxable
Allocation RB, (INS-MBIA Insurance Corp.) 6.10%,
05/01/24(e)(f) 2,060,000 1,996,861
==================================================================================
Total Municipal Obligations (Cost $7,455,862) 7,172,687
==================================================================================
U.S. TREASURY SECURITIES-0.39%
U.S. TREASURY BILLS-0.04%
1.60%, 10/23/08(e)(l)(q) 380,000 377,815
==================================================================================
U.S. TREASURY NOTES-0.35%
3.25%, 12/31/09(e)(m) 3,500,000 3,542,665
==================================================================================
Total U.S. Treasury Securities (Cost
$3,933,296) 3,920,480
==================================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-0.43%
Liquid Assets Portfolio-Institutional Class(r) 2,174,433 2,174,433
- ----------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(r) 2,174,433 2,174,433
- ----------------------------------------------------------------------------------
Total Money Market Funds (Cost $4,348,866) 4,348,866
==================================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-110.19% (Cost $1,152,738,229) 1,110,388,769
==================================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-5.16%
Liquid Assets Portfolio-Institutional Class (Cost
$51,951,238)(r)(s) 51,951,238 51,951,238
==================================================================================
TOTAL INVESTMENTS-115.35% (Cost $1,204,689,467) 1,162,340,007
==================================================================================
OTHER ASSETS LESS LIABILITIES-(15.35)% (154,645,651)
==================================================================================
NET ASSETS-100.00% $1,007,694,356
__________________________________________________________________________________
==================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM BASIC BALANCED FUND
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
GO - General Obligation Bonds
Gtd. - Guaranteed
INS - Insurer
Jr. - Junior
LILACS - Life Insurance and Life Annuities Based Charitable Securities
Pfd. - Preferred
RB - Revenue Bonds
Ref. - Refunding
REIT - Real Estate Investment Trust
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
VRD - Variable Rate Demand
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) All or a portion of this security was out on loan at June 30, 2008.
(d) 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, 2008 was $28,356,884,
which represented 2.81% of the Fund's Net Assets. See Note 1A.
(e) 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, 2008 was $451,190,528, which represented 44.77% of the Fund's Net
Assets. See Note 1A.
(f) Principal and/or interest payments are secured by the bond insurance
company listed.
(g) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at June 30, 2008 was $80,707,212, which represented 8.01% of the Fund's
Net Assets. Unless otherwise indicated, these securities are not
considered to be illiquid.
(h) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on June 30, 2008.
(i) Perpetual bond with no specified maturity date.
(j) 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, 2008
was $30,221,687, which represented 3.00% of the Fund's Net Assets.
(k) Security purchased on a forward commitment basis. This security is subject
to dollar roll transactions. See Note 1I.
(l) All or a portion of the value was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1M and Note 8.
(m) A portion of the principal balance was pledged as collateral for open
credit default swap contracts. See Note 1N and Note 9.
(n) Security subject to the alternative minimum tax.
(o) Demand security payable upon demand by the Fund at specified time
intervals no greater than thirteen months. Interest rate is redetermined
periodically. Rate shown is the rate in effect on June 30, 2008.
(p) Security is considered a cash equivalent.
(q) Security traded on a discount basis. The interest rate shown represents
the discount rate at the time of purchase by the Fund.
(r) The money market fund and the Fund are affiliated by having the same
investment advisor.
(s) 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 1J.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM BASIC BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost
$1,148,389,363)* $1,106,039,903
- -------------------------------------------------------
Investments in affiliated money market
funds (Cost $56,300,104) 56,300,104
=======================================================
Total investments (Cost
$1,204,689,467) 1,162,340,007
=======================================================
Cash 5,669,082
- -------------------------------------------------------
Foreign currencies, at value (Cost
$284,550) 287,903
- -------------------------------------------------------
Receivables for:
Investments sold 28,535,239
- -------------------------------------------------------
Variation margin 18,633
- -------------------------------------------------------
Fund shares sold 1,849,590
- -------------------------------------------------------
Dividends and Interest 4,794,259
- -------------------------------------------------------
Principal paydowns 416
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 372,687
- -------------------------------------------------------
Other assets 37,691
=======================================================
Total assets 1,203,905,507
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Investments purchased 132,722,267
- -------------------------------------------------------
Fund shares reacquired 3,701,114
- -------------------------------------------------------
Collateral upon return of securities
loaned 51,951,238
- -------------------------------------------------------
Accrued fees to affiliates 888,226
- -------------------------------------------------------
Accrued other operating expenses 242,270
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 596,425
- -------------------------------------------------------
Unrealized depreciation on swap
agreements 5,188,813
- -------------------------------------------------------
Premiums received on swap agreements 920,798
=======================================================
Total liabilities 196,211,151
=======================================================
Net assets applicable to shares
outstanding $1,007,694,356
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,494,221,288
- -------------------------------------------------------
Undistributed net investment income 843,813
- -------------------------------------------------------
Undistributed net realized gain (loss) (440,095,235)
- -------------------------------------------------------
Unrealized appreciation (depreciation) (47,275,510)
=======================================================
$1,007,694,356
_______________________________________________________
=======================================================
NET ASSETS:
Class A $ 556,939,207
_______________________________________________________
=======================================================
Class B $ 156,847,487
_______________________________________________________
=======================================================
Class C $ 104,598,214
_______________________________________________________
=======================================================
Class R $ 8,069,689
_______________________________________________________
=======================================================
Investor Class $ 180,788,496
_______________________________________________________
=======================================================
Institutional Class $ 451,263
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 48,341,607
_______________________________________________________
=======================================================
Class B 13,645,250
_______________________________________________________
=======================================================
Class C 9,091,942
_______________________________________________________
=======================================================
Class R 700,971
_______________________________________________________
=======================================================
Investor Class 15,695,739
_______________________________________________________
=======================================================
Institutional Class 39,209
_______________________________________________________
=======================================================
Class A:
Net asset value per share $ 11.52
- -------------------------------------------------------
Maximum offering price per share
(Net asset value of $11.52
divided by 94.50%) $ 12.19
_______________________________________________________
=======================================================
Class B:
Net asset value and offering price
per share $ 11.49
_______________________________________________________
=======================================================
Class C:
Net asset value and offering price
per share $ 11.50
_______________________________________________________
=======================================================
Class R:
Net asset value and offering price
per share $ 11.51
_______________________________________________________
=======================================================
Investor Class:
Net asset value and offering price
per share $ 11.52
_______________________________________________________
=======================================================
Institutional Class:
Net asset value and offering price
per share $ 11.51
_______________________________________________________
=======================================================
</Table>
* At June 30, 2008, securities with an aggregate value of $50,509,562 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM BASIC BALANCED FUND
STATEMENT OF OPERATIONS
For the six months ended June 30, 2008
(Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 13,539,006
- ------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $131,760) 8,592,280
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $236,355) 372,215
================================================================================================
Total investment income 22,503,501
================================================================================================
EXPENSES:
Advisory fees 2,952,739
- ------------------------------------------------------------------------------------------------
Administrative services fees 155,543
- ------------------------------------------------------------------------------------------------
Custodian fees 76,653
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 762,287
- ------------------------------------------------------------------------------------------------
Class B 995,221
- ------------------------------------------------------------------------------------------------
Class C 588,629
- ------------------------------------------------------------------------------------------------
Class R 21,330
- ------------------------------------------------------------------------------------------------
Investor Class 250,793
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C, R and Investor 1,572,733
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 251
- ------------------------------------------------------------------------------------------------
Trustees' and officer's fees and benefits 26,266
- ------------------------------------------------------------------------------------------------
Other 243,797
================================================================================================
Total expenses 7,646,242
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (43,827)
================================================================================================
Net expenses 7,602,415
================================================================================================
Net investment income 14,901,086
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities (includes net gains (losses) from securities sold to
affiliates of $(483,390)) 35,650,702
- ------------------------------------------------------------------------------------------------
Foreign currencies 22,446
- ------------------------------------------------------------------------------------------------
Futures contracts 444,038
- ------------------------------------------------------------------------------------------------
Swap agreements 1,836,477
================================================================================================
37,953,663
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (196,930,506)
- ------------------------------------------------------------------------------------------------
Foreign currencies 2,715
- ------------------------------------------------------------------------------------------------
Futures contracts 240,125
- ------------------------------------------------------------------------------------------------
Swap agreements (2,527,853)
================================================================================================
(199,215,519)
================================================================================================
Net realized and unrealized gain (loss) (161,261,856)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(146,360,770)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
14 AIM BASIC BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2008 and the year ended December 31, 2007
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2008 2007
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 14,901,086 $ 28,283,719
- ----------------------------------------------------------------------------------------------------------
Net realized gain 37,953,663 125,472,988
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (199,215,519) (114,162,205)
==========================================================================================================
Net increase (decrease) in net assets resulting from operations (146,360,770) 39,594,502
==========================================================================================================
Distributions to shareholders from net investment income:
Class A (8,196,688) (17,116,265)
- ----------------------------------------------------------------------------------------------------------
Class B (1,818,956) (4,563,714)
- ----------------------------------------------------------------------------------------------------------
Class C (1,130,518) (2,316,568)
- ----------------------------------------------------------------------------------------------------------
Class R (105,527) (178,636)
- ----------------------------------------------------------------------------------------------------------
Investor Class (2,685,052) (6,039,341)
- ----------------------------------------------------------------------------------------------------------
Institutional Class (6,515) (102,908)
==========================================================================================================
Total distributions from net investment income (13,943,256) (30,317,432)
==========================================================================================================
Share transactions-net:
Class A (33,779,343) (114,679,639)
- ----------------------------------------------------------------------------------------------------------
Class B (56,563,788) (120,698,935)
- ----------------------------------------------------------------------------------------------------------
Class C (12,011,615) (31,327,601)
- ----------------------------------------------------------------------------------------------------------
Class R (1,658,738) 3,699,698
- ----------------------------------------------------------------------------------------------------------
Investor Class (17,722,811) (63,494,189)
- ----------------------------------------------------------------------------------------------------------
Institutional Class (6,010,307) 6,717,170
==========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (127,746,602) (319,783,496)
==========================================================================================================
Net increase (decrease) in net assets (288,050,628) (310,506,426)
__________________________________________________________________________________________________________
==========================================================================================================
NET ASSETS:
Beginning of period 1,295,744,984 1,606,251,410
==========================================================================================================
End of period (including undistributed net investment income of
$843,813 and $(114,017), respectively) $1,007,694,356 $1,295,744,984
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
15 AIM BASIC BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2008
(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 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
contingent deferred sales charges ("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. 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 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.
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, American
Depositary Receipts 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 the issuer's assets,
general economic conditions, interest rates, investor perceptions and
market liquidity.
16 AIM BASIC BALANCED FUND
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. Paydown gains and losses on mortgage and asset-backed securities are
recorded as adjustments to interest income. 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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, the investment
advisor may determine the country in which an issuer is located and/or
credit risk exposure based on various factors. These factors include the
laws of the country under which the issuer is organized, where the issuer
maintains a principal office, the country in which the issuer derives 50%
or more of its total revenues and the country that has the primary market
for the issuer's securities, as well as other criteria. Among the other
criteria that may be evaluated for making this determination are the
country in which the issuer maintains 50% or more of its assets, the type
of security, financial guarantees and enhancements, the nature of the
collateral and the sponsor organization. Country of issuer and/or credit
risk exposure has been determined to be the United States of America
unless otherwise noted.
D. DISTRIBUTIONS -- Distributions from income are declared 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.
The Fund files tax returns in the U.S. Federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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 AND FORWARD COMMITMENT TRANSACTIONS -- The Fund may engage in
dollar roll and forward commitment transactions with respect to mortgage-
backed securities issued by GNMA, FNMA and FHLMC. These transactions are
often conducted on a to be announced ("TBA") basis. In a TBA mortgage-
backed transaction, the seller does not specify the particular securities
to be delivered. Rather, a Fund agrees to accept any security that meets
specified terms, such as an agreed upon issuer, coupon rate and terms of
the underlying mortgages. TBA mortgage-backed transactions generally
settle once a month on a specific date.
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 coupon 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.
17 AIM BASIC BALANCED FUND
Forward commitment transactions involve commitments by the Fund to
acquire or sell TBA mortgage-backed securities from/to a financial
institution, such as a bank or broker-dealer at a specified future date
and amount. The TBA mortgage-backed security is marked to market until
settlement and the unrealized appreciation or depreciation is recorded in
the statement of operations.
At the time the Fund enters into the dollar roll or forward commitment
transaction, mortgage-backed securities or other liquid assets held by the
Fund having a dollar value equal to the purchase price or in an amount
sufficient to honor the forward commitment will be segregated.
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.
Forward commitment transactions involve the risk that a counter-party to
the transaction may fail to complete the transaction. If this occurs, the
Fund may lose the opportunity to purchase or sell the security at the
agreed upon price. Settlement dates of forward commitment transactions may
be a month or more after entering into these transactions and as a result
the market values of the securities may vary from the purchase or sale
prices. Therefore, forward commitment transactions may increase the Fund's
overall interest rate exposure.
J. SECURITIES LENDING -- 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 by the securities lending provider. Such
collateral will be cash or debt securities issued or guaranteed by the
U.S. Government or any of its sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Dividends received on cash collateral
investments for securities lending transactions, which are net of
compensation to counterparties, is included in Dividends from affiliates
on the Statement of Operations. The aggregate value of securities out on
loan is shown as a footnote on the Statement of Assets and Liabilities.
K. 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.
L. 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.
M. 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
recalculating the value of the contracts on a daily basis. 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.
N. 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
18 AIM BASIC BALANCED FUND
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 an upfront payment and/or 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 an upfront payment and/or a
fixed payment over the life of the agreement. If a credit event occurs,
the Fund as a protection seller would cease to receive the fixed payment
stream, the Fund would pay the buyer the full notional value of the
referenced obligation, and the Fund would receive the corresponding bonds
or similar bonds issued by the same reference entity. If no credit event
occurs, the Fund receives the fixed payment over the life of the
agreement. As the seller, the Fund would effectively add leverage to its
portfolio because, in addition to its total net assets, the Fund would be
subject to investment exposure on the notional amount of the CDS. Because
the CDS is a bilateral agreement between Counterparties, the transaction
can alternatively be settled by a cash payment in the case of a credit
event.
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. Payments received or paid at the beginning of the agreement
are reflected as such on the Statement of Assets and Liabilities and may
be referred to as upfront payments. The Fund amortizes upfront payments
and/or accrues for the fixed payment stream on swap agreements on a daily
basis with the net amount, 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.
O. 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund on February 29, 2008, effective May 1, 2008, between the Advisor and
each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management
Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited,
Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco
Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco
Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the
Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-
Advisor(s) that provide discretionary investment management services to the Fund
based on the percentage of assets allocated to such Sub-Advisor(s).
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (but not cash collateral from
securities lending) in such affiliated money market funds.
For the six months ended June 30, 2008, the Advisor waived advisory fees of
$5,851.
At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") 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, 2008, Invesco reimbursed expenses of the Fund in the
amount of $1,250.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain
administrative costs incurred in providing accounting services to the Fund. For
the six months ended June 30, 2008, 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
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. IAIS may make payments to intermediaries that
provide omnibus account services, sub-accounting services and/or networking
services. All fees payable by IAIS 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, 2008, expenses incurred under the agreement are shown in
the Statement of Operations as transfer agent fees.
19 AIM BASIC BALANCED FUND
The Trust has entered into master distribution agreements with Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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 IADI 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. Rules of the Financial Industry Regulatory Authority ("FINRA") 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, 2008,
expenses incurred under the Plans are shown in the Statement of Operations as
distribution fees.
Front-end sales commissions and 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, 2008, IADI
advised the Fund that IADI retained $39,665 in front-end sales commissions from
the sale of Class A shares and $0, $114,611, $3,322 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 establishes a hierarchy that prioritizes the
inputs to valuation methods giving the highest priority to readily available
unadjusted quoted prices in an active market for identical assets (level 1) and
the lowest priority to unobservable inputs (level 3) market prices are not
readily available or are unreliable. Based on the inputs the securities or other
instruments are tiered into three levels of hierarchy under SFAS 157. Changes in
valuation methods may result in transfers in or out of an investment's assigned
level within the hierarchy,
Level 1 -- Quoted prices in an active market for identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered input levels, as of the end of the reporting
period, June 30, 2008. The inputs or methods used for valuing securities may not
be an indication of the risk associated with investing in those securities.
<Table>
<Caption>
INVESTMENTS IN OTHER
INPUT LEVEL SECURITIES INVESTMENTS*
- -------------------------------------------------------
Level 1 $ 651,094,096 $ 260,069
- -------------------------------------------------------
Level 2 511,245,911 (5,188,813)
- -------------------------------------------------------
Level 3 -- --
=======================================================
$1,162,340,007 $(4,928,744)
_______________________________________________________
=======================================================
</Table>
* Other investments include futures and swap contracts, which are included at
the unrealized appreciation/(depreciation).
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, 2008, the Fund
engaged in securities sales of $7,572,545, which resulted in net realized gains
(losses) of $(483,390), and securities purchases of $4,067,260.
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, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $36,726.
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
20 AIM BASIC BALANCED FUND
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, 2008, the Fund paid legal fees of $3,074
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company ("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 Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 8--FUTURES CONTRACTS
<Table>
<Caption>
OPEN FUTURES CONTRACTS AT PERIOD-END
- --------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF MONTH/ VALUE APPRECIATION
CONTRACT CONTRACTS COMMITMENT 06/30/08 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 67 September-2008/Long $ 7,407,164 $ (3,815)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 115 September-2008/Long 13,101,016 263,884
==========================================================================================================================
$20,508,180 $260,069
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
NOTE 9--CREDIT DEFAULT SWAP AGREEMENTS
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD-END
- -----------------------------------------------------------------------------------------------------------------------------
NOTIONAL UNREALIZED
BUY/SELL (PAY)/RECEIVE EXPIRATION AMOUNT APPRECIATION
COUNTERPARTY REFERENCE ENTITY PROTECTION FIXED RATE DATE (000) (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special CDX North America Sell 0.75%(a) 06/20/12 $26,000 $(1,415,265)
Financing Inc. Investment Grade
High Volatility
Index
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special MBIA Inc. Sell 1.90% 09/20/08 10,400 (707,962)
Financing Inc.
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Residential Capital, Sell 2.75% 09/20/08 1,525 (70,302)
Financing Inc. LLC
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Residential Capital, Sell 6.80% 09/20/08 3,600 (133,031)
Financing Inc. LLC
- -----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International AMBAC Financial Sell 2.30% 12/20/08 5,710 (810,913)
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International AMBAC Financial Sell 6.75% 12/20/08 2,855 (351,068)
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International Assured Guaranty Sell 5.00% 03/20/09 2,645 (135,372)
Ltd.
- -----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International CIT Group, Inc. Sell 2.40% 09/20/08 2,745 (47,187)
- -----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International CIT Group, Inc. Sell 2.50% 09/20/08 1,225 (20,777)
- -----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International Lehman Brothers Sell 0.90% 09/20/08 5,190 (42,144)
Holdings Inc.
- -----------------------------------------------------------------------------------------------------------------------------
UBS AG AMBAC Financial Sell 5.10% 12/20/08 2,855 (371,235)
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
UBS AG AMBAC Financial Sell 11.00% 12/20/08 4,995 (523,336)
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
UBS AG MBIA Inc. Sell 7.10% 12/20/08 5,200 (575,926)
- -----------------------------------------------------------------------------------------------------------------------------
UBS AG Pulte Homes, Inc. Sell 4.20% 12/20/08 5,720 15,705
=============================================================================================================================
Total Credit Default Swap Agreements $80,665 $(5,188,813)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</Table>
(a) Unamortized premium at period-end of $920,798.
21 AIM BASIC BALANCED FUND
NOTE 10--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, 2007 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2008 $ 1,837,190
- -----------------------------------------------------------------------------------------------
December 31, 2009 473,561,762
===============================================================================================
Total capital loss carryforward $475,398,952
_______________________________________________________________________________________________
===============================================================================================
</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
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.
NOTE 11--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the six months ended June 30, 2008 was $279,298,520 and
$423,382,804, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 102,018,633
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (149,302,634)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $ (47,284,001)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $1,209,624,008.
</Table>
22 AIM BASIC BALANCED FUND
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008(a) DECEMBER 31, 2007
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,648,017 $ 20,567,149 4,209,506 $ 57,162,509
- --------------------------------------------------------------------------------------------------------------------------
Class B 493,056 6,125,016 1,194,220 16,151,409
- --------------------------------------------------------------------------------------------------------------------------
Class C 324,513 4,039,721 732,151 9,919,539
- --------------------------------------------------------------------------------------------------------------------------
Class R 158,826 1,975,940 406,529 5,464,024
- --------------------------------------------------------------------------------------------------------------------------
Investor Class 652,025 8,117,620 1,868,750 25,391,431
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 14,680 183,872 518,506 7,064,137
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 634,676 7,636,718 1,194,081 16,101,260
- --------------------------------------------------------------------------------------------------------------------------
Class B 142,393 1,710,291 317,627 4,272,152
- --------------------------------------------------------------------------------------------------------------------------
Class C 84,844 1,019,802 156,224 2,102,325
- --------------------------------------------------------------------------------------------------------------------------
Class R 8,778 105,518 13,284 178,433
- --------------------------------------------------------------------------------------------------------------------------
Investor Class 213,733 2,571,779 430,071 5,801,012
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 542 6,515 7,675 102,643
==========================================================================================================================
Automatic conversion of Class B shares to Class A
shares:
Class A 2,755,413 34,121,964 4,288,570 58,188,297
- --------------------------------------------------------------------------------------------------------------------------
Class B (2,763,071) (34,121,964) (4,301,053) (58,188,297)
==========================================================================================================================
Reacquired:
Class A (7,710,242) (96,105,174) (18,111,387) (246,131,705)
- --------------------------------------------------------------------------------------------------------------------------
Class B (2,435,162) (30,277,131) (6,118,316) (82,934,199)
- --------------------------------------------------------------------------------------------------------------------------
Class C (1,372,646) (17,071,138) (3,194,289) (43,349,465)
- --------------------------------------------------------------------------------------------------------------------------
Class R (293,222) (3,740,196) (143,706) (1,942,759)
- --------------------------------------------------------------------------------------------------------------------------
Investor Class (2,272,151) (28,412,210) (6,962,193) (94,686,632)
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class (480,302) (6,200,694) (33,081) (449,610)
==========================================================================================================================
(10,195,300) $(127,746,602) (23,526,831) $(319,783,496)
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) There is an entity that is a record owner of more than 5% of the
outstanding shares of the Fund that owns 7% of the outstanding shares of
the Fund. IADI has an agreement with this entity to sell Fund shares. The
Fund, Invesco Aim and/or Invesco Aim affiliates may make payments to this
entity, which is considered to be related to the Fund, for providing
services to the Fund, Invesco Aim and/or Invesco Aim affiliates including
but not limited to services such as, securities brokerage, distribution,
third party record keeping and account servicing. The Trust has no
knowledge as to whether all or any portion of the shares owned of record by
this entity are owned beneficially.
NOTE 13--NEW ACCOUNTING STANDARD
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position and financial performance. It is effective for financial statements
issued for fiscal years beginning after November 15, 2008. Management is
currently in the process of determining the impact of the standard on the Fund's
disclosures in the financial statements.
23 AIM BASIC BALANCED FUND
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.27 $ 13.26 $ 12.25 $ 11.86 $ 11.50 $ 9.46
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a) 0.29(a) 0.24(a) 0.16 0.08 0.05
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (1.76) 0.04 1.05 0.41 0.71 2.05
==============================================================================================================================
Total from investment operations (1.58) 0.33 1.29 0.57 0.79 2.10
==============================================================================================================================
Less distributions:
Dividends from net investment income (0.17) (0.32) (0.28) (0.18) (0.10) (0.06)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.33) --
==============================================================================================================================
Total distributions (0.17) (0.32) (0.28) (0.18) (0.43) (0.06)
==============================================================================================================================
Net asset value, end of period $ 11.52 $ 13.27 $ 13.26 $ 12.25 $ 11.86 $ 11.50
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) (11.96)% 2.46% 10.67% 4.85% 6.89% 22.35%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $556,939 $676,945 $788,003 $817,588 $68,951 $53,675
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.14%(c) 1.08% 1.14% 1.14% 1.47% 1.50%
- ------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.14%(c) 1.08% 1.14% 1.14% 1.49% 1.57%
==============================================================================================================================
Ratio of net investment income to average
net assets 2.83%(c) 2.14% 1.93% 1.59% 0.73% 0.46%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(d) 25% 44% 38% 90% 64% 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. 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
$613,180,390.
(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 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.24 $ 13.23 $ 12.22 $ 11.84 $ 11.49 $ 9.46
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.13(a) 0.19(a) 0.15(a) 0.08 0.01 (0.02)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (1.76) 0.04 1.04 0.40 0.69 2.06
==============================================================================================================================
Total from investment operations (1.63) 0.23 1.19 0.48 0.70 2.04
==============================================================================================================================
Less distributions:
Dividends from net investment income (0.12) (0.22) (0.18) (0.10) (0.02) (0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.33) --
==============================================================================================================================
Total distributions (0.12) (0.22) (0.18) (0.10) (0.35) (0.01)
==============================================================================================================================
Net asset value, end of period $ 11.49 $ 13.24 $ 13.23 $ 12.22 $ 11.84 $ 11.49
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) (12.33)% 1.69% 9.86% 4.04% 6.12% 21.64%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $156,847 $241,041 $358,655 $517,032 $79,968 $76,304
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.89%(c) 1.83% 1.89% 1.88% 2.12% 2.15%
- ------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.89%(c) 1.83% 1.89% 1.88% 2.14% 2.22%
==============================================================================================================================
Ratio of net investment income (loss) to
average net assets 2.08%(c) 1.39% 1.18% 0.85% 0.08% (0.19)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(d) 25% 44% 38% 90% 64% 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. 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
$200,137,772.
(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 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
-------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.25 $ 13.24 $ 12.23 $ 11.85 $ 11.49 $ 9.46
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.13(a) 0.19(a) 0.15(a) 0.08 0.01 (0.02)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (1.76) 0.04 1.04 0.40 0.70 2.06
==============================================================================================================================
Total from investment operations (1.63) 0.23 1.19 0.48 0.71 2.04
==============================================================================================================================
Less distributions:
Dividends from net investment income (0.12) (0.22) (0.18) (0.10) (0.02) (0.01)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.33) --
==============================================================================================================================
Total distributions (0.12) (0.22) (0.18) (0.10) (0.35) (0.01)
==============================================================================================================================
Net asset value, end of period $ 11.50 $ 13.25 $ 13.24 $ 12.23 $ 11.85 $ 11.49
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) (12.32)% 1.69% 9.86% 4.04% 6.21% 21.64%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $104,598 $133,222 $163,630 $194,027 $27,729 $24,790
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.89%(c) 1.83% 1.89% 1.88% 2.12% 2.15%
- ------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.89%(c) 1.83% 1.89% 1.88% 2.14% 2.22%
==============================================================================================================================
Ratio of net investment income (loss) to
average net assets 2.08%(c) 1.39% 1.18% 0.85% 0.08% (0.19)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(d) 25% 44% 38% 90% 64% 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. 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
$118,372,605.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
26 AIM BASIC BALANCED FUND
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS R
---------------------------------------------------------------------
APRIL 30, 2004
(COMMENCEMENT
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DATE) TO
JUNE 30, ----------------------------- DECEMBER 31
2008 2007 2006 2005 2004
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.26 $ 13.25 $12.24 $11.87 $11.61
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16(a) 0.26(a) 0.21(a) 0.13 0.05
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (1.76) 0.04 1.05 0.40 0.60
=======================================================================================================================
Total from investment operations (1.60) 0.30 1.26 0.53 0.65
=======================================================================================================================
Less distributions:
Dividends from net investment income (0.15) (0.29) (0.25) (0.16) (0.06)
- -----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.33)
=======================================================================================================================
Total distributions (0.15) (0.29) (0.25) (0.16) (0.39)
=======================================================================================================================
Net asset value, end of period $ 11.51 $ 13.26 $13.25 $12.24 $11.87
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) (12.08)% 2.20% 10.40% 4.47% 5.68%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 8,070 $10,959 $7,293 $6,684 $ 19
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.39%(c) 1.33% 1.39% 1.38% 1.62%(d)
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.39%(c) 1.33% 1.39% 1.38% 1.64%(d)
=======================================================================================================================
Ratio of net investment income to average net
assets 2.58%(c) 1.89% 1.68% 1.35% 0.58%(d)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(e) 25% 44% 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 $8,579,023.
(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
------------------------------------------------------------------
YEAR ENDED DECEMBER JULY 15, 2005
SIX MONTHS ENDED 31, (COMMENCEMENT DATE)
JUNE 30, --------------------- TO DECEMBER 31,
2008 2007 2006 2005
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.27 $ 13.26 $ 12.25 $ 11.97
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a) 0.29(a) 0.24(a) 0.09
- --------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (1.76) 0.04 1.05 0.30
====================================================================================================================
Total from investment operations (1.58) 0.33 1.29 0.39
====================================================================================================================
Less dividends from net investment income (0.17) (0.32) (0.28) (0.11)
====================================================================================================================
Net asset value, end of period $ 11.52 $ 13.27 $ 13.26 $ 12.25
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) (11.96)% 2.46% 10.67% 3.28%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $180,788 $226,893 $288,522 $344,015
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets 1.14%(c) 1.08% 1.14% 1.10%(d)
====================================================================================================================
Ratio of net investment income to average net
assets 2.83%(c) 2.14% 1.93% 1.63%(d)
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(e) 25% 44% 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
$201,736,923.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
27 AIM BASIC BALANCED FUND
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
---------------------------------------------------------------------
SIX APRIL 30, 2004
MONTHS ENDED YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE)
JUNE 30, ---------------------------- TO DECEMBER 31,
2008 2007 2006 2005 2004
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.26 $13.25 $12.24 $11.86 $11.61
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.21(a) 0.34(a) 0.30(a) 0.22 0.10
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (1.76) 0.04 1.05 0.40 0.61
======================================================================================================================
Total from investment operations (1.55) 0.38 1.35 0.62 0.71
======================================================================================================================
Less distributions:
Dividends from net investment income (0.20) (0.37) (0.34) (0.24) (0.13)
- ----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.33)
======================================================================================================================
Total distributions (0.20) (0.37) (0.34) (0.24) (0.46)
======================================================================================================================
Net asset value, end of period $ 11.51 $13.26 $13.25 $12.24 $11.86
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) (11.77)% 2.89% 11.22% 5.28% 6.15%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 451 $6,685 $ 149 $ 34 $ 11
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 0.69%(c) 0.69% 0.68% 0.67% 0.93%(d)
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 0.69%(c) 0.69% 0.68% 0.67% 0.95%(d)
======================================================================================================================
Ratio of net investment income to average net
assets 3.28%(c) 2.53% 2.39% 2.06% 1.27%(d)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(e) 25% 44% 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 $578,506.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On May 23, 2008, the Securities and Exchange Commission ("SEC") publicly
posted its final approval of the 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"), Invesco Aim Advisors, Inc. ("Invesco Aim") and Invesco Aim
Distributors, Inc. ("IADI") 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 Invesco Aim who may have been harmed by market timing
and related activity. The Distribution Plans provide for the distribution to all
eligible investors 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 of the
Fair Funds has not yet commenced, management of Invesco 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 Ltd. ("Invesco"), the
parent company of IFG and Invesco 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 Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI 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 Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI 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, Invesco Aim's time to respond to that Order has been indefinitely
suspended.
28 AIM BASIC BALANCED FUND
NOTE 15--LEGAL PROCEEDINGS--(CONTINUED)
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI
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; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
Employee Retirement Income Security Act of 1974, as amended ("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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
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 Invesco 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 ERISA
purportedly brought on behalf of participants in the Invesco 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. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Court of Appeals reversed the dismissal and remanded this
lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco 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 Invesco Aim, IADI or the Fund.
29 AIM BASIC BALANCED FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments or
contingent deferred sales charges on redemptions, and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and/or service
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with ongoing costs of investing in other mutual funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) on purchase payments, contingent deferred sales charges on
redemptions, and redemption fees, if any. Therefore, the hypothetical
information is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $880.40 $5.33 $1,019.19 $5.72 1.14%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 876.70 8.82 1,015.47 9.47 1.89
- ---------------------------------------------------------------------------------------------------
C 1,000.00 876.80 8.82 1,015.47 9.47 1.89
- ---------------------------------------------------------------------------------------------------
R 1,000.00 879.20 6.49 1,017.95 6.97 1.39
- ---------------------------------------------------------------------------------------------------
Investor 1,000.00 880.40 5.33 1,019.19 5.72 1.14
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
30 AIM BASIC BALANCED FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT their assigned funds. During the contract evaluated the information provided
renewal process, the Trustees receive differently from one another and
The Board of Trustees (the Board) of AIM comparative performance and fee data attributed different weight to the various
Funds Group is required under the regarding the AIM Funds prepared by an factors. The Trustees recognized that the
Investment Company Act of 1940 to approve independent company, Lipper, Inc. advisory arrangements and resulting
annually the renewal of the AIM Basic (Lipper), under the direction and advisory fees for the Fund and the other
Balanced Fund (the Fund) investment supervision of the independent Senior AIM Funds are the result of years of
advisory agreement with Invesco Aim Officer who also prepares a separate review and negotiation between the
Advisors, Inc. (Invesco Aim). During analysis of this information for the Trustees and Invesco Aim, that the
contract renewal meetings held on June Trustees. Each Sub-Committee then makes Trustees may focus to a greater extent on
18-19, 2008, the Board as a whole and the recommendations to the Investments certain aspects of these arrangements in
disinterested or "independent" Trustees, Committee regarding the performance, fees some years than in others, and that the
voting separately, approved the and expenses of their assigned funds. The Trustees' deliberations and conclusions in
continuance of the Fund's investment Investments Committee considers each a particular year may be based in part on
advisory agreement for another year, Sub-Committee's recommendations and makes their deliberations and conclusions of
effective July 1, 2008. In doing so, the its own recommendations regarding the these same arrangements throughout the
Board determined that the Fund's performance, fees and expenses of the AIM year and in prior years.
investment advisory agreement is in the Funds to the full Board. The Investments
best interests of the Fund and its Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF
shareholders and that the compensation to Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION
Invesco Aim under the Fund's investment its annual recommendation to the Board
advisory agreement is fair and reasonable. whether to approve the continuance of each The discussion below serves as a summary
AIM Fund's investment advisory agreement of the Senior Officer's independent
The independent Trustees met separately and sub-advisory agreements for another written evaluation with respect to the
during their evaluation of the Fund's year. Fund's investment advisory agreement as
investment advisory agreement with well as a discussion of the material
independent legal counsel from whom they The independent Trustees are assisted factors and related conclusions that
received independent legal advice, and the in their annual evaluation of the Fund's formed the basis for the Board's approval
independent Trustees also received investment advisory agreement by the of the Fund's investment advisory
assistance during their deliberations from independent Senior Officer. One agreement and sub-advisory agreements.
the independent Senior Officer, a responsibility of the Senior Officer is to Unless otherwise stated, information set
full-time officer of the AIM Funds who manage the process by which the AIM Funds' forth below is as of June 19, 2008 and
reports directly to the independent proposed management fees are negotiated does not reflect any changes that may have
Trustees. during the annual contract renewal process occurred since that date, including but
to ensure that they are negotiated in a not limited to changes to the Fund's
THE BOARD'S FUND EVALUATION PROCESS manner that is at arms' length and performance, advisory fees, expense
reasonable. Accordingly, the Senior limitations and/or fee waivers.
The Board's Investments Committee has Officer must either supervise a
established three Sub-Committees that are competitive bidding process or prepare an I. Investment Advisory Agreement
responsible for overseeing the management independent written evaluation. The Senior
of a number of the series portfolios of Officer has recommended that an A. Nature, Extent and Quality of
the AIM Funds. This Sub-Committee independent written evaluation be provided Services Provided by Invesco Aim
structure permits the Trustees to focus on and, at the direction of the Board, has
the performance of the AIM Funds that have prepared an independent written The Board reviewed the advisory
been assigned to them. The Sub-Committees evaluation. services provided to the Fund by Invesco
meet throughout the year to review the Aim under the Fund's investment advisory
performance of their assigned funds, and During the annual contract renewal agreement, the performance of Invesco Aim
the Sub-Committees review monthly and process, the Board considered the factors in providing these services, and the
quarterly comparative performance discussed below under the heading "Factors credentials and experience of the officers
information and periodic asset flow data and Conclusions and Summary of Independent and employees of Invesco Aim who provide
for their assigned funds. These materials Written Fee Evaluation" in evaluating the these services. The Board's review of the
are prepared under the direction and fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide
supervision of the independent Senior investment advisory agreement and these services included the Board's
Officer. Over the course of each year, the sub-advisory agreements at the contract consideration of Invesco Aim's portfolio
Sub-Committees meet with portfolio renewal meetings and at their meetings and product review process, various back
managers for their assigned funds and throughout the year as part of their office support functions provided by
other members of management and review ongoing oversight of the Fund. The Fund's Invesco Aim and its affiliates, and
with these individuals the performance, investment advisory agreement and Invesco Aim's equity and fixed income
investment objective(s), policies, sub-advisory agreements were considered trading operations. The Board concluded
strategies and limitations of these funds. separately, although the Board also that the nature, extent and quality of the
considered the common interests of all of advisory services provided to the Fund by
In addition to their meetings the AIM Funds in their deliberations. The Invesco Aim were appropriate and that
throughout the year, the Sub-Committees Board considered all of the information Invesco Aim currently is providing
meet at designated contract renewal provided to them and did not identify any satisfactory advisory services in
meetings each year to conduct an in-depth particular factor that was controlling. accordance with the terms of the Fund's
review of the performance, fees and Each Trustee may have investment advisory agreement. In
expenses of addition, based on their ongoing meetings
throughout the year with the Fund's
portfolio manager or
continued
31 AIM BASIC BALANCED FUND
managers, the Board concluded that these focus on fund performance. However, due to whether the Fund benefits from such
individuals are competent and able to the Fund's underperformance, the Board economies of scale through contractual
continue to carry out their also concluded that it would be breakpoints in the Fund's advisory fee
responsibilities under the Fund's appropriate for the Board to continue to schedule or through advisory fee waivers
investment advisory agreement. monitor more closely the performance of or expense limitations. The Board noted
the Fund. Although the independent written that the Fund's contractual advisory fee
In determining whether to continue the evaluation of the Fund's Senior Officer schedule includes five breakpoints and
Fund's investment advisory agreement, the only considered Fund performance through that the level of the Fund's advisory
Board considered the prior relationship the most recent calendar year, the Board fees, as a percentage of the Fund's net
between Invesco Aim and the Fund, as well also reviewed more recent Fund performance assets, has decreased as net assets
as the Board's knowledge of Invesco Aim's and this review did not change their increased because of the breakpoints. The
operations, and concluded that it was conclusions. Board also noted that Invesco Aim's
beneficial to maintain the current contractual advisory fee waiver discussed
relationship, in part, because of such C. Advisory Fees and Fee Waivers above includes breakpoints based on net
knowledge. The Board also considered the asset levels. Based on this information,
steps that Invesco Aim and its affiliates The Board compared the Fund's contractual the Board concluded that the Fund's
have taken over the last several years to advisory fee rate to the contractual advisory fees appropriately reflect
improve the quality and efficiency of the advisory fee rates of funds in the Fund's economies of scale at current asset
services they provide to the AIM Funds in Lipper expense group that are not managed levels. The Board also noted that the Fund
the areas of investment performance, by Invesco Aim, at a common asset level shares directly in economies of scale
product line diversification, and as of the end of the past calendar through lower fees charged by third party
distribution, fund operations, shareholder year. The Board noted that the Fund's service providers based on the combined
services and compliance. The Board contractual advisory fee rate was below size of all of the AIM Funds and
concluded that the quality and efficiency the median contractual advisory fee rate affiliates.
of the services Invesco Aim and its of funds in its expense group. The Board
affiliates provide to the AIM Funds in also reviewed the methodology used by E. Profitability and Financial
each of these areas have generally Lipper in determining contractual fee Resources of Invesco Aim
improved, and support the Board's approval rates.
of the continuance of the Fund's The Board reviewed information from
investment advisory agreement. The Board also compared the Fund's Invesco Aim concerning the costs of the
effective fee rate (the advisory fee after advisory and other services that Invesco
B. Fund Performance any advisory fee waivers and before any Aim and its affiliates provide to the Fund
expense limitations/waivers) to the and the profitability of Invesco Aim and
The Board compared the Fund's performance advisory fee rates of other clients of its affiliates in providing these
during the past one, three and five Invesco Aim and its affiliates with services. The Board also reviewed
calendar years to the performance of funds investment strategies comparable to those information concerning the financial
in the Fund's performance group that are of the Fund, including two mutual funds condition of Invesco Aim and its
not managed by Invesco Aim, and against advised by Invesco Aim. The Board noted affiliates. The Board also reviewed with
the performance of all funds in the Lipper that the Fund's rate was below the rate Invesco Aim the methodology used to
Mixed-Asset Target Allocation Moderate for one mutual fund and above the rate for prepare the profitability information. The
Funds Index. The Board also reviewed the the other mutual fund, which is an asset Board considered the overall
criteria used by Invesco Aim to identify allocation fund that does not pay an profitability of Invesco Aim, as well as
the funds in the Fund's performance group advisory fee. the profitability of Invesco Aim in
for inclusion in the Lipper reports. The connection with managing the Fund. The
Board noted that the Fund's performance The Board noted that Invesco Aim has Board noted that Invesco Aim continues to
was in the fourth quintile of its contractually agreed to waive advisory operate at a net profit, although
performance group for the one, three and fees of the Fund through December 31, 2012 increased expenses in recent years have
five year periods (the first quintile and that this fee waiver includes reduced the profitability of Invesco Aim
being the best performing funds and the breakpoints based on net asset levels. The and its affiliates. The Board concluded
fifth quintile being the worst performing Board considered the contractual nature of that the Fund's fees were fair and
funds). The Board noted that the Fund's this fee waiver and noted that it remains reasonable, and that the level of profits
performance was below the performance of in effect until December 31, 2012. The realized by Invesco Aim and its affiliates
the Index for the one, three and five year Board also considered the effect this fee from providing services to the Fund was
periods. The Board also noted that Invesco waiver would have on the Fund's total not excessive in light of the nature,
Aim acknowledges the Fund's estimated expenses. quality and extent of the services
underperformance and is focused on the provided. The Board considered whether
longer term and business issues that After taking account of the Fund's Invesco Aim is financially sound and has
affect the Fund's performance. The Board contractual advisory fee rate, as well as the resources necessary to perform its
also considered the steps Invesco Aim has the comparative advisory fee information obligations under the Fund's investment
taken over the last several years to and the fee waiver discussed above, the advisory agreement, and concluded that
improve the quality and efficiency of the Board concluded that the Fund's advisory Invesco Aim has the financial resources
services that Invesco Aim provides to the fees were fair and reasonable. necessary to fulfill these obligations.
AIM Funds. The Board concluded that
Invesco Aim continues to be responsive to D. Economies of Scale and Breakpoints F. Independent Written Evaluation of
the Board's the Fund's Senior Officer
The Board considered the extent to which
there are economies of scale in Invesco The Board noted that, at their direction,
Aim's provision of advisory services to the Senior Officer of the Fund, who is
the Fund. The Board also considered
continued
32 AIM BASIC BALANCED FUND
independent of Invesco Aim and Invesco regulatory requirements. providing investment advisory services.
Aim's affiliates, had prepared an The Board concluded that the sub-advisory
independent written evaluation to assist The Board considered the fact that the agreements will benefit the Fund and its
the Board in determining the Fund's uninvested cash and cash collateral shareholders by permitting Invesco Aim to
reasonableness of the proposed management from any securities lending arrangements utilize the additional resources and
fees of the AIM Funds, including the Fund. may be invested in money market funds talent of the Affiliated Sub-Advisers in
The Board noted that they had relied upon advised by Invesco Aim pursuant to managing the Fund.
the Senior Officer's written evaluation procedures approved by the Board. The
instead of a competitive bidding process. Board noted that Invesco Aim will receive B. Fund Performance
In determining whether to continue the advisory fees from these affiliated money
Fund's investment advisory agreement, the market funds attributable to such The Board did not view Fund performance as
Board considered the Senior Officer's investments, although Invesco Aim has a relevant factor in considering whether
written evaluation. contractually agreed to waive through at to approve the sub-advisory agreements for
least June 30, 2009, the advisory fees the Fund, as no Affiliated Sub-Adviser
G. Collateral Benefits to Invesco Aim payable by the Fund in an amount equal to served as sub-adviser to the Fund prior to
and its Affiliates 100% of the net advisory fees Invesco Aim May 1, 2008.
receives from the affiliated money market
The Board considered various other funds with respect to the Fund's C. Sub-Advisory Fees
benefits received by Invesco Aim and its investment of uninvested cash, but not
affiliates resulting from Invesco Aim's cash collateral. The Board considered the The Board considered the services to be
relationship with the Fund, including the contractual nature of this fee waiver and provided by the Affiliated Sub-Advisers
fees received by Invesco Aim and its noted that it remains in effect until at pursuant to the sub-advisory agreements
affiliates for their provision of least June 30, 2009. The Board concluded and the services to be provided by Invesco
administrative, transfer agency and that the Fund's investment of uninvested Aim pursuant to the Fund's investment
distribution services to the Fund. The cash and cash collateral from any advisory agreement, as well as the
Board considered the performance of securities lending arrangements in the allocation of fees between Invesco Aim and
Invesco Aim and its affiliates in affiliated money market funds is in the the Affiliated Sub-Advisers pursuant to
providing these services and the best interests of the Fund and its the sub-advisory agreements. The Board
organizational structure employed by shareholders. noted that the sub-advisory fees have no
Invesco Aim and its affiliates to provide direct effect on the Fund or its
these services. The Board also considered II. Sub-Advisory Agreements shareholders, as they are paid by Invesco
that these services are provided to the Aim to the Affiliated Sub-Advisers, and
Fund pursuant to written contracts which A. Nature, Extent and Quality of that Invesco Aim and the Affiliated
are reviewed and approved on an annual Services Provided by Affiliated Sub-Advisers are affiliates. After taking
basis by the Board. The Board concluded Sub-Advisers account of the Fund's contractual
that Invesco Aim and its affiliates were sub-advisory fee rate, as well as other
providing these services in a satisfactory The Board reviewed the services to be relevant factors, the Board concluded that
manner and in accordance with the terms of provided by Invesco Trimark Ltd., Invesco the Fund's sub-advisory fees were fair and
their contracts, and were qualified to Asset Management Deutschland, GmbH, reasonable.
continue to provide these services to the Invesco Asset Management Limited, Invesco
Fund. Asset Management (Japan) Limited, Invesco D. Financial Resources of the
Australia Limited, Invesco Global Asset Affiliated Sub-Advisers
The Board considered the benefits Management (N.A.), Inc., Invesco Hong Kong
realized by Invesco Aim as a result of Limited, Invesco Institutional (N.A.), The Board considered whether each
portfolio brokerage transactions executed Inc. and Invesco Senior Secured Affiliated Sub-Adviser is financially
through "soft dollar" arrangements. Under Management, Inc. (collectively, the sound and has the resources necessary to
these arrangements, portfolio brokerage "Affiliated Sub-Advisers") under the perform its obligations under its
commissions paid by the Fund and/or other sub-advisory agreements and the respective sub-advisory agreement, and
funds advised by Invesco Aim are used to credentials and experience of the officers concluded that each Affiliated Sub-Adviser
pay for research and execution services. and employees of the Affiliated has the financial resources necessary to
The Board noted that soft dollar Sub-Advisers who will provide these fulfill these obligations.
arrangements shift the payment obligation services. The Board concluded that the
for the research and execution services nature, extent and quality of the services
from Invesco Aim to the funds and to be provided by the Affiliated
therefore may reduce Invesco Aim's Sub-Advisers were appropriate. The Board
expenses. The Board also noted that noted that the Affiliated Sub-Advisers,
research obtained through soft dollar which have offices and personnel that are
arrangements may be used by Invesco Aim in geographically dispersed in financial
making investment decisions for the Fund centers around the world, have been formed
and may therefore benefit Fund in part for the purpose of researching and
shareholders. The Board concluded that compiling information and making
Invesco Aim's soft dollar arrangements recommendations on the markets and
were appropriate. The Board also concluded economies of various countries and
that, based on their review and securities of companies located in such
representations made by Invesco Aim, these countries or on various types of
arrangements were consistent with investments and investment techniques, and
33 AIM BASIC BALANCED FUND
Supplement to Semiannual Report dated 6/30/08
AIM BASIC BALANCED FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is
For periods ended 6/30/08 not indicative of future results. More
The following information has been recent returns may be more or less than
prepared to provide Institutional Class Inception 4.44% those shown. All returns assume
shareholders with a performance overview 5 Years 4.99 reinvestment of distributions at NAV.
specific to their holdings. Institutional 1 Year -14.49 Investment return and principal value will
Class shares are offered exclusively to 6 Months* -11.77 fluctuate so your shares, when redeemed,
institutional investors, including defined may be worth more or less than their
contribution plans that meet certain * Cumulative total return that has not original cost. See full report for
criteria. been annualized information on comparative benchmarks.
========================================== Please consult your Fund prospectus for
more information. For the most current
Institutional Class shares' inception date month-end performance, please call 800 451
is April 30, 2004. Returns since that date 4246 or visit invescoaim.com.
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 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
differing sales charges and class
expenses.
The total annual Fund operating expense
ratio set forth in the most recent Fund
prospectus as of the date of this
supplement for Institutional Class shares
was 0.69%. The expense ratios presented
above may vary from the expense ratios
presented in other sections of the actual
report that are based on expenses incurred
during the period covered by the report.
Over for information on your Fund's expenses.
THIS SUPPLEMENT 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. [INVESCO AIM LOGO]
- SERVICE MARK -
invescoaim.com BBA-INS-2 Invesco Aim Distributors, Inc.
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management fees
and other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with ongoing costs of investing in other mutual funds. The example is based on
an investment of $1,000 invested at the beginning of the period and held for the
entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the hypothetical information is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $882.30 $3.23 $1,021.43 $3.47 0.69%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
AIM BASIC BALANCED FUND
PROXY RESULTS
A Special Meeting ("Meeting") of Shareholders of AIM Basic Balanced Fund, an
investment portfolio of AIM Funds Group, a Delaware statutory trust ("Trust"),
was held on February 29, 2008. The Meeting was held for the following purposes:
(1) Elect 13 trustees to the Board of Trustees of the Trust, each of whom will
serve until his or her successor is elected and qualified.
(2) Approve an amendment to the Trust's Agreement and Declaration of Trust that
would permit the Board of Trustees of the Trust to terminate the Trust, the
Fund, and each other series portfolio of the Trust, or a share class without
a shareholder vote.
(3) Approve a new sub-advisory agreement between Invesco Aim Advisors, Inc. and
each of AIM Funds Management, Inc.; Invesco Asset Management Deutschland,
GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco Global Asset Management (N.A.),
Inc.; Invesco Hong Kong Limited; Invesco Institutional (N.A.), Inc.; and
Invesco Senior Secured Management, Inc.
The results of the voting on the above matters were as follows:
<Table>
<Caption>
WITHHELD/
MATTERS VOTES FOR ABSTENTIONS**
- ------------------------------------------------------------------------------------------------------------
(1)* Bob R. Baker..................................................... 136,849,147 4,123,920
Frank S. Bayley.................................................. 136,856,960 4,116,107
James T. Bunch................................................... 136,850,068 4,122,999
Bruce L. Crockett................................................ 136,834,285 4,138,782
Albert R. Dowden................................................. 136,851,266 4,121,801
Jack M. Fields................................................... 136,893,917 4,079,150
Martin L. Flanagan............................................... 136,889,028 4,084,039
Carl Frischling.................................................. 136,837,466 4,135,601
Prema Mathai-Davis............................................... 136,840,379 4,132,688
Lewis F. Pennock................................................. 136,853,427 4,119,640
Larry Soll, Ph.D................................................. 136,708,623 4,264,444
Raymond Stickel, Jr.............................................. 136,747,468 4,225,599
Philip A. Taylor................................................. 136,731,527 4,241,540
</Table>
<Table>
<Caption>
VOTES WITHHELD/ BROKER
VOTES FOR AGAINST ABSTENTIONS NON-VOTES
- ---------------------------------------------------------------------------------------------------------------------------
(2)* Approve an amendment to the Trust's Agreement
and Declaration of Trust that would permit the
Board of Trustees of the Trust to terminate the
Trust, the Fund, and each other series
portfolio of the Trust, or a share class
without a shareholder vote..................... 89,092,876 12,597,596 4,024,351 35,258,244
(3) Approve a new sub-advisory agreement between
Invesco Aim Advisors, Inc. and each of AIM
Funds Management, Inc.; Invesco Asset
Management Deutschland, GmbH; Invesco Asset
Management Limited; Invesco Asset Management
(Japan) Limited; Invesco Australia Limited;
Invesco Global Asset Management (N.A.), Inc.;
Invesco Hong Kong Limited; Invesco
Institutional (N.A.), Inc.; and Invesco Senior
Secured Management, Inc........................ 36,534,791 1,826,207 1,682,362 12,753,405
</Table>
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Funds Group.
** Includes Broker Non-Votes.
34 AIM BASIC BALANCED FUND
====================================================================================================================================
EDELIVERY
INVESCOAIM.COM/EDELIVERY
REGISTER FOR EDELIVERY - eDelivery is the process of receiving your fund and account information via e-mail. Once your quarterly
statements, tax forms, fund reports, and prospectuses are available, we will send you an e-mail notification containing links to
these documents. For security purposes, you will need to log in to your account to view your statements and tax forms.
WHY SIGN UP? HOW DO I SIGN UP?
Register for eDelivery to: It's easy. Just follow these simple steps:
- - save your Fund the cost of printing and postage. 1. Log in to your account.
- - reduce the amount of paper you receive. 2. Click on the "Service Center" tab.
- - gain access to your documents faster by not waiting for the mail. 3. Select "Register for eDelivery" and complete the consent
- - view your documents online anytime at your convenience. process.
- - save the documents to your personal computer or print
them out for your records.
This service is provided by Invesco Aim Investment Services, Inc.
====================================================================================================================================
FUND HOLDINGS AND PROXY VOTING INFORMATION
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth
quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund
files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your
Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC
Web site at sec.gov. Copies of the 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 Reference Room, including information about duplicating fee charges, by
calling 202 942 8090 or 800 732 0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file
numbers for the Fund are 811-01540 and 002-27334.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities
is available without charge, upon request, from our Client Services department at 800 959 4246 or on the Invesco Aim Web site,
invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is
available at our Web site. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting
Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC Web site, sec.gov.
If used after October 20, 2008, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly
Performance Review for the most recent quarter-end. Invesco Aim --SERVICE MARK-- is a service mark of Invesco
Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors for [INVESCO AIM LOGO]
the products and services represented by Invesco Aim; they each provide investment advisory services to - SERVICE MARK -
individual and institutional clients and do not sell securities. Invesco Institutional (N.A.), Inc., Invesco
Senior Secured Management, Inc., Invesco Global Asset Management (N.A.), Inc., Invesco Trimark Ltd., Invesco
Asset Management (Japan) Ltd. and Invesco Hong Kong Ltd. are affiliated investment advisors that serve as the
subadvisor for some of the products and services represented by Invesco Aim. Invesco Aim Distributors, Inc. is
the distributor for the retail mutual funds, exchange-traded funds and U.S. institutional money market funds
represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd.
invescoaim.com BBA-SAR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM EUROPEAN SMALL COMPANY FUND
- SERVICE MARK - Semiannual Report to Shareholders - June 30, 2008
[MOUNTAIN GRAPHIC]
AIM Investments 2 Fund Performance
became INVESCO AIM 3 Letter to Shareholders
on March 31, 2008. 4 Schedule of Investments
6 Financial Statements
For more details, go to 9 Notes to Financial Statements
invescoaim.com 14 Financial Highlights
17 Fund Expenses
18 Approval of Investment Advisory Agreement
21 Results of Proxy
For the most current month-end Fund performance and commentary, please visit
invescoaim.com.
Unless otherwise noted, all data provided by Invesco Aim.
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
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/07 to 6/30/08, at net asset value (NAV). Performance
shown does not include applicable contingent deferred sales charges (CDSC) or front-end
sales charges, which would have reduced performance.
Class A Shares -10.80%
Class B Shares -11.11
Class C Shares -11.15
MSCI EAFE Index(triangle) (Broad Market Index) -10.96
MSCI Europe Small Cap Index(triangle) (Style-Specific Index) -10.63
Lipper European Funds Index(triangle) (Peer Group Index) -11.80
(triangle)Lipper Inc.
The MSCI EAFE--REGISTERED TRADEMARK-- INDEX is a free float-adjusted market
capitalization index that is designed to measure developed market equity performance,
excluding the U.S. and Canada.
The MSCI EUROPE SMALL CAP INDEX is a free float-adjusted market capitalization index
that represents the small cap segment in developed equity markets in Europe.
The LIPPER EUROPEAN FUNDS INDEX is an equally weighted representation of the largest
funds in the Lipper European Funds category. These funds concentrate their investments
in equity securities whose primary trading markets or operations are concentrated in
the European region or a single country within this region.
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.
=======================================================================================
==========================================
AVERAGE ANNUAL TOTAL RETURNS FUND SHARES. INVESTMENT RETURN AND A REDEMPTION FEE OF 2% WILL BE IMPOSED
PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
As of 6/30/08, including maximum MAY HAVE A GAIN OR LOSS WHEN YOU SELL THE FUND WITHIN 30 DAYS OF PURCHASE.
applicable sales charges SHARES. EXCEPTIONS TO THE REDEMPTION FEE ARE
LISTED IN THE FUND'S PROSPECTUS.
CLASS A SHARES THE TOTAL ANNUAL FUND OPERATING EXPENSE
Inception (8/31/00) 16.05% RATIO SET FORTH IN THE MOST RECENT FUND HAD THE ADVISOR NOT WAIVED FEES AND/OR
5 Years 29.41 PROSPECTUS AS OF THE DATE OF THIS REPORT REIMBURSED EXPENSES IN THE PAST,
1 Year -23.66 FOR CLASS A, CLASS B AND CLASS C SHARES PERFORMANCE WOULD HAVE BEEN LOWER.
WAS 1.44%, 2.19% AND 2.19%, RESPECTIVELY.
CLASS B SHARES THE EXPENSE RATIOS PRESENTED ABOVE MAY
Inception (8/31/00) 16.07% VARY FROM THE EXPENSE RATIOS PRESENTED IN
5 Years 29.78 OTHER SECTIONS OF THIS REPORT THAT ARE
1 Year -22.89 BASED ON EXPENSES INCURRED DURING THE
PERIOD COVERED BY THIS REPORT.
CLASS C SHARES
Inception (8/31/00) 16.07% CLASS A SHARE PERFORMANCE REFLECTS THE
5 Years 29.94 MAXIMUM 5.50% SALES CHARGE, AND CLASS B
1 Year -20.45 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 INVESCOAIM.COM FOR THE MOST RECENT YEAR AFTER PURCHASE.
MONTH-END PERFORMANCE. PERFORMANCE FIGURES
REFLECT REINVESTED DISTRIBUTIONS, CHANGES THE PERFORMANCE OF THE FUND'S SHARE
IN NET ASSET VALUE AND THE EFFECT OF THE CLASSES WILL DIFFER PRIMARILY DUE TO
MAXIMUM SALES CHARGE UNLESS OTHERWISE DIFFERENT SALES CHARGE STRUCTURES AND
STATED. PERFORMANCE FIGURES DO NOT REFLECT CLASS EXPENSES.
DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY
ON FUND DISTRIBUTIONS OR SALE OF
2 AIM EUROPEAN SMALL COMPANY FUND
Dear Fellow Shareholders:
As I write this letter in July 2008, turbulent financial markets are causing
considerable investor anxiety, reminding us again that markets are cyclical and the
[CROCKETT PHOTO] correction of excess is often painful, at least in the short-term. Your Board of
Trustees believes in the wisdom of a long-term perspective and consistent investment
discipline. We continue to put your interests first in the effort to improve investment
performance, contain shareholder costs and uphold the highest ethical standards.
We remain enthusiastic about the global reach and investment expertise that Invesco,
a leading independent global investment management company, brings to the management of
AIM Funds as the parent company of the advisors. The diverse investment strategies
Bruce Crockett deployed throughout the worldwide network of Invesco investment centers has helped
strengthen the management of many AIM Funds. The rebranding of the Funds' management
company as Invesco Aim was followed by the launch of an upgraded, investor-friendly Web
site (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize
stability, endurance, strength and longevity; and a new ad campaign. Emphasizing
Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and Investment News
through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim
Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click
on "Investment Advisory Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes
in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the
movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be
interested to hear your thoughts on this policy.
As always, you are welcome to e-mail your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been
established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund
annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured
that your comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/s/ BRUCE L. CROCKETT
- ------------------------------------------
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
August 11, 2008
3 AIM EUROPEAN SMALL COMPANY FUND
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2008
<Table>
- -------------------------------------------------------------------------
Industrials 40.1%
- -------------------------------------------------------------------------
Consumer Discretionary 22.6
- -------------------------------------------------------------------------
Materials 9.1
- -------------------------------------------------------------------------
Financials 6.4
- -------------------------------------------------------------------------
Information Technology 5.1
- -------------------------------------------------------------------------
Energy 3.7
- -------------------------------------------------------------------------
Consumer Staples 2.9
- -------------------------------------------------------------------------
Money Market Funds Plus Other Assets Less Liabilities 10.1
_________________________________________________________________________
=========================================================================
</Table>
SCHEDULE OF INVESTMENTS(a)
June 30, 2008
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-84.81%
AUSTRIA-2.32%
Andritz A.G.(b) 116,240 $ 7,312,269
===============================================================================
BRAZIL-1.78%
Ocean Wilsons Holdings Ltd. 325,000 5,632,097
===============================================================================
FINLAND-2.56%
Nokian Renkaat Oyj(b) 169,350 8,081,337
===============================================================================
FRANCE-1.53%
Alten(b)(c) 67,000 2,436,645
- -------------------------------------------------------------------------------
Sword Group 78,300 2,397,785
===============================================================================
4,834,430
===============================================================================
GERMANY-10.25%
D+S europe A.G.(b)(c) 491,336 10,044,849
- -------------------------------------------------------------------------------
Elexis A.G. 190,500 5,098,856
- -------------------------------------------------------------------------------
ElringKlinger A.G.(b) 43,415 4,108,533
- -------------------------------------------------------------------------------
Symrise A.G. 180,860 3,929,619
- -------------------------------------------------------------------------------
Takkt A.G. 356,300 6,277,327
- -------------------------------------------------------------------------------
Wirecard A.G.(b)(c) 225,693 2,889,649
===============================================================================
32,348,833
===============================================================================
GREECE-7.42%
Intralot S.A. 741,692 12,728,551
- -------------------------------------------------------------------------------
Jumbo S.A.(b) 276,500 7,746,805
- -------------------------------------------------------------------------------
Mytilineos Holdings S.A.(b) 256,400 2,941,237
===============================================================================
23,416,593
===============================================================================
IRELAND-5.95%
CPL Resources PLC 640,000 1,964,914
- -------------------------------------------------------------------------------
DCC PLC(b) 193,000 4,805,085
- -------------------------------------------------------------------------------
IAWS Group PLC 171,278 4,287,731
- -------------------------------------------------------------------------------
Paddy Power PLC(b) 245,700 7,709,350
===============================================================================
18,767,080
===============================================================================
ISRAEL-1.69%
Advanced Vision Technology Ltd.(b)(c) 251,656 2,164,587
- -------------------------------------------------------------------------------
Israel Discount Bank-Class A(b)(c) 1,435,000 3,161,477
===============================================================================
5,326,064
===============================================================================
ITALY-3.54%
Biesse S.p.A.(b) 297,905 5,097,861
- -------------------------------------------------------------------------------
Cementir Holding S.p.A.(b) 904,313 6,062,681
===============================================================================
11,160,542
===============================================================================
NETHERLANDS-10.30%
Aalberts Industries N.V.(b) 519,336 9,796,824
- -------------------------------------------------------------------------------
Accell Group N.V. 96,122 3,311,304
- -------------------------------------------------------------------------------
Bateman Litwin B.V. 902,194 2,650,693
- -------------------------------------------------------------------------------
Koninklijke BAM Groep N.V.(b)(d) 35,000 618,147
- -------------------------------------------------------------------------------
Koninklijke BAM Groep N.V.(b) 290,594 5,132,278
- -------------------------------------------------------------------------------
Smartrac N.V.(c) 128,000 4,276,458
- -------------------------------------------------------------------------------
Smit Internationale N.V. 34,697 3,386,979
- -------------------------------------------------------------------------------
USG People N.V.(b) 184,634 3,343,689
===============================================================================
32,516,372
===============================================================================
NORWAY-5.69%
ODIM A.S.A.(c) 191,828 3,201,339
- -------------------------------------------------------------------------------
Petroleum Geo-Services A.S.A.(b)(c) 255,926 6,251,792
- -------------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A.(b)(c) 385,107 5,338,251
- -------------------------------------------------------------------------------
Veidekke A.S.A.(b) 441,300 3,154,167
===============================================================================
17,945,549
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
4 AIM EUROPEAN SMALL COMPANY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
SWEDEN-1.84%
Oriflame Cosmetics S.A.-SDR(b) 62,550 $ 4,006,312
- -------------------------------------------------------------------------------
Poolia A.B.-Class B(b) 396,300 1,809,335
===============================================================================
5,815,647
===============================================================================
SWITZERLAND-10.76%
Conzzeta A.G. 2,347 5,641,385
- -------------------------------------------------------------------------------
Daetwyler Holding A.G.(b)(c) 126,100 9,088,389
- -------------------------------------------------------------------------------
Dufry Group(b) 41,079 3,743,762
- -------------------------------------------------------------------------------
Lem Holding S.A. 6,561 2,049,188
- -------------------------------------------------------------------------------
Mobilezone Holding A.G. 981,003 6,723,409
- -------------------------------------------------------------------------------
Rieter Holding A.G.(b) 7,345 2,382,052
- -------------------------------------------------------------------------------
Schweiter A.G. 10,687 4,331,889
===============================================================================
33,960,074
===============================================================================
UNITED KINGDOM-19.18%
Amlin PLC(b) 911,184 4,518,719
- -------------------------------------------------------------------------------
Homeserve PLC(b) 290,906 9,798,000
- -------------------------------------------------------------------------------
IG Group Holdings PLC(b) 522,472 3,412,236
- -------------------------------------------------------------------------------
Inchcape PLC(b) 742,028 4,697,124
- -------------------------------------------------------------------------------
Informa PLC 450,919 3,709,506
- -------------------------------------------------------------------------------
Kier Group PLC(b) 247,371 4,643,411
- -------------------------------------------------------------------------------
Lancashire Holdings Ltd. 944,500 5,738,116
- -------------------------------------------------------------------------------
Mears Group PLC 1,030,000 5,636,928
- -------------------------------------------------------------------------------
Mitie Group PLC(b) 1,562,300 6,559,330
- -------------------------------------------------------------------------------
Morgan Sindall PLC 171,000 2,547,800
- -------------------------------------------------------------------------------
Savills PLC(b) 788,442 3,471,131
- -------------------------------------------------------------------------------
Ultra Electronics Holdings PLC 214,250 5,091,302
- -------------------------------------------------------------------------------
Zetar PLC(c) 111,000 685,413
===============================================================================
60,509,016
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $193,826,073) 267,625,903
===============================================================================
PREFERRED STOCKS-5.04%
GERMANY-5.04%
Fuchs Petrolub A.G.-Pfd. (Cost $7,012,435) 168,512 15,918,823
===============================================================================
MONEY MARKET FUNDS-10.75%
Liquid Assets Portfolio-Institutional Class(e) 16,952,957 16,952,957
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 16,952,957 16,952,957
===============================================================================
Total Money Market Funds (Cost $33,905,914) 33,905,914
===============================================================================
TOTAL INVESTMENTS-100.60% (Cost $234,744,422) 317,450,640
===============================================================================
OTHER ASSETS LESS LIABILITIES-(0.60)% (1,904,237)
===============================================================================
NET ASSETS-100.00% $315,546,403
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
Pfd. - Preferred
SDR - Swedish Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(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, 2008 was $166,327,314,
which represented 52.71% of the Fund's Net Assets. See Note 1A.
(c) Non-income producing security.
(d) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The value of this security at June 30,
2008 represented 0.20% of the Fund's Net Assets. Unless otherwise
indicated, this security is not considered to be illiquid.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
5 AIM EUROPEAN SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost
$200,838,508) $283,544,726
- ------------------------------------------------------
Investments in affiliated money market
funds (Cost $33,905,914) 33,905,914
======================================================
Total investments (Cost
$234,744,422) 317,450,640
======================================================
Cash 116,314
- ------------------------------------------------------
Receivables for:
Investments sold 620,356
- ------------------------------------------------------
Fund shares sold 620,802
- ------------------------------------------------------
Dividends 879,322
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 27,273
- ------------------------------------------------------
Other assets 22,509
======================================================
Total assets 319,737,216
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 943,287
- ------------------------------------------------------
Fund shares reacquired 2,769,914
- ------------------------------------------------------
Amount due custodian -- foreign
currencies (Cost $71,579) 72,353
- ------------------------------------------------------
Accrued fees to affiliates 196,234
- ------------------------------------------------------
Accrued other operating expenses 157,942
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 51,083
======================================================
Total liabilities 4,190,813
======================================================
Net assets applicable to shares
outstanding $315,546,403
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $180,988,899
- ------------------------------------------------------
Undistributed net investment income 4,975,330
- ------------------------------------------------------
Undistributed net realized gain 46,832,131
- ------------------------------------------------------
Unrealized appreciation 82,750,043
======================================================
$315,546,403
______________________________________________________
======================================================
NET ASSETS:
Class A $235,531,896
______________________________________________________
======================================================
Class B $ 35,107,330
______________________________________________________
======================================================
Class C $ 44,907,177
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 11,545,231
______________________________________________________
======================================================
Class B 1,806,274
______________________________________________________
======================================================
Class C 2,309,427
______________________________________________________
======================================================
Class A:
Net asset value per share $ 20.40
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $20.40 divided
by 94.50%) $ 21.59
______________________________________________________
======================================================
Class B:
Net asset value and offering price
per share $ 19.44
______________________________________________________
======================================================
Class C:
Net asset value and offering price
per share $ 19.45
______________________________________________________
======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
6 AIM EUROPEAN SMALL COMPANY FUND
STATEMENT OF OPERATIONS
For the six months ended June 30, 2008
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $679,146) $ 6,910,698
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $26,138) 392,075
================================================================================================
Total investment income 7,302,773
================================================================================================
EXPENSES:
Advisory fees 1,529,470
- ------------------------------------------------------------------------------------------------
Administrative services fees 47,817
- ------------------------------------------------------------------------------------------------
Custodian fees 173,630
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 302,589
- ------------------------------------------------------------------------------------------------
Class B 196,825
- ------------------------------------------------------------------------------------------------
Class C 239,402
- ------------------------------------------------------------------------------------------------
Transfer agent fees 281,304
- ------------------------------------------------------------------------------------------------
Trustees' and officer's fees and benefits 13,319
- ------------------------------------------------------------------------------------------------
Other 112,694
================================================================================================
Total expenses 2,897,050
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (20,064)
================================================================================================
Net expenses 2,876,986
================================================================================================
Net investment income 4,425,787
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities 19,661,044
- ------------------------------------------------------------------------------------------------
Foreign currencies 49,113
================================================================================================
19,710,157
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (70,029,343)
- ------------------------------------------------------------------------------------------------
Foreign currencies (14,313)
================================================================================================
(70,043,656)
================================================================================================
Net realized and unrealized gain (loss) (50,333,499)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(45,907,712)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
7 AIM EUROPEAN SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2008 and the year ended December 31, 2007
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2008 2007
- -------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,425,787 $ 4,105,847
- -------------------------------------------------------------------------------------------------------
Net realized gain 19,710,157 109,308,048
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (70,043,656) (66,083,522)
=======================================================================================================
Net increase (decrease) in net assets resulting from operations (45,907,712) 47,330,373
=======================================================================================================
Distributions to shareholders from net investment income:
Class A -- (4,275,440)
- -------------------------------------------------------------------------------------------------------
Class B -- (282,518)
- -------------------------------------------------------------------------------------------------------
Class C -- (326,815)
=======================================================================================================
Total distributions from net investment income -- (4,884,773)
=======================================================================================================
Distributions to shareholders from net realized gains:
Class A -- (65,212,926)
- -------------------------------------------------------------------------------------------------------
Class B -- (12,297,030)
- -------------------------------------------------------------------------------------------------------
Class C -- (14,225,259)
=======================================================================================================
Total distributions from net realized gains -- (91,735,215)
=======================================================================================================
Share transactions-net:
Class A (12,427,080) (45,038,679)
- -------------------------------------------------------------------------------------------------------
Class B (9,711,604) (6,989,742)
- -------------------------------------------------------------------------------------------------------
Class C (6,546,271) (11,634,802)
=======================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (28,684,955) (63,663,223)
=======================================================================================================
Net increase (decrease) in net assets (74,592,667) (112,952,838)
_______________________________________________________________________________________________________
=======================================================================================================
NET ASSETS:
Beginning of period 390,139,070 503,091,908
- -------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of
$4,975,330 and $549,543, respectively) $315,546,403 $ 390,139,070
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8 AIM EUROPEAN SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2008
(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 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. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class. As of February 1, 2008, the
Fund's shares are open to investors. Prior to February 1, 2008, the Fund's
shares were closed to certain new investors.
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 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, American
Depositary Receipts 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 the issuer's 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 periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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 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, the investment
advisor 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.
The Fund files tax returns in the U.S. Federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 by the securities lending provider. Such
collateral will be cash or debt securities issued or guaranteed by the
U.S. Government or any of its sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Dividends received on cash collateral
investments for securities lending transactions, which are net of
compensation to counterparties, is included in Dividends from affiliates
on the Statement of Operations. The aggregate value of securities out on
loan is shown as a footnote on the Statement of Assets and Liabilities, if
any.
K. 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
10 AIM EUROPEAN SMALL COMPANY FUND
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.
L. 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
based on the annual rate of the Fund's average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.935%
- -------------------------------------------------------------------
Next $250 million 0.91%
- -------------------------------------------------------------------
Next $500 million 0.885%
- -------------------------------------------------------------------
Next $1.5 billion 0.86%
- -------------------------------------------------------------------
Next $2.5 billion 0.835%
- -------------------------------------------------------------------
Next $2.5 billion 0.81%
- -------------------------------------------------------------------
Next $2.5 billion 0.785%
- -------------------------------------------------------------------
Over $10 billion 0.76%
___________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund on February 29, 2008, effective May 1, 2008, between the Advisor and
each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management
Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited,
Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco
Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco
Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the
Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-
Advisor(s) that provide discretionary investment management services to the Fund
based on the percentage of assets allocated to such Sub-Advisor(s).
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (but not cash collateral from
securities lending) in such affiliated money market funds.
For the six months ended June 30, 2008, the Advisor waived advisory fees of
$13,189.
At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") 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, 2008, Invesco reimbursed expenses of the Fund in the
amount of $661.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain
administrative costs incurred in providing accounting services to the Fund. For
the six months ended June 30, 2008, 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
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. IAIS may make payments to intermediaries that
provide omnibus account services, sub-accounting services and/or networking
services. All fees payable by IAIS 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, 2008, 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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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. Rules of the Financial Industry Regulatory
Authority ("FINRA") 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, 2008, expenses incurred under the Plans are shown in
the Statement of Operations as distribution fees.
11 AIM EUROPEAN SMALL COMPANY 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, 2008, IADI advised the Fund that IADI retained $72,165 in
front-end sales commissions from the sale of Class A shares and $8,378, $65,262
and $8,599 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 establishes a hierarchy that prioritizes the
inputs to valuation methods giving the highest priority to readily available
unadjusted quoted prices in an active market for identical assets (level 1) and
the lowest priority to unobservable inputs (level 3) market prices are not
readily available or are unreliable. Based on the inputs the securities or other
instruments are tiered into three levels of hierarchy under SFAS 157. Changes in
valuation methods may result in transfers in or out of an investment's assigned
level within the hierarchy,
Level 1--Quoted prices in an active market for identical assets.
Level 2--Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing a
security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3--Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the end
of the period), unobservable inputs may be used. Unobservable inputs reflect the
Fund's own assumptions about the factors market participants would use in
determining fair value of the securities or instruments and would be based on
the best available information.
Below is a summary of the tiered input levels, as of the end of the reporting
period, June 30, 2008. The inputs or methods used for valuing securities may not
be an indication of the risk associated with investing in those securities.
<Table>
<Caption>
INVESTMENTS
INPUT LEVEL IN SECURITIES
- -------------------------------------
Level 1 $151,123,326
- -------------------------------------
Level 2 166,327,314
- -------------------------------------
Level 3 --
=====================================
$317,450,640
_____________________________________
=====================================
</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, 2008, the Fund
engaged in securities purchases of $58,817.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the six months ended June 30, 2008,
the Fund received credits from this arrangement, which resulted in the reduction
of the Fund's total expenses of $6,214.
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, 2008, the Fund paid legal fees of $2,028
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.
12 AIM EUROPEAN SMALL COMPANY FUND
NOTE 7--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company ("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 Invesco Aim, not to exceed the contractually agreed upon rate.
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, 2007.
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, 2008 was $34,907,615 and
$89,947,855, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 96,904,639
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (14,236,463)
================================================================================================
Net unrealized appreciation of investment securities $ 82,668,176
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $234,782,464.
</Table>
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2008(a) 2007
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,318,628 $ 71,602,023 1,978,085 $ 61,465,926
- -------------------------------------------------------------------------------------------------------------------------
Class B 247,868 5,114,402 131,158 3,911,352
- -------------------------------------------------------------------------------------------------------------------------
Class C 612,588 12,730,580 467,646 13,942,919
=========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 2,828,388 64,714,500
- -------------------------------------------------------------------------------------------------------------------------
Class B -- -- 539,376 11,806,919
- -------------------------------------------------------------------------------------------------------------------------
Class C -- -- 614,471 13,456,950
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 124,490 2,667,257 250,450 7,377,129
- -------------------------------------------------------------------------------------------------------------------------
Class B (130,487) (2,667,257) (260,985) (7,377,129)
=========================================================================================================================
Reacquired:(b)
Class A (4,197,006) (86,696,360) (5,770,926) (178,596,234)
- -------------------------------------------------------------------------------------------------------------------------
Class B (626,477) (12,158,749) (519,630) (15,330,884)
- -------------------------------------------------------------------------------------------------------------------------
Class C (965,513) (19,276,851) (1,321,525) (39,034,671)
=========================================================================================================================
(1,615,909) $(28,684,955) (1,063,492) $ (63,663,223)
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 22% of the
outstanding shares of the Fund. IADI has an agreement with these entities
to sell Fund shares. The Fund, Invesco Aim and/or Invesco Aim affiliates
may make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, Invesco Aim and/or Invesco
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) Net of redemption fees of $19,777 and $10,905 which were allocated among
the classes based on relative net assets of each class for the six months
ended June 30, 2008 and the year ended December 31, 2007, respectively.
13 AIM EUROPEAN 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, -----------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.87 $ 27.72 $ 21.68 $ 16.94 $ 12.05 $ 7.37
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.31(a) 0.30(a) 0.21 0.11(a) (0.05)(a) (0.03)(a)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.78) 1.88 10.08 6.03 5.30 4.74
==============================================================================================================================
Total from investment operations (2.47) 2.18 10.29 6.14 5.25 4.71
==============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.43) (0.27) (0.07) -- (0.03)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (6.60) (3.98) (1.33) (0.36) --
==============================================================================================================================
Total distributions -- (7.03) (4.25) (1.40) (0.36) (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 $ 20.40 $ 22.87 $ 27.72 $ 21.68 $ 16.94 $ 12.05
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) (10.80)% 7.88% 48.07% 36.48% 43.67% 63.96%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $235,532 $281,248 $360,688 $286,882 $161,014 $42,103
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.55%(c) 1.43% 1.54% 1.63% 2.00% 2.00%
- ------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.56%(c) 1.45% 1.57% 1.68% 2.03% 2.68%
==============================================================================================================================
Ratio of net investment income (loss) to
average net assets 2.88%(c) 0.97% 0.67% 0.57% (0.38)% (0.28)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(d) 11% 20% 35% 72% 71% 130%
______________________________________________________________________________________________________________________________
==============================================================================================================================
</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
$243,401,281.
(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, ------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.87 $ 26.73 $ 21.02 $ 16.52 $ 11.84 $ 7.27
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.22(a) 0.06(a) (0.01) (0.03)(a) (0.14)(a) (0.08)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.65) 1.83 9.76 5.86 5.18 4.65
============================================================================================================================
Total from investment operations (2.43) 1.89 9.75 5.83 5.04 4.57
============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.15) (0.06) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (6.60) (3.98) (1.33) (0.36) --
============================================================================================================================
Total distributions -- (6.75) (4.04) (1.33) (0.36) --
============================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 --
============================================================================================================================
Net asset value, end of period $ 19.44 $ 21.87 $ 26.73 $ 21.02 $ 16.52 $11.84
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) (11.11)% 7.06% 46.98% 35.51% 42.67% 62.86%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $35,107 $50,639 $64,827 $51,108 $26,540 $9,415
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.30%(c) 2.18% 2.29% 2.35% 2.65% 2.65%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.31%(c) 2.20% 2.32% 2.38% 2.68% 3.33%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets 2.13%(c) 0.22% (0.08)% (0.15)% (1.03)% (0.93)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 11% 20% 35% 72% 71% 130%
____________________________________________________________________________________________________________________________
============================================================================================================================
</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 $39,581,303.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
14 AIM EUROPEAN SMALL COMPANY FUND
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
---------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.88 $ 26.73 $ 21.03 $ 16.53 $ 11.84 $ 7.27
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.22(a) 0.06(a) (0.01) (0.03)(a) (0.14)(a) (0.09)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.65) 1.84 9.75 5.86 5.19 4.66
============================================================================================================================
Total from investment operations (2.43) 1.90 9.74 5.83 5.05 4.57
============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.15) (0.06) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (6.60) (3.98) (1.33) (0.36) --
============================================================================================================================
Total distributions -- (6.75) (4.04) (1.33) (0.36) --
============================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 --
============================================================================================================================
Net asset value, end of period $ 19.45 $ 21.88 $ 26.73 $ 21.03 $ 16.53 $11.84
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) (11.11)% 7.10% 46.90% 35.49% 42.75% 62.86%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $44,907 $58,252 $77,576 $59,930 $27,983 $6,346
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.30%(c) 2.18% 2.29% 2.35% 2.65% 2.65%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.31%(c) 2.20% 2.32% 2.38% 2.68% 3.33%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets 2.13%(c) 0.22% (0.08)% (0.15)% (1.03)% (0.93)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 11% 20% 35% 72% 71% 130%
____________________________________________________________________________________________________________________________
============================================================================================================================
</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 $48,143,537.
(d) 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 Invesco Aim and IADI (Order No. 05-1318). The WVASC makes
findings of fact that Invesco Aim and IADI 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 Invesco Aim and IADI violated the West Virginia securities laws. The
WVASC orders Invesco Aim and IADI 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, Invesco 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"), Invesco Aim, IADI 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; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws
Employee Retirement Income Security Act of 1974, as amended ("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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
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 Invesco 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 ERISA
purportedly brought on behalf of participants in the Invesco 401(k) plan. Based
on orders
15 AIM EUROPEAN SMALL COMPANY FUND
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
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. Plaintiff appealed this ruling. On June 16, 2008, the Fourth
Court of Appeals reversed the dismissal and remanded this lawsuit back to the
MDL Court for further proceedings..
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco 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 Invesco Aim, IADI or the Fund.
16 AIM EUROPEAN SMALL COMPANY FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments or
contingent deferred sales charges on redemptions, and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and/or service
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with ongoing costs of investing in other mutual funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) on purchase payments, contingent deferred sales charges on
redemptions, and redemption fees, if any. Therefore, the hypothetical
information is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $892.00 $ 7.29 $1,017.16 $ 7.77 1.55%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 888.90 10.80 1,013.43 11.51 2.30
- ---------------------------------------------------------------------------------------------------
C 1,000.00 888.50 10.80 1,013.43 11.51 2.30
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
17 AIM EUROPEAN SMALL COMPANY FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM their assigned funds. During the contract the information provided differently from
Funds Group is required under the renewal process, the Trustees receive one another and attributed different
Investment Company Act of 1940 to approve comparative performance and fee data weight to the various factors. The
annually the renewal of the AIM European regarding the AIM Funds prepared by an Trustees recognized that the advisory
Small Company Fund (the Fund) investment independent company, Lipper, Inc. arrangements and resulting advisory fees
advisory agreement with Invesco Aim (Lipper), under the direction and for the Fund and the other AIM Funds are
Advisors, Inc. (Invesco Aim). During supervision of the independent Senior the result of years of review and
contract renewal meetings held on June Officer who also prepares a separate negotiation between the Trustees and
18-19, 2008, the Board as a whole and the analysis of this information for the Invesco Aim, that the Trustees may focus
disinterested or "independent" Trustees, Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of
voting separately, approved the recommendations to the Investments these arrangements in some years than in
continuance of the Fund's investment Committee regarding the performance, fees others, and that the Trustees'
advisory agreement for another year, and expenses of their assigned funds. The deliberations and conclusions in a
effective July 1, 2008. In doing so, the Investments Committee considers each particular year may be based in part on
Board determined that the Fund's Sub-Committee's recommendations and makes their deliberations and conclusions of
investment advisory agreement is in the its own recommendations regarding the these same arrangements throughout the
best interests of the Fund and its performance, fees and expenses of the AIM year and in prior years.
shareholders and that the compensation to Funds to the full Board. The Investments
Invesco Aim under the Fund's investment Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF
advisory agreement is fair and reasonable. SubCommittee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION
its annual recommendation to the Board
The independent Trustees met separately whether to approve the continuance of each The discussion below serves as a summary
during their evaluation of the Fund's AIM Fund's investment advisory agreement of the Senior Officer's independent
investment advisory agreement with and sub-advisory agreements for another written evaluation with respect to the
independent legal counsel from whom they year. Fund's investment advisory agreement as
received independent legal advice, and the well as a discussion of the material
independent Trustees also received The independent Trustees are assisted factors and related conclusions that
assistance during their deliberations from in their annual evaluation of the Fund's formed the basis for the Board's approval
the independent Senior Officer, a investment advisory agreement by the of the Fund's investment advisory
full-time officer of the AIM Funds who independent Senior Officer. One agreement and sub-advisory agreements.
reports directly to the independent responsibility of the Senior Officer is to Unless otherwise stated, information set
Trustees. manage the process by which the AIM Funds' forth below is as of June 19, 2008 and
proposed management fees are negotiated does not reflect any changes that may have
THE BOARD'S FUND EVALUATION PROCESS during the annual contract renewal process occurred since that date, including but
to ensure that they are negotiated in a not limited to changes to the Fund's
The Board's Investments Committee has manner that is at arms' length and performance, advisory fees, expense
established three Sub-Committees that are reasonable. Accordingly, the Senior limitations and/or fee waivers.
responsible for overseeing the management Officer must either supervise a
of a number of the series portfolios of competitive bidding process or prepare an I. Investment Advisory Agreement
the AIM Funds. This Sub-Committee independent written evaluation. The Senior
structure permits the Trustees to focus on Officer has recommended that an A. Nature, Extent and Quality of
the performance of the AIM Funds that have independent written evaluation be provided Services Provided by Invesco Aim
been assigned to them. The Sub-Committees and, at the direction of the Board, has
meet throughout the year to review the prepared an independent written The Board reviewed the advisory services
performance of their assigned funds, and evaluation. provided to the Fund by Invesco Aim under
the Sub-Committees review monthly and the Fund's investment advisory agreement,
quarterly comparative performance During the annual contract renewal the performance of Invesco Aim in
information and periodic asset flow data process, the Board considered the factors providing these services, and the
for their assigned funds. These materials discussed below under the heading "Factors credentials and experience of the officers
are prepared under the direction and and Conclusions and Summary of Independent and employees of Invesco Aim who provide
supervision of the independent Senior Written Fee Evaluation" in evaluating the these services. The Board's review of the
Officer. Over the course of each year, the fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide
Sub-Committees meet with portfolio investment advisory agreement and these services included the Board's
managers for their assigned funds and sub-advisory agreements at the contract consideration of Invesco Aim's portfolio
other members of management and review renewal meetings and at their meetings and product review process, various back
with these individuals the performance, throughout the year as part of their office support functions provided by
investment objective(s), policies, ongoing oversight of the Fund. The Fund's Invesco Aim, and Invesco Aim's equity and
strategies and limitations of these funds. investment advisory agreement and fixed income trading operations. The Board
sub-advisory agreements were considered concluded that the nature, extent and
In addition to their meetings separately, although the Board also quality of the advisory services provided
throughout the year, the Sub-Committees considered the common interests of all of to the Fund by Invesco Aim were
meet at designated contract renewal the AIM Funds in their deliberations. The appropriate and that Invesco Aim currently
meetings each year to conduct an in-depth Board considered all of the information is providing satisfactory advisory
review of the performance, fees and provided to them and did not identify any services in accordance with the terms of
expenses of particular factor that was controlling. the Fund's investment advisory agreement.
Each Trustee may have evaluated In addition, based on their ongoing
meetings throughout the year with the
continued
18 AIM EUROPEAN SMALL COMPANY FUND
Fund's portfolio manager or managers, the continues to be responsive to the Board's because of the breakpoints. Based on this
Board concluded that these individuals are focus on fund performance. Although the information, the Board concluded that the
competent and able to continue to carry independent written evaluation of the Fund's advisory fees appropriately reflect
out their responsibilities under the Fund's Senior Officer only considered Fund economies of scale at current asset
Fund's investment advisory agreement. performance through the most recent levels. The Board also noted that the Fund
calendar year, the Board also reviewed shares directly in economies of scale
In determining whether to continue the more recent Fund performance and this through lower fees charged by third party
Fund's investment advisory agreement, the review did not change their conclusions. service providers based on the combined
Board considered the prior relationship size of all of the AIM Funds and
between Invesco Aim and the Fund, as well C. Advisory Fees and Fee Waivers affiliates.
as the Board's knowledge of Invesco Aim's
operations, and concluded that it was The Board compared the Fund's contractual E. Profitability and Financial
beneficial to maintain the current advisory fee rate to the contractual Resources of Invesco Aim
relationship, in part, because of such advisory fee rates of funds in the Fund's
knowledge. The Board also considered the expense group that are not managed by The Board reviewed information from
steps that Invesco Aim and its affiliates Invesco Aim, at a common asset level and Invesco Aim concerning the costs of the
have taken over the last several years to as of the end of the past calendar year. advisory and other services that Invesco
improve the quality and efficiency of the The Board noted that the Fund's Aim and its affiliates provide to the Fund
services they provide to the AIM Funds in contractual advisory fee rate was above and the profitability of Invesco Aim and
the areas of investment performance, the median contractual advisory fee rate its affiliates in providing these
product line diversification, of funds in its expense group. The Board services. The Board also reviewed
distribution, fund operations, shareholder also reviewed the methodology used by information concerning the financial
services and compliance. The Board Lip-per in determining contractual fee condition of Invesco Aim and its
concluded that the quality and efficiency rates. affiliates. The Board also reviewed with
of the services Invesco Aim and its Invesco Aim the methodology used to
affiliates provide to the AIM Funds in The Board also compared the Fund's prepare the profitability information. The
each of these areas have generally effective fee rate (the advisory fee after Board considered the overall profitability
improved, and support the Board's approval any advisory fee waivers and before any of Invesco Aim, as well as the
of the continuance of the Fund's expense limitations/waivers) to the profitability of Invesco Aim in connection
investment advisory agreement. advisory fee rates of other clients of with managing the Fund. The Board noted
Invesco Aim and its affiliates with that Invesco Aim continues to operate at a
B. Fund Performance investment strategies comparable to those net profit, although increased expenses in
of the Fund, including one mutual fund recent years have reduced the
The Board compared the Fund's performance advised by Invesco Aim. The Board noted profitability of Invesco Aim and its
during the past one, three and five that the Fund's rate was above the rate affiliates. The Board concluded that the
calendar years to the performance of funds for the other mutual fund. Fund's fees were fair and reasonable, and
in the Fund's performance group that are that the level of profits realized by
not managed by Invesco Aim, and against Based upon amendments to the Fund's Invesco Aim and its affiliates from
the performance of all funds in the contractual advisory fee schedule in providing services to the Fund was not
Lip-per European Region Funds Index. The recent years, the Board concluded that it excessive in light of the nature, quality
Board also reviewed the criteria used by was not necessary at this time to discuss and extent of the services provided. The
Invesco Aim to identify the funds in the with Invesco Aim whether to amend the Board considered whether Invesco Aim is
Fund's performance group for inclusion in contractual advisory fee schedule or financially sound and has the resources
the Lipper reports. The Board noted that implement any fee waivers or expense necessary to perform its obligations under
the Fund's performance was in the fourth limitations for the Fund. the Fund's investment advisory agreement,
quintile of its performance group for the and concluded that Invesco Aim has the
one year period and the first quintile for After taking account of the Fund's financial resources necessary to fulfill
the three and five year periods (the first contractual advisory fee rate, as well as these obligations.
quintile being the best performing funds the comparative advisory fee information
and the fifth quintile being the worst discussed above, the Board concluded that F. Independent Written Evaluation of
performing funds). The Board noted that the Fund's advisory fees were fair and the Fund's Senior Officer
the Fund's performance was below the reasonable.
performance of the Index for the one year The Board noted that, at their direction,
period and above the performance for the D. Economies of Scale and Breakpoints the Senior Officer of the Fund, who is
three and five year periods. The Board independent of Invesco Aim and Invesco
noted that Invesco Aim acknowledges the The Board considered the extent to which Aim's affiliates, had prepared an
Fund's underperformance because of there are economies of scale in Invesco independent written evaluation to assist
shorter term performance results and Aim's provision of advisory services to the Board in determining the
continues to monitor the Fund. The Board the Fund. The Board also considered reasonableness of the proposed management
also considered the steps Invesco Aim has whether the Fund benefits from such fees of the AIM Funds, including the Fund.
taken over the last several years to economies of scale through contractual The Board noted that they had relied upon
improve the quality and efficiency of the breakpoints in the Fund's advisory fee the Senior Officer's written evaluation
services that Invesco Aim provides to the schedule or through advisory fee waivers instead of a competitive bidding process.
AIM Funds. The Board concluded that or expense limitations. The Board noted In determining whether to continue the
Invesco Aim that the Fund's contractual advisory fee Fund's investment advisory agreement, the
schedule includes seven breakpoints and Board considered the Senior Officer's
that the level of the Fund's advisory written evaluation.
fees, as a percentage of the Fund's net
assets, has decreased as net assets
increased
continued
19 AIM EUROPEAN SMALL COMPANY FUND
G. Collateral Benefits to Invesco Aim to 100% of the net advisory fees Invesco of the Fund's assets.
and its Affiliates Aim receives from the affiliated money
market funds with respect to the Fund's C. Sub-Advisory Fees
The Board considered various other investment of uninvested cash, but not
benefits received by Invesco Aim and its cash collateral. The Board considered the The Board considered the services to be
affiliates resulting from Invesco Aim's contractual nature of this fee waiver and provided by the Affiliated Sub-Advisers
relationship with the Fund, including noted that it remains in effect until at pursuant to the sub-advisory agreements
the fees received by Invesco Aim and its least June 30, 2009. The Board concluded and the services to be provided by Invesco
affiliates for their provision of that the Fund's investment of uninvested Aim pursuant to the Fund's investment
administrative, transfer agency and cash and cash collateral from any advisory agreement, as well as the
distribution services to the Fund. The securities lending arrangements in the allocation of fees between Invesco Aim and
Board considered the performance of affiliated money market funds is in the the Affiliated Sub-Advisers pursuant to
Invesco Aim and its affiliates in best interests of the Fund and its the sub-advisory agreements. The Board
providing these services and the shareholders. noted that the sub-advisory fees have no
organizational structure employed by direct effect on the Fund or its
Invesco Aim and its affiliates to II. Sub-Advisory Agreements shareholders, as they are paid by Invesco
provide these services. The Board also Aim to the Affiliated Sub-Advisers, and
considered that these services are A. Nature, Extent and Quality of that Invesco Aim and the Affiliated
provided to the Fund pursuant to written Services Provided by Affiliated Sub-Advisers are affiliates. After taking
contracts which are reviewed and Sub-Advisers account of the Fund's contractual
approved on an annual basis by the sub-advisory fee rate, as well as other
Board. The Board concluded that Invesco The Board reviewed the services to be relevant factors, the Board concluded that
Aim and its affiliates were providing provided by Invesco Trimark Ltd., Invesco the Fund's sub-advisory fees were fair and
these services in a satisfactory manner Asset Management Deutschland, GmbH, reasonable.
and in accordance with the terms of Invesco Asset Management Limited, Invesco
their contracts, and were qualified to Asset Management (Japan) Limited, Invesco D. Financial Resources of the
continue to provide these services to Australia Limited, Invesco Global Asset Affiliated Sub-Advisers
the Fund. Management (N.A.), Inc., Invesco Hong Kong
Limited, Invesco Institutional (N.A.), The Board considered whether each
The Board considered the benefits Inc. and Invesco Senior Secured Affiliated Sub-Adviser is financially
realized by Invesco Aim as a result of Management, Inc. (collectively, the sound and has the resources necessary to
portfolio brokerage transactions "Affiliated Sub-Advisers") under the perform its obligations under its
executed through "soft dollar" sub-advisory agreements and the respective sub-advisory agreement, and
arrangements. Under these arrangements, credentials and experience of the officers concluded that each Affiliated Sub-Adviser
portfolio brokerage commissions paid by and employees of the Affiliated has the financial resources necessary to
the Fund and/or other funds advised by Sub-Advisers who will provide these fulfill these obligations.
Invesco Aim are used to pay for research services. The Board concluded that the
and execution services. The Board noted nature, extent and quality of the services
that soft dollar arrangements shift the to be provided by the Affiliated
payment obligation for the research and Sub-Advisers were appropriate. The Board
execution services from Invesco Aim to noted that the Affiliated Sub-Advisers,
the funds and therefore may reduce which have offices and personnel that are
Invesco Aim's expenses. The Board also geographically dispersed in financial
noted that research obtained through centers around the world, have been formed
soft dollar arrangements may be used by in part for the purpose of researching and
Invesco Aim in making investment compiling information and making
decisions for the Fund and may therefore recommendations on the markets and
benefit Fund shareholders. The Board economies of various countries and
concluded that Invesco Aim's soft dollar securities of companies located in such
arrangements were appropriate. The Board countries or on various types of
also concluded that, based on their investments and investment techniques, and
review and representations made by providing investment advisory services.
Invesco Aim, these arrangements were The Board concluded that the sub-advisory
consistent with regulatory requirements. agreements will benefit the Fund and its
shareholders by permitting In-vesco Aim to
The Board considered the fact that utilize the additional resources and
the Fund's uninvested cash and cash talent of the Affiliated Sub-Advisers in
collateral from any securities lending managing the Fund.
arrangements may be invested in money
market funds advised by Invesco Aim B. Fund Performance
pursuant to procedures approved by the
Board. The Board noted that Invesco Aim The Board did not view Fund performance as
will receive advisory fees from these a relevant factor in considering whether
affiliated money market funds to approve the sub-advisory agreements for
attributable to such investments, the Fund, as no Affiliated Sub-Adviser
although Invesco Aim has contractually currently manages any portion
agreed to waive through at least June
30, 2009, the advisory fees payable by
the Fund in an amount equal
20 AIM EUROPEAN SMALL COMPANY FUND
PROXY RESULTS
A Special Meeting ("Meeting") of Shareholders of AIM European Small Company
Fund, an investment portfolio of AIM Funds Group, a Delaware statutory trust
("Trust"), was held on February 29, 2008. The Meeting was held for the following
purposes:
(1) Elect 13 trustees to the Board of Trustees of the Trust, each of whom will
serve until his or her successor is elected and qualified.
(2) Approve an amendment to the Trust's Agreement and Declaration of Trust that
would permit the Board of Trustees of the Trust to terminate the Trust, the
Fund, and each other series portfolio of the Trust, or a share class without
a shareholder vote.
(3) Approve a new sub-advisory agreement between Invesco Aim Advisors, Inc. and
each of AIM Funds Management, Inc.; Invesco Asset Management Deutschland,
GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco Global Asset Management (N.A.),
Inc.; Invesco Hong Kong Limited; Invesco Institutional (N.A.), Inc.; and
Invesco Senior Secured Management, Inc.
The results of the voting on the above matters were as follows:
<Table>
<Caption>
WITHHELD/
MATTERS VOTES FOR ABSTENTIONS**
- -----------------------------------------------------------------------------------------------------------
(1)* Bob R. Baker...................................................... 136,849,147 4,123,920
Frank S. Bayley................................................... 136,856,960 4,116,107
James T. Bunch.................................................... 136,850,068 4,122,999
Bruce L. Crockett................................................. 136,834,285 4,138,782
Albert R. Dowden.................................................. 136,851,266 4,121,801
Jack M. Fields.................................................... 136,893,917 4,079,150
Martin L. Flanagan................................................ 136,889,028 4,084,039
Carl Frischling................................................... 136,837,466 4,135,601
Prema Mathai-Davis................................................ 136,840,379 4,132,688
Lewis F. Pennock.................................................. 136,853,427 4,119,640
Larry Soll, Ph.D. ................................................ 136,708,623 4,264,444
Raymond Stickel, Jr. ............................................. 136,747,468 4,225,599
Philip A. Taylor.................................................. 136,731,527 4,241,540
</Table>
<Table>
<Caption>
VOTES WITHHELD/ BROKER
VOTES FOR AGAINST ABSTENTIONS NON-VOTES
- --------------------------------------------------------------------------------------------------------------------------
(2)* Approve an amendment to the Trust's Agreement
and Declaration of Trust that would permit the
Board of Trustees of the Trust to terminate the
Trust, the Fund, and each other series portfolio
of the Trust, or a share class without a
shareholder vote................................ 89,092,876 12,597,596 4,024,351 35,258,244
(3) Approve a new sub-advisory agreement between
Invesco Aim Advisors, Inc. and each of AIM Funds
Management, Inc.; Invesco Asset Management
Deutschland, GmbH; Invesco Asset Management
Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco
Global Asset Management (N.A.), Inc.; Invesco
Hong Kong Limited; Invesco Institutional (N.A.),
Inc.; and Invesco Senior Secured Management,
Inc. ........................................... 6,393,586 260,462 231,430 2,519,044
</Table>
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Funds Group.
** Includes Broker Non-Votes.
21 AIM EUROPEAN SMALL COMPANY FUND
====================================================================================================================================
EDELIVERY
INVESCOAIM.COM/EDELIVERY
REGISTER FOR EDELIVERY - eDelivery is the process of receiving your fund and account information via e-mail. Once your quarterly
statements, tax forms, fund reports, and prospectuses are available, we will send you an e-mail notification containing links to
these documents. For security purposes, you will need to log in to your account to view your statements and tax forms.
WHY SIGN UP? HOW DO I SIGN UP?
Register for eDelivery to: It's easy. Just follow these simple steps:
- - save your Fund the cost of printing and postage. 1. Log in to your account.
- - reduce the amount of paper you receive. 2. Click on the "Service Center" tab.
- - gain access to your documents faster by not waiting for the mail. 3. Select "Register for eDelivery" and complete the consent
- - view your documents online anytime at your convenience. process.
- - save the documents to your personal computer or print
them out for your records.
This service is provided by Invesco Aim Investment Services, Inc.
====================================================================================================================================
FUND HOLDINGS AND PROXY VOTING INFORMATION
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth
quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund
files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your
Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC
Web site at sec.gov. Copies of the 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 Reference Room, including information about duplicating fee charges, by
calling 202 942 8090 or 800 732 0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file
numbers for the Fund are 811-01540 and 002-27334.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities
is available without charge, upon request, from our Client Services department at 800 959 4246 or on the Invesco Aim Web site,
invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is
available at our Web site. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting
Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC Web site, sec.gov.
If used after October 20, 2008, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly
Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco
Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors for [INVESCO AIM LOGO]
the products and services represented by Invesco Aim; they each provide investment advisory services to - SERVICE MARK -
individual and institutional clients and do not sell securities. Invesco Institutional (N.A.), Inc., Invesco
Senior Secured Management, Inc., Invesco Global Asset Management (N.A.), Inc., Invesco Trimark Ltd., Invesco
Asset Management (Japan) Ltd. and Invesco Hong Kong Ltd. are affiliated investment advisors that serve as the
subadvisor for some of the products and services represented by Invesco Aim. Invesco Aim Distributors, Inc. is
the distributor for the retail mutual funds, exchange-traded funds and U.S. institutional money market funds
represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd.
invescoaim.com ESC-SAR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM GLOBAL CORE EQUITY FUND
- SERVICE MARK - Semiannual Report to Shareholders - June 30, 2008
On July 24, 2008, after the close of the
reporting period covered by this report,
AIM Global Value Fund was renamed AIM Global Core
Equity Fund.
[MOUNTAIN GRAPHIC]
AIM Investments 2 Fund Performance
became INVESCO AIM 3 Letter to Shareholders
on March 31, 2008. 4 Schedule of Investments
6 Financial Statements
For more details, go to 9 Notes to Financial Statements
invescoaim.com 16 Financial Highlights
19 Fund Expenses
20 Approval of Investment Advisory Agreement
23 Results of Proxy
For the most current month-end Fund performance and commentary, please visit
invescoaim.com.
Unless otherwise noted, all data provided by Invesco Aim.
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
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY In conjunction with the change of the
Fund's management team on July 9, 2008,
FUND VS. INDEXES and the corresponding change in the Fund's
investment style from global value to
Cumulative total returns, 12/31/07 to 6/30/08, at net asset value (NAV). Performance global core, the Fund has elected to use
shown does not include applicable contingent deferred sales charges (CDSC) or front-end the Lipper Global Large-Cap Core Funds
sales charges, which would have reduced performance. Index to represent its peer group rather
than the Lipper Global Multi-Cap Value
Funds Index. The Lipper Global Large-Cap
Class A Shares -13.14% Core Funds Index more closely reflects the
Class B Shares -13.53 performance of the types of securities in
Class C Shares -13.52 which the Fund invests. In addition, the
MSCI World Index(triangle) (Broad Market Index) -10.57 MSCI World Value Index no longer reflects
MSCI World Value Index(triangle) (Style-Specific Index) -14.15 the performance of the types of securities
Lipper Global Multi-Cap Value Funds Index(triangle) (Peer Group Index) -11.74 in which the Fund invests. The Lipper
Global Large-Cap Core Funds Index is an
(triangle)Lipper Inc. equally weighted representation of the
largest funds in the Lipper Global
The MSCI WORLD INDEX--SERVICE MARK-- is a free float-adjusted market capitalization Large-Cap Core Funds category.
index that is designed to measure global developed market equity performance.
The MSCI WORLD VALUE INDEX is a free float-adjusted market capitalization index that
represents the value segment in global developed market equity performance.
The LIPPER GLOBAL MULTI-CAP VALUE FUNDS INDEX is an equally weighted representation
of the largest funds in the Lipper Global Multi-Cap Value Funds category. These funds
typically have a below-average price-to-cash flow ratio, price-to-book ratio, and
three-year sales-per-share growth value, compared to the S&P/Citigroup BMI.
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.
=======================================================================================
==========================================
AVERAGE ANNUAL TOTAL RETURNS VESTMENT RETURN AND PRINCIPAL VALUE WILL THE PERFORMANCE OF THE FUND'S SHARE
As of 6/30/08, including maximum FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR CLASSES WILL DIFFER PRIMARILY DUE TO
applicable sales charges LOSS WHEN YOU SELL SHARES. DIFFERENT SALES CHARGE STRUCTURES AND
CLASS EXPENSES.
CLASS A SHARES THE NET ANNUAL FUND OPERATING EXPENSE
Inception (12/29/00) 6.40% RATIO SET FORTH IN THE MOST RECENT FUND HAD THE ADVISOR NOT WAIVED FEES AND/OR
5 Years 9.98 PROSPECTUS AS OF THE DATE OF THIS REPORT REIMBURSED EXPENSES IN THE PAST, PER-
1 Year -20.19 FOR CLASS A, CLASS B AND CLASS C SHARES FORMANCE WOULD HAVE BEEN LOWER.
CLASS B SHARES WAS 1.45%, 2.20% AND 2.20%,
Inception (12/29/00) 6.47% RESPECTIVELY.(1) THE TOTAL ANNUAL FUND A REDEMPTION FEE OF 2% WILL BE IM-
5 Years 10.15 OPERATING EXPENSE RATIO SET FORTH IN THE POSED ON CERTAIN REDEMPTIONS OR EX-
1 Year -20.21 MOST RECENT FUND PROSPECTUS AS OF THE DATE CHANGES OUT OF THE FUND WITHIN 30 DAYS OF
CLASS C SHARES OF THIS REPORT FOR CLASS A, CLASS B AND PURCHASE. EXCEPTIONS TO THE REDEMPTION FEE
Inception (12/29/00) 6.48% CLASS C SHARES WAS 1.46%, 2.21% AND 2.21%, ARE LISTED IN THE FUND'S PROSPECTUS.
5 Years 10.43 RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
1 Year -16.98 ABOVE MAY VARY FROM THE EXPENSE RATIOS (1) Total annual operating expenses less
========================================== PRESENTED IN OTHER SECTIONS OF THIS REPORT any contractual fee waivers and/or
THAT ARE BASED ON EXPENSES INCURRED DURING expense reimbursements by the advisor
THE PERFORMANCE DATA QUOTED REPRESENT PAST THE PERIOD COVERED BY THIS REPORT. in effect through at least June 30,
PERFORMANCE AND CANNOT GUARANTEE 2009. See current prospectus for more
COMPARABLE FUTURE RESULTS; CURRENT CLASS A SHARE PERFORMANCE REFLECTS THE information.
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE MAXIMUM 5.50% SALES CHARGE, AND CLASS B
VISIT INVESCOAIM.COM FOR THE MOST RECENT AND CLASS C SHARE PERFORMANCE REFLECTS THE
MONTH-END PERFORMANCE. PERFORMANCE FIGURES APPLICABLE CONTINGENT DEFERRED SALES
REFLECT REINVESTED DISTRIBUTIONS, CHANGES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
IN NET ASSET VALUE AND THE EFFECT OF THE CDSC ON CLASS B SHARES DECLINES FROM 5%
MAXIMUM SALES CHARGE UNLESS OTHERWISE BEGINNING AT THE TIME OF PURCHASE TO 0% AT
STATED. PERFORMANCE FIGURES DO NOT REFLECT THE BEGINNING OF THE SEVENTH YEAR. THE
DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
ON FUND DISTRIBUTIONS OR SALE OF FUND YEAR AFTER PURCHASE.
SHARES. IN-
2 AIM GLOBAL CORE EQUITY FUND
Dear Fellow Shareholders:
As I write this letter in July 2008, turbulent financial markets are causing considerable investor
anxiety, reminding us again that markets are cyclical and the correction of excess is often painful,
at least in the short-term. Your Board of Trustees believes in the wisdom of a long-term perspective
[CROCKETT PHOTO] and consistent investment discipline. We continue to put your interests first in the effort to
improve investment performance, contain shareholder costs and uphold the highest ethical standards.
We remain enthusiastic about the global reach and investment expertise that Invesco, a leading
Bruce Crockett independent global investment management company, brings to the management of AIM Funds as the parent
company of the advisors. The diverse investment strategies deployed throughout the worldwide network
of Invesco investment centers has helped strengthen the management of many AIM Funds. The rebranding
of the Funds' management company as Invesco Aim was followed by the launch of an upgraded,
investor-friendly Web site (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize
stability, endurance, strength and longevity; and a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads
will appear in financial publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim
Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click
on "Investment Advisory Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes
in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the
movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be
interested to hear your thoughts on this policy.
As always, you are welcome to e-mail your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been
established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund
annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured
that your comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
August 11, 2008
3 AIM GLOBAL CORE EQUITY FUND
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2008
<Table>
- -------------------------------------------------------------------------
Financials 17.3%
- -------------------------------------------------------------------------
Information Technology 16.4
- -------------------------------------------------------------------------
Consumer Staples 11.9
- -------------------------------------------------------------------------
Energy 10.8
- -------------------------------------------------------------------------
Telecommunication Services 8.2
- -------------------------------------------------------------------------
Health Care 7.2
- -------------------------------------------------------------------------
Industrials 7.0
- -------------------------------------------------------------------------
Materials 6.9
- -------------------------------------------------------------------------
Consumer Discretionary 6.0
- -------------------------------------------------------------------------
Money Market Funds Plus Other Assets Less Liabilities 8.3
_________________________________________________________________________
=========================================================================
</Table>
SCHEDULE OF INVESTMENTS(a)
June 30, 2008
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-91.69%
CANADA-18.43%
Agnico-Eagle Mines Ltd. 52,400 $ 3,854,056
- -------------------------------------------------------------------------------
Barrick Gold Corp. 175,600 7,996,840
- -------------------------------------------------------------------------------
Denison Mines Corp.(b)(c) 363,700 3,190,664
- -------------------------------------------------------------------------------
E-L Financial Corp. Ltd. 10,228 5,413,962
- -------------------------------------------------------------------------------
EnCana Corp. 46,300 4,210,659
- -------------------------------------------------------------------------------
Harvest Energy Trust 117,700 2,828,861
- -------------------------------------------------------------------------------
Nortel Networks Corp.(c) 289 2,375
- -------------------------------------------------------------------------------
OPTI Canada Inc.(c) 143,300 3,265,757
- -------------------------------------------------------------------------------
Paladin Energy Ltd.(c) 594,300 3,635,005
- -------------------------------------------------------------------------------
Suncor Energy, Inc. 75,600 4,378,012
- -------------------------------------------------------------------------------
Talisman Energy Inc. 193,700 4,273,855
- -------------------------------------------------------------------------------
Teck Cominco Ltd.-Class B 57,400 2,753,535
- -------------------------------------------------------------------------------
Viterra, Inc.(c) 129,100 1,770,348
===============================================================================
47,573,929
===============================================================================
FINLAND-0.64%
Nokia Oyj-ADR 67,000 1,641,500
===============================================================================
FRANCE-2.55%
Renault S.A.(d) 34,500 2,822,589
- -------------------------------------------------------------------------------
Sanofi-Aventis(d) 56,400 3,752,037
===============================================================================
6,574,626
===============================================================================
GERMANY-1.16%
Bayerische Motoren Werke A.G.(d) 62,300 2,989,751
===============================================================================
HONG KONG-5.31%
Cheung Kong (Holdings) Ltd.(d) 399,000 5,365,621
- -------------------------------------------------------------------------------
Henderson Land Development Co. Ltd. 775,000 4,830,518
- -------------------------------------------------------------------------------
Sun Hung Kai Properties Ltd.(d) 259,000 3,506,405
===============================================================================
13,702,544
===============================================================================
JAPAN-16.31%
Japan Petroleum Exploration Co., Ltd.(b)(d) 24,700 1,769,246
- -------------------------------------------------------------------------------
Keyence Corp.(b) 37,000 8,813,507
- -------------------------------------------------------------------------------
Meitec Corp.(b) 358,900 10,175,087
- -------------------------------------------------------------------------------
Mitsubishi UFJ Financial Group, Inc.(d) 237,200 2,088,341
- -------------------------------------------------------------------------------
Mizuho Financial Group, Inc.(d) 479 2,218,451
- -------------------------------------------------------------------------------
Nomura Holdings, Inc.(b) 117,100 1,734,937
- -------------------------------------------------------------------------------
NTT DoCoMo, Inc.(d) 6,741 9,887,241
- -------------------------------------------------------------------------------
Toyota Industries Corp.(d) 169,900 5,408,621
===============================================================================
42,095,431
===============================================================================
NETHERLANDS-1.89%
Heineken N.V.(d) 96,100 4,884,601
===============================================================================
SINGAPORE-2.22%
Singapore Airport Terminal Services Ltd.(d) 3,500,500 5,739,632
===============================================================================
SOUTH KOREA-2.11%
SK Telecom Co., Ltd.-ADR(b) 262,600 5,454,202
===============================================================================
SWITZERLAND-4.84%
Nestle S.A.(d) 111,500 5,026,892
- -------------------------------------------------------------------------------
Novartis A.G.(d) 135,900 7,453,670
===============================================================================
12,480,562
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
4 AIM GLOBAL CORE EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
THAILAND-0.53%
Siam Cement PCL (The) 230,700 $ 1,373,296
===============================================================================
UNITED KINGDOM-6.95%
Diageo PLC(d) 276,954 5,086,897
- -------------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR 111,700 4,939,374
- -------------------------------------------------------------------------------
Lloyds TSB Group PLC(d) 358,600 2,197,760
- -------------------------------------------------------------------------------
Vodafone Group PLC(d) 1,940,237 5,717,054
===============================================================================
17,941,085
===============================================================================
UNITED STATES-28.75%
Alcoa Inc. 53,000 1,887,860
- -------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 84,800 5,267,776
- -------------------------------------------------------------------------------
Avon Products, Inc. 105,600 3,803,712
- -------------------------------------------------------------------------------
Berkshire Hathaway Inc.-Class A(c) 81 9,780,750
- -------------------------------------------------------------------------------
Comcast Corp.-Class A 222,689 4,224,410
- -------------------------------------------------------------------------------
Dell Inc.(c) 338,350 7,403,098
- -------------------------------------------------------------------------------
Grey Wolf, Inc.(c) 48,543 438,343
- -------------------------------------------------------------------------------
Legg Mason, Inc. 65,600 2,858,192
- -------------------------------------------------------------------------------
Merck & Co. Inc. 67,200 2,532,768
- -------------------------------------------------------------------------------
Microsoft Corp. 324,200 8,918,742
- -------------------------------------------------------------------------------
Motorola, Inc. 1,063,000 7,802,420
- -------------------------------------------------------------------------------
Progressive Corp. (The) 253,800 4,751,136
- -------------------------------------------------------------------------------
QLogic Corp.(c) 178,400 2,602,856
- -------------------------------------------------------------------------------
Symantec Corp.(c) 259,800 5,027,130
- -------------------------------------------------------------------------------
Tyco International Ltd. 50,850 2,036,034
- -------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 86,499 4,861,244
===============================================================================
74,196,471
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $235,981,147) 236,647,630
===============================================================================
MONEY MARKET FUNDS-9.67%
Liquid Assets Portfolio-Institutional Class(e) 12,473,032 12,473,032
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 12,473,032 12,473,032
===============================================================================
Total Money Market Funds (Cost $24,946,064) 24,946,064
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-101.36% (Cost $260,927,211) 261,593,694
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-7.22%
Liquid Assets Portfolio-Institutional Class (Cost
$18,639,947)(e)(f) 18,639,947 18,639,947
===============================================================================
TOTAL INVESTMENTS-108.58% (Cost $279,567,158) 280,233,641
===============================================================================
OTHER ASSETS LESS LIABILITIES-(8.58)% (22,142,518)
===============================================================================
NET ASSETS-100.00% $258,091,123
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) All or a portion of this security was out on loan at June 30, 2008.
(c) Non-income producing security.
(d) 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, 2008 was $75,914,809,
which represented 29.41% 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.
(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 1J.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
5 AIM GLOBAL CORE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost
$235,981,147)* $236,647,630
- ------------------------------------------------------
Investments in affiliated money market
funds (Cost $43,586,011) 43,586,011
======================================================
Total investments (Cost
$279,567,158) 280,233,641
======================================================
Foreign currencies, at value (Cost
$696,121) 716,862
- ------------------------------------------------------
Receivables for:
Fund shares sold 204,913
- ------------------------------------------------------
Dividends 680,472
- ------------------------------------------------------
Foreign currency contracts 226,539
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 23,249
- ------------------------------------------------------
Other assets 24,665
======================================================
Total assets 282,110,341
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 3,910,623
- ------------------------------------------------------
Fund shares reacquired 1,167,339
- ------------------------------------------------------
Collateral upon return of securities
loaned 18,639,947
- ------------------------------------------------------
Accrued fees to affiliates 143,216
- ------------------------------------------------------
Accrued other operating expenses 122,809
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 35,284
======================================================
Total liabilities 24,019,218
======================================================
Net assets applicable to shares
outstanding $258,091,123
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $268,402,507
- ------------------------------------------------------
Undistributed net investment income (436,150)
- ------------------------------------------------------
Undistributed net realized gain (loss) (10,815,890)
- ------------------------------------------------------
Unrealized appreciation 940,656
======================================================
$258,091,123
______________________________________________________
======================================================
NET ASSETS:
Class A $102,442,196
______________________________________________________
======================================================
Class B $ 31,566,930
______________________________________________________
======================================================
Class C $ 22,689,877
______________________________________________________
======================================================
Institutional Class $101,392,120
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 7,491,956
______________________________________________________
======================================================
Class B 2,375,194
______________________________________________________
======================================================
Class C 1,706,054
______________________________________________________
======================================================
Institutional Class 7,384,723
______________________________________________________
======================================================
Class A:
Net asset value per share $ 13.67
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $13.67 divided
by 94.50%) $ 14.47
______________________________________________________
======================================================
Class B:
Net asset value and offering price
per share $ 13.29
______________________________________________________
======================================================
Class C:
Net asset value and offering price
per share $ 13.30
______________________________________________________
======================================================
Institutional Class:
Net asset value and offering price
per share $ 13.73
______________________________________________________
======================================================
</Table>
* At June 30, 2008, securities with an aggregate value of $17,957,186 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
6 AIM GLOBAL CORE EQUITY FUND
STATEMENT OF OPERATIONS
For the six months ended June 30, 2008
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $262,902) $ 3,060,495
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $56,695) 466,405
================================================================================================
Total investment income 3,526,900
================================================================================================
EXPENSES:
Advisory fees 1,125,770
- ------------------------------------------------------------------------------------------------
Administrative services fees 47,381
- ------------------------------------------------------------------------------------------------
Custodian fees 36,037
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 142,730
- ------------------------------------------------------------------------------------------------
Class B 193,738
- ------------------------------------------------------------------------------------------------
Class C 137,871
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B and C 284,326
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 280
- ------------------------------------------------------------------------------------------------
Trustees' and officer's fees and benefits 12,459
- ------------------------------------------------------------------------------------------------
Other 138,599
================================================================================================
Total expenses 2,119,191
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (22,841)
================================================================================================
Net expenses 2,096,350
================================================================================================
Net investment income 1,430,550
================================================================================================
Realized and unrealized gain (loss) from:
Net realized gain (loss) from:
Investment securities (includes net gains from securities sold to affiliates of
$72,568) (5,028,135)
- ------------------------------------------------------------------------------------------------
Foreign currencies (115,119)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts (916,123)
================================================================================================
(6,059,377)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (37,778,454)
- ------------------------------------------------------------------------------------------------
Foreign currencies 25,247
- ------------------------------------------------------------------------------------------------
Foreign currency contracts (613,498)
================================================================================================
(38,366,705)
================================================================================================
Net realized and unrealized gain (loss) (44,426,082)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(42,995,532)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
7 AIM GLOBAL CORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2008 and the year ended December 31, 2007
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2008 2007
- -------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,430,550 $ 3,487,366
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) (6,059,377) 4,298,075
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (38,366,705) (1,029,315)
=======================================================================================================
Net increase (decrease) in net assets resulting from operations (42,995,532) 6,756,126
=======================================================================================================
Distributions to shareholders from net investment income:
Class A -- (1,860,686)
- -------------------------------------------------------------------------------------------------------
Class B -- (223,283)
- -------------------------------------------------------------------------------------------------------
Class C -- (152,179)
- -------------------------------------------------------------------------------------------------------
Institutional Class -- (2,095,499)
=======================================================================================================
Total distributions from net investment income -- (4,331,647)
=======================================================================================================
Distributions to shareholders from net realized gains:
Class A -- (4,652,489)
- -------------------------------------------------------------------------------------------------------
Class B -- (1,758,838)
- -------------------------------------------------------------------------------------------------------
Class C -- (1,198,736)
- -------------------------------------------------------------------------------------------------------
Institutional Class -- (3,634,288)
=======================================================================================================
Total distributions from net realized gains -- (11,244,351)
=======================================================================================================
Share transactions-net:
Class A (19,686,818) (6,728,890)
- -------------------------------------------------------------------------------------------------------
Class B (12,174,592) (14,221,922)
- -------------------------------------------------------------------------------------------------------
Class C (7,562,758) (9,504,540)
- -------------------------------------------------------------------------------------------------------
Institutional Class 4,373,783 65,524,804
=======================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (35,050,385) 35,069,452
=======================================================================================================
Net increase (decrease) in net assets (78,045,917) 26,249,580
_______________________________________________________________________________________________________
=======================================================================================================
NET ASSETS:
Beginning of period 336,137,040 309,887,460
- -------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of
$(436,150) and $(1,866,700), respectively) $258,091,123 $336,137,040
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8 AIM GLOBAL CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Core Equity Fund, formerly 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 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.
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, American
Depositary Receipts 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 the issuer's 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.
9 AIM GLOBAL CORE EQUITY FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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, the investment
advisor 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.
The Fund files tax returns in the U.S. Federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 by the securities lending provider. Such
collateral will be cash or debt securities issued or guaranteed by the
U.S. Government or any of its sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Dividends received on cash collateral
investments for securities lending transactions, which are net of
compensation to counterparties, is included in Dividends from affiliates
on the Statement of Operations. The aggregate value of securities out on
loan is shown as a footnote on the Statement of Assets and Liabilities.
K. 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
10 AIM GLOBAL CORE EQUITY FUND
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.
L. 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.
M. 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. 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
based on the annual rate of the Fund's average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.80%
- -------------------------------------------------------------------
Next $250 million 0.78%
- -------------------------------------------------------------------
Next $500 million 0.76%
- -------------------------------------------------------------------
Next $1.5 billion 0.74%
- -------------------------------------------------------------------
Next $2.5 billion 0.72%
- -------------------------------------------------------------------
Next $2.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.68%
- -------------------------------------------------------------------
Over $10 billion 0.66%
___________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund on February 29, 2008, effective May 1, 2008, between the Advisor and
each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management
Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited,
Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco
Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco
Trimark Ltd., (collectively, the "Affiliated Sub-Advisors") the Advisor, not the
Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-
Advisor(s) that provide discretionary investment management services to the Fund
based on the percentage of assets allocated to such Sub-Advisor(s).
The Advisor has contractually agreed, through at least June 30, 2009, to waive
the advisory fee payable by the Fund in an amount equal to 100% of the net
advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (but not cash collateral from
securities lending) in such affiliated money market funds.
For the six months ended June 30, 2008, the Advisor waived advisory fees of
$15,844.
11 AIM GLOBAL CORE EQUITY FUND
At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") 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, 2008, Invesco reimbursed expenses of the Fund in the
amount of $658.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain
administrative costs incurred in providing accounting services to the Fund. For
the six months ended June 30, 2008, 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
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. IAIS may make payments to intermediaries that
provide omnibus account services, sub-accounting services and/or networking
services. All fees payable by IAIS 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, 2008, 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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI 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. Rules of the Financial Industry
Regulatory Authority ("FINRA") 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, 2008, 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, 2008, IADI advised the Fund that IADI retained $11,814 in
front-end sales commissions from the sale of Class A shares and $855, $31,964
and $2,815 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 establishes a hierarchy that prioritizes the
inputs to valuation methods giving the highest priority to readily available
unadjusted quoted prices in an active market for identical assets (level 1) and
the lowest priority to unobservable inputs (level 3) market prices are not
readily available or are unreliable. Based on the inputs the securities or other
instruments are tiered into three levels of hierarchy under SFAS 157. Changes in
valuation methods may result in transfers in or out of an investment's assigned
level within the hierarchy,
Level 1 -- Quoted prices in an active market for identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered input levels, as of the end of the reporting
period, June 30, 2008. The inputs or methods used for valuing securities may not
be an indication of the risk associated with investing in those securities.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $204,318,832
- --------------------------------------
Level 2 75,914,809
- --------------------------------------
Level 3 --
======================================
$280,233,641
______________________________________
======================================
</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, 2008, the Fund
engaged in securities sales of $1,671,000, which resulted in net realized gains
of $72,568.
12 AIM GLOBAL CORE EQUITY FUND
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, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $6,339.
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, 2008, the Fund paid legal fees of $1,899
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company ("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 Invesco 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 06/30/08 APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------------------
2,838,000,0- 27,392,4-
8/21/2008 JPY 00 USD 69 $26,808,652 $583,817
- ---------------------------------------------------------------------------------------------------------------------------------
28,463,6-
9/10/2008 CAD 29,050,000 USD 49 28,447,872 15,777
- ---------------------------------------------------------------------------------------------------------------------------------
3,850,000,0-
9/10/2008 KRW 00 USD 3,718,549 3,669,812 48,737
=================================================================================================================================
$648,331
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
<Table>
<Caption>
CONTRACT TO
SETTLEMENT -------------------------------------- VALUE UNREALIZED
DATE DELIVER RECEIVE 06/30/08 (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------------
8/21/2008 EUR 6,400,000 USD 9,882,752 $10,049,274 $(166,522)
- -------------------------------------------------------------------------------------------------------------------------------
8/21/2008 GBP 4,400,000 USD 8,506,520 8,728,223 (221,703)
- -------------------------------------------------------------------------------------------------------------------------------
$(388,225)
===============================================================================================================================
Total open foreign currency contracts $ 260,106
_______________________________________________________________________________________________________________________________
===============================================================================================================================
</Table>
<Table>
<Caption>
CLOSED FOREIGN CURRENCY CONTRACTS AT PERIOD END
- --------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO
CLOSED -------------------------------------- VALUE REALIZED
DATE DELIVER RECEIVE 06/30/08 GAIN
- --------------------------------------------------------------------------------------------------------------------------------
6/16/2008 EUR 1,000,000 USD 1,544,180 $1,542,140 $2,040
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
<Table>
<Caption>
CONTRACT TO
CLOSED -------------------------------------- VALUE REALIZED
DATE DELIVER RECEIVE 06/30/08 (LOSS)
- --------------------------------------------------------------------------------------------------------------------------------
6/16/2008 EUR 1,100,000 USD 1,698,598 $1,723,480 $(24,882)
- --------------------------------------------------------------------------------------------------------------------------------
6/16/2008 GBP 500,000 USD 966,650 977,375 (10,725)
- --------------------------------------------------------------------------------------------------------------------------------
$(35,607)
- --------------------------------------------------------------------------------------------------------------------------------
Total closed foreign currency contracts $(33,567)
================================================================================================================================
Total foreign currency contracts $226,539
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
CURRENCY ABBREVIATIONS:
<Table>
CAD -- Canadian Dollar JPY -- Japanese Yen
EUR -- Euro KRW -- South Korea Won
GBP -- British Pound Sterling USD -- U.S. Dollar
</Table>
13 AIM GLOBAL CORE EQUITY FUND
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, 2007.
NOTE 10--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
TRANSACTIONS DURING THE PERIOD
- --------------------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- --------------------------------------------------------------------------------------------------
Beginning of period -- $ --
- --------------------------------------------------------------------------------------------------
Written 767 91,007
- --------------------------------------------------------------------------------------------------
Expired 767 (91,007)
- --------------------------------------------------------------------------------------------------
End of period -- $ --
__________________________________________________________________________________________________
==================================================================================================
</Table>
NOTE 11--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities, U.S. Treasury obligations and money market funds, if any) purchased
and sold by the Fund during the six months ended June 30, 2008 was $76,224,328
and $114,943,500, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 20,727,870
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (22,277,111)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $ (1,549,241)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $281,782,882.
</Table>
14 AIM GLOBAL CORE EQUITY FUND
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008(a) DECEMBER 31, 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 309,300 $ 4,415,791 2,333,811 $ 38,668,393
- ------------------------------------------------------------------------------------------------------------------------
Class B 78,698 1,093,291 652,181 10,492,639
- ------------------------------------------------------------------------------------------------------------------------
Class C 119,019 1,648,649 818,145 13,161,513
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 627,744 9,067,395 3,637,243 60,833,946
========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 389,392 6,132,925
- ------------------------------------------------------------------------------------------------------------------------
Class B -- -- 119,309 1,833,783
- ------------------------------------------------------------------------------------------------------------------------
Class C -- -- 83,493 1,284,116
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 363,335 5,729,787
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 353,598 5,002,454 473,239 7,815,385
- ------------------------------------------------------------------------------------------------------------------------
Class B (363,153) (5,002,454) (487,035) (7,815,385)
========================================================================================================================
Reacquired:(b)
Class A (2,039,429) (29,105,063) (3,577,959) (59,345,593)
- ------------------------------------------------------------------------------------------------------------------------
Class B (595,184) (8,265,429) (1,162,019) (18,732,959)
- ------------------------------------------------------------------------------------------------------------------------
Class C (664,705) (9,211,407) (1,481,903) (23,950,169)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class (331,819) (4,693,612) (66,013) (1,038,929)
========================================================================================================================
(2,505,931) $(35,050,385) 2,095,219 $ 35,069,452
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 6% of the
outstanding shares of the Fund. IADI has an agreement with these entities
to sell Fund shares. The Fund, Invesco Aim and/or Invesco Aim affiliates
may make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, Invesco Aim and/or Invesco
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, 39% 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 Invesco Aim.
(b) Net of redemption fees of $446 and $7,024 which were allocated among the
classes based on relative net assets of each class for the six months ended
June 30, 2008 and the year ended December 31, 2007, respectively.
NOTE 13--NEW ACCOUNTING STANDARD
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position and financial performance. It is effective for financial statements
issued for fiscal years beginning after November 15, 2008. Management is
currently in the process of determining the impact of the standard on the Fund's
disclosures in the financial statements.
15 AIM GLOBAL CORE EQUITY FUND
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
2008 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.75 $ 16.14 $ 13.97 $ 13.28 $ 11.74 $ 9.05
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.07 0.18 0.14 0.13 0.01(b) 0.01
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.15) 0.19 2.82 1.38 2.04 2.89
================================================================================================================================
Total from investment operations (2.08) 0.37 2.96 1.51 2.05 2.90
================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.22) (0.17) (0.16) (0.03) (0.09)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.54) (0.62) (0.66) (0.48) (0.12)
================================================================================================================================
Total distributions -- (0.76) (0.79) (0.82) (0.51) (0.21)
================================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 --
================================================================================================================================
Net asset value, end of period $ 13.67 $ 15.75 $ 16.14 $ 13.97 $ 13.28 $11.74
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(c) (13.21)% 2.31% 21.16% 11.35% 17.50% 32.15%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $102,442 $139,688 $149,283 $93,363 $36,092 $9,270
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.52%(d) 1.44% 1.53% 1.62% 2.00% 2.00%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.53%(d) 1.47% 1.58% 1.67% 2.20% 3.12%
================================================================================================================================
Ratio of net investment income to average net
assets 0.98%(d) 1.08% 0.88% 0.91% 0.10%(b) 0.14%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate(e) 29% 35% 24% 51% 129% 372%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income 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
per share and the ratio of net investment income 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
$114,811,602.
(e) 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, ------------------------------------------------------
2008 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.37 $ 15.73 $ 13.65 $ 13.02 $ 11.57 $ 8.94
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) 0.02 0.05 0.02 0.03 (0.07)(b) (0.05)
- -------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (2.10) 0.20 2.75 1.34 2.00 2.83
===============================================================================================================================
Total from investment operations (2.08) 0.25 2.77 1.37 1.93 2.78
===============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.07) (0.07) (0.08) (0.00) (0.03)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.54) (0.62) (0.66) (0.48) (0.12)
===============================================================================================================================
Total distributions -- (0.61) (0.69) (0.74) (0.48) (0.15)
===============================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 --
===============================================================================================================================
Net asset value, end of period $ 13.29 $ 15.37 $ 15.73 $ 13.65 $ 13.02 $11.57
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) (13.53)% 1.62% 20.27% 10.51% 16.77% 31.26%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $31,567 $50,018 $65,013 $49,827 $24,675 $7,075
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.27%(d) 2.19% 2.28% 2.33% 2.65% 2.65%
- -------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.28%(d) 2.22% 2.33% 2.38% 2.85% 3.77%
===============================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.23%(d) 0.33% 0.13% 0.20% (0.55)%(b) (0.51)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(e) 29% 35% 24% 51% 129% 372%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
</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 $38,960,519.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
16 AIM GLOBAL CORE EQUITY FUND
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
---------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2008 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.38 $ 15.74 $ 13.66 $ 13.03 $ 11.58 $ 8.94
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) 0.02 0.05 0.02 0.03 (0.07)(b) (0.05)
- -------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (2.10) 0.20 2.75 1.34 2.00 2.84
===============================================================================================================================
Total from investment operations (2.08) 0.25 2.77 1.37 1.93 2.79
===============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.07) (0.07) (0.08) (0.00) (0.03)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.54) (0.62) (0.66) (0.48) (0.12)
===============================================================================================================================
Total distributions -- (0.61) (0.69) (0.74) (0.48) (0.15)
===============================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 --
===============================================================================================================================
Net asset value, end of period $ 13.30 $ 15.38 $ 15.74 $ 13.66 $ 13.03 $11.58
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) (13.52)% 1.62% 20.26% 10.50% 16.75% 31.37%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $22,690 $34,626 $44,587 $24,316 $10,021 $2,853
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.27%(d) 2.19% 2.28% 2.33% 2.65% 2.65%
- -------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.28%(d) 2.22% 2.33% 2.38% 2.85% 3.77%
===============================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.23%(d) 0.33% 0.13% 0.20% (0.55)%(b) (0.51)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(e) 29% 35% 24% 51% 129% 372%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
</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 $27,725,789.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
INSTITUTIONAL CLASS
-----------------------------------------------------------------
YEAR ENDED DECEMBER OCTOBER 25, 2005
SIX MONTHS ENDED 31, (COMMENCEMENT DATE)
JUNE 30, -------------------- TO DECEMBER 31,
2008 2007 2006 2005
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.77 $ 16.17 $ 13.98 $13.90
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.11 0.26 0.22 0.04
- ----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (2.15) 0.19 2.83 0.86
======================================================================================================================
Total from investment operations (2.04) 0.45 3.05 0.90
======================================================================================================================
Less distributions:
Dividends from net investment income -- (0.31) (0.24) (0.16)
- ----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.54) (0.62) (0.66)
======================================================================================================================
Total distributions -- (0.85) (0.86) (0.82)
======================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00
======================================================================================================================
Net asset value, end of period $ 13.73 $ 15.77 $ 16.17 $13.98
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) (12.94)% 2.84% 21.81% 6.48%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $101,392 $111,805 $51,005 $2,542
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.95%(c) 0.93% 0.98% 1.09%(d)
- ----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 0.96%(c) 0.96% 1.03% 1.14%(d)
======================================================================================================================
Ratio of net investment income to average net
assets 1.55%(c) 1.59% 1.43% 1.44%(d)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(e) 29% 35% 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
$102,336,806.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
17 AIM GLOBAL CORE EQUITY FUND
NOTE 15--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 Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI 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 Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI 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, Invesco 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"), Invesco Aim, IADI 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; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws
Employee Retirement Income Security Act of 1974, as amended ("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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
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 Invesco 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 ERISA
purportedly brought on behalf of participants in the Invesco 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. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Court of Appeals reversed the dismissal and remanded this
lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco 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 Invesco Aim, IADI or the Fund.
18 AIM GLOBAL CORE EQUITY FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments or
contingent deferred sales charges on redemptions, and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and/or service
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with ongoing costs of investing in other mutual funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) on purchase payments, contingent deferred sales charges on
redemptions, and redemption fees, if any. Therefore, the hypothetical
information is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $868.60 $ 7.06 $1,017.30 $ 7.62 1.52%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 864.70 10.52 1,013.58 11.36 2.27
- ---------------------------------------------------------------------------------------------------
C 1,000.00 864.80 10.52 1,013.58 11.36 2.27
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
19 AIM GLOBAL CORE EQUITY FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM of the performance, fees and expenses of controlling. Each Trustee may have
Funds Group is required under the their assigned funds. During the contract evaluated the information provided
Investment Company Act of 1940 to approve renewal process, the Trustees receive differently from one another and
annually the renewal of the AIM Global comparative performance and fee data attributed different weight to the various
Core Equity Fund, formerly AIM Global regarding the AIM Funds prepared by an factors. The Trustees recognized that the
Value Fund, (the Fund) investment advisory independent company, Lipper, Inc. advisory arrangements and resulting
agreement with Invesco Aim Advisors, Inc. (Lipper), under the direction and advisory fees for the Fund and the other
(Invesco Aim). During contract renewal supervision of the independent Senior AIM Funds are the result of years of
meetings held on June 18-19, 2008, the Officer who also prepares a separate review and negotiation between the
Board as a whole and the disinterested or analysis of this information for the Trustees and Invesco Aim, that the
"independent" Trustees, voting separately, Trustees. Each Sub-Committee then makes Trustees may focus to a greater extent on
approved the continuance of the Fund's recommendations to the Investments certain aspects of these arrangements in
investment advisory agreement for another Committee regarding the performance, fees some years than in others, and that the
year, effective July 1, 2008. In doing so, and expenses of their assigned funds. The Trustees' deliberations and conclusions in
the Board determined that the Fund's Investments Committee considers each a particular year may be based in part on
investment advisory agreement is in the Sub-Committee's recommendations and makes their deliberations and conclusions of
best interests of the Fund and its its own recommendations regarding the these same arrangements throughout the
shareholders and that the compensation to performance, fees and expenses of the AIM year and in prior years.
Invesco Aim under the Fund's investment Funds to the full Board. The Investments
advisory agreement is fair and reasonable. Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF
Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION
The independent Trustees met separately its annual recommendation to the Board
during their evaluation of the Fund's whether to approve the continuance of each The discussion below serves as a summary
investment advisory agreement with AIM Fund's investment advisory agreement of the Senior Officer's independent
independent legal counsel from whom they and sub-advisory agreements for another written evaluation with respect to the
received independent legal advice, and the year. Fund's investment advisory agreement as
independent Trustees also received well as a discussion of the material
assistance during their deliberations from The independent Trustees are assisted factors and related conclusions that
the independent Senior Officer, a in their annual evaluation of the Fund's formed the basis for the Board's approval
full-time officer of the AIM Funds who investment advisory agreement by the of the Fund's investment advisory
reports directly to the independent independent Senior Officer. One agreement and sub-advisory agreements.
Trustees. responsibility of the Senior Officer is to Unless otherwise stated, information set
manage the process by which the AIM Funds' forth below is as of June 19, 2008 and
THE BOARD'S FUND EVALUATION PROCESS proposed management fees are negotiated does not reflect any changes that may have
during the annual contract renewal process occurred since that date, including but
The Board's Investments Committee has to ensure that they are negotiated in a not limited to changes to the Fund's
established three Sub-Committees that are manner that is at arms' length and performance, advisory fees, expense
responsible for overseeing the management reasonable. Accordingly, the Senior limitations and/or fee waivers.
of a number of the series portfolios of Officer must either supervise a
the AIM Funds. This Sub-Committee competitive bidding process or prepare an I. Investment Advisory Agreement
structure permits the Trustees to focus on independent written evaluation. The Senior
the performance of the AIM Funds that have Officer has recommended that an A. Nature, Extent and Quality of
been assigned to them. The Sub-Committees independent written evaluation be provided Services Provided by Invesco Aim
meet throughout the year to review the and, at the direction of the Board, has
performance of their assigned funds, and prepared an independent written The Board reviewed the advisory services
the Sub-Committees review monthly and evaluation. provided to the Fund by Invesco Aim under
quarterly comparative performance the Fund's investment advisory agreement,
information and periodic asset flow data During the annual contract renewal the performance of Invesco Aim in
for their assigned funds. These materials process, the Board considered the factors providing these services, and the
are prepared under the direction and discussed below under the heading "Factors credentials and experience of the officers
supervision of the independent Senior and Conclusions and Summary of Independent and employees of Invesco Aim who provide
Officer. Over the course of each year, the Written Fee Evaluation" in evaluating the these services. The Board's review of the
Sub-Committees meet with portfolio fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide
managers for their assigned funds and investment advisory agreement and these services included the Board's
other members of management and review sub-advisory agreements at the contract consideration of Invesco Aim's portfolio
with these individuals the performance, renewal meetings and at their meetings and product review process, various back
investment objective(s), policies, throughout the year as part of their office support functions provided by
strategies and limitations of these funds. ongoing oversight of the Fund. The Fund's Invesco Aim and its affiliates, and
investment advisory agreement and Invesco Aim's equity and fixed income
In addition to their meetings sub-advisory agreements were considered trading operations. The Board concluded
throughout the year, the Sub-Committees separately, although the Board also that the nature, extent and quality of the
meet at designated contract renewal considered the common interests of all of advisory services provided to the Fund by
meetings each year to conduct an in-depth the AIM Funds in their deliberations. The Invesco Aim were appropriate and that
review Board considered all of the information Invesco Aim currently is providing
provided to them and did not identify any satisfactory advisory services in
particular factor that was accordance with the terms of the Fund's
investment advisory agreement. In
addition, based on their
continued
20 AIM GLOBAL CORE EQUITY FUND
ongoing meetings throughout the year with However, due to the Fund's because of the breakpoint. Based on this
the Fund's portfolio manager or managers, underperformance, the Board also concluded information, the Board concluded that the
the Board concluded that these individuals that it would be appropriate for the Board Fund's advisory fees appropriately reflect
are competent and able to continue to to continue to monitor more closely the economies of scale at current asset
carry out their responsibilities under the performance of the Fund. Although the levels. The Board also noted that the Fund
Fund's investment advisory agreement. independent written evaluation of the shares directly in economies of scale
Fund's Senior Officer only considered Fund through lower fees charged by third party
In determining whether to continue the performance through the most recent service providers based on the combined
Fund's advisory agreement, the Board calendar year, the Board also reviewed size of all of the AIM Funds and
considered the prior relationship between more recent Fund performance and this affiliates.
Invesco Aim and the Fund, as well as the review did not change their conclusions.
Board's knowledge of Invesco Aim's E. Profitability and Financial
operations, and concluded that it was C. Advisory Fees and Fee Waivers Resources of Invesco Aim
beneficial to maintain the current
relationship, in part, because of such The Board compared the Fund's contractual The Board reviewed information from
knowledge. The Board also considered the advisory fee rate to the contractual Invesco Aim concerning the costs of the
steps that Invesco Aim and its affiliates advisory fee rates of funds in the Fund's advisory and other services that Invesco
have taken over the last several years to Lipper expense group that are not managed Aim and its affiliates provide to the Fund
improve the quality and efficiency of the by Invesco Aim, at a common asset level and the profitability of Invesco Aim and
services they provide to the Funds in the and as of the end of the past calendar its affiliates in providing these
areas of investment performance, product year. The Board noted that the Fund's services. The Board also reviewed
line diversification, distribution, fund contractual advisory fee rate was below information concerning the financial
operations, shareholder services and the median contractual advisory fee rate condition of Invesco Aim and its
compliance. The Board concluded that the of funds in its expense group. The Board affiliates. The Board also reviewed with
quality and efficiency of the services also reviewed the methodology used by Invesco Aim the methodology used to
Invesco Aim and its affiliates provide to Lipper in determining contractual fee prepare the profitability information. The
the AIM Funds in each of these areas have rates. The Board noted that Invesco Aim Board considered the overall profitability
generally improved, and support the does not serve as an advisor to other of Invesco Aim, as well as the
Board's approval of the continuance of the mutual funds or other domestic clients profitability of Invesco Aim in connection
Fund's advisory agreement. with investment strategies comparable to with managing the Fund. The Board noted
those of the Fund. that Invesco Aim continues to operate at a
B. Fund Performance net profit, although increased expenses in
The Board noted that Invesco Aim has recent years have reduced the
The Board compared the Fund's performance not proposed any advisory fee waivers or profitability of Invesco Aim and its
during the past one, three and five expense limitations for the Fund. The affiliates. The Board concluded that the
calendar years to the performance of funds Board concluded that it was not necessary Fund's fees were fair and reasonable, and
in the Fund's performance group that are at this time to discuss with Invesco Aim that the level of profits realized by
not managed by Invesco Aim, and against whether to implement any fee waivers or Invesco Aim and its affiliates from
the performance of all funds in the Lipper expense limitations because the Fund's providing services to the Fund was not
Global Multi-Cap Value Funds Index. The total expenses for most classes were at or excessive in light of the nature, quality
Board also reviewed the criteria used by below the median total expenses of funds and extent of the services provided. The
Invesco Aim to identify the funds in the in the Fund's Lipper expense group that Board considered whether Invesco Aim is
Fund's performance group for inclusion in are not managed by Invesco Aim. financially sound and has the resources
the Lipper reports. The Board noted that necessary to perform its obligations under
the Fund's performance was in the fourth After taking account of the Fund's the Fund's investment advisory agreement,
quintile of its performance group for the contractual advisory fee rate, as well as and concluded that Invesco Aim has the
one, three and five year periods (the the comparative advisory fee information financial resources necessary to fulfill
first quintile being the best performing discussed above, the Board concluded that these obligations.
funds and the fifth quintile being the the Fund's advisory fees were fair and
worst performing funds). The Board noted reasonable. F. Independent Written Evaluation of
that the Fund's performance was below the the Fund's Senior Officer
performance of the Index for the one, D. Economies of Scale and Breakpoints
three and five year periods. The Board The Board noted that, at their direction,
also noted that Invesco Aim acknowledges The Board considered the extent to which the Senior Officer of the Fund, who is
the Fund's underperformance and is focused there are economies of scale in Invesco independent of Invesco Aim and Invesco
on the longer term and business issues Aim's provision of advisory services to Aim's affiliates, had prepared an
that affect the Fund's performance. The the Fund. The Board also considered independent written evaluation to assist
Board also considered the steps Invesco whether the Fund benefits from such the Board in determining the
Aim has taken over the last several years economies of scale through contractual reasonableness of the proposed management
to improve the quality and efficiency of breakpoints in the Fund's advisory fee fees of the AIM Funds, including the Fund.
the services that Invesco Aim provides to schedule or through advisory fee waivers The Board noted that they had relied upon
the AIM Funds. The Board concluded that or expense limitations. The Board noted the Senior Officer's written evaluation
Invesco Aim continues to be responsive to that the Fund's contractual advisory fee instead of a competitive bidding process.
the Board's focus on fund performance. schedule includes seven breakpoints and In determining whether to continue the
that the level of the Fund's advisory Fund's investment advisory agreement, the
fees, as a percentage of the Fund's net Board considered the Senior Officer's
assets, has decreased as net assets written evaluation.
increased
continued
21 AIM GLOBAL CORE EQUITY FUND
G. Collateral Benefits to Invesco Aim to 100% of the net advisory fees Invesco C. Sub-Advisory Fees
and its Affiliates Aim receives from the affiliated money
market funds with respect to the Fund's The Board considered the services to be
The Board considered various other investment of uninvested cash, but not provided by the Affiliated Sub-Advisers
benefits received by Invesco Aim and its cash collateral. The Board considered the pursuant to the sub-advisory agreements
affiliates resulting from Invesco Aim's contractual nature of this fee waiver and and the services to be provided by Invesco
relationship with the Fund, including the noted that it remains in effect until at Aim pursuant to the Fund's investment
fees received by Invesco Aim and its least June 30, 2009. The Board concluded advisory agreement, as well as the
affiliates for their provision of that the Fund's investment of uninvested allocation of fees between Invesco Aim and
administrative, transfer agency and cash and cash collateral from any the Affiliated Sub-Advisers pursuant to
distribution services to the Fund. The securities lending arrangements in the the sub-advisory agreements. The Board
Board considered the performance of affiliated money market funds is in the noted that the sub-advisory fees have no
Invesco Aim and its affiliates in best interests of the Fund and its direct effect on the Fund or its
providing these services and the shareholders. shareholders, as they are paid by Invesco
organizational structure employed by Aim to the Affiliated Sub-Advisers, and
Invesco Aim and its affiliates to provide II. Sub-Advisory Agreements that Invesco Aim and the Affiliated
these services. The Board also considered Sub-Advisers are affiliates. After taking
that these services are provided to the A. Nature, Extent and Quality of account of the Fund's contractual
Fund pursuant to written contracts which Services Provided by Affiliated sub-advisory fee rate, as well as other
are reviewed and approved on an annual Sub-Advisers relevant factors, the Board concluded that
basis by the Board. The Board concluded the Fund's sub-advisory fees were fair and
that Invesco Aim and its affiliates were The Board reviewed the services to be reasonable.
providing these services in a satisfactory provided by Invesco Trimark Ltd., Invesco
manner and in accordance with the terms of Asset Management Deutschland, GmbH, D. Financial Resources of the
their contracts, and were qualified to Invesco Asset Management Limited, Invesco Affiliated Sub-Advisers
continue to provide these services to the Asset Management (Japan) Limited, Invesco
Fund. Australia Limited, Invesco Global Asset The Board considered whether each
Management (N.A.), Inc., Invesco Hong Kong Affiliated Sub-Adviser is financially
The Board considered the benefits Limited, Invesco Institutional (N.A.), sound and has the resources necessary to
realized by Invesco Aim as a result of Inc. and Invesco Senior Secured perform its obligations under its
portfolio brokerage transactions executed Management, Inc. (collectively, the sub-advisory agreement, and concluded that
through "soft dollar" arrangements. Under "Affiliated Sub-Advisers") under the each Affiliated Sub-Adviser has the
these arrangements, portfolio brokerage sub-advisory agreements and the financial resources necessary to fulfill
commissions paid by the Fund and/or other credentials and experience of the officers these obligations.
funds advised by Invesco Aim are used to and employees of the Affiliated
pay for research and execution services. Sub-Advisers who will provide these
The Board noted that soft dollar services. The Board concluded that the
arrangements shift the payment obligation nature, extent and quality of the services
for the research and execution services to be provided by the Affiliated
from Invesco Aim to the funds and Sub-Advisers were appropriate. The Board
therefore may reduce Invesco Aim's noted that the Affiliated Sub-Advisers,
expenses. The Board also noted that which have offices and personnel that are
research obtained through soft dollar geographically dispersed in financial
arrangements may be used by Invesco Aim in centers around the world, have been formed
making investment decisions for the Fund in part for the purpose of researching and
and may therefore benefit Fund compiling information and making
shareholders. The Board concluded that recommendations on the markets and
Invesco Aim's soft dollar arrangements economies of various countries and
were appropriate. The Board also concluded securities of companies located in such
that, based on their review and countries or on various types of
representations made by Invesco Aim, these investments and investment techniques, and
arrangements were consistent with providing investment advisory services.
regulatory requirements. The Board concluded that the sub-advisory
agreements will benefit the Fund and its
The Board considered the fact that the shareholders by permitting Invesco Aim to
Fund's uninvested cash and cash collateral utilize the additional resources and
from any securities lending arrangements talent of the Affiliated Sub-Advisers in
may be invested in money market funds managing the Fund.
advised by Invesco Aim pursuant to
procedures approved by the Board. The B. Fund Performance
Board noted that Invesco Aim will receive
advisory fees from these affiliated money The Board did not view Fund performance as
market funds attributable to such a relevant factor in considering whether
investments, although Invesco Aim has to approve the sub-advisory agreements for
contractually agreed to waive through at the Fund, as no Affiliated Sub-Adviser
least June 30, 2009, the advisory fees currently manages any portion of the
payable by the Fund in an amount equal Fund's assets.
22 AIM GLOBAL CORE EQUITY FUND
Supplement to Semiannual Report dated 6/30/08
AIM GLOBAL CORE EQUITY FUND
(EFFECTIVE JULY 24, 2008, AFTER THE CLOSE OF THE REPORTING PERIOD, AIM GLOBAL VALUE
FUND WAS RENAMED AIM GLOBAL CORE EQUITY FUND.)
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS A redemption fee of 2% will be imposed
For periods ended 6/30/08 on certain redemptions or exchanges out of
The following information has been the Fund within 30 days of purchase.
prepared to provide Institutional Class Inception 7.40% Exceptions to the redemption fee are
shareholders with a performance overview 5 Years 11.55 listed in the Fund's prospectus.
specific to their holdings. Institutional 1 Year -15.08
Class shares are offered exclusively to 6 Months* -12.94 Had the advisor not waived fees and/or
institutional investors, including defined * Cumulative total return that has not reimbursed expenses in the past,
contribution plans that meet certain been annualized performance would have been lower.
criteria. ==========================================
Please note that past performance is
Institutional Class shares' inception date not indicative of future results. More
is October 25, 2005. Returns since that recent returns may be more or less than
date are historical returns. All other those shown. All returns assume
returns are blended returns of historical reinvestment of distributions at NAV.
Institutional Class share performance and Investment return and principal value will
restated Class A share performance (for fluctuate so your shares, when redeemed,
periods prior to the inception date of may be worth more or less than their
Institutional Class shares) at net asset original cost. See full report for
value (NAV) and reflect the Rule 12b-1 information on comparative benchmarks.
fees applicable to Class A shares. Class A Please consult your Fund prospectus for
shares' inception date is December 29, more information. For the most current
2000. month-end performance, please call 800 451
4246 or visit invescoaim.com.
Institutional Class shares have no
sales charge; therefore, performance is at (1) Total annual operating expenses less
NAV. Performance of Institutional Class any contractual fee waivers and/or
shares will differ from performance of expense reimbursements by the advisor
other share classes primarily due to in effect through at least June 30,
differing sales charges and class 2009. See current prospectus for more
expenses. information.
The net annual Fund operating expense
ratio set forth in the most recent Fund
prospectus as of the date of this
supplement for Institutional Class shares
was 0.94%.(1) The total annual Fund
operating expense ratio set forth in the
most recent Fund prospectus as of the date
of this supplement for Institutional Class
shares was 0.95%. The expense ratios
presented above may vary from the expense
ratios presented in other sections of the
actual report that are based on expenses
incurred during the period covered by the
report.
Over for information on your Fund's expenses.
THIS SUPPLEMENT 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. [INVESCO AIM LOGO]
- SERVICE MARK -
invescoaim.com GCE-INS-2 Invesco Aim Distributors, Inc.
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management fees
and other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with ongoing costs of investing in other mutual funds. The example is based on
an investment of $1,000 invested at the beginning of the period and held for the
entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the hypothetical information is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $870.60 $4.42 $1,020.14 $4.77 0.95%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
AIM GLOBAL CORE EQUITY FUND
PROXY RESULTS
A Special Meeting ("Meeting") of Shareholders of AIM Global Core Equity Fund
(formerly AIM Global Value Fund), an investment portfolio of AIM Funds Group, a
Delaware statutory trust ("Trust"), was held on February 29, 2008. The Meeting
was held for the following purposes:
(1) Elect 13 trustees to the Board of Trustees of the Trust, each of whom will
serve until his or her successor is elected and qualified.
(2) Approve an amendment to the Trust's Agreement and Declaration of Trust that
would permit the Board of Trustees of the Trust to terminate the Trust, the
Fund, and each other series portfolio of the Trust, or a share class without
a shareholder vote.
(3) Approve a new sub-advisory agreement between Invesco Aim Advisors, Inc. and
each of AIM Funds Management, Inc.; Invesco Asset Management Deutschland,
GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco Global Asset Management (N.A.),
Inc.; Invesco Hong Kong Limited; Invesco Institutional (N.A.), Inc.; and
Invesco Senior Secured Management, Inc.
The results of the voting on the above matters were as follows:
<Table>
<Caption>
WITHHELD/
MATTERS VOTES FOR ABSTENTIONS**
- -----------------------------------------------------------------------------------------------------------
(1)* Bob R. Baker...................................................... 136,849,147 4,123,920
Frank S. Bayley................................................... 136,856,960 4,116,107
James T. Bunch.................................................... 136,850,068 4,122,999
Bruce L. Crockett................................................. 136,834,285 4,138,782
Albert R. Dowden.................................................. 136,851,266 4,121,801
Jack M. Fields.................................................... 136,893,917 4,079,150
Martin L. Flanagan................................................ 136,889,028 4,084,039
Carl Frischling................................................... 136,837,466 4,135,601
Prema Mathai-Davis................................................ 136,840,379 4,132,688
Lewis F. Pennock.................................................. 136,853,427 4,119,640
Larry Soll, Ph.D. ................................................ 136,708,623 4,264,444
Raymond Stickel, Jr. ............................................. 136,747,468 4,225,599
Philip A. Taylor.................................................. 136,731,527 4,241,540
</Table>
<Table>
<Caption>
VOTES WITHHELD/ BROKER
VOTES FOR AGAINST ABSTENTIONS NON-VOTES
- ---------------------------------------------------------------------------------------------------------------------------
(2)* Approve an amendment to the Trust's Agreement and
Declaration of Trust that would permit the Board
of Trustees of the Trust to terminate the Trust,
the Fund, and each other series portfolio of the
Trust, or a share class without a shareholder
vote............................................. 89,092,876 12,597,596 4,024,351 35,258,244
(3) Approve a new sub-advisory agreement between
Invesco Aim Advisors, Inc. and each of AIM Funds
Management, Inc.; Invesco Asset Management
Deutschland, GmbH; Invesco Asset Management
Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco
Global Asset Management (N.A.), Inc.; Invesco
Hong Kong Limited; Invesco Institutional (N.A.),
Inc.; and Invesco Senior Secured Management,
Inc. ............................................ 10,703,422 539,593 480,649 2,537,573
</Table>
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Funds Group.
** Includes Broker Non-Votes.
23 AIM GLOBAL CORE EQUITY FUND
====================================================================================================================================
EDELIVERY
INVESCOAIM.COM/EDELIVERY
REGISTER FOR EDELIVERY - eDelivery is the process of receiving your fund and account information via e-mail. Once your quarterly
statements, tax forms, fund reports, and prospectuses are available, we will send you an e-mail notification containing links to
these documents. For security purposes, you will need to log in to your account to view your statements and tax forms.
WHY SIGN UP? HOW DO I SIGN UP?
Register for eDelivery to: It's easy. Just follow these simple steps:
- - save your Fund the cost of printing and postage. 1. Log in to your account.
- - reduce the amount of paper you receive. 2. Click on the "Service Center" tab.
- - gain access to your documents faster by not waiting for the mail. 3. Select "Register for eDelivery" and complete the consent
- - view your documents online anytime at your convenience. process.
- - save the documents to your personal computer or print them out
for your records.
This service is provided by Invesco Aim Investment Services, Inc.
====================================================================================================================================
FUND HOLDINGS AND PROXY VOTING INFORMATION
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth
quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund
files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your
Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC
Web site at sec.gov. Copies of the 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 Reference Room, including information about duplicating fee charges, by
calling 202 942 8090 or 800 732 0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file
numbers for the Fund are 811-01540 and 002-27334.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities
is available without charge, upon request, from our Client Services department at 800 959 4246 or on the Invesco Aim Web site,
invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is
available at our Web site. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting
Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC Web site, sec.gov.
If used after October 20, 2008, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly
Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco
Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors for [INVESCO AIM LOGO]
the products and services represented by Invesco Aim; they each provide investment advisory services to - SERVICE MARK -
individual and institutional clients and do not sell securities. Invesco Institutional (N.A.), Inc., Invesco
Senior Secured Management, Inc., Invesco Global Asset Management (N.A.), Inc., Invesco Trimark Ltd., Invesco
Asset Management (Japan) Ltd. and Invesco Hong Kong Ltd. are affiliated investment advisors that serve as the
subadvisor for some of the products and services represented by Invesco Aim. Invesco Aim Distributors, Inc.
is the distributor for the retail mutual funds, exchange-traded funds and U.S. institutional money market
funds represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd.
invescoaim.com GCE-SAR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM INTERNATIONAL SMALL COMPANY FUND
- SERVICE MARK - Semiannual Report to Shareholders - June 30, 2008
[MOUNTAIN GRAPHIC]
AIM Investments 2 Fund Performance
became INVESCO AIM 3 Letter to Shareholders
on March 31, 2008. 4 Schedule of Investments
7 Financial Statements
For more details, go to 10 Notes to Financial Statements
invescoaim.com 16 Financial Highlights
21 Fund Expenses
22 Approval of Investment Advisory Agreement
25 Results of Proxy
For the most current month-end Fund performance and commentary, please visit
invescoaim.com.
Unless otherwise noted, all data provided by Invesco Aim.
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
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/07 to 6/30/08, at net asset value (NAV).
Performance shown does not include applicable contingent deferred sales charges
(CDSC) or front-end sales charges, which would have reduced performance.
Class A Shares -15.50%
Class B Shares -15.85
Class C Shares -15.85
MSCI EAFE Index(triangle) (Broad Market Index) -10.96
MSCI World Ex-US Small Cap Index(triangle) (Style-Specific Index) -9.79
Lipper International Small/Mid-Cap Growth Funds Index(triangle)
(Peer Group Index) -9.59
(triangle)Lipper Inc.
The MSCI EAFE--REGISTERED TRADEMARK--INDEX is a free float-adjusted market
capitalization index that is designed to measure developed market equity
performance, excluding the U.S. and Canada.
The MSCI WORLD EX-US SMALL CAP INDEX is a free float-adjusted market
capitalization index that represents the small cap segment in global developed
market equity performance excluding the United States.
The LIPPER INTERNATIONAL SMALL/MID-CAP GROWTH FUNDS INDEX is an equally
weighted representation of the largest funds in the Lipper International
Small/Mid-Cap Growth Funds category. These funds typically have an above-average
price-to-cash flow ratio, price-to-book ratio, and three-year sales-per-share
growth value, compared to the S&P/Citigroup World ex-U.S. BMI.
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.
=======================================================================================
==========================================
AVERAGE ANNUAL TOTAL RETURNS PAY ON FUND DISTRIBUTIONS OR SALE OF FUND BEGINNING OF THE SEVENTH YEAR. THE CDSC ON
SHARES. INVESTMENT RETURN AND PRINCIPAL CLASS C SHARES IS 1% FOR THE FIRST YEAR
As of 6/30/08, including maximum VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE AFTER PURCHASE.
applicable sales charges A GAIN OR LOSS WHEN YOU SELL SHARES.
THE PERFORMANCE OF THE FUND'S SHARE
CLASS A SHARES THE NET ANNUAL FUND OPERATING EXPENSE CLASSES WILL DIFFER PRIMARILY DUE TO
Inception (8/31/00) 14.20% RATIO SET FORTH IN THE MOST RECENT FUND DIFFERENT SALES CHARGE STRUCTURES AND
5 Years 26.79 PROSPECTUS AS OF THE DATE OF THIS REPORT CLASS EXPENSES.
1 Year -21.52 FOR CLASS A, CLASS B AND CLASS C SHARES
WAS 1.48%, 2.23% AND 2.23%, HAD THE ADVISOR NOT WAIVED FEES AND/OR
CLASS B SHARES RESPECTIVELY.(1) THE TOTAL ANNUAL FUND REIMBURSED EXPENSES IN THE PAST,
Inception (8/31/00) 14.23% OPERATING EXPENSE RATIO SET FORTH IN THE PERFORMANCE WOULD HAVE BEEN LOWER.
5 Years 27.14 MOST RECENT FUND PROSPECTUS AS OF THE DATE
1 Year -20.86 OF THIS REPORT FOR CLASS A, CLASS B AND A REDEMPTION FEE OF 2% WILL BE IMPOSED
CLASS C SHARES WAS 1.49%, 2.24% AND 2.24%, ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
CLASS C SHARES RESPECTIVELY. THE EXPENSE RATIOS PRESENTED THE FUND WITHIN 30 DAYS OF PURCHASE.
Inception (8/31/00) 14.22% ABOVE MAY VARY FROM THE EXPENSE RATIOS EXCEPTIONS TO THE REDEMPTION FEE ARE
5 Years 27.28 PRESENTED IN OTHER SECTIONS OF THIS REPORT LISTED IN THE FUND'S PROSPECTUS.
1 Year -18.26 THAT ARE BASED ON EXPENSES INCURRED DURING
========================================== THE PERIOD COVERED BY THIS REPORT. (1) Total annual operating expenses less
any contractual fee waivers and/or
THE PERFORMANCE DATA QUOTED REPRESENT PAST CLASS A SHARE PERFORMANCE REFLECTS THE expense reimbursements by the advisor
PERFORMANCE AND CANNOT GUARANTEE MAXIMUM 5.50% SALES CHARGE, AND CLASS B in effect through at least June 30,
COMPARABLE FUTURE RESULTS; CURRENT AND CLASS C SHARE PERFORMANCE REFLECTS THE 2009. See current prospectus for more
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE APPLICABLE CONTINGENT DEFERRED SALES information.
VISIT INVESCOAIM.COM FOR THE MOST RECENT CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
MONTH-END PERFORMANCE. PERFORMANCE FIGURES CDSC ON CLASS B SHARES DECLINES FROM 5%
REFLECT REINVESTED DISTRIBUTIONS, CHANGES BEGINNING AT THE TIME OF PURCHASE TO 0% AT
IN NET ASSET VALUE AND THE EFFECT OF THE THE
MAXIMUM SALES CHARGE UNLESS OTHERWISE
STATED. PERFORMANCE FIGURES DO NOT REFLECT
DEDUCTION OF TAXES A SHAREHOLDER WOULD
2 AIM INTERNATIONAL SMALL COMPANY FUND
Dear Fellow Shareholders:
As I write this letter in July 2008, turbulent financial markets are causing
considerable investor anxiety, reminding us again that markets are cyclical and the
[CROCKETT PHOTO] correction of excess is often painful, at least in the short- term. Your Board of
Trustees believes in the wisdom of a long-term perspective and consistent investment
discipline. We continue to put your interests first in the effort to improve investment
performance, contain shareholder costs and uphold the highest ethical standards.
We remain enthusiastic about the global reach and investment expertise that Invesco,
a leading independent global investment management company, brings to the management of
Bruce Crockett AIM Funds as the parent company of the advisors. The diverse investment strategies
deployed throughout the worldwide network of Invesco investment centers has
helped strengthen the management of many AIM Funds. The rebranding of the Funds'
management company as Invesco Aim was followed by the launch of an upgraded,
investor-friendly Web site (invescoaim.com); a new mountain logo using a Himalayan peak
to symbolize stability, endurance, strength and longevity; and a new ad campaign.
Emphasizing Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and
Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim
Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click
on "Investment Advisory Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your behalf to double the number of
votes in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to
support the movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay."
Like virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be
interested to hear your thoughts on this policy.
As always, you are welcome to e-mail your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been
established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund
annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured
that your comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
August 11, 2008
3 AIM INTERNATIONAL SMALL COMPANY FUND
PORTFOLIO COMPOSITION
By sector, based on Net Assets
As of June 30, 2008
<Table>
- -------------------------------------------------------------------------
Consumer Discretionary 21.0%
- -------------------------------------------------------------------------
Industrials 20.5
- -------------------------------------------------------------------------
Financials 17.6
- -------------------------------------------------------------------------
Materials 8.6
- -------------------------------------------------------------------------
Utilities 5.9
- -------------------------------------------------------------------------
Consumer Staples 4.5
- -------------------------------------------------------------------------
Energy 3.6
- -------------------------------------------------------------------------
Health Care 3.6
- -------------------------------------------------------------------------
Information Technology 2.2
- -------------------------------------------------------------------------
Telecommunication Services 1.5
- -------------------------------------------------------------------------
Money Market Funds Plus Other Assets Less Liabilities 11.0
_________________________________________________________________________
=========================================================================
</Table>
SCHEDULE OF INVESTMENTS(a)
June 30, 2008
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY INTERESTS-86.37%
AUSTRALIA-0.66%
Australian Wealth Management Ltd. 3,563,600 $ 4,422,538
================================================================================
AUSTRIA-1.47%
Andritz AG(b) 157,200 9,888,925
================================================================================
BRAZIL-6.62%
American Banknote S.A.(c) 325,900 3,352,776
- --------------------------------------------------------------------------------
American Banknote S.A. 1,100,600 11,322,692
- --------------------------------------------------------------------------------
Equatorial Energia S.A. 1,658,300 16,388,101
- --------------------------------------------------------------------------------
Gafisa S.A. 294,500 5,078,948
- --------------------------------------------------------------------------------
OdontoPrev S.A.(c) 139,600 3,568,663
- --------------------------------------------------------------------------------
OdontoPrev S.A. 186,200 4,759,921
================================================================================
44,471,101
================================================================================
CANADA-6.99%
BMTC Group, Inc.-Class A 147,564 2,580,417
- --------------------------------------------------------------------------------
Canam Group Inc.(c) 510,200 5,035,987
- --------------------------------------------------------------------------------
FirstService Corp.(d) 95,600 1,369,061
- --------------------------------------------------------------------------------
Genesis Land Development Corp.(d) 1,208,400 4,844,497
- --------------------------------------------------------------------------------
Onex Corp. 221,600 6,501,164
- --------------------------------------------------------------------------------
Reitmans (Canada) Ltd.-Class A 517,800 7,735,025
- --------------------------------------------------------------------------------
Sherritt International Corp. 713,407 10,733,971
- --------------------------------------------------------------------------------
Total Energy Trust Ltd. 598,190 4,937,032
- --------------------------------------------------------------------------------
Transat A.T. Inc.-Class A(e) 160,300 3,238,368
================================================================================
46,975,522
================================================================================
CHINA-0.81%
Xinyi Glass Holdings Co. Ltd. 8,446,000 5,470,137
================================================================================
FINLAND-2.26%
Nokian Renkaat Oyj(b) 318,000 15,174,874
================================================================================
GERMANY-2.70%
MTU Aero Engines Holding AG(b) 130,000 4,221,489
- --------------------------------------------------------------------------------
Symrise AG 358,712 7,793,883
- --------------------------------------------------------------------------------
Wirecard AG(b)(d) 478,185 6,122,417
================================================================================
18,137,789
================================================================================
GREECE-5.57%
Intralot S.A. 1,066,000 18,294,164
- --------------------------------------------------------------------------------
Jumbo S.A.(b) 459,000 12,859,977
- --------------------------------------------------------------------------------
Mytilineos Holdings S.A.(b) 543,600 6,235,790
================================================================================
37,389,931
================================================================================
HONG KONG-5.27%
First Pacific Co. Ltd. 35,420,000 22,349,583
- --------------------------------------------------------------------------------
Hopewell Holdings Ltd. 627,000 2,227,425
- --------------------------------------------------------------------------------
Paliburg Holdings Ltd. 229,421,700 5,001,948
- --------------------------------------------------------------------------------
Paliburg Holdings Ltd.-Wts., Expiring 11/08/10(d) 25,491,300 81,731
- --------------------------------------------------------------------------------
Regal Hotels International Holdings Ltd.(b) 118,356,000 5,755,599
================================================================================
35,416,286
================================================================================
HUNGARY-1.12%
Richter Gedeon Nyrt.(b) 34,730 7,489,371
================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
4 AIM INTERNATIONAL SMALL COMPANY FUND
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------------
INDONESIA-0.88%
PT Kawasan Industri Jababeka Tbk(b)(d) 127,385,500 $ 1,771,827
- --------------------------------------------------------------------------------
Total Bangun Persada(b)(d) 123,715,500 4,171,168
================================================================================
5,942,995
================================================================================
IRELAND-4.00%
DCC PLC(b) 235,000 5,850,751
- --------------------------------------------------------------------------------
IAWS Group PLC 370,083 9,264,567
- --------------------------------------------------------------------------------
Paddy Power PLC(b) 375,000 11,766,408
================================================================================
26,881,726
================================================================================
ISRAEL-1.81%
Israel Discount Bank-Class A(b)(d) 5,518,687 12,158,330
================================================================================
ITALY-0.88%
Cementir Holding S.p.A.(b) 882,224 5,914,593
================================================================================
JAPAN-5.37%
EXEDY Corp. 406,600 10,704,031
- --------------------------------------------------------------------------------
Miyano Machinery Inc. 2,001,000 3,920,203
- --------------------------------------------------------------------------------
Nippon Ceramic Co., Ltd. 754,300 8,738,712
- --------------------------------------------------------------------------------
Nishio Rent All Co., Ltd. 302,000 4,024,960
- --------------------------------------------------------------------------------
Noritsu Koki Co., Ltd. 437,500 5,505,322
- --------------------------------------------------------------------------------
Takeuchi Mfg. Co., Ltd. 129,900 3,187,242
================================================================================
36,080,470
================================================================================
MALAYSIA-4.79%
IGB Corp. Berhad(b) 28,820,800 12,598,539
- --------------------------------------------------------------------------------
Lion Diversified Holdings Berhad 25,132,200 9,694,343
- --------------------------------------------------------------------------------
Parkson Holdings Berhad(b) 6,435,360 9,851,439
================================================================================
32,144,321
================================================================================
NETHERLANDS-5.37%
Aalberts Industries N.V.(b) 586,484 11,063,513
- --------------------------------------------------------------------------------
Koninklijke BAM Groep N.V.(b)(c) 65,000 1,147,987
- --------------------------------------------------------------------------------
Koninklijke BAM Groep N.V.(b) 487,688 8,613,222
- --------------------------------------------------------------------------------
Smit Internationale N.V. 98,057 9,571,922
- --------------------------------------------------------------------------------
USG People N.V.(b) 314,154 5,689,273
================================================================================
36,085,917
================================================================================
NEW ZEALAND-0.95%
Freightways Ltd.(b) 2,847,600 6,365,849
================================================================================
NORWAY-2.83%
Petroleum Geo-Services A.S.A.(b)(d) 519,400 12,687,966
- --------------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A.(b)(d) 454,623 6,301,863
================================================================================
18,989,829
================================================================================
PHILIPPINES-4.89%
First Gen Corp. 8,958,200 5,602,627
- --------------------------------------------------------------------------------
Globe Telecom, Inc. 376,020 9,910,735
- --------------------------------------------------------------------------------
Manila Water Co.(b) 30,311,000 12,330,469
- --------------------------------------------------------------------------------
PNOC Energy Development Corp.(c) 4,405,000 511,637
- --------------------------------------------------------------------------------
PNOC Energy Development Corp. 38,508,000 4,472,674
================================================================================
32,828,142
================================================================================
SOUTH AFRICA-0.80%
Massmart Holdings Ltd. 684,600 5,393,914
================================================================================
SOUTH KOREA-4.07%
Daegu Bank 596,350 7,917,915
- --------------------------------------------------------------------------------
Joongang Construction Co., Ltd.(d)(e) 218,060 2,395,348
- --------------------------------------------------------------------------------
Lotte Confectionery Co., Ltd. 5,671 6,874,104
- --------------------------------------------------------------------------------
Qrix Communications Inc.(e) 928,990 6,016,384
- --------------------------------------------------------------------------------
Sung Kwang Bend Co., Ltd.(b) 144,287 4,109,181
================================================================================
27,312,932
================================================================================
SWEDEN-1.29%
Oriflame Cosmetics S.A.-SDR(b) 135,400 8,672,337
================================================================================
TAIWAN-0.76%
Feng Tay Enterprise Co., Ltd.(b) 3,411,048 2,325,364
- --------------------------------------------------------------------------------
Hung Poo Real Estate Development Corp. 2,048,250 2,803,188
================================================================================
5,128,552
================================================================================
THAILAND-1.53%
Siam Commercial Bank PCL(b) 4,461,600 10,301,531
================================================================================
UNITED KINGDOM-12.68%
Amlin PLC(b) 1,614,460 8,006,384
- --------------------------------------------------------------------------------
Hikma Pharmaceuticals PLC(b)(c) 99,200 994,288
- --------------------------------------------------------------------------------
Hikma Pharmaceuticals PLC(b) 751,064 7,527,962
- --------------------------------------------------------------------------------
Homeserve PLC(b) 424,217 14,288,046
- --------------------------------------------------------------------------------
IG Group Holdings PLC(b) 964,807 6,301,102
- --------------------------------------------------------------------------------
Inchcape PLC(b) 1,446,155 9,154,330
- --------------------------------------------------------------------------------
Informa PLC 1,003,859 8,258,293
- --------------------------------------------------------------------------------
Kier Group PLC(b) 369,600 6,937,777
- --------------------------------------------------------------------------------
Lancashire Holdings Ltd. 934,000 5,674,325
- --------------------------------------------------------------------------------
Mitie Group PLC(b) 2,807,500 11,787,313
- --------------------------------------------------------------------------------
Savills PLC(b) 1,417,742 6,241,637
================================================================================
85,171,457
================================================================================
Total Foreign Common Stocks & Other Equity
Interests (Cost $511,358,889) 580,209,369
================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
5 AIM INTERNATIONAL SMALL COMPANY FUND
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------------
FOREIGN PREFERRED STOCKS-2.60%
BRAZIL-0.67%
Duratex S.A.-Pfd. 211,700 $ 4,487,826
================================================================================
CANADA-0.10%
FirstService Corp.-Series 1, 7% Pfd. 36,320 690,080
================================================================================
GERMANY-1.83%
Fuchs Petrolub AG-Pfd. 130,100 12,290,157
================================================================================
Total Foreign Preferred Stocks (Cost
$12,459,894) 17,468,063
================================================================================
MONEY MARKET FUNDS-8.36%
Liquid Assets Portfolio-Institutional Class(f) 28,082,136 28,082,136
- --------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(f) 28,082,136 28,082,136
================================================================================
Total Money Market Funds (Cost $56,164,272) 56,164,272
================================================================================
TOTAL INVESTMENTS-97.33% (Cost $579,983,055) 653,841,704
================================================================================
OTHER ASSETS LESS LIABILITIES-2.67% 17,919,233
================================================================================
NET ASSETS-100.00% $671,760,937
________________________________________________________________________________
================================================================================
</Table>
Investment Abbreviations:
<Table>
Pfd. - Preferred
SDR - Swedish Depositary Receipt
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(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, 2008 was $292,678,891,
which represented 43.57% of the Fund's Net Assets. See Note 1A.
(c) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at June 30, 2008 was $14,611,338, which represented 2.18% of the Fund's
Net Assets. Unless otherwise indicated, these securities are not
considered to be illiquid.
(d) Non-income producing security.
(e) Affiliated company during the period. 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, 2008 was $11,650,100, which represented
1.73% of the Fund's Net Assets. See Note 4.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
6 AIM INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost
$516,521,487) $592,043,716
- ------------------------------------------------------
Investments in affiliates, at value
(Cost $63,461,568) 61,797,988
======================================================
Total investments (Cost
$579,983,055) 653,841,704
======================================================
Foreign currencies, at value (Cost
$20,653,288) 20,811,220
- ------------------------------------------------------
Receivables for:
Investments sold 1,420,226
- ------------------------------------------------------
Fund shares sold 532,344
- ------------------------------------------------------
Dividends 1,463,999
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 29,676
- ------------------------------------------------------
Other assets 27,064
======================================================
Total assets 678,126,233
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 1,342,645
- ------------------------------------------------------
Fund shares reacquired 3,518,983
- ------------------------------------------------------
Accrued fees to affiliates 470,766
- ------------------------------------------------------
Accrued other operating expenses 963,012
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 69,890
======================================================
Total liabilities 6,365,296
======================================================
Net assets applicable to shares
outstanding $671,760,937
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $548,261,769
- ------------------------------------------------------
Undistributed net investment income 6,053,054
- ------------------------------------------------------
Undistributed net realized gain 43,419,608
- ------------------------------------------------------
Unrealized appreciation 74,026,506
======================================================
$671,760,937
______________________________________________________
======================================================
NET ASSETS:
Class A $499,877,754
______________________________________________________
======================================================
Class B $ 50,182,642
______________________________________________________
======================================================
Class C $ 84,056,159
______________________________________________________
======================================================
Institutional Class $ 37,644,382
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 26,354,812
______________________________________________________
======================================================
Class B 2,763,788
______________________________________________________
======================================================
Class C 4,629,892
______________________________________________________
======================================================
Institutional Class 1,979,420
______________________________________________________
======================================================
Class A:
Net asset value per share $ 18.97
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $18.97 divided
by 94.50%) $ 20.07
______________________________________________________
======================================================
Class B:
Net asset value and offering price
per share $ 18.16
______________________________________________________
======================================================
Class C:
Net asset value and offering price
per share $ 18.16
______________________________________________________
======================================================
Institutional Class:
Net asset value and offering price
per share $ 19.02
______________________________________________________
======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
7 AIM INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF OPERATIONS
For the six months ended June 30, 2008
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $1,171,828) $ 11,451,937
- ------------------------------------------------------------------------------------------------
Dividends from affiliates (includes securities lending income of $149,714) 1,002,948
================================================================================================
Total investment income 12,454,885
================================================================================================
EXPENSES:
Advisory fees 3,493,349
- ------------------------------------------------------------------------------------------------
Administrative services fees 103,283
- ------------------------------------------------------------------------------------------------
Custodian fees 464,181
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 712,152
- ------------------------------------------------------------------------------------------------
Class B 301,161
- ------------------------------------------------------------------------------------------------
Class C 491,808
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B and C 670,725
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 474
- ------------------------------------------------------------------------------------------------
Trustees' and officer's fees and benefits 20,303
- ------------------------------------------------------------------------------------------------
Other 174,847
================================================================================================
Total expenses 6,432,283
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (42,055)
================================================================================================
Net expenses 6,390,228
================================================================================================
Net investment income 6,064,657
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities 24,519,767
- ------------------------------------------------------------------------------------------------
Foreign currencies 962,478
================================================================================================
25,482,245
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (net of foreign taxes on holdings of $(168,501)) (170,418,782)
- ------------------------------------------------------------------------------------------------
Foreign currencies 97,923
================================================================================================
(170,320,859)
================================================================================================
Net realized and unrealized gain (loss) (144,838,614)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(138,773,957)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8 AIM INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2008 and the year ended December 31, 2007
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 6,064,657 $ 9,806,533
- --------------------------------------------------------------------------------------------------------
Net realized gain 25,482,245 184,675,828
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (170,320,859) (47,336,530)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (138,773,957) 147,145,831
========================================================================================================
Distributions to shareholders from net investment income:
Class A -- (9,525,197)
- --------------------------------------------------------------------------------------------------------
Class B -- (473,898)
- --------------------------------------------------------------------------------------------------------
Class C -- (760,926)
- --------------------------------------------------------------------------------------------------------
Institutional Class -- (722,704)
========================================================================================================
Total distributions from net investment income -- (11,482,725)
========================================================================================================
Distributions to shareholders from net realized gains:
Class A -- (136,361,072)
- --------------------------------------------------------------------------------------------------------
Class B -- (16,097,917)
- --------------------------------------------------------------------------------------------------------
Class C -- (25,848,347)
- --------------------------------------------------------------------------------------------------------
Institutional Class -- (7,976,274)
========================================================================================================
Total distributions from net realized gains -- (186,283,610)
========================================================================================================
Share transactions-net:
Class A (92,486,594) 96,431,720
- --------------------------------------------------------------------------------------------------------
Class B (15,981,605) (5,743,754)
- --------------------------------------------------------------------------------------------------------
Class C (22,039,608) 6,561,535
- --------------------------------------------------------------------------------------------------------
Institutional Class 2,266,054 27,049,040
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (128,241,753) 124,298,541
========================================================================================================
Net increase (decrease) in net assets (267,015,710) 73,678,037
========================================================================================================
NET ASSETS:
Beginning of period 938,776,647 865,098,610
========================================================================================================
End of period (including undistributed net investment income of
$6,053,054 and $(11,603), respectively) $ 671,760,937 $ 938,776,647
________________________________________________________________________________________________________
========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2008
(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 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 contingent deferred sales charges ("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. As of March 14, 2005, the Fund's shares are
offered on a limited basis. 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 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, American
Depositary Receipts 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 the issuer's 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.
10 AIM INTERNATIONAL SMALL COMPANY FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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, the investment
advisor 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.
The Fund files tax returns in the U.S. Federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 by the securities lending provider. Such
collateral will be cash or debt securities issued or guaranteed by the
U.S. Government or any of its sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Dividends received on cash collateral
investments for securities lending transactions, which are net of
compensation to counterparties, is included in Dividends from affiliates
on the Statement of Operations. The aggregate value of securities out on
loan is shown as a footnote on the Statement of Assets and Liabilities, if
any.
K. 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
11 AIM INTERNATIONAL SMALL COMPANY FUND
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.
L. 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
based on the annual rate of the Fund's average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.935%
- -------------------------------------------------------------------
Next $250 million 0.91%
- -------------------------------------------------------------------
Next $500 million 0.885%
- -------------------------------------------------------------------
Next $1.5 billion 0.86%
- -------------------------------------------------------------------
Next $2.5 billion 0.835%
- -------------------------------------------------------------------
Next $2.5 billion 0.81%
- -------------------------------------------------------------------
Next $2.5 billion 0.785%
- -------------------------------------------------------------------
Over $10 billion 0.76%
___________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund on February 29, 2008, effective May 1, 2008, between the Advisor and
each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management
Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited,
Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco
Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco
Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the
Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-
Advisor(s) that provide discretionary investment management services to the Fund
based on the percentage of assets allocated to such Sub-Advisor(s).
The Advisor has contractually agreed, through at least June 30, 2009, to waive
the advisory fee payable by the Fund in an amount equal to 100% of the net
advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (but not cash collateral from
securities lending) in such affiliated money market funds.
For the six months ended June 30, 2008, the Advisor waived advisory fees of
$33,710.
At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") 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, 2008, Invesco reimbursed expenses of the Fund in the
amount of $881.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain
administrative costs incurred in providing accounting services to the Fund. For
the six months ended June 30, 2008, 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
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. IAIS may make payments to intermediaries that
provide omnibus account services, sub-accounting services and/or networking
services. All fees payable by IAIS 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, 2008, 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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI 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
12 AIM INTERNATIONAL SMALL COMPANY FUND
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. Rules of the Financial Industry
Regulatory Authority ("FINRA") 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, 2008, expenses incurred under the
Plans are shown in the Statement of Operations as distribution fees.
Front-end sales commissions and 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, 2008, IADI
advised the Fund that IADI retained $11,039 in front-end sales commissions from
the sale of Class A shares and $519, $54,628 and $18,368 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 establishes a hierarchy that prioritizes the
inputs to valuation methods giving the highest priority to readily available
unadjusted quoted prices in an active market for identical assets (level 1) and
the lowest priority to unobservable inputs (level 3) market prices are not
readily available or are unreliable. Based on the inputs the securities or other
instruments are tiered into three levels of hierarchy under SFAS 157. Changes in
valuation methods may result in transfers in or out of an investment's assigned
level within the hierarchy,
Level 1 -- Quoted prices in an active market for identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use
in pricing a security. These may include quoted prices for similar
securities, interest rates, prepayment speeds, credit risk and
others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable
(for example, when there is little or no market activity for an
investment at the end of the period), unobservable inputs may be
used. Unobservable inputs reflect the Fund's own assumptions about
the factors market participants would use in determining fair value
of the securities or instruments and would be based on the best
available information.
Below is a summary of the tiered input levels, as of the end of the reporting
period, June 30, 2008. The inputs or methods used for valuing securities may not
be an indication of the risk associated with investing in those securities.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $361,162,813
- --------------------------------------
Level 2 292,678,891
- --------------------------------------
Level 3 --
======================================
$653,841,704
______________________________________
======================================
</Table>
NOTE 4--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 investments in affiliates for the six months ended
June 30, 2008.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
12/31/07 AT COST FROM SALES (DEPRECIATION) 06/30/08 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------
Joongang Constuction Co., Ltd.
(Cost $4,352,088) $ 7,359,124 $-- $(2,428,767) $(1,065,249) $ 2,395,348 $ -- $(1,469,760)
- -----------------------------------------------------------------------------------------------------------------------
Qrix Communications Inc. (Cost
$5,881,918)(a) 7,777,613 -- (942,125) (1,004,757) 6,016,384 78,193 185,653
- -----------------------------------------------------------------------------------------------------------------------
Transat A.T. Inc. -- Class A
(Cost $2,945,208) 5,638,004 -- -- (2,399,636) 3,238,368 28,442 --
=======================================================================================================================
Total Investments in
Affiliates $20,774,741 $-- $(3,370,892) $(4,469,642) $11,650,100 $106,635 $(1,284,107)
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) As of June 30, 2008, the security is no longer considered an affiliate of
the Fund.
NOTE 5--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, 2008, the Fund
engaged in securities purchases of $131,334.
13 AIM INTERNATIONAL SMALL COMPANY FUND
NOTE 6--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangements 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, 2008,
the Fund received credits from these arrangements, which resulted in the
reduction of the Fund's total expenses of $7,464.
NOTE 7--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, 2008, the Fund paid legal fees of $2,633
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 8--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company ("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 Invesco Aim, not to exceed the contractually agreed upon rate.
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, 2007.
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, 2008 was $72,585,634 and
$218,139,478, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $134,004,231
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (62,725,325)
================================================================================================
Net unrealized appreciation of investment securities $ 71,278,906
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $582,562,798.
</Table>
14 AIM INTERNATIONAL SMALL COMPANY FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008(a) DECEMBER 31, 2007
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,058,731 $ 42,212,220 6,063,332 $ 164,125,842
- -------------------------------------------------------------------------------------------------------------------------
Class B 50,245 987,931 139,730 3,619,677
- -------------------------------------------------------------------------------------------------------------------------
Class C 202,943 3,998,103 773,005 20,084,980
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 207,975 4,465,346 752,485 20,235,812
=========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 5,902,557 130,565,065
- -------------------------------------------------------------------------------------------------------------------------
Class B -- -- 735,895 15,645,130
- -------------------------------------------------------------------------------------------------------------------------
Class C -- -- 1,144,087 24,323,328
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 393,085 8,698,978
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 200,035 4,052,830 337,998 8,867,674
- -------------------------------------------------------------------------------------------------------------------------
Class B (208,465) (4,052,830) (350,686) (8,867,674)
=========================================================================================================================
Reacquired(b):
Class A (6,838,204) (138,751,644) (7,695,805) (207,126,861)
- -------------------------------------------------------------------------------------------------------------------------
Class B (674,470) (12,916,706) (618,496) (16,140,887)
- -------------------------------------------------------------------------------------------------------------------------
Class C (1,338,001) (26,037,711) (1,466,329) (37,846,773)
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class (109,376) (2,199,292) (67,675) (1,885,750)
=========================================================================================================================
(6,448,587) $(128,241,753) 6,043,183 $ 124,298,541
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 22% of the
outstanding shares of the Fund. IADI has an agreement with these entities
to sell Fund shares. The Fund, Invesco Aim and/or Invesco Aim affiliates
may make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, Invesco Aim and/or Invesco
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, 5% 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 Invesco Aim.
(b) Net of redemption fees of $39,746 and $57,535 which were allocated among
the classes based on relative net assets of each class for the six months
ended June 30, 2008 and the year ended December 31, 2007, respectively.
15 AIM INTERNATIONAL 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, -----------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.45 $ 24.13 $ 20.52 $ 16.17 $ 12.08 $ 6.91
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.17(a) 0.32(a) 0.23(a) 0.07 (0.03)(a) (0.04)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (3.65) 3.79 7.54 5.12 4.34 5.24
============================================================================================================================
Total from investment operations (3.48) 4.11 7.77 5.19 4.31 5.20
============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.38) (0.23) (0.05) (0.00) (0.03)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (5.41) (3.93) (0.79) (0.22) --
============================================================================================================================
Total distributions -- (5.79) (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 0.00
============================================================================================================================
Net asset value, end of period $ 18.97 $ 22.45 $ 24.13 $ 20.52 $ 16.17 $ 12.08
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) (15.50)% 17.39% 38.18% 32.21% 35.83% 75.10%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $499,878 $694,568 $635,318 $451,630 $257,579 $87,269
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.53%(c) 1.47% 1.54% 1.61% 1.83% 2.00%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.54%(c) 1.50% 1.58% 1.64% 1.85% 2.35%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets 1.71%(c) 1.16% 0.93% 0.42% (0.19)% (0.46)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 10% 40% 69% 60% 87% 93%
____________________________________________________________________________________________________________________________
============================================================================================================================
</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
$572,851,752.
(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 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------
2008 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.58 $ 23.37 $ 19.95 $ 15.81 $ 11.89 $ 6.84
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09(a) 0.11(a) 0.04(a) (0.05) (0.11)(a) (0.10)(a)
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (3.51) 3.67 7.32 4.98 4.25 5.15
==========================================================================================================================
Total from investment operations (3.42) 3.78 7.36 4.93 4.14 5.05
==========================================================================================================================
Less distributions:
Dividends from net investment income -- (0.16) (0.01) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (5.41) (3.93) (0.79) (0.22) --
==========================================================================================================================
Total distributions -- (5.57) (3.94) (0.79) (0.22) --
==========================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 0.00
==========================================================================================================================
Net asset value, end of period $ 18.16 $ 21.58 $ 23.37 $ 19.95 $ 15.81 $ 11.89
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) (15.85)% 16.54% 37.20% 31.28% 34.94% 73.83%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $50,183 $77,598 $86,236 $76,626 $47,942 $16,543
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.28%(c) 2.22% 2.29% 2.35% 2.48% 2.65%
- --------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.29%(c) 2.25% 2.33% 2.38% 2.50% 3.00%
==========================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.96%(c) 0.41% 0.18% (0.32)% (0.84)% (1.11)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(d) 10% 40% 69% 60% 87% 93%
__________________________________________________________________________________________________________________________
==========================================================================================================================
</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 $60,563,114.
(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 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.57 $ 23.36 $ 19.94 $ 15.81 $ 11.89 $ 6.83
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.09(a) 0.11(a) 0.04(a) (0.05) (0.11)(a) (0.10)(a)
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (3.50) 3.67 7.32 4.97 4.25 5.16
===========================================================================================================================
Total from investment operations (3.41) 3.78 7.36 4.92 4.14 5.06
===========================================================================================================================
Less distributions:
Dividends from net investment income -- (0.16) (0.01) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (5.41) (3.93) (0.79) (0.22) --
===========================================================================================================================
Total distributions -- (5.57) (3.94) (0.79) (0.22) --
===========================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00 0.00 0.00
===========================================================================================================================
Net asset value, end of period $ 18.16 $ 21.57 $ 23.36 $ 19.94 $ 15.81 $11.89
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) (15.81)% 16.53% 37.21% 31.22% 34.94% 74.09%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $84,056 $124,359 $124,161 $102,861 $47,818 $9,208
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.28%(c) 2.22% 2.29% 2.35% 2.48% 2.65%
- ---------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.29%(a) 2.25% 2.33% 2.38% 2.50% 3.00%
===========================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.96%(c) 0.41% 0.18% (0.32)% (0.84)% (1.11)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(d) 10% 40% 69% 60% 87% 93%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</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 $98,902,096.
(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 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------
SIX MONTHS YEAR ENDED OCTOBER 25, 2005
ENDED DECEMBER 31, (COMMENCEMENT DATE)
JUNE 30, ------------------- TO DECEMBER 31,
2008 2007 2006 2005
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.47 $ 24.14 $ 20.52 $18.73
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.22(a) 0.43(a) 0.33(a) 0.03
- -----------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (3.67) 3.80 7.55 2.61
=================================================================================================================
Total from investment operations (3.45) 4.23 7.88 2.64
=================================================================================================================
Less distributions:
Dividends from net investment income -- (0.49) (0.33) (0.06)
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (5.41) (3.93) (0.79)
=================================================================================================================
Total distributions -- (5.90) (4.26) (0.85)
=================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 0.00 0.00 0.00
=================================================================================================================
Net asset value, end of period $ 19.02 $ 22.47 $ 24.14 $20.52
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(b) (15.35)% 17.90% 38.73% 14.19%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $37,644 $42,253 $19,384 $ 972
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.10%(c) 1.08% 1.14% 1.18%(d)
- -----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.11%(c) 1.11% 1.18% 1.21%(d)
=================================================================================================================
Ratio of net investment income to average net assets 2.14%(c) 1.55% 1.33% 0.85%(d)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(e) 10% 40% 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 $40,291,729.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
19 AIM INTERNATIONAL SMALL COMPANY 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 Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI 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 Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI 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, Invesco 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"), Invesco Aim, IADI 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; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws
Employee Retirement Income Security Act of 1974, as amended ("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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
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 Invesco 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 ERISA
purportedly brought on behalf of participants in the Invesco 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. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Court of Appeals reversed the dismissal and remanded this
lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco 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 Invesco Aim, IADI or the Fund.
20 AIM INTERNATIONAL SMALL COMPANY FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments or
contingent deferred sales charges on redemptions, and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and/or service
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with ongoing costs of investing in other mutual funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) on purchase payments, contingent deferred sales charges on
redemptions, and redemption fees, if any. Therefore, the hypothetical
information is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $845.00 $ 7.04 $1,017.30 $ 7.70 1.53%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 841.50 10.47 1,013.56 11.45 2.28
- ---------------------------------------------------------------------------------------------------
C 1,000.00 841.50 10.47 1,013.56 11.45 2.28
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 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 renewal process, the Trustees receive from one another and attributed
AIM Funds Group is required under the comparative performance and fee data different weight to the various factors.
Investment Company Act of 1940 to approve regarding the AIM Funds prepared by an The Trustees recognized that the advisory
annually the renewal of the AIM independent company, Lipper, Inc. arrangements and resulting advisory fees
International Small Company Fund (the (Lipper), under the direction and for the Fund and the other AIM Funds are
Fund) investment advisory agreement with supervision of the independent Senior the result of years of review and
Invesco Aim Advisors, Inc. (Invesco Aim). Officer who also prepares a separate negotiation between the Trustees and
During contract renewal meetings held on analysis of this information for the Invesco Aim, that the Trustees may focus
June 18-19, 2008, the Board as a whole and Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of
the disinterested or "independent" recommendations to the Investments these arrangements in some years than in
Trustees, voting separately, approved the Committee regarding the performance, fees others, and that the Trustees'
continuance of the Fund's investment and expenses of their assigned funds. The deliberations and conclusions in a
advisory agreement for another year, Investments Committee considers each particular year may be based in part on
effective July 1, 2008. In doing so, the Sub-Committee's recommendations and makes their deliberations and conclusions of
Board determined that the Fund's its own recommendations regarding the these same arrangements throughout the
investment advisory agreement is in the performance, fees and expenses of the AIM year and in prior years.
best interests of the Fund and its Funds to the full Board. The Investments
shareholders and that the compensation to Committee also considers each Sub- FACTORS AND CONCLUSIONS AND SUMMARY
Invesco Aim under the Fund's investment Committee's recommendations in making its OF INDEPENDENT WRITTEN FEE EVALUATION
advisory agreement is fair and annual recommendation to the Board whether
reasonable. to approve the continuance of each AIM The discussion below serves as a
Fund's investment advisory agreement and summary of the Senior Officer's
The independent Trustees met sub-advisory agreements for another year. independent written evaluation with
separately during their evaluation of the respect to the Fund's investment advisory
Fund's investment advisory agreement with The independent Trustees are assisted agreement as well as a discussion of the
independent legal counsel from whom they in their annual evaluation of the Fund's material factors and related conclusions
received independent legal advice, and the investment advisory agreement by the that formed the basis for the Board's
independent Trustees also received independent Senior Officer. One approval of the Fund's investment
assistance during their deliberations responsibility of the Senior Officer is to advisory agreement and sub-advisory
from the independent Senior Officer, a manage the process by which the AIM Funds' agreements. Unless otherwise stated,
full-time officer of the AIM Funds who proposed management fees are negotiated information set forth below is as of June
reports directly to the independent during the annual contract renewal process 19, 2008 and does not reflect any changes
Trustees. to ensure that they are negotiated in a that may have occurred since that date,
manner that is at arms' length and including but not limited to changes to
THE BOARD'S FUND EVALUATION PROCESS reasonable. Accordingly, the Senior the Fund's performance, advisory fees,
Officer must either supervise a expense limitations and/or fee waivers.
The Board's Investments Committee has competitive bidding process or prepare an
established three Sub-Committees that are independent written evaluation. The Senior I. Investment Advisory Agreement
responsible for overseeing the management Officer has recommended that an
of a number of the series portfolios of independent written evaluation be provided A. Nature, Extent and Quality of
the AIM Funds. This Sub-Committee and, at the direction of the Board, has Services Provided by Invesco Aim
structure permits the Trustees to focus on prepared an independent written
the performance of the AIM Funds that have evaluation. The Board reviewed the advisory
been assigned to them. The Sub-Committees services provided to the Fund by Invesco
meet throughout the year to review the During the annual contract renewal Aim under the Fund's investment advisory
performance of their assigned funds, and process, the Board considered the factors agreement, the performance of Invesco Aim
the Sub-Committees review monthly and discussed below under the heading "Factors in providing these services, and the
quarterly comparative performance and Conclusions and Summary of Independent credentials and experience of the officers
information and periodic asset flow data Written Fee Evaluation" in evaluating the and employees of Invesco Aim who provide
for their assigned funds. These materials fairness and reasonableness of the Fund's these services. The Board's review of the
are prepared under the direction and investment advisory agreement and sub- qualifications of Invesco Aim to provide
supervision of the independent Senior advisory agreements at the contract these services included the Board's
Officer. Over the course of each year, the renewal meetings and at their meetings consideration of Invesco Aim's portfolio
Sub-Committees meet with portfolio throughout the year as part of their and product review process, various back
managers for their assigned funds and ongoing oversight of the Fund. The Fund's office support functions provided by
other members of management and review investment advisory agreement and sub- Invesco Aim, and Invesco Aim's equity and
with these individuals the performance, advisory agreements were considered fixed income trading operations. The
investment objective(s), policies, separately, although the Board also Board concluded that the nature, extent
strategies and limitations of these funds. considered the common interests of all of and quality of the advisory services
the AIM Funds in their deliberations. provided to the Fund by Invesco Aim were
In addition to their meetings The Board considered all of the appropriate and that Invesco Aim currently
throughout the year, the Sub-Committees information provided to them and did not is providing satisfactory advisory
meet at designated contract renewal identify any particular factor that was services in accordance with the terms of
meetings each year to conduct an in-depth controlling. Each Trustee may have the Fund's investment advisory agreement.
review of the performance, fees and evaluated the information provided In addition, based on their ongoing
expenses of their assigned funds. During differently meetings throughout the year with the
the contract Fund's portfolio manager or managers,
continued
22 AIM INTERNATIONAL SMALL COMPANY FUND
the Board concluded that these reviewed more recent Fund performance Invesco Aim concerning the costs of the
individuals are competent and able to and this review did not change their advisory and other services that Invesco
continue to carry out their conclusions. Aim and its affiliates provide to the Fund
responsibilities under the Fund's and the profitability of Invesco Aim and
investment advisory agreement. C. Advisory Fees and Fee Waivers its affiliates in providing these
services. The Board also reviewed
In determining whether to continue The Board compared the Fund's information concerning the financial
the Fund's investment advisory agreement, contractual advisory fee rate to the condition of Invesco Aim and its
the Board considered the prior contractual advisory fee rates of funds in affiliates. The Board also reviewed with
relationship between Invesco Aim and the the Fund's expense group that are not Invesco Aim the methodology used to
Fund, as well as the Board's knowledge of managed by Invesco Aim, at a common asset prepare the profitability information. The
Invesco Aim's operations, and concluded level and as of the end of the past Board considered the overall profitability
that it was beneficial to maintain the calendar year. The Board noted that the of Invesco Aim, as well as the
current relationship, in part, because of Fund's contractual advisory fee rate was profitability of Invesco Aim in connection
such knowledge. The Board also considered below the median contractual advisory fee with managing the Fund. The Board noted
the steps that Invesco Aim and its rate of funds in its expense group. The that Invesco Aim continues to operate at a
affiliates have taken over the last Board also reviewed the methodology used net profit, although increased expenses in
several years to improve the quality and by Lipper in determining contractual fee recent years have reduced the
efficiency of the services they provide to rates. The Board noted that Invesco Aim profitability of Invesco Aim and its
the AIM Funds in the areas of investment does not serve as an advisor to other affiliates. The Board concluded that the
performance, product line diversification, mutual funds or other clients with Fund's fees were fair and reasonable, and
distribution, fund operations, shareholder investment strategies comparable to those that the level of profits realized by
services and compliance. The Board of the Fund. Invesco Aim and its affiliates from
concluded that the quality and efficiency providing services to the Fund was not
of the services Invesco Aim and its The Board concluded that it was not excessive in light of the nature, quality
affiliates provide to the AIM Funds in necessary at this time to discuss with and extent of the services provided. The
each of these areas have generally Invesco Aim whether to implement any fee Board considered whether Invesco Aim is
improved, and support the Board's approval waivers or expense limitations because the financially sound and has the resources
of the continuance of the Fund's Fund's total expenses were below the necessary to perform its obligations under
investment advisory agreement. median total expenses of the funds in the the Fund's investment advisory agreement,
Fund's Lipper expense group that are not and concluded that Invesco Aim has the
B. Fund Performance managed by Invesco Aim. financial resources necessary to fulfill
these obligations.
The Board compared the Fund's After taking account of the Fund's
performance during the past one, three contractual advisory fee rate, as well as F. Independent Written Evaluation of
and five calendar years to the performance the comparative advisory fee information the Fund's Senior Officer
of funds in the Fund's performance that discussed above, the Board concluded that
are not managed by Invesco Aim, and the Fund's advisory fees were fair and The Board noted that, at their
against the performance of all funds in reasonable. direction, the Senior Officer of the Fund,
the Lipper International Small/Mid-Cap who is independent of Invesco Aim and
Growth Funds Index. The Board also D. Economies of Scale and Breakpoints Invesco Aim's affiliates, had prepared an
reviewed the criteria used by Invesco Aim independent written evaluation to assist
to identify the funds in the Fund's The Board considered the extent to the Board in determining the
performance group for inclusion in the which there are economies of scale in reasonableness of the proposed management
Lipper reports. The Board noted that the Invesco Aim's provision of advisory fees of the AIM Funds, including the Fund.
Fund's performance was in the third services to the Fund. The Board also The Board noted that they had relied upon
quintile of its performance group for the considered whether the Fund benefits from the Senior Officer's written evaluation
one year period, the second quintile for such economies of scale through instead of a competitive bidding process.
the three year period, and the first contractual breakpoints in the Fund's In determining whether to continue the
quintile for the five year period (the advisory fee schedule or through advisory Fund's investment advisory agreement, the
first quintile being the best performing fee waivers or expense limitations. The Board considered the Senior Officer's
funds and the fifth quintile being the Board noted that the Fund's contractual written evaluation.
worst performing funds.). The Board noted advisory fee schedule includes seven
that the Fund's performance was above the breakpoints and that the level of the G. Collateral Benefits to Invesco Aim
performance of the Index for the one, Fund's advisory fees, as a percentage of and its Affiliates
three and five year periods. The Board the Fund's net assets, has decreased as
also considered the steps Invesco Aim has net assets increased because of the The Board considered various other
taken over the last several years to breakpoints. Based on this information, benefits received by Invesco Aim and its
improve the quality and efficiency of the the Board concluded that the Fund's affiliates resulting from Invesco Aim's
services that Invesco Aim provides to the advisory fees appropriately reflect relationship with the Fund, including the
AIM Funds. The Board concluded that economies of scale at current assets. The fees received by Invesco Aim and its
Invesco Aim continues to be responsive to Board also noted that the Fund shares affiliates for their provision of
the Board's focus on fund performance. directly in economies of scale through administrative, transfer agency and
Although the independent written lower fees charged by third party service distribution services to the Fund. The
evaluation of the Fund's Senior Officer providers based on the combined size of Board considered the performance of
only considered Fund performance through all of the AIM Funds and affiliates. Invesco Aim and its affiliates in
the most recent calendar year, the Board providing these services and the
also E. Profitability and Financial organizational structure employed by
Resources Of Invesco Aim
The Board reviewed information from
continued
23 AIM INTERNATIONAL SMALL COMPANY FUND
Invesco Aim and its affiliates to in the best interests of the Fund and The Board noted that the sub-advisory
provide these services. The Board also its shareholders. fees have no direct effect on the Fund
considered that these services are or its shareholders, as they are paid by
provided to the Fund pursuant to written II. Sub-Advisory Agreements Invesco Aim to the Affiliated
contracts which are reviewed and approved Sub-Advisers, and that Invesco Aim and the
on an annual basis by the Board. The Board A. Nature, Extent and Quality of Affiliated Sub-Advisers are affiliates.
concluded that Invesco Aim and its Services Provided by Affiliated After taking account of the Fund's
affiliates were providing these services Sub-Advisers contractual sub-advisory fee rate, as well
in a satisfactory manner and in as other relevant factors, the Board
accordance with the terms of their The Board reviewed the services to be concluded that the Fund's sub-advisory
contracts, and were qualified to continue provided by Invesco Trimark Ltd., Invesco fees were fair and reasonable.
to provide these services to the Fund. Asset Management Deutschland, GmbH,
Invesco Asset Management Limited, D. Financial Resources of the
The Board considered the benefits Invesco Asset Management (Japan) Limited, Affiliated Sub-advisers
realized by Invesco Aim as a result of Invesco Australia Limited, Invesco Global
portfolio brokerage transactions executed Asset Management (N.A.), Inc., Invesco The Board considered whether each
through "soft dollar" arrangements. Under Hong Kong Limited, Invesco Institutional Affiliated Sub-Adviser is financially
these arrangements, portfolio brokerage (N.A.), Inc. and Invesco Senior Secured sound and has the resources necessary to
commissions paid by the Fund and/or Management, Inc. (collectively, the perform its obligations under its
other funds advised by Invesco Aim are "Affiliated Sub-Advisers") under the respective sub-advisory agreement, and
used to pay for research and execution sub-advisory agreements and the creden- concluded that each Affiliated Sub-Adviser
services. The Board noted that soft dollar tials and experience of the officers and has the financial resources necessary to
arrangements shift the payment obligation employees of the Affiliated Sub-Advisers fulfill these obligations.
for the research and execution services who will provide these services. The Board
from Invesco Aim to the funds and concluded that the nature, extent and
therefore may reduce Invesco Aim's quality of the services to be provided by
expenses. The Board also noted that the Affiliated Sub-Advisers were
research obtained through soft dollar appropriate. The Board noted that the
arrangements may be used by Invesco Aim in Affiliated Sub-Advisers, which have
making investment decisions for the Fund offices and personnel that are
and may therefore benefit Fund geographically dispersed in financial
shareholders. The Board concluded that centers around the world, have been formed
Invesco Aim's soft dollar arrangements in part for the purpose of researching and
were appropriate. The Board also concluded compiling information and making
that, based on their review and recommendations on the markets and
representations made by Invesco Aim, these economies of various countries and
arrangements were consistent with securities of companies located in such
regulatory requirements. countries or on various types of
investments and investment techniques, and
The Board considered the fact that the providing investment advisory services.
Fund's uninvested cash and cash collateral The Board concluded that the sub-advisory
from any securities lending arrangements agreements will benefit the Fund and its
may be invested in money market funds shareholders by permitting Invesco Aim
advised by Invesco Aim pursuant to to utilize the additional resources and
procedures approved by the Board. The talent of the Affiliated Sub-Advisers in
Board noted that Invesco Aim will receive managing the Fund.
advisory fees from these affiliated money
market funds attributable to such B. Fund Performance
investments, although Invesco Aim has
contractually agreed to waive through at The Board did not view Fund performance
least June 30, 2009, the advisory fees as a relevant factor in considering
payable by the Fund in an amount equal to whether to approve the sub-advisory
100% of the net advisory fees Invesco Aim agreements for the Fund, as no Affiliated
receives from the affiliated money market Sub-Adviser currently manages any portion
funds with respect to the Fund's of the Fund's assets.
investment of uninvested cash, but not
cash collateral. The Board considered the C. Sub-Advisory Fees
contractual nature of this fee waiver and
noted that it remains in effect until at The Board considered the services to be
least June 30, 2009. The Board concluded provided by the Affiliated Sub-Advisers
that the Fund's investment of uninvested pursuant to the sub-advisory agreements
cash and cash collateral from any and the services to be provided by Invesco
securities lending arrangements in the Aim pursuant to the Fund's investment
affiliated money market funds is advisory agreement, as well as the
allocation of fees between Invesco Aim and
the Affiliated Sub-Advisers pursuant to
the sub-advisory agreements.
24 AIM INTERNATIONAL SMALL COMPANY FUND
Supplement to Semiannual Report dated 6/30/08
AIM INTERNATIONAL SMALL COMPANY FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS A redemption fee of 2% will be imposed
on certain redemptions or exchanges out of
The following information has been For periods ended 6/30/08 the Fund within 30 days of purchase.
prepared to provide Institutional Class Inception 15.19% Exceptions to the redemption fee are
shareholders with a performance overview 5 Years 28.51 listed in the Fund's prospectus.
specific to their holdings. Institutional 1 Year -16.61
Class shares are offered exclusively to 6 Months* -15.32 Had the advisor not waived fees and/or
institutional investors, including defined reimbursed expenses in the past,
contribution plans that meet certain * Cumulative total return that has not performance would have been lower.
criteria. been annualized
========================================== Please note that past performance is
not indicative of future results. More
Institutional Class shares' inception date recent returns may be more or less than
is October 25, 2005. Returns since that those shown. All returns assume
date are historical returns. All other reinvestment of distributions at NAV.
returns are blended returns of historical Investment return and principal value will
Institutional Class share performance and fluctuate so your shares, when redeemed,
restated Class A share performance (for may be worth more or less than their
periods prior to the inception date of original cost. See full report for
Institutional Class shares) at net asset information on comparative benchmarks.
value (NAV) and reflect the Rule 12b-1 Please consult your Fund prospectus for
fees applicable to Class A shares. Class A more information. For the most current
shares' inception date is August 31, 2000. month-end performance, please call 800 451
4246 or visit invescoaim.com.
Institutional Class shares have no
sales charge; therefore, performance is at (1) Total annual operating expenses less
NAV. Performance of Institutional Class any contractual fee waivers and/or
shares will differ from performance of expense reimbursements by the advisor
other share classes primarily due to in effect through at least June 30,
differing sales charges and class 2009. See current prospectus for more
expenses. information.
The net annual Fund operating expense
ratio set forth in the most recent Fund
prospectus as of the date of this
supplement for Institutional Class shares
was 1.09%.(1) The total annual Fund
operating expense ratio set forth in the
most recent Fund prospectus as of the date
of this supplement for Institutional Class
shares was 1.10%. The expense ratios
presented above may vary from the expense
ratios presented in other sections of the
actual report that are based on expenses
incurred during the period covered by the
report.
Over for information on your Fund's expenses.
THIS SUPPLEMENT 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. [INVESCO AIM LOGO]
- SERVICE MARK -
invescoaim.com ISC-INS-2 Invesco Aim Distributors, Inc.
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management fees
and other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with ongoing costs of investing in other mutual funds. The example is based on
an investment of $1,000 invested at the beginning of the period and held for the
entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the hypothetical information is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $846.80 $5.06 $1,019.45 $5.54 1.10%
- ---------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
AIM INTERNATIONAL SMALL COMPANY FUND
PROXY RESULTS
A Special Meeting ("Meeting") of Shareholders of AIM International Small Company
Fund, an investment portfolio of AIM Funds Group, a Delaware statutory trust
("Trust"), was held on February 29, 2008. The Meeting was held for the following
purposes:
(1) Elect 13 trustees to the Board of Trustees of the Trust, each of whom will
serve until his or her successor is elected and qualified.
(2) Approve an amendment to the Trust's Agreement and Declaration of Trust that
would permit the Board of Trustees of the Trust to terminate the Trust, the
Fund, and each other series portfolio of the Trust, or a share class without
a shareholder vote.
(3) Approve a new sub-advisory agreement between Invesco Aim Advisors, Inc. and
each of AIM Funds Management, Inc.; Invesco Asset Management Deutschland,
GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco Global Asset Management (N.A.),
Inc.; Invesco Hong Kong Limited; Invesco Institutional (N.A.), Inc.; and
Invesco Senior Secured Management, Inc.
The results of the voting on the above matters were as follows:
<Table>
<Caption>
WITHHELD/
MATTERS VOTES FOR ABSTENTIONS**
- -----------------------------------------------------------------------------------------------------------
(1)* Bob R. Baker...................................................... 136,849,147 4,123,920
Frank S. Bayley................................................... 136,856,960 4,116,107
James T. Bunch.................................................... 136,850,068 4,122,999
Bruce L. Crockett................................................. 136,834,285 4,138,782
Albert R. Dowden.................................................. 136,851,266 4,121,801
Jack M. Fields.................................................... 136,893,917 4,079,150
Martin L. Flanagan................................................ 136,889,028 4,084,039
Carl Frischling................................................... 136,837,466 4,135,601
Prema Mathai-Davis................................................ 136,840,379 4,132,688
Lewis F. Pennock.................................................. 136,853,427 4,119,640
Larry Soll, Ph.D. ................................................ 136,708,623 4,264,444
Raymond Stickel, Jr. ............................................. 136,747,468 4,225,599
Philip A. Taylor.................................................. 136,731,527 4,241,540
</Table>
<Table>
<Caption>
WITHHELD/ BROKER
VOTES FOR VOTES AGAINST ABSTENTIONS NON-VOTES
- ---------------------------------------------------------------------------------------------------------------------------
(2)* Approve an amendment to the Trust's Agreement
and Declaration of Trust that would permit the
Board of Trustees of the Trust to terminate
the Trust, the Fund, and each other series
portfolio of the Trust, or a share class
without a shareholder vote.................... 89,092,876 12,597,596 4,024,351 35,258,244
</Table>
<Table>
<Caption>
WITHHELD/ BROKER
VOTES FOR VOTES AGAINST ABSTENTIONS NON-VOTES
- --------------------------------------------------------------------------------------------------------------------------
(3) Approve a new sub-advisory agreement between
Invesco Aim Advisors, Inc. and each of AIM
Funds Management, Inc.; Invesco Asset
Management Deutschland, GmbH; Invesco Asset
Management Limited; Invesco Asset Management
(Japan) Limited; Invesco Australia Limited;
Invesco Global Asset Management (N.A.), Inc.;
Invesco Hong Kong Limited; Invesco
Institutional (N.A.), Inc.; and Invesco Senior
Secured Management, Inc. ..................... 13,619,817 462,164 406,911 4,714,691
</Table>
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Funds Group.
** Includes Broker Non-Votes.
25 AIM INTERNATIONAL SMALL COMPANY FUND
====================================================================================================================================
EDELIVERY
INVESCOAIM.COM/EDELIVERY
REGISTER FOR EDELIVERY - eDelivery is the process of receiving your fund and account information via e-mail. Once your quarterly
statements, tax forms, fund reports, and prospectuses are available, we will send you an e-mail notification containing links to
these documents. For security purposes, you will need to log in to your account to view your statements and tax forms.
WHY SIGN UP? HOW DO I SIGN UP?
Register for eDelivery to: It's easy. Just follow these simple steps:
- - save your Fund the cost of printing and postage. 1. Log in to your account.
- - reduce the amount of paper you receive. 2. Click on the "Service Center" tab.
- - gain access to your documents faster by not waiting for the mail. 3. Select "Register for eDelivery" and complete the consent
- - view your documents online anytime at your convenience. process.
- - save the documents to your personal computer or print them out
for your records.
This Service is provided by Invesco Aim Investment Services, Inc.
====================================================================================================================================
FUND HOLDINGS AND PROXY VOTING INFORMATION
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth
quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund
files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your
Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC
Web site at sec.gov. Copies of the 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 Reference Room, including information about duplicating fee charges, by
calling 202 942 8090 or 800 732 0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file
numbers for the Fund are 811-01540 and 002-27334.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities
is available without charge, upon request, from our Client Services department at 800 959 4246 or on the Invesco Aim Web site,
invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is
available at our Web site. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting
Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC Web site, sec.gov.
If used after October 20, 2008, this report must be accompanied by a Fund fact sheet or Invesco Aim
Quarterly Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of
Invesco Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Aim Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors [INVESCO AIM LOGO]
for the products and services represented by Invesco Aim; they each provide investment advisory services to - SERVICE MARK -
individual and institutional clients and do not sell securities. Invesco Institutional (N.A.), Inc., Invesco
Senior Secured Management, Inc., Invesco Global Asset Management (N.A.), Inc., Invesco Trimark Ltd., Invesco
Asset Management (Japan) Ltd. and Invesco Hong Kong Ltd. are affiliated investment advisors that serve as the
subadvisor for some of the products and services represented by Invesco Aim. Invesco Aim Distributors, Inc. is
the distributor for the retail mutual funds, exchange-traded funds and U.S. institutional money market funds
represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd.
invescoaim.com ISC-SAR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM MID CAP BASIC VALUE FUND
- - SERVICE MARK - Semiannual Report to Shareholders - June 30, 2008
[MOUNTAIN GRAPHIC]
AIM Investments 2 Fund Performance
became INVESCO AIM 3 Letter to Shareholders
on March 31, 2008. 4 Schedule of Investments
6 Financial Statements
For more details, go to 9 Notes to Financial Statements
invescoaim.com 15 Financial Highlights
19 Fund Expenses
20 Approval of Investment Advisory Agreement
23 Results of Proxy
For the most current month-end Fund performance and commentary, please visit
invescoaim.com.
Unless otherwise noted, all data provided by Invesco Aim.
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
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY MUM SALES CHARGE UNLESS OTHERWISE STATED.
PERFORMANCE FIGURES DO NOT REFLECT
FUND VS. INDEXES DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY
ON FUND DISTRIBUTIONS OR SALE OF FUND
Cumulative total returns, 12/31/07 to 6/30/08, at net asset value (NAV). Performance SHARES. INVESTMENT RETURN AND PRINCIPAL
shown does not include applicable contingent deferred sales charges (CDSC) or front-end VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE
sales charges, which would have reduced performance. A GAIN OR LOSS WHEN YOU SELL SHARES.
Class A Shares -21.87% THE TOTAL ANNUAL FUND OPERATING EXPENSE
Class B Shares -22.15 RATIO SET FORTH IN THE MOST RECENT FUND
Class C Shares -22.09 PROSPECTUS AS OF THE DATE OF THIS REPORT
Class R Shares -21.89 FOR CLASS A, CLASS B, CLASS C AND CLASS R
S&P 500 Index(triangle) (Broad Market Index) -11.90 SHARES WAS 1.43%, 2.18%, 2.18% AND 1.68%,
Russell Midcap Value Index(triangle) (Style-Specific Index) -8.58 RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
Lipper Mid-Cap Value Funds Index(triangle) (Peer Group Index) -7.62 ABOVE MAY VARY FROM THE EXPENSE RATIOS
PRESENTED IN OTHER SECTIONS OF THIS REPORT
(triangle)Lipper Inc. THAT ARE BASED ON EXPENSES INCURRED DURING
THE PERIOD COVERED BY THIS REPORT.
The S&P 500--REGISTERED TRADEMARK--INDEX is a market capitalization-weighted index
covering all major areas of the U.S. economy. It is not the 500 largest companies, CLASS A SHARE PERFORMANCE REFLECTS THE
but rather the most widely held 500 companies chosen with respect to market size, MAXIMUM 5.50% SALES CHARGE, AND CLASS B
liquidity, and their industry. AND CLASS C SHARE PERFORMANCE REFLECTS THE
APPLICABLE CONTINGENT DEFERRED SALES
The RUSSELL MIDCAP--REGISTERED TRADEMARK--VALUE INDEX measures the performance of CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
those Russell Midcap companies with lower price-to-book ratios and lower forecasted CDSC ON CLASS B SHARES DECLINES FROM 5%
growth values. The Russell Midcap Value Index is a trademark/service mark of the Frank BEGINNING AT THE TIME OF PURCHASE TO 0%
Russell Company. Russell--REGISTERED TRADEMARK--is a trademark of the Frank Russell AT THE BEGINNING OF THE SEVENTH YEAR.
Company. THE CDSC ON CLASS C SHARES IS 1% FOR THE
FIRST YEAR AFTER PURCHASE. CLASS R SHARES
The LIPPER MID-CAP VALUE FUNDS INDEX is an equally weighted representation of the DO NOT HAVE A FRONT-END SALES CHARGE;
largest funds in the Lipper Mid-Cap Value Funds category. These funds have a below- RETURNS SHOWN ARE AT NET ASSET VALUE AND
average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share DO NOT REFLECT A 0.75% CDSC THAT MAY BE
growth value, compared to the S&P MidCap 400 Index. IMPOSED ON A TOTAL REDEMPTION OF
RETIREMENT PLAN ASSETS WITHIN THE FIRST
The Fund is not managed to track the performance of any particular index, including YEAR.
the indexes defined here, and consequently, the performance of the Fund may deviate
significantly from the performance of the indexes. THE PERFORMANCE OF THE FUND'S SHARE
CLASSES WILL DIFFER PRIMARILY DUE TO
A direct investment cannot be made in an index. Unless otherwise indicated, index DIFFERENT SALES CHARGE STRUCTURES AND
results include reinvested dividends, and they do not reflect sales charges. CLASS EXPENSES.
Performance of an index of funds reflects fund expenses; performance of a market index
does not.
=======================================================================================
==========================================
AVERAGE ANNUAL TOTAL RETURNS CLASS R SHARES' INCEPTION DATE IS APRIL
30, 2004. RETURNS SINCE THAT DATE ARE
As of 6/30/08, including HISTORICAL RETURNS. ALL OTHER RETURNS ARE
maximum applicable sales charges BLENDED RETURNS OF HISTORICAL CLASS R
SHARE PERFORMANCE AND RESTATED CLASS A
CLASS A SHARES SHARE PERFORMANCE (FOR PERIODS PRIOR TO
Inception (12/31/01) 3.72% THE INCEPTION DATE OF CLASS R SHARES) AT
5 Years 6.05 NET ASSET VALUE, ADJUSTED TO REFLECT THE
1 Year -30.57 HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS
R SHARES. CLASS A SHARES' INCEPTION DATE
CLASS B SHARES IS DECEMBER 31, 2001.
Inception (12/31/01) 3.90%
5 Years 6.18 THE PERFORMANCE DATA QUOTED REPRESENT
1 Year -30.37 PAST PERFORMANCE AND CANNOT GUARANTEE
COMPARABLE FUTURE RESULTS; CURRENT
CLASS C SHARES PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE
Inception (12/31/01) 3.90% VISIT INVESCOAIM.COM FOR THE MOST RECENT
5 Years 6.50 MONTH-END PERFORMANCE. PERFORMANCE
1 Year -27.68 FIGURES REFLECT REINVESTED DISTRIBUTIONS,
CHANGES IN NET ASSET VALUE AND THE EFFECT
CLASS R SHARES OF THE MAXI-
Inception 4.44%
5 Years 7.06
1 Year -26.64
==========================================
2 AIM MID CAP BASIC VALUE FUND
Dear Fellow Shareholders:
As I write this letter in July 2008, turbulent financial markets are causing
considerable investor anxiety, reminding us again that markets are cyclical and the
[CROCKETT PHOTO] correction of excess is often painful, at least in the short- term. Your Board of
Trustees believes in the wisdom of a long-term perspective and consistent investment
discipline. We continue to put your interests first in the effort to improve investment
performance, contain shareholder costs and uphold the highest ethical standards.
We remain enthusiastic about the global reach and investment expertise that Invesco,
a leading independent global investment management company, brings to the management of
Bruce Crockett AIM Funds as the parent company of the advisors. The diverse investment strategies
deployed throughout the worldwide network of Invesco investment centers has helped
strengthen the management of many AIM Funds. The rebranding of the Funds' management
company as Invesco Aim was followed by the launch of an upgraded, investor-friendly Web
site (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize
stability, endurance, strength and longevity; and a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads
will appear in financial publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim
Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click
on "Investment Advisory Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes
in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the
movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be
interested to hear your thoughts on this policy.
As always, you are welcome to e-mail your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been
established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund
annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured
that your comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
August 11, 2008
3 AIM MID CAP BASIC VALUE FUND
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2008
<Table>
- -------------------------------------------------------------------------
Consumer Discretionary 24.3%
- -------------------------------------------------------------------------
Information Technology 21.0
- -------------------------------------------------------------------------
Financials 19.9
- -------------------------------------------------------------------------
Health Care 18.8
- -------------------------------------------------------------------------
Industrials 8.3
- -------------------------------------------------------------------------
Consumer Staples 5.5
- -------------------------------------------------------------------------
Materials 1.0
- -------------------------------------------------------------------------
Money Market Funds Plus Other Assets Less Liabilities 1.2
_________________________________________________________________________
=========================================================================
</Table>
SCHEDULE OF INVESTMENTS(a)
June 30, 2008
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.83%
ADVERTISING-3.75%
Interpublic Group of Cos., Inc. (The)(b) 782,801 $ 6,732,089
===============================================================================
APPAREL RETAIL-2.85%
Men's Wearhouse, Inc. (The)(c) 314,255 5,119,214
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-2.69%
Liz Claiborne, Inc.(c) 341,624 4,833,980
===============================================================================
BREWERS-3.48%
Molson Coors Brewing Co.-Class B 115,086 6,252,622
===============================================================================
COMMUNICATIONS EQUIPMENT-2.97%
Plantronics, Inc. 239,396 5,343,319
===============================================================================
COMPUTER HARDWARE-3.45%
Dell Inc.(b) 283,112 6,194,490
===============================================================================
CONSTRUCTION & ENGINEERING-4.06%
Shaw Group Inc. (The)(b) 118,206 7,303,949
===============================================================================
CONSUMER FINANCE-1.41%
AmeriCredit Corp.(b)(c) 294,864 2,541,728
===============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.50%
DST Systems, Inc.(b)(c) 81,723 4,498,851
===============================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES-1.17%
ChoicePoint Inc.(b) 43,449 2,094,242
===============================================================================
EDUCATION SERVICES-3.01%
Apollo Group Inc.-Class A(b) 122,148 5,406,270
===============================================================================
HEALTH CARE DISTRIBUTORS-5.49%
Cardinal Health, Inc. 103,994 5,364,011
- -------------------------------------------------------------------------------
McKesson Corp. 80,562 4,504,221
===============================================================================
9,868,232
===============================================================================
HEALTH CARE EQUIPMENT-3.56%
Advanced Medical Optics, Inc.(b)(c) 121,945 2,285,249
- -------------------------------------------------------------------------------
Symmetry Medical Inc.(b) 253,818 4,116,928
===============================================================================
6,402,177
===============================================================================
HOME FURNISHINGS-2.12%
Tempur-Pedic International Inc.(c) 487,505 3,807,414
===============================================================================
HOUSEHOLD APPLIANCES-2.33%
Whirlpool Corp.(c) 67,743 4,181,775
===============================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-3.11%
Robert Half International, Inc. 233,451 5,595,820
===============================================================================
INSURANCE BROKERS-4.19%
Marsh & McLennan Cos., Inc. 187,199 4,970,133
- -------------------------------------------------------------------------------
National Financial Partners Corp.(c) 128,814 2,553,094
===============================================================================
7,523,227
===============================================================================
INVESTMENT BANKING & BROKERAGE-1.71%
FBR Capital Markets Corp.(b)(c) 609,493 3,065,750
===============================================================================
LEISURE PRODUCTS-2.35%
Brunswick Corp.(c) 397,911 4,217,857
===============================================================================
LIFE SCIENCES TOOLS & SERVICES-3.28%
Waters Corp.(b) 91,350 5,892,075
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
4 AIM MID CAP BASIC VALUE FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
MANAGED HEALTH CARE-6.48%
Aetna Inc. 97,116 $ 3,936,112
- -------------------------------------------------------------------------------
Coventry Health Care, Inc.(b) 159,708 4,858,317
- -------------------------------------------------------------------------------
UnitedHealth Group Inc. 108,592 2,850,540
===============================================================================
11,644,969
===============================================================================
PACKAGED FOODS & MEATS-2.07%
Cadbury PLC-ADR (United Kingdom) 73,964 3,721,844
===============================================================================
PAPER PACKAGING-0.98%
Smurfit-Stone Container Corp.(b)(c) 432,019 1,758,317
===============================================================================
PROPERTY & CASUALTY INSURANCE-1.65%
Security Capital Assurance Ltd.(b)(c)(d) 258,339 74,918
- -------------------------------------------------------------------------------
XL Capital Ltd.-Class A 140,246 2,883,458
===============================================================================
2,958,376
===============================================================================
PUBLISHING-5.23%
McGraw-Hill Cos., Inc. (The) 103,400 4,148,408
- -------------------------------------------------------------------------------
Valassis Communications, Inc.(b)(c) 419,855 5,256,585
===============================================================================
9,404,993
===============================================================================
REGIONAL BANKS-3.75%
Popular, Inc.(c) 461,580 3,041,812
- -------------------------------------------------------------------------------
Zions Bancorp.(c) 117,145 3,688,896
===============================================================================
6,730,708
===============================================================================
SEMICONDUCTOR EQUIPMENT-8.16%
ASML Holding N.V. (Netherlands)(e) 215,563 5,250,065
- -------------------------------------------------------------------------------
Brooks Automation, Inc.(b) 159,921 1,322,547
- -------------------------------------------------------------------------------
KLA-Tencor Corp. 198,747 8,090,990
===============================================================================
14,663,602
===============================================================================
SEMICONDUCTORS-3.88%
Maxim Integrated Products, Inc. 329,938 6,978,189
===============================================================================
SPECIALIZED FINANCE-4.57%
CIT Group, Inc.(c) 196,552 1,338,519
- -------------------------------------------------------------------------------
Moody's Corp.(c) 199,849 6,882,800
===============================================================================
8,221,319
===============================================================================
THRIFTS & MORTGAGE FINANCE-2.58%
Fannie Mae 79,100 1,543,241
- -------------------------------------------------------------------------------
Freddie Mac 188,723 3,095,057
===============================================================================
4,638,298
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $221,264,367) 177,595,696
===============================================================================
MONEY MARKET FUNDS-1.75%
Liquid Assets Portfolio-Institutional Class(f) 1,571,850 1,571,850
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(f) 1,571,850 1,571,850
===============================================================================
Total Money Market Funds (Cost $3,143,700) 3,143,700
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-100.58% (Cost $224,408,067) 180,739,396
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-20.63%
Liquid Assets Portfolio-Institutional Class (Cost
$37,074,591)(f)(g) 37,074,591 37,074,591
===============================================================================
TOTAL INVESTMENTS-121.21% (Cost $261,482,658) 217,813,987
===============================================================================
OTHER ASSETS LESS LIABILITIES-(21.21)% (38,114,027)
===============================================================================
NET ASSETS-100.00% $179,699,960
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) All or a portion of this security was out on loan at June 30, 2008.
(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, 2008 represented 0.04% of the Fund's Net Assets. See Note 1A.
(e) In accordance with the procedures established by the Board of Trustees,
the foreign security is fair valued using adjusted closing market prices.
The value of this security at June 30, 2008 represented 2.92% of the
Fund's Net Assets. See Note 1A.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor.
(g) 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 1I.
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, 2008
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost
$221,264,367)* $177,595,696
- ------------------------------------------------------
Investments in affiliated money market
funds (Cost $40,218,291) 40,218,291
======================================================
Total investments (Cost
$261,482,658) 217,813,987
======================================================
Receivables for:
Fund shares sold 154,367
- ------------------------------------------------------
Dividends 141,545
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 19,260
- ------------------------------------------------------
Other assets 30,100
======================================================
Total assets 218,159,259
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 538,650
- ------------------------------------------------------
Fund shares reacquired 608,216
- ------------------------------------------------------
Collateral upon return of securities
loaned 37,074,591
- ------------------------------------------------------
Accrued fees to affiliates 127,582
- ------------------------------------------------------
Accrued other operating expenses 75,777
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 34,483
======================================================
Total liabilities 38,459,299
======================================================
Net assets applicable to shares
outstanding $179,699,960
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $187,127,327
- ------------------------------------------------------
Undistributed net investment income 176,652
- ------------------------------------------------------
Undistributed net realized gain 36,064,652
- ------------------------------------------------------
Unrealized appreciation (depreciation) (43,668,671)
======================================================
$179,699,960
______________________________________________________
======================================================
NET ASSETS:
Class A $ 86,324,358
______________________________________________________
======================================================
Class B $ 25,499,096
______________________________________________________
======================================================
Class C $ 15,389,247
______________________________________________________
======================================================
Class R $ 1,605,246
______________________________________________________
======================================================
Institutional Class $ 50,882,013
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 8,079,531
______________________________________________________
======================================================
Class B 2,509,081
______________________________________________________
======================================================
Class C 1,515,159
______________________________________________________
======================================================
Class R 151,496
______________________________________________________
======================================================
Institutional Class 4,655,981
______________________________________________________
======================================================
Class A:
Net asset value per share $ 10.68
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $10.68 divided
by 94.50%) $ 11.30
______________________________________________________
======================================================
Class B:
Net asset value and offering price
per share $ 10.16
______________________________________________________
======================================================
Class C:
Net asset value and offering price
per share $ 10.16
______________________________________________________
======================================================
Class R:
Net asset value and offering price
per share $ 10.60
______________________________________________________
======================================================
Institutional Class:
Net asset value and offering price
per share $ 10.93
______________________________________________________
======================================================
</Table>
* At June 30, 2008, securities with an aggregate value of $34,700,786 were on
loan to brokers.
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, 2008
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $10,464) $ 1,478,517
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $142,409) 266,420
================================================================================================
Total investment income 1,744,937
================================================================================================
EXPENSES:
Advisory fees 810,918
- ------------------------------------------------------------------------------------------------
Administrative services fees 44,926
- ------------------------------------------------------------------------------------------------
Custodian fees 6,995
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 128,796
- ------------------------------------------------------------------------------------------------
Class B 169,266
- ------------------------------------------------------------------------------------------------
Class C 99,036
- ------------------------------------------------------------------------------------------------
Class R 3,090
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 280,806
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 299
- ------------------------------------------------------------------------------------------------
Trustees' and officer's fees and benefits 11,191
- ------------------------------------------------------------------------------------------------
Other 113,057
================================================================================================
Total expenses 1,668,380
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (15,689)
================================================================================================
Net expenses 1,652,691
================================================================================================
Net investment income 92,246
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from:
Investment securities 23,379,801
================================================================================================
Foreign currencies 4,065
================================================================================================
23,383,866
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (75,952,020)
================================================================================================
Foreign currencies (11)
================================================================================================
(75,952,031)
================================================================================================
Net realized and unrealized gain (loss) (52,568,165)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(52,475,919)
________________________________________________________________________________________________
================================================================================================
</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, 2008 and the year ended December 31, 2007
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2008 2007
- ------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 92,246 $ 1,213,784
- ------------------------------------------------------------------------------------------------------
Net realized gain 23,383,866 32,018,457
- ------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (75,952,031) (11,242,671)
======================================================================================================
Net increase (decrease) in net assets resulting from operations (52,475,919) 21,989,570
======================================================================================================
Distributions to shareholders from net investment income:
Class A -- (465,258)
- ------------------------------------------------------------------------------------------------------
Class R -- (2,312)
- ------------------------------------------------------------------------------------------------------
Institutional Class -- (634,499)
======================================================================================================
Total distributions from net investment income -- (1,102,069)
======================================================================================================
Distributions to shareholders from net realized gains:
Class A -- (10,506,012)
- ------------------------------------------------------------------------------------------------------
Class B -- (4,087,313)
- ------------------------------------------------------------------------------------------------------
Class C -- (2,383,619)
- ------------------------------------------------------------------------------------------------------
Class R -- (92,324)
- ------------------------------------------------------------------------------------------------------
Institutional Class -- (5,850,220)
======================================================================================================
Total distributions from net realized gains -- (22,919,488)
======================================================================================================
Share transactions-net:
Class A (3,974,237) 2,313,585
- ------------------------------------------------------------------------------------------------------
Class B (8,303,737) (10,356,322)
- ------------------------------------------------------------------------------------------------------
Class C (4,681,413) (1,352,665)
- ------------------------------------------------------------------------------------------------------
Class R 921,271 652,416
- ------------------------------------------------------------------------------------------------------
Institutional Class (1,089,737) 23,538,871
======================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (17,127,853) 14,795,885
======================================================================================================
Net increase (decrease) in net assets (69,603,772) 12,763,898
______________________________________________________________________________________________________
======================================================================================================
NET ASSETS:
Beginning of period 249,303,732 236,539,834
- ------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of
$176,652 and $84,406, respectively) $179,699,960 $249,303,732
______________________________________________________________________________________________________
======================================================================================================
</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, 2008
(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 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. 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 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, American
Depositary Receipts 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 the issuer's 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.
9 AIM MID CAP BASIC VALUE FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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, the investment
advisor 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.
The Fund files tax returns in the U.S. Federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 by the securities lending provider. Such
collateral will be cash or debt securities issued or guaranteed by the
U.S. Government or any of its sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Dividends received on cash collateral
investments for securities lending transactions, which are net of
compensation to counterparties, is included in Dividends from affiliates
on the Statement of Operations. The aggregate value of securities out on
loan is shown as a footnote on the Statement of Assets and Liabilities.
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
10 AIM MID CAP BASIC VALUE FUND
(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.
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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
based on the annual rate of the Fund's average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.745%
- -------------------------------------------------------------------
Next $250 million 0.73%
- -------------------------------------------------------------------
Next $500 million 0.715%
- -------------------------------------------------------------------
Next $1.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.685%
- -------------------------------------------------------------------
Next $2.5 billion 0.67%
- -------------------------------------------------------------------
Next $2.5 billion 0.655%
- -------------------------------------------------------------------
Over $10 billion 0.64%
___________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund on February 29, 2008, effective May 1, 2008, between the Advisor and
each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management
Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited,
Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco
Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco
Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the
Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-
Advisor(s) that provide discretionary investment management services to the Fund
based on the percentage of assets allocated to such Sub-Advisor(s).
The Advisor has contractually agreed, through at least June 30, 2009, to waive
the advisory fee payable by the Fund in an amount equal to 100% of the net
advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (but not cash collateral from
securities lending) in such affiliated money market funds.
For the six months ended June 30, 2008, the Advisor waived advisory fees of
$5,455.
At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") 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, 2008, Invesco reimbursed expenses of the Fund in the
amount of $630.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain
administrative costs incurred in providing accounting services to the Fund. For
the six months ended June 30, 2008, 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
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. IAIS may make payments to intermediaries that
provide omnibus account services, sub-accounting services and/or networking
services. All fees payable by IAIS 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, 2008, 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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI 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. Rules of the Financial Industry
Regulatory Authority ("FINRA") impose a cap on the total sales charges,
including asset-based sales
11 AIM MID CAP BASIC VALUE FUND
charges that may be paid by any class of shares of the Fund. For the six months
ended June 30, 2008, 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, 2008, IADI advised the Fund that IADI retained $17,682 in
front-end sales commissions from the sale of Class A shares and $752, $18,006,
$2,403 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 establishes a hierarchy that prioritizes the
inputs to valuation methods giving the highest priority to readily available
unadjusted quoted prices in an active market for identical assets (level 1) and
the lowest priority to unobservable inputs (level 3) market prices are not
readily available or are unreliable. Based on the inputs the securities or other
instruments are tiered into three levels of hierarchy under SFAS 157. Changes in
valuation methods may result in transfers in or out of an investment's assigned
level within the hierarchy,
Level 1 -- Quoted prices in an active market for identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered input levels, as of the end of the reporting
period, June 30, 2008. The inputs or methods used for valuing securities may not
be an indication of the risk associated with investing in those securities.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $212,563,922
- --------------------------------------
Level 2 5,250,065
- --------------------------------------
Level 3 --
======================================
$217,813,987
______________________________________
======================================
</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, 2008, the Fund
engaged in securities purchases of $2,184,735.
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, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $9,604.
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, 2008, the Fund paid legal fees of $1,795
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.
12 AIM MID CAP BASIC VALUE FUND
NOTE 7--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company ("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 Invesco Aim, not to exceed the contractually agreed upon rate.
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, 2007.
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, 2008 was $87,319,428 and
$102,369,040, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 19,177,664
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (64,182,364)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(45,004,700)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $262,818,687.
</Table>
13 AIM MID CAP BASIC VALUE FUND
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,053,983 $ 13,178,783 2,160,406 $ 32,888,783
- ------------------------------------------------------------------------------------------------------------------------
Class B 169,542 1,995,555 482,044 6,979,030
- ------------------------------------------------------------------------------------------------------------------------
Class C 130,034 1,526,173 454,282 6,524,442
- ------------------------------------------------------------------------------------------------------------------------
Class R 97,891 1,193,600 47,353 721,142
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 439,955 5,601,971 1,564,505 23,793,276
========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 774,788 10,537,114
- ------------------------------------------------------------------------------------------------------------------------
Class B -- -- 298,586 3,878,626
- ------------------------------------------------------------------------------------------------------------------------
Class C -- -- 170,194 2,209,130
- ------------------------------------------------------------------------------------------------------------------------
Class R -- -- 7,010 94,634
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 467,873 6,484,715
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 310,446 3,815,822 387,795 5,834,239
- ------------------------------------------------------------------------------------------------------------------------
Class B (325,769) (3,815,822) (404,613) (5,834,239)
========================================================================================================================
Reacquired:
Class A (1,711,874) (20,968,842) (3,118,165) (46,946,551)
- ------------------------------------------------------------------------------------------------------------------------
Class B (553,475) (6,483,470) (1,064,161) (15,379,739)
- ------------------------------------------------------------------------------------------------------------------------
Class C (527,620) (6,207,586) (700,064) (10,086,237)
- ------------------------------------------------------------------------------------------------------------------------
Class R (22,649) (272,329) (10,758) (163,360)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class (526,070) (6,691,708) (417,049) (6,739,120)
========================================================================================================================
(1,465,606) $(17,127,853) 1,100,026 $ 14,795,885
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There is an entity that is a record owner of more than 5% of the
outstanding shares of the Fund that owns 6% of the outstanding shares of
the Fund. IADI has an agreement with this entity to sell Fund shares. The
Fund, Invesco Aim and/or Invesco Aim affiliates may make payments to this
entity, which is considered to be related to the Fund, for providing
services to the Fund, Invesco Aim and/or Invesco 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 is owned beneficially.
In addition, 26% 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 Invesco Aim.
14 AIM MID CAP BASIC VALUE 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, -----------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.67 $ 13.83 $ 14.48 $ 13.12 $ 11.28 $ 8.23
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01(a) 0.09 (0.04)(a) (0.07) (0.10)(a) (0.08)
- ----------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (3.00) 1.19 1.25 1.43 1.93 3.13
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase from payments by affiliates -- -- -- -- 0.01 --
==================================================================================================================================
Total from investment operations (2.99) 1.28 1.21 1.36 1.84 3.05
==================================================================================================================================
Less distributions:
Dividends from net investment income -- (0.06) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (1.38) (1.86) -- -- --
==================================================================================================================================
Total distributions -- (1.44) (1.86) -- -- --
==================================================================================================================================
Net asset value, end of period $ 10.68 $ 13.67 $ 13.83 $ 14.48 $ 13.12 $ 11.28
__________________________________________________________________________________________________________________________________
==================================================================================================================================
Total return(b) (21.87)% 9.30% 8.47% 10.37% 16.31%(c) 37.06%
__________________________________________________________________________________________________________________________________
==================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $86,324 $115,198 $113,672 $127,775 $115,164 $55,372
__________________________________________________________________________________________________________________________________
==================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.51%(d) 1.43% 1.52% 1.51% 1.67% 1.80%
- ----------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.52%(d) 1.46% 1.58% 1.57% 1.69% 1.92%
==================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.10%(d) 0.55% (0.30)% (0.51)% (0.85)% (1.00)%
__________________________________________________________________________________________________________________________________
==================================================================================================================================
Portfolio turnover rate(e) 41% 44% 46% 29% 34% 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. Does not include sales charges 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 a trading error. Total return before reimbursement by
the advisor was 16.22%.
(d) Ratios are annualized and based on average daily net assets of
$103,602,974.
(e) 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, -------------------------------------------------------
2008 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.05 $ 13.30 $ 14.10 $ 12.87 $ 11.14 $ 8.18
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.03) (0.15)(a) (0.16) (0.18)(a) (0.13)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (2.85) 1.16 1.21 1.39 1.90 3.09
- --------------------------------------------------------------------------------------------------------------------------------
Net increase from payments by affiliates -- -- -- -- 0.01 --
================================================================================================================================
Total from investment operations (2.89) 1.13 1.06 1.23 1.73 2.96
================================================================================================================================
Less distributions from net realized gains -- (1.38) (1.86) -- -- --
================================================================================================================================
Net asset value, end of period $ 10.16 $ 13.05 $ 13.30 $ 14.10 $ 12.87 $ 11.14
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (22.15)% 8.53% 7.63% 9.56% 15.53%(c) 36.19%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $25,499 $42,012 $51,970 $69,594 $63,374 $38,165
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.26%(d) 2.18% 2.27% 2.21% 2.32% 2.45%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.27%(d) 2.21% 2.33% 2.27% 2.34% 2.57%
================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.65)%(d) (0.20)% (1.05)% (1.21)% (1.50)% (1.65)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate(e) 41% 44% 46% 29% 34% 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. Does not include sales charges 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 a trading error. Total return before reimbursement by
the advisor was 15.44%.
(d) Ratios are annualized and based on average daily net assets of $34,039,244.
(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 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------
2008 2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.04 $ 13.30 $ 14.09 $ 12.86 $ 11.13 $ 8.18
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.03) (0.15)(a) (0.16) (0.18)(a) (0.12)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (2.84) 1.15 1.22 1.39 1.90 3.07
- --------------------------------------------------------------------------------------------------------------------------------
Net increase from payments by affiliates -- -- -- -- 0.01 --
================================================================================================================================
Total from investment operations (2.88) 1.12 1.07 1.23 1.73 2.95
================================================================================================================================
Less distributions from net realized gains -- (1.38) (1.86) -- -- --
================================================================================================================================
Net asset value, end of period $ 10.16 $ 13.04 $ 13.30 $ 14.09 $ 12.86 $ 11.13
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (22.09)% 8.45% 7.70% 9.56% 15.54%(c) 36.06%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $15,389 $24,950 $26,435 $29,946 $27,601 $13,422
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.26%(d) 2.18% 2.27% 2.21% 2.32% 2.45%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.27%(d) 2.21% 2.33% 2.27% 2.34% 2.57%
================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.65)%(d) (0.20)% (1.05)% (1.21)% (1.50)% (1.65)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate(e) 41% 44% 46% 29% 34% 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. Does not include sales charges 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 a trading error. Total return before reimbursement by
the advisor was 15.45%.
(d) Ratios are annualized and based on average daily net assets of $19,916,076.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS R
-------------------------------------------------------------------------
APRIL 30, 2004
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE)
JUNE 30, ---------------------------- TO DECEMBER 31,
2008 2007 2006 2005 2004
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.57 $13.75 $14.44 $13.11 $11.88
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) 0.03 (0.08)(a) (0.05) (0.08)(a)
- -------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.96) 1.20 1.25 1.38 1.30
- -------------------------------------------------------------------------------------------------------------------------
Net increase from payments by affiliates -- -- -- -- 0.01
=========================================================================================================================
Total from investment operations (2.97) 1.23 1.17 1.33 1.23
=========================================================================================================================
Less distributions:
Dividends from net investment income -- (0.03) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (1.38) (1.86) -- --
=========================================================================================================================
Total distributions -- (1.41) (1.86) -- --
=========================================================================================================================
Net asset value, end of period $ 10.60 $13.57 $13.75 $14.44 $13.11
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) (21.89)% 9.01% 8.22% 10.15% 10.35%(c)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,605 $1,035 $ 449 $ 175 $ 33
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.76%(d) 1.68% 1.77% 1.71% 1.78%(e)
- -------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.77%(d) 1.71% 1.83% 1.77% 1.80%(e)
=========================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.15)%(d) 0.30% (0.55)% (0.71)% (0.96)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 41% 44% 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 a trading error. Total return before reimbursement by
the advisor was 10.27%.
(d) Ratios are annualized and based on average daily net assets of $1,242,910.
(e) Annualized.
(f) 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 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------------------
APRIL 30, 2004
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, (COMMENCEMENT DATE)
JUNE 30, ------------------------------- TO DECEMBER 31,
2008 2007 2006 2005 2004
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.94 $ 14.08 $ 14.62 $ 13.17 $11.88
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a) 0.16 0.05(a) 0.01 (0.02)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (3.05) 1.23 1.27 1.44 1.30
- ----------------------------------------------------------------------------------------------------------------------------
Net increase from payments by affiliates -- -- -- -- 0.01
============================================================================================================================
Total from investment operations (3.01) 1.39 1.32 1.45 1.29
============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.15) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (1.38) (1.86) -- --
============================================================================================================================
Total distributions -- (1.53) (1.86) -- --
============================================================================================================================
Net asset value, end of period $ 10.93 $ 13.94 $ 14.08 $ 14.62 $13.17
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) (21.59)% 9.91% 9.15% 11.01% 10.86%(c)
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $50,882 $66,109 $44,013 $25,174 $7,530
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 0.90%(d) 0.87% 0.92% 0.92% 1.03%(e)
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 0.91%(d) 0.90% 0.98% 0.98% 1.05%(e)
============================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.71%(d) 1.11% 0.30% (0.08)% (0.21)%(e)
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(f) 41% 44% 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 a trading error. Total return before reimbursement by
the advisor was 10.77%.
(d) Ratios are annualized and based on average daily net assets of $60,090,990.
(e) Annualized.
(f) 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 Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI 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 Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI 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, Invesco 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"), Invesco Aim, IADI 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; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws
Employee Retirement Income Security Act of 1974, as amended ("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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
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 Invesco 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 ERISA
purportedly brought on behalf of participants in the Invesco 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
17 AIM MID CAP BASIC VALUE FUND
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
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. Plaintiff appealed this ruling. On June 16, 2008, the Fourth
Court of Appeals reversed the dismissal and remanded this lawsuit back to the
MDL Court for further proceedings.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco 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 Invesco Aim, IADI or the Fund.
18 AIM MID CAP BASIC VALUE FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments or
contingent deferred sales charges on redemptions, and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and/or service
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with ongoing costs of investing in other mutual funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) on purchase payments, contingent deferred sales charges on
redemptions, and redemption fees, if any. Therefore, the hypothetical
information is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $781.30 $ 6.69 $1,017.35 $ 7.57 1.51%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 778.50 9.99 1,013.63 11.31 2.26
- ---------------------------------------------------------------------------------------------------
C 1,000.00 779.10 10.00 1,013.63 11.31 2.26
- ---------------------------------------------------------------------------------------------------
R 1,000.00 781.10 7.79 1,016.11 8.82 1.76
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
19 AIM MID CAP BASIC VALUE FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of renewal process, the Trustees receive from one another and attributed
AIM Funds Group is required under the comparative performance and fee data different weight to the various factors.
Investment Company Act of 1940 to regarding the AIM Funds prepared by an The Trustees recognized that the advisory
approve annually the renewal of the AIM independent company, Lipper, Inc. arrangements and resulting advisory fees
Mid Cap Basic Value Fund (the Fund) (Lipper), under the direction and for the Fund and the other AIM Funds are
investment advisory agreement with Invesco supervision of the independent Senior the result of years of review and
Aim Advisors, Inc. (Invesco Aim). During Officer who also prepares a separate negotiation between the Trustees and
contract renewal meetings held on June analysis of this information for the Invesco Aim, that the Trustees may focus
18-19, 2008, the Board as a whole and the Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of
disinterested or "independent" Trustees, recommendations to the Investments these arrangements in some years than in
voting separately, approved the Committee regarding the performance, fees others, and that the Trustees'
continuance of the Fund's investment and expenses of their assigned funds. The deliberations and conclusions in a
advisory agreement for another year, Investments Committee considers each particular year may be based in part on
effective July 1, 2008. In doing so, the Sub-Committee's recommendations and makes their deliberations and conclusions of
Board determined that the Fund's its own recommendations regarding the these same arrangements throughout the
investment advisory agreement is in the performance, fees and expenses of the AIM year and in prior years.
best interests of the Fund and its Funds to the full Board. The Investments
shareholders and that the compensation to Committee also considers each Sub- FACTORS AND CONCLUSIONS AND SUMMARY OF
Invesco Aim under the Fund's investment Committee's recommendations in making its INDEPENDENT WRITTEN FEE EVALUATION
advisory agreement is fair and reasonable. annual recommendation to the Board whether
to approve the continuance of each AIM The discussion below serves as a
The independent Trustees met separately Fund's investment advisory agreement and summary of the Senior Officer's
during their evaluation of the Fund's sub-advisory agreements for another year. independent written evaluation with
investment advisory agreement with respect to the Fund's investment advisory
independent legal counsel from whom they The independent Trustees are assisted agreement as well as a discussion of the
received independent legal advice, and the in their annual evaluation of the Fund's material factors and related conclusions
independent Trustees also received investment advisory agreement by the that formed the basis for the Board's
assistance during their deliberations from independent Senior Officer. One approval of the Fund's investment
the independent Senior Officer, a responsibility of the Senior Officer is to advisory agreement and sub-advisory
full-time officer of the AIM Funds who manage the process by which the AIM Funds' agreements. Unless otherwise stated,
reports directly to the independent proposed management fees are negotiated information set forth below is as of June
Trustees. during the annual contract renewal process 19, 2008 and does not reflect any changes
to ensure that they are negotiated in a that may have occurred since that date,
THE BOARD'S FUND EVALUATION PROCESS manner that is at arms' length and including but not limited to changes to
reasonable. Accordingly, the Senior the Fund's performance, advisory fees,
The Board's Investments Committee has Officer must either supervise a expense limitations and/or fee waivers.
established three Sub-Committees that are competitive bidding process or prepare an
responsible for overseeing the manage- independent written evaluation. The Senior I. Investment Advisory Agreement
ment of a number of the series portfolios Officer has recommended that an independ-
of the AIM Funds. This Sub-Committee ent written evaluation be provided and, at A. Nature, Extent and Quality of
structure permits the Trustees to focus on the direction of the Board, has prepared Services Provided by Invesco Aim
the performance of the AIM Funds that have an independent written evaluation.
been assigned to them. The Sub-Com- The Board reviewed the advisory
mittees meet throughout the year to review During the annual contract renewal services provided to the Fund by Invesco
the performance of their assigned funds, process, the Board considered the factors Aim under the Fund's investment advisory
and the Sub-Committees review monthly and discussed below under the heading "Factors agreement, the performance of Invesco Aim
quarterly comparative performance and Conclusions and Summary of Inde- in providing these services, and the
information and periodic asset flow data pendent Written Fee Evaluation" in credentials and experience of the officers
for their assigned funds. These materials evaluating the fairness and and employees of Invesco Aim who provide
are prepared under the direction and reasonableness of the Fund's investment these services. The Board's review of the
supervision of the independent Senior advisory agreement and sub-advisory qualifications of Invesco Aim to provide
Officer. Over the course of each year, the agreements at the contract renewal these services included the Board's
Sub-Committees meet with portfolio meetings and at their meetings throughout consideration of Invesco Aim's portfolio
managers for their assigned funds and the year as part of their ongoing and product review process, various back
other members of management and review oversight of the Fund. The Fund's invest- office support functions provided by
with these individuals the performance, ment advisory agreement and sub-advisory Invesco Aim and its affiliates, and
investment objective(s), policies, agreements were considered separately, Invesco Aim's equity and fixed income
strategies and limitations of these funds. although the Board also considered the trading operations. The Board concluded
common interests of all of the AIM Funds that the nature, extent and quality of the
In addition to their meetings through- in their deliberations. The Board advisory services provided to the Fund by
out the year, the Sub-Committees meet at considered all of the information provided Invesco Aim were appropriate and that
designated contract renewal meetings each to them and did not identify any Invesco Aim currently is providing
year to conduct an in-depth review of the particular factor that was controlling. satisfactory advisory services in
performance, fees and expenses of their Each Trustee may have evaluated the accordance with the terms of the Fund's
assigned funds. During the contract information provided differently investment advisory agreement. In
addition, based on their ongoing meetings
throughout the year with the Fund's
portfolio manager or
continued
20 AIM MID CAP BASIC VALUE FUND
managers, the Board concluded that these Fund performance through the most recent the Fund's advisory fees appropriately
individuals are competent and able to calendar year, the Board also reviewed reflect economies of scale at current
continue to carry out their more recent Fund performance and this asset levels. The Board also noted that
responsibilities under the Fund's review did not change their conclusions. the Fund shares directly in economies of
investment advisory agreement. scale through lower fees charged by third
party service providers based on the
In determining whether to continue the C. Advisory Fees and Fee Waivers combined size of all of the AIM Funds and
Fund's investment advisory agreement, the affiliates.
Board considered the prior relationship The Board compared the Fund's contrac-
between Invesco Aim and the Fund, as well tual advisory fee rate to the contractual E. Profitability and Financial
as the Board's knowledge of Invesco Aim's advisory fee rates of funds in the Fund's Resources of Invesco Aim
operations, and concluded that it was Lipper expense group that are not managed
beneficial to maintain the current by Invesco Aim, at a common asset level The Board reviewed information from
relationship, in part, because of such and as of the end of the past calendar Invesco Aim concerning the costs of the
knowledge. The Board also considered the year. The Board noted that the Fund's advisory and other services that Invesco
steps that Invesco Aim and its affiliates contractual advisory fee rate was below Aim and its affiliates provide to the Fund
have taken over the last several years to the median contractual advisory fee rate and the profitability of Invesco Aim and
improve the quality and efficiency of the of funds in its expense group. The Board its affiliates in providing these
services they provide to the AIM Funds in also reviewed the methodology used by services. The Board also reviewed
the areas of investment performance, Lipper in determining contractual fee information concerning the financial
product line diversification, rates. The Board noted that Invesco Aim condition of Invesco Aim and its
distribution, fund operations, shareholder does not serve as an advisor to other affiliates. The Board also reviewed with
services and compliance. The Board con- mutual funds or other clients with Invesco Aim the methodology used to
cluded that the quality and efficiency of investment strategies comparable to those prepare the profitability information. The
the services Invesco Aim and its of the Fund. Board considered the overall profitability
affiliates provide to the AIM Funds in of Invesco Aim, as well as the
each of these areas have generally The Board noted that Invesco Aim has profitability of Invesco Aim in connection
improved, and support the Board's approval not proposed any advisory fee waivers or with managing the Fund. The Board noted
of the continuance of the Fund's expense limitations for the Fund; however that Invesco Aim continues to operate at a
investment advisory agreement. Invesco Aim informed the Board that it had net profit, although increased expenses in
analyzed the total expenses of the Fund, recent years have reduced the
B. Fund Performance which are impacted by transfer agent fees, profitability of Invesco Aim and its
and determined that the total expenses are affiliates. The Board concluded that the
The Board compared the Fund's perform- currently appropriate. Based upon amend- Fund's fees were fair and reasonable, and
ance during the past one, three and five ments to the Fund's contractual advisory that the level of profits realized by
calendar years to the performance of funds fee schedule in recent years, the Board Invesco Aim and its affiliates from
in the Fund's performance group that are concluded that it was not necessary at providing services to the Fund was not
not managed by Invesco Aim, and against this time to discuss with Invesco Aim excessive in light of the nature, quality
the performance of all funds in the Lipper whether to amend the contractual advisory and extent of the services provided. The
Mid-Cap Value Funds Index. The Board also fee schedule or implement any fee Board considered whether Invesco Aim is
reviewed the criteria used by Invesco Aim waivers or expense limitations for the financially sound and has the resources
to identify the funds in the Fund's Fund. necessary to perform its obligations
performance group for inclusion in the under the Fund's investment advisory
Lipper reports. The Board noted that the After taking account of the Fund's agreement, and concluded that Invesco Aim
Fund's performance was in the first contractual advisory fee rate, as well as has the financial resources necessary to
quintile of its performance group for the the comparative advisory fee information fulfill these obligations.
one year period and in the third quintile discussed above, the Board concluded that
for the three and five year periods (the the Fund's advisory fees were fair and F. Independent Written Evaluation of
first quintile being the best performing reasonable. the Fund's Senior Officer
funds and the fifth quintile being the
worst performing funds). The Board noted D. Economies of Scale and Breakpoints The Board noted that, at their direction,
that the Fund's performance was above the the Senior Officer of the Fund, who is
performance of the Index for the one and The Board considered the extent to which independent of Invesco Aim and Invesco
three year periods, and below the there are economies of scale in Invesco Aim's affiliates, had prepared an
performance of the Index for the five year Aim's provision of advisory services to independent written evaluation to assist
period. The Board also considered the the Fund. The Board also considered the Board in determining the
steps Invesco Aim has taken over the last whether the Fund benefits from such reasonableness of the proposed
several years to improve the quality and economies of scale through contractual management fees of the AIM Funds,
efficiency of the services that Invesco breakpoints in the Fund's advisory fee including the Fund. The Board noted that
Aim provides to the AIM Funds. The Board schedule or through advisory fee waivers they had relied upon the Senior Officer's
concluded that Invesco Aim continues to be or expense limitations. The Board noted written evaluation instead of a
responsive to the Board's focus on fund that the Fund's contractual advisory fee competitive bidding process. In
performance. Although the independent schedule includes seven breakpoints and determining whether to continue the Fund's
written evaluation of the Fund's Senior that the level of the Fund's advisory investment advisory agreement, the Board
Officer only considered fees, as a percentage of the Fund's net considered the Senior Officer's written
assets, has decreased as net assets evaluation.
increased because of the breakpoint. Based
on this information, the Board concluded
that
continued
21 AIM MID CAP BASIC VALUE FUND
G. Collateral Benefits to Invesco Aim to 100% of the net advisory fees Invesco C. Sub-Advisory Fees
and its Affiliates Aim receives from the affiliated money
market funds with respect to the Fund's The Board considered the services to be
The Board considered various other investment of uninvested cash, but not provided by the Affiliated Sub-Advisers
benefits received by Invesco Aim and its cash collateral. The Board considered pursuant to the sub-advisory agreements
affiliates resulting from Invesco Aim's the contractual nature of this fee waiver and the services to be provided by Invesco
relationship with the Fund, including the and noted that it remains in effect until Aim pursuant to the Fund's investment
fees received by Invesco Aim and its at least June 30, 2009. The Board advisory agreement, as well as the
affiliates for their provision of concluded that the Fund's investment of allocation of fees between Invesco Aim and
administrative, transfer agency and uninvested cash and cash collateral from the Affiliated Sub-Advisers pursuant to
distribution services to the Fund. The any securities lending arrangements in the sub-advisory agreements. The Board
Board considered the performance of the affiliated money market funds is in noted that the subadvisory fees have no
Invesco Aim and its affiliates in provid- the best interests of the Fund and its direct effect on the Fund or its
ing these services and the organizational shareholders. shareholders, as they are paid by Invesco
structure employed by Invesco Aim and its Aim to the Affiliated Sub-Advisers, and
affiliates to provide these services. The II. Sub-Advisory Agreements that Invesco Aim and the Affiliated Sub-
Board also considered that these services Advisers are affiliates. After taking
are provided to the Fund pursuant to A. Nature, Extent and Quality of account of the Fund's contractual
written contracts which are reviewed and Services Provided by Affiliated sub-advisory fee rate, as well as other
approved on an annual basis by the Board. Sub-Advisors relevant factors, the Board concluded that
The Board concluded that Invesco Aim and the Fund's sub-advisory fees were fair
its affiliates were providing these The Board reviewed the services to be and reasonable.
services in a satisfactory manner and in provided by Invesco Trimark Ltd., Invesco
accordance with the terms of their Asset Management Deutschland, GmbH, D. Financial Resources of the
contracts, and were qualified to continue Invesco Asset Management Limited, In- Affiliated Sub-Advisers
to provide these services to the Fund. vesco Asset Management (Japan) Limited,
Invesco Australia Limited, Invesco Global The Board considered whether each Affili-
The Board considered the benefits real- Asset Management (N.A.), Inc., Invesco ated Sub-Adviser is financially sound and
ized by Invesco Aim as a result of Hong Kong Limited, Invesco Institutional has the resources necessary to perform its
portfolio brokerage transactions executed (N.A.), Inc. and Invesco Senior Secured obligations under its respective sub-advi-
through "soft dollar" arrangements. Under Management, Inc. (collectively, the sory agreement, and concluded that each
these arrangements, portfolio brokerage "Affiliated Sub-Advisers") under the Affiliated Sub-Adviser has the financial
commissions paid by the Fund and/or sub-advisory agreements and the resources necessary to fulfill these
other funds advised by Invesco Aim are credentials and experience of the obligations.
used to pay for research and execution officers and employees of the Affiliated
services. The Board noted that soft dollar Sub-Advisers who will provide these
arrangements shift the payment obligation services. The Board concluded that the
for the research and execution services nature, extent and quality of the services
from Invesco Aim to the funds and to be provided by the Affiliated
therefore may reduce Invesco Aim's Sub-Advisers were appropriate. The Board
expenses. The Board also noted that noted that the Affiliated Sub-Advisers,
research obtained through soft dollar which have offices and personnel that
arrangements may be used by Invesco Aim in are geographically dispersed in financial
making investment decisions for the Fund centers around the world, have been formed
and may therefore benefit Fund sharehold- in part for the purpose of researching
ers. The Board concluded that Invesco and compiling information and making
Aim's soft dollar arrangements were appro- recommendations on the markets and
priate. The Board also concluded that, economies of various countries and
based on their review and representations securities of companies located in such
made by Invesco Aim, these arrangements countries or on various types of
were consistent with regulatory investments and investment techniques, and
requirements. providing investment advisory services.
The Board concluded that the sub-advisory
The Board considered the fact that the agreements will benefit the Fund and its
Fund's uninvested cash and cash collat- shareholders by permitting Invesco Aim to
eral from any securities lending arrange- utilize the additional resources and
ments may be invested in money market talent of the Affiliated Sub-Advisers in
funds advised by Invesco Aim pursuant to managing the Fund.
procedures approved by the Board. The
Board noted that Invesco Aim will receive B. Fund Performance
advisory fees from these affiliated money
market funds attributable to such invest- The Board did not view Fund performance as
ments, although Invesco Aim has contractu- a relevant factor in considering whether
ally agreed to waive through at least June to approve the sub-advisory agreements for
30, 2009, the advisory fees payable by the the Fund, as no Affiliated Sub-Adviser
Fund in an amount equal currently manages any portion of the
Fund's assets.
22 AIM MID CAP BASIC VALUE FUND
Supplement to Semiannual Report dated 6/30/08
AIM MID CAP BASIC VALUE FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is
not indicative of future results. More
The following information has been For periods ended 6/30/08 recent returns may be more or less than
prepared to provide Institutional Class Inception 5.03% those shown. All returns assume
shareholders with a performance overview 5 Years 7.79 reinvestment of distributions at NAV.
specific to their holdings. Institutional 1 Year -26.06 Investment return and principal value will
Class shares are offered exclusively to 6 Months* -21.59 fluctuate so your shares, when redeemed,
institutional investors, including defined may be worth more or less than their
contribution plans that meet certain * Cumulative total return that has not original cost. See full report for
criteria. been annualized information on comparative benchmarks.
========================================== Please consult your Fund prospectus for
more information. For the most current
Institutional Class shares' inception date month-end performance, please call 800 451
is April 30, 2004. Returns since that date 4246 or visit invescoaim.com.
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 Rule 12b-1
fees applicable to Class A shares. Class A
shares' inception date is December 31,
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
differing sales charges and class
expenses.
The total annual Fund operating expense
ratio set forth in the most recent Fund
prospectus as of the date of this
supplement for Institutional Class shares
was 0.87%. The expense ratios presented
above may vary from the expense ratios
presented in other sections of the actual
report that are based on expenses incurred
during the period covered by the report.
Over for information on your Fund's expenses.
THIS SUPPLEMENT 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. [INVESCO AIM LOGO]
- SERVICE MARK -
invescoaim.com MCBV-INS-2 Invesco Aim Distributors, Inc.
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management fees
and other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with ongoing costs of investing in other mutual funds. The example is based on
an investment of $1,000 invested at the beginning of the period and held for the
entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the hypothetical information is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $784.10 $3.99 $1,020.39 $4.52 0.90%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
AIM MID CAP BASIC VALUE FUND
PROXY RESULTS
A Special Meeting ("Meeting") of Shareholders of AIM Mid Cap Basic Value Fund,
an investment portfolio of AIM Funds Group, a Delaware statutory trust
("Trust"), was held on February 29, 2008. The Meeting was held for the following
purposes:
(1) Elect 13 trustees to the Board of Trustees of the Trust, each of whom will
serve until his or her successor is elected and qualified.
(2) Approve an amendment to the Trust's Agreement and Declaration of Trust that
would permit the Board of Trustees of the Trust to terminate the Trust, the
Fund, and each other series portfolio of the Trust, or a share class without
a shareholder vote.
(3) Approve a new sub-advisory agreement between Invesco Aim Advisors, Inc. and
each of AIM Funds Management, Inc.; Invesco Asset Management Deutschland,
GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco Global Asset Management (N.A.),
Inc.; Invesco Hong Kong Limited; Invesco Institutional (N.A.), Inc.; and
Invesco Senior Secured Management, Inc.
The results of the voting on the above matters were as follows:
<Table>
<Caption>
WITHHELD/
MATTERS VOTES FOR ABSTENTIONS**
- -----------------------------------------------------------------------------------------------------------
(1)* Bob R. Baker..................................................... 136,849,147 4,123,920
Frank S. Bayley.................................................. 136,856,960 4,116,107
James T. Bunch................................................... 136,850,068 4,122,999
Bruce L. Crockett................................................ 136,834,285 4,138,782
Albert R. Dowden................................................. 136,851,266 4,121,801
Jack M. Fields................................................... 136,893,917 4,079,150
Martin L. Flanagan............................................... 136,889,028 4,084,039
Carl Frischling.................................................. 136,837,466 4,135,601
Prema Mathai-Davis............................................... 136,840,379 4,132,688
Lewis F. Pennock................................................. 136,853,427 4,119,640
Larry Soll, Ph.D................................................. 136,708,623 4,264,444
Raymond Stickel, Jr.............................................. 136,747,468 4,225,599
Philip A. Taylor................................................. 136,731,527 4,241,540
</Table>
<Table>
<Caption>
VOTES WITHHELD/ BROKER
VOTES FOR AGAINST ABSTENTIONS NON-VOTES
- ---------------------------------------------------------------------------------------------------------------------------
(2)* Approve an amendment to the Trust's Agreement
and Declaration of Trust that would permit the
Board of Trustees of the Trust to terminate the
Trust, the Fund, and each other series portfolio
of the Trust, or a share class without a
shareholder vote................................ 89,092,876 12,597,596 4,024,351 35,258,244
(3) Approve a new sub-advisory agreement between
Invesco Aim Advisors, Inc. and each of AIM Funds
Management, Inc.; Invesco Asset Management
Deutschland, GmbH; Invesco Asset Management
Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco
Global Asset Management (N.A.), Inc.; Invesco
Hong Kong Limited; Invesco Institutional (N.A.),
Inc.; and Invesco Senior Secured Management,
Inc............................................. 8,149,837 264,691 314,672 2,077,242
</Table>
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Funds Group.
** Includes Broker Non-Votes.
23 AIM MID CAP BASIC VALUE FUND
====================================================================================================================================
EDELIVERY
INVESCOAIM.COM/EDELIVERY
REGISTER FOR EDELIVERY - eDelivery is the process of receiving your fund and account information via e-mail. Once your quarterly
statements, tax forms, fund reports, and prospectuses are available, we will send you an e-mail notification containing links to
these documents. For security purposes, you will need to log in to your account to view your statements and tax forms.
WHY SIGN UP? HOW DO I SIGN UP?
Register for eDelivery to: It's easy. Just follow these simple steps:
- - save your Fund the cost of printing and postage. 1. Log in to your account.
- - reduce the amount of paper you receive. 2. Click on the "Service Center" tab.
- - gain access to your documents faster by not waiting for the mail. 3. Select "Register for eDelivery" and complete the consent
- - view your documents online anytime at your convenience. process.
- - save the documents to your personal computer or print them out
for your records.
This service is provided by Invesco Aim Investment Services, Inc.
====================================================================================================================================
FUND HOLDINGS AND PROXY VOTING INFORMATION
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth
quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund
files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your
Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC
Web site at sec.gov. Copies of the 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 Reference Room, including information about duplicating fee charges, by
calling 202 942 8090 or 800 732 0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file
numbers for the Fund are 811-01540 and 002-27334.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities
is available without charge, upon request, from our Client Services department at 800 959 4246 or on the Invesco Aim Web site,
invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is
available at our Web site. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting
Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC Web site, sec.gov.
If used after October 20, 2008, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly
Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco
Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors for
the products and services represented by Invesco Aim; they each provide investment advisory services to [INVESCO AIM LOGO]
individual and institutional clients and do not sell securities. Invesco Institutional (N.A.), Inc., Invesco - SERVICE MARK -
Senior Secured Management, Inc., Invesco Global Asset Management (N.A.), Inc., Invesco Trimark Ltd., Invesco
Asset Management (Japan) Ltd. and Invesco Hong Kong Ltd. are affiliated investment advisors - SERVICE MARK
- -that serve as the subadvisor for some of the products and services represented by Invesco Aim. Invesco Aim
Distributors, Inc. is the distributor for the retail mutual funds, exchange-traded funds and U.S.
institutional money market funds represented by Invesco Aim. All entities are indirect, wholly owned
subsidiaries of Invesco Ltd.
invescoaim.com MCBV-SAR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM SELECT EQUITY FUND
- SERVICE MARK - Semiannual Report to Shareholders - June 30, 2008
[MOUNTAIN GRAPHIC]
AIM Investments became 2 Fund Performance
INVESCO AIM 3 Letter to Shareholders
on March 31, 2008. 4 Schedule of Investments
7 Financial Statements
10 Notes to Financial Statements
For more details, go to 16 Financial Highlights
invescoaim.com 19 Fund Expenses
20 Approval of Investment Advisory Agreement
23 Results of Proxy
For the most current month-end Fund performance and commentary, please visit
invescoaim.com.
Unless otherwise noted, all data provided by Invesco Aim.
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
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY
FUND VS. INDEXES
Cumulative total returns, 12/31/07 to 6/30/08, at net asset value (NAV). Performance
shown does not include applicable contingent deferred sales charges (CDSC) or front-end
sales charges, which would have reduced performance.
Class A Shares -12.70%
Class B Shares -13.01
Class C Shares -12.98
S&P 500 Index(triangle)(Broad Market Index) -11.90
Russell 3000 Index(triangle) (Style-Specific Index) -11.05
Lipper Multi-Cap Core Funds Index(triangle) (Peer Group Index) -10.28
(triangle)Lipper Inc.
The S&P 500--REGISTERED TRADEMARK-- INDEX is a market capitalization-weighted index
covering all major areas of the U.S. economy. It is not the 500 largest companies, but
rather the most widely held 500 companies chosen with respect to market size,
liquidity, and their industry.
The RUSSELL 3000--REGISTERED TRADEMARK-- INDEX measures the performance of the 3,000
largest U.S. companies based on total market capitalization, which represents approxi-
mately 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 trade-
mark 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.
=======================================================================================
==========================================
AVERAGE ANNUAL TOTAL RETURNS DISTRIBUTIONS, CHANGES IN NET ASSET VALUE CLASS A SHARE PERFORMANCE REFLECTS THE
AND THE EFFECT OF THE MAXIMUM SALES CHARGE MAXIMUM 5.50% SALES CHARGE, AND CLASS B
As of 6/30/08, including UNLESS OTHERWISE STATED. PERFORMANCE AND CLASS C SHARE PERFORMANCE REFLECTS THE
maximum applicable sales FIGURES DO NOT REFLECT DEDUCTION OF TAXES APPLICABLE CONTINGENT DEFERRED SALES
charges A SHAREHOLDER WOULD PAY ON FUND CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
DISTRIBUTIONS OR SALE OF FUND SHARES. CDSC ON CLASS B SHARES DECLINES FROM 5%
CLASS A SHARES INVESTMENT RETURN AND PRINCIPAL VALUE WILL BEGINNING AT THE TIME OF PURCHASE TO 0%
Inception (12/4/67) 7.85% FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR AT THE BEGINNING OF THE SEVENTH YEAR.
10 Years 1.56 LOSS WHEN YOU SELL SHARES. THE CDSC ON CLASS C SHARES IS 1% FOR THE
5 Years 5.46 FIRST YEAR AFTER PURCHASE.
1 Year -22.61 THE NET ANNUAL FUND OPERATING EXPENSE
CLASS B SHARES RATIO SET FORTH IN THE MOST RECENT FUND THE PERFORMANCE OF THE FUND'S SHARE
Inception (9/1/93) 6.02% PROSPECTUS AS OF THE DATE OF THIS REPORT CLASSES WILL DIFFER PRIMARILY DUE TO DIF-
10 Years 1.52 FOR CLASS A, CLASS B AND CLASS C SHARES FERENT SALES CHARGE STRUCTURES AND CLASS
5 Years 5.54 WAS 1.34%, 2.09% AND 2.09%, EXPENSES.
1 Year -22.78 RESPECTIVELY.(1) THE TOTAL ANNUAL FUND OP-
CLASS C SHARES ERATING EXPENSE RATIO SET FORTH IN THE (1) Total annual operating expenses less
Inception (8/4/97) 2.12% MOST RECENT FUND PROSPECTUS AS OF THE DATE any contractual fee waivers and/or
10 Years 1.36 OF THIS REPORT FOR CLASS A, CLASS B AND expense reimbursements by the advisor
5 Years 5.86 CLASS C SHARES WAS 1.35%, 2.10% AND 2.10%, in effect through at least June 30,
1 Year -19.56 RESPECTIVELY. THE EXPENSE RATIOS PRESENTED 2009. See current prospectus for more
========================================== ABOVE MAY VARY FROM THE EXPENSE RATIOS information.
PRESENTED IN OTHER SECTIONS OF THIS REPORT
THE PERFORMANCE DATA QUOTED REPRESENT PAST THAT ARE BASED ON EXPENSES INCURRED DUR-
PERFORMANCE AND CANNOT GUARANTEE ING THE PERIOD COVERED BY THIS REPORT.
COMPARABLE FUTURE RESULTS; CURRENT PER-
FORMANCE MAY BE LOWER OR HIGHER. PLEASE
VISIT INVESCOAIM.COM FOR THE MOST RECENT
MONTH-END PERFORMANCE. PERFORMANCE FIGURES
REFLECT REINVESTED
2 AIM SELECT EQUITY FUND
Dear Fellow Shareholders:
As I write this letter in July 2008, turbulent financial markets are causing
considerable investor anxiety, re- minding us again that markets are cyclical and the
[CROCKETT PHOTO] correction of excess is often painful, at least in the short- term. Your Board of
Trustees believes in the wisdom of a long-term perspective and consistent investment
discipline. We continue to put your interests first in the effort to improve investment
performance, contain shareholder costs and uphold the highest ethical standards.
We remain enthusiastic about the global reach and investment expertise that Invesco,
a leading independent glob- al investment management company, brings to the management
Bruce Crockett of AIM Funds as the parent company of the advisors. The diverse investment strategies
deployed throughout the worldwide network of Invesco investment centers has helped
strengthen the management of many AIM Funds. The rebranding of the Funds' management
company as Invesco Aim was followed by the launch of an upgraded, investor-friendly Web
site (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize
stability, endurance, strength and longevity; and a new ad campaign. Emphasizing
Invesco Aim's focus and investment quality, the ads will appear in financial
publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim
Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click
on "Investment Advisory Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes
in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the
movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be
interested to hear your thoughts on this policy.
As always, you are welcome to e-mail your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been
established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund
annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured
that your comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
- ---------------------------------
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
August 11, 2008
3 AIM SELECT EQUITY FUND
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2008
<Table>
- -------------------------------------------------------------------------
Information Technology 17.8%
- -------------------------------------------------------------------------
Health Care 13.2
- -------------------------------------------------------------------------
Financials 12.7
- -------------------------------------------------------------------------
Energy 12.6
- -------------------------------------------------------------------------
Industrials 10.8
- -------------------------------------------------------------------------
Consumer Discretionary 10.1
- -------------------------------------------------------------------------
Materials 9.6
- -------------------------------------------------------------------------
Consumer Staples 5.9
- -------------------------------------------------------------------------
Utilities 3.7
- -------------------------------------------------------------------------
Telecommunication Services 2.7
- -------------------------------------------------------------------------
Money Market Funds, U.S. Treasury Bills Plus Other Assets Less
Liabilities 0.9
_________________________________________________________________________
=========================================================================
</Table>
SCHEDULE OF INVESTMENTS(a)
June 30, 2008
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.10%
AEROSPACE & DEFENSE-1.26%
Boeing Co. (The) 45,700 $ 3,003,404
- -------------------------------------------------------------------------------
L-3 Communications Holdings, Inc. 8,710 791,478
===============================================================================
3,794,882
===============================================================================
APPAREL RETAIL-4.42%
Aeropostale, Inc.(b) 141,600 4,436,328
- -------------------------------------------------------------------------------
Gap, Inc. (The) 348,600 5,811,162
- -------------------------------------------------------------------------------
TJX Cos., Inc. (The) 97,180 3,058,255
===============================================================================
13,305,745
===============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.99%
State Street Corp. 93,500 5,983,065
===============================================================================
BIOTECHNOLOGY-1.96%
Amgen Inc.(b) 24,000 1,131,840
- -------------------------------------------------------------------------------
Biogen Idec Inc.(b) 85,300 4,767,417
===============================================================================
5,899,257
===============================================================================
COAL & CONSUMABLE FUELS-0.77%
Massey Energy Co. 24,600 2,306,250
===============================================================================
COMMUNICATIONS EQUIPMENT-0.44%
Juniper Networks, Inc.(b) 59,200 1,313,056
===============================================================================
COMPUTER & ELECTRONICS RETAIL-0.31%
GameStop Corp.-Class A(b) 22,800 921,120
===============================================================================
COMPUTER HARDWARE-1.94%
Apple Inc.(b) 14,400 2,411,136
- -------------------------------------------------------------------------------
International Business Machines Corp. 29,100 3,449,223
===============================================================================
5,860,359
===============================================================================
COMPUTER STORAGE & PERIPHERALS-2.52%
QLogic Corp.(b) 298,700 4,358,033
- -------------------------------------------------------------------------------
Western Digital Corp.(b) 94,000 3,245,820
===============================================================================
7,603,853
===============================================================================
CONSTRUCTION & ENGINEERING-0.31%
Foster Wheeler Ltd.(b) 12,700 929,005
===============================================================================
CONSUMER FINANCE-0.17%
Discover Financial Services 39,400 518,898
===============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.21%
Hewitt Associates, Inc.-Class A(b) 44,900 1,721,017
- -------------------------------------------------------------------------------
MasterCard, Inc.-Class A 18,550 4,925,396
===============================================================================
6,646,413
===============================================================================
DIVERSIFIED BANKS-0.08%
Wells Fargo & Co. 10,300 244,625
===============================================================================
DIVERSIFIED CHEMICALS-0.30%
Dow Chemical Co. (The) 26,000 907,660
===============================================================================
EDUCATION SERVICES-1.62%
Apollo Group Inc.-Class A(b) 110,000 4,868,600
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
4 AIM SELECT EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
ELECTRICAL COMPONENTS & EQUIPMENT-2.56%
First Solar, Inc.(b) 17,520 $ 4,779,806
- -------------------------------------------------------------------------------
GrafTech International Ltd.(b) 109,900 2,948,617
===============================================================================
7,728,423
===============================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-5.96%
CF Industries Holdings, Inc. 37,600 5,745,280
- -------------------------------------------------------------------------------
Mosaic Co. (The)(b) 42,500 6,149,750
- -------------------------------------------------------------------------------
Terra Industries Inc. 122,800 6,060,180
===============================================================================
17,955,210
===============================================================================
GAS UTILITIES-1.27%
Energen Corp. 49,000 3,823,470
===============================================================================
GENERAL MERCHANDISE STORES-1.36%
Big Lots, Inc.(b) 130,700 4,083,068
===============================================================================
HEALTH CARE DISTRIBUTORS-0.11%
PharMerica Corp.(b) 15,300 345,627
===============================================================================
HEALTH CARE SERVICES-3.20%
Express Scripts, Inc.(b) 72,200 4,528,384
- -------------------------------------------------------------------------------
Medco Health Solutions, Inc.(b) 108,500 5,121,200
===============================================================================
9,649,584
===============================================================================
HOUSEHOLD PRODUCTS-4.00%
Colgate-Palmolive Co. 53,200 3,676,120
- -------------------------------------------------------------------------------
Procter & Gamble Co. (The) 137,900 8,385,699
===============================================================================
12,061,819
===============================================================================
HOUSEWARES & SPECIALTIES-0.76%
American Greetings Corp.-Class A 184,440 2,275,990
===============================================================================
HYPERMARKETS & SUPER CENTERS-0.15%
Wal-Mart Stores, Inc. 7,900 443,980
===============================================================================
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS-1.26%
Mirant Corp.(b) 97,100 3,801,465
===============================================================================
INDUSTRIAL CONGLOMERATES-6.79%
3M Co. 76,900 5,351,471
- -------------------------------------------------------------------------------
General Electric Co. 270,500 7,219,645
- -------------------------------------------------------------------------------
McDermott International, Inc.(b) 14,400 891,216
- -------------------------------------------------------------------------------
Walter Industries, Inc. 64,300 6,993,911
===============================================================================
20,456,243
===============================================================================
INTEGRATED OIL & GAS-11.83%
Chevron Corp. 107,100 10,616,823
- -------------------------------------------------------------------------------
ConocoPhillips 82,600 7,796,614
- -------------------------------------------------------------------------------
Exxon Mobil Corp. 180,700 15,925,091
- -------------------------------------------------------------------------------
Occidental Petroleum Corp. 14,400 1,293,984
===============================================================================
35,632,512
===============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.24%
Verizon Communications Inc. 190,700 6,750,780
===============================================================================
INTERNET RETAIL-1.39%
Amazon.com, Inc.(b) 13,700 1,004,621
- -------------------------------------------------------------------------------
Priceline.com Inc.(b) 27,600 3,186,696
===============================================================================
4,191,317
===============================================================================
INTERNET SOFTWARE & SERVICES-2.94%
eBay Inc.(b) 175,300 4,790,949
- -------------------------------------------------------------------------------
Sohu.com Inc.(b) 57,800 4,071,432
===============================================================================
8,862,381
===============================================================================
LEISURE PRODUCTS-0.26%
Polaris Industries Inc. 19,500 787,410
===============================================================================
LIFE & HEALTH INSURANCE-1.70%
Aflac, Inc. 81,800 5,137,040
===============================================================================
MANAGED HEALTH CARE-1.14%
Aetna Inc. 43,300 1,754,949
- -------------------------------------------------------------------------------
CIGNA Corp. 47,200 1,670,408
===============================================================================
3,425,357
===============================================================================
METAL & GLASS CONTAINERS-1.28%
Owens-Illinois, Inc.(b) 92,400 3,852,156
===============================================================================
MULTI-UTILITIES-1.18%
Dominion Resources, Inc. 75,100 3,566,499
===============================================================================
PHARMACEUTICALS-6.74%
Lilly (Eli) and Co. 33,600 1,550,976
- -------------------------------------------------------------------------------
Merck & Co. Inc. 180,400 6,799,276
- -------------------------------------------------------------------------------
Perrigo Co. 120,600 3,831,462
- -------------------------------------------------------------------------------
Pfizer Inc. 465,100 8,125,297
===============================================================================
20,307,011
===============================================================================
PROPERTY & CASUALTY INSURANCE-4.77%
ACE Ltd. 85,000 4,682,650
- -------------------------------------------------------------------------------
Aspen Insurance Holdings Ltd. (Bermuda) 215,820 5,108,459
- -------------------------------------------------------------------------------
Axis Capital Holdings Ltd. 63,400 1,889,954
- -------------------------------------------------------------------------------
Chubb Corp. (The) 34,900 1,710,449
- -------------------------------------------------------------------------------
CNA Financial Corp. 28,200 709,230
- -------------------------------------------------------------------------------
Travelers Cos., Inc. (The) 6,400 277,760
===============================================================================
14,378,502
===============================================================================
REGIONAL BANKS-0.34%
BOK Financial Corp. 19,300 1,031,585
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
5 AIM SELECT EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
REINSURANCE-2.44%
Endurance Specialty Holdings Ltd. 20,390 $ 627,808
- -------------------------------------------------------------------------------
Odyssey Re Holdings Corp. 6,300 223,650
- -------------------------------------------------------------------------------
Platinum Underwriters Holdings, Ltd. (Bermuda) 136,700 4,457,787
- -------------------------------------------------------------------------------
RenaissanceRe Holdings Ltd. 46,000 2,054,820
===============================================================================
7,364,065
===============================================================================
SEMICONDUCTOR EQUIPMENT-0.71%
Amkor Technology, Inc.(b) 205,000 2,134,050
===============================================================================
SEMICONDUCTORS-1.88%
National Semiconductor Corp. 15,196 312,126
- -------------------------------------------------------------------------------
Texas Instruments Inc. 190,300 5,358,848
===============================================================================
5,670,974
===============================================================================
SOFT DRINKS-0.67%
Coca-Cola Co. (The) 32,330 1,680,513
- -------------------------------------------------------------------------------
Dr. Pepper Snapple Group, Inc.(b) 16,600 348,268
===============================================================================
2,028,781
===============================================================================
SPECIALIZED REIT'S-1.00%
Public Storage 32,700 2,641,833
- -------------------------------------------------------------------------------
Senior Housing Properties Trust 12,000 234,360
- -------------------------------------------------------------------------------
Ventas, Inc. 3,400 144,738
===============================================================================
3,020,931
===============================================================================
STEEL-2.06%
AK Steel Holding Corp. 78,700 5,430,300
- -------------------------------------------------------------------------------
Schnitzer Steel Industries, Inc.-Class A 6,800 779,280
===============================================================================
6,209,580
===============================================================================
SYSTEMS SOFTWARE-5.14%
Microsoft Corp. 386,240 10,625,462
- -------------------------------------------------------------------------------
Symantec Corp.(b) 250,800 4,852,980
===============================================================================
15,478,442
===============================================================================
THRIFTS & MORTGAGE FINANCE-0.21%
Fannie Mae 20,500 399,955
- -------------------------------------------------------------------------------
Freddie Mac 13,900 227,960
===============================================================================
627,915
===============================================================================
TOBACCO-1.03%
Altria Group, Inc. 44,200 908,752
- -------------------------------------------------------------------------------
Philip Morris International Inc. 44,200 2,183,038
===============================================================================
3,091,790
===============================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.43%
USA Mobility, Inc.(b) 170,800 1,289,540
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $305,998,223) 298,566,285
===============================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-0.18%
1.85%, 09/18/08 (Cost $547,767)(c)(d)(e) $ 550,000 547,855
===============================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-0.91%
Liquid Assets Portfolio-Institutional Class(f) 1,370,695 1,370,695
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(f) 1,370,695 1,370,695
===============================================================================
Total Money Market Funds (Cost $2,741,390) 2,741,390
===============================================================================
TOTAL INVESTMENTS-100.19% (Cost $309,287,380) 301,855,530
===============================================================================
OTHER ASSETS LESS LIABILITIES-(0.19)% (578,273)
===============================================================================
NET ASSETS-100.00% $301,277,257
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(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 value of this security at June 30, 2008
represented 0.18% of the Fund's Net Assets. See Note 1A.
(d) Security traded on a discount basis. The interest rate shown represents
the discount rate at the time of purchase by the Fund.
(e) All or a portion of the value was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1K and Note 7.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
6 AIM SELECT EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost
$306,545,990) $299,114,140
- ------------------------------------------------------
Investments in affiliated money market
funds (Cost $2,741,390) 2,741,390
======================================================
Total investments (Cost
$309,287,380) 301,855,530
======================================================
Receivables for:
Variation margin 4,012
- ------------------------------------------------------
Fund shares sold 417,282
- ------------------------------------------------------
Dividends 299,420
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 126,251
- ------------------------------------------------------
Other assets 27,747
======================================================
Total assets 302,730,242
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 895,221
- ------------------------------------------------------
Accrued fees to affiliates 256,095
- ------------------------------------------------------
Accrued other operating expenses 103,260
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 198,409
======================================================
Total liabilities 1,452,985
======================================================
Net assets applicable to shares
outstanding $301,277,257
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $350,271,276
- ------------------------------------------------------
Undistributed net investment income
(loss) (6,611)
- ------------------------------------------------------
Undistributed net realized gain (loss) (41,445,183)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (7,542,225)
======================================================
$301,277,257
______________________________________________________
======================================================
NET ASSETS:
Class A $228,450,323
______________________________________________________
======================================================
Class B $ 52,206,924
______________________________________________________
======================================================
Class C $ 20,620,010
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 12,446,983
______________________________________________________
======================================================
Class B 3,266,766
______________________________________________________
======================================================
Class C 1,292,594
______________________________________________________
======================================================
Class A:
Net asset value per share $ 18.35
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $18.35 divided
by 94.50%) $ 19.42
______________________________________________________
======================================================
Class B:
Net asset value and offering price
per share $ 15.98
______________________________________________________
======================================================
Class C:
Net asset value and offering price
per share $ 15.95
______________________________________________________
======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
7 AIM SELECT EQUITY FUND
STATEMENT OF OPERATIONS
For the six months ended June 30, 2008
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $1,973) $ 2,706,560
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $80,856) 159,310
================================================================================================
Total investment income 2,865,870
================================================================================================
EXPENSES:
Advisory fees 1,171,107
- ------------------------------------------------------------------------------------------------
Administrative services fees 48,238
- ------------------------------------------------------------------------------------------------
Custodian fees 8,031
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 302,810
- ------------------------------------------------------------------------------------------------
Class B 338,239
- ------------------------------------------------------------------------------------------------
Class C 115,441
- ------------------------------------------------------------------------------------------------
Transfer agent fees 553,284
- ------------------------------------------------------------------------------------------------
Trustees' and officer's fees and benefits 13,325
- ------------------------------------------------------------------------------------------------
Other 151,086
================================================================================================
Total expenses 2,701,561
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (17,600)
================================================================================================
Net expenses 2,683,961
================================================================================================
Net investment income 181,909
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (26,286,900)
- ------------------------------------------------------------------------------------------------
Futures contracts (180,930)
================================================================================================
(26,467,830)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (21,421,723)
- ------------------------------------------------------------------------------------------------
Futures contracts (110,375)
================================================================================================
(21,532,098)
================================================================================================
Net realized and unrealized gain (loss) (47,999,928)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(47,818,019)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
8 AIM SELECT EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2008 and the year ended December 31, 2007
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2008 2007
- ------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 181,909 $ (131,194)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) (26,467,830) 67,693,157
- ------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (21,532,098) (73,002,025)
======================================================================================================
Net increase (decrease) in net assets resulting from operations (47,818,019) (5,440,062)
======================================================================================================
Share transactions-net:
Class A (9,510,883) 14,471,482
- ------------------------------------------------------------------------------------------------------
Class B (26,624,964) 5,977,756
- ------------------------------------------------------------------------------------------------------
Class C (3,364,637) 8,282,959
======================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (39,500,484) 28,732,197
======================================================================================================
Net increase (decrease) in net assets (87,318,503) 23,292,135
======================================================================================================
NET ASSETS:
Beginning of period 388,595,760 365,303,625
======================================================================================================
End of period (including undistributed net investment income (loss)
of $(6,611) and $(188,520), respectively) $301,277,257 $388,595,760
______________________________________________________________________________________________________
======================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM SELECT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2008
(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 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. 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 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, American
Depositary Receipts 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 the issuer's 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.
10 AIM SELECT EQUITY FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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, the investment
advisor 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.
The Fund files tax returns in the U.S. Federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 by the securities lending provider. Such
collateral will be cash or debt securities issued or guaranteed by the
U.S. Government or any of its sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Dividends received on cash collateral
investments for securities lending transactions, which are net of
compensation to counterparties, is included in Dividends from affiliates
on the Statement of Operations. The aggregate value of securities out on
loan is shown as a footnote on the Statement of Assets and Liabilities, if
any.
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
11 AIM SELECT EQUITY FUND
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.
K. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts.
Initial margin deposits required upon entering into futures contracts are
satisfied by the segregation of specific securities as collateral for the
account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contracts are open, changes in
the value of the contracts are recognized as unrealized gains or losses by
recalculating the value of the contracts on a daily basis. Variation
margin payments are received or made depending upon whether unrealized
gains or losses are incurred. When the contracts are closed, the Fund
recognizes a realized gain or loss equal to the difference between the
proceeds from, or cost of, the closing transaction and the Fund's basis in
the contract. If the Fund were unable to liquidate a futures contract
and/or enter into an offsetting closing transaction, the Fund would
continue to be subject to market risk with respect to the value of the
contracts and continue to be required to maintain the margin deposits on
the futures contracts. Risks may exceed amounts recognized in the
Statement of Assets and Liabilities.
L. 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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
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>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund on February 29, 2008, effective May 1, 2008, between the Advisor and
each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management
Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited,
Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco
Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco
Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the
Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-
Advisor(s) that provide discretionary investment management services to the Fund
based on the percentage of assets allocated to such Sub-Advisor(s).
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (but not cash collateral from
securities lending) in such affiliated money market funds.
For the six months ended June 30, 2008, the Advisor waived advisory fees of
$3,769.
At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") 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, 2008, Invesco reimbursed expenses of the Fund in the
amount of $738.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain
administrative costs incurred in providing accounting services to the Fund. For
the six months ended June 30, 2008, 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
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. IAIS may make payments to intermediaries that
provide omnibus account services, sub-accounting services and/or networking
services. All fees payable by IAIS 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, 2008, 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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI
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. Rules of the Financial Industry Regulatory
Authority ("FINRA") 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, 2008, 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, 2008, IADI advised the Fund that IADI retained $8,400 in
front- end sales commissions from the sale of Class A shares and $7, $26,905 and
$596 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
Invesco Aim, IAIS and/or IADI.
12 AIM SELECT EQUITY FUND
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 establishes a hierarchy that prioritizes the
inputs to valuation methods giving the highest priority to readily available
unadjusted quoted prices in an active market for identical assets (level 1) and
the lowest priority to unobservable inputs (level 3) market prices are not
readily available or are unreliable. Based on the inputs the securities or other
instruments are tiered into three levels of hierarchy under SFAS 157. Changes in
valuation methods may result in transfers in or out of an investment's assigned
level within the hierarchy,
Level 1 -- Quoted prices in an active market for identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered input levels, as of the end of the reporting
period, June 30, 2008. The inputs or methods used for valuing securities may not
be an indication of the risk associated with investing in those securities.
<Table>
<Caption>
INVESTMENTS IN OTHER
INPUT LEVEL SECURITIES INVESTMENTS*
- -------------------------------------------------------
Level 1 $301,307,675 $(110,375)
- -------------------------------------------------------
Level 2 547,855 --
- -------------------------------------------------------
Level 3 -- --
=======================================================
$301,855,530 $(110,375)
_______________________________________________________
=======================================================
</Table>
* Other investments include futures contracts, which are included at unrealized
appreciation/(depreciation).
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, 2008,
the Fund received credits from this arrangement, which resulted in the reduction
of the Fund's total expenses of $13,093.
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, 2008, the Fund paid legal fees of $1,972
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company ("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 Invesco Aim, not to exceed the contractually agreed upon rate.
NOTE 7--FUTURES CONTRACTS
<Table>
<Caption>
OPEN FUTURES CONTRACTS AT PERIOD END
- --------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF MONTH/ VALUE APPRECIATION
CONTRACT CONTRACTS COMMITMENT 06/30/08 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------
S & P 500 Futures 7 Sept-08/Long $2,241,925 $(110,375)
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
13 AIM SELECT EQUITY FUND
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.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as to utilizing
$5,782,944 of capital loss carryforward in the fiscal year ended December 31,
2008.
The Fund had a capital loss carryforward as of December 31, 2007 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2009 $ 6,596,270
- -----------------------------------------------------------------------------------------------
December 31, 2010 7,313,689
- -----------------------------------------------------------------------------------------------
December 31, 2011 246,250
===============================================================================================
Total capital loss carryforward $14,156,209
_______________________________________________________________________________________________
===============================================================================================
</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 reorganization.
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, 2008 was $340,475,158 and
$376,050,315, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 22,998,932
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (31,251,927)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $ (8,252,995)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $310,108,525.
</Table>
14 AIM SELECT EQUITY FUND
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008(a) DECEMBER 31, 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 154,103 $ 2,964,745 467,843 $ 10,015,119
- ------------------------------------------------------------------------------------------------------------------------
Class B 79,601 1,336,215 207,196 3,997,298
- ------------------------------------------------------------------------------------------------------------------------
Class C 46,595 777,398 124,883 2,407,197
========================================================================================================================
Issued in connection with acquisitions:(b)
Class A -- -- 3,084,610 67,940,845
- ------------------------------------------------------------------------------------------------------------------------
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 1,005,225 19,130,302 705,747 15,163,646
- ------------------------------------------------------------------------------------------------------------------------
Class B (1,152,179) (19,130,302) (805,162) (15,163,646)
========================================================================================================================
Reacquired:
Class A (1,646,693) (31,605,930) (3,638,205) (78,648,128)
- ------------------------------------------------------------------------------------------------------------------------
Class B (526,347) (8,830,877) (1,595,873) (30,381,893)
- ------------------------------------------------------------------------------------------------------------------------
Class C (248,188) (4,142,035) (586,495) (11,114,180)
========================================================================================================================
(2,287,883) $(39,500,484) 1,300,018 $ 28,732,197
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There is an entity that is a record owner of more than 5% of the
outstanding shares of the Fund that owns 6% of the outstanding shares of
the Fund. IADI has an agreement with this entity to sell Fund shares. The
Fund, Invesco Aim and/or Invesco Aim affiliates may make payments to this
entity, which is considered to be related to the Fund, for providing
services to the Fund, Invesco Aim and/or Invesco 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 is owned beneficially.
(b) As of the open of business on April 23, 2007 the Fund acquired all the net
asset 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, respectively 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. Each class of shares of AIM Opportunities II
Fund and AIM Opportunities III Fund was exchanged for the like class of
shares of the Fund based on the relative net asset value of AIM
Opportunities II Fund and AIM Opportunities III Fund to the net asset value
of the Fund on the close of business, April 20, 2007. AIM Opportunities II
Fund's net assets as of the close of business on April 20, 2007 of
$78,902,797 including $8,801,527 of unrealized appreciation and AIM
Opportunities III Fund's net assets as of the close of business on April
20, 2007 of $53,553,987 including $7,852,880 of unrealized appreciation,
were combined with the net assets of the Fund immediately before the
acquisition of $350,064,699. The combined aggregate net assets of the Fund
subsequent to the reorganization were $482,521,483.
15 AIM SELECT EQUITY 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, ------------------------------------------------------------
2008 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.02 $ 21.10 $ 18.55 $ 17.65 $ 15.50 $ 11.97
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) 0.03 0.04 0.03 (0.04) (0.06)(b) (0.09)
- -------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.70) (0.12) 2.52 0.94 2.21 3.62
===============================================================================================================================
Total from investment operations (2.67) (0.08) 2.55 0.90 2.15 3.53
===============================================================================================================================
Net asset value, end of period $ 18.35 $ 21.02 $ 21.10 $ 18.55 $ 17.65 $ 15.50
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) (12.70)% (0.38)% 13.75% 5.10% 13.87% 29.49%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $228,450 $271,828 $259,817 $259,946 $292,681 $288,976
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.42%(d) 1.33% 1.40% 1.39% 1.38% 1.47%
- -------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.42%(d) 1.34% 1.41% 1.39% 1.40% 1.47%
===============================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.31%(d) 0.19% 0.14% (0.21)% (0.40)%(b) (0.65)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(e) 103% 129% 72% 91% 38% 69%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
</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 for the year ended December 31, 2004.
(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
$243,578,656.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $116,070,354 and sold of $105,558,150 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 B
-------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.37 $ 18.58 $ 16.46 $ 15.78 $ 13.96 $ 10.86
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.04) (0.11) (0.11) (0.15) (0.17)(b) (0.17)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.35) (0.10) 2.23 0.83 1.99 3.27
==============================================================================================================================
Total from investment operations (2.39) (0.21) 2.12 0.68 1.82 3.10
==============================================================================================================================
Net asset value, end of period $ 15.98 $ 18.37 $ 18.58 $ 16.46 $ 15.78 $ 13.96
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(c) (13.01)% (1.13)% 12.88% 4.31% 13.04% 28.55%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $52,207 $89,372 $85,521 $106,097 $148,300 $198,148
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.17%(d) 2.08% 2.15% 2.14% 2.13% 2.22%
- ------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.17%(d) 2.09% 2.16% 2.14% 2.15% 2.22%
==============================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.44)%(d) (0.56)% (0.61)% (0.96)% (1.15)%(b) (1.40)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(e) 103% 129% 72% 91% 38% 69%
______________________________________________________________________________________________________________________________
==============================================================================================================================
</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 for the year ended December 31, 2004.
(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 $68,019,518.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $116,070,354 and sold of $105,558,150 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.
16 AIM SELECT EQUITY FUND
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.33 $ 18.55 $ 16.43 $ 15.75 $ 13.94 $ 10.84
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) (0.04) (0.11) (0.11) (0.15) (0.17)(b) (0.17)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.34) (0.11) 2.23 0.83 1.98 3.27
============================================================================================================================
Total from investment operations (2.38) (0.22) 2.12 0.68 1.81 3.10
============================================================================================================================
Net asset value, end of period $ 15.95 $ 18.33 $ 18.55 $ 16.43 $ 15.75 $ 13.94
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(c) (12.98)% (1.19)% 12.90% 4.32% 12.98% 28.60%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $20,620 $27,396 $19,966 $22,860 $29,710 $33,585
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.17%(d) 2.08% 2.15% 2.14% 2.13% 2.22%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.17%(d) 2.09% 2.16% 2.14% 2.15% 2.22%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.44)%(d) (0.56)% (0.61)% (0.96)% (1.15)%(b) (1.40)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(e) 103% 129% 72% 91% 38% 69%
____________________________________________________________________________________________________________________________
============================================================================================================================
</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 for the year ended December 31, 2004.
(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 $23,215,041.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $116,070,354 and sold of $105,558,150 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.
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 Invesco Aim and IADI (Order No. 05-1318). The WVASC makes
findings of fact that Invesco Aim and IADI 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 Invesco Aim and IADI violated the West Virginia securities laws. The
WVASC orders Invesco Aim and IADI 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, Invesco 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"), Invesco Aim, IADI 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; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws
Employee Retirement Income Security Act of 1974, as amended ("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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
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 Invesco 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 ERISA
purportedly brought on behalf of participants in the Invesco 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'
17 AIM SELECT EQUITY FUND
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
motion to dismiss the Amended Class Action Complaint for Violations of ERISA and
dismissed such Complaint. Plaintiff appealed this ruling. On June 16, 2008, the
Fourth Court of Appeals reversed the dismissal and remanded this lawsuit back to
the MDL Court for further proceedings.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco 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 Invesco Aim, IADI or the Fund.
18 AIM SELECT EQUITY FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments or
contingent deferred sales charges on redemptions, and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and/or service
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with ongoing costs of investing in other mutual funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) on purchase payments, contingent deferred sales charges on
redemptions, and redemption fees, if any. Therefore, the hypothetical
information is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $873.00 $ 6.61 $1,017.80 $ 7.12 1.42%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 869.90 10.09 1,014.07 10.87 2.17
- ---------------------------------------------------------------------------------------------------
C 1,000.00 870.20 10.09 1,014.07 10.87 2.17
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
19 AIM SELECT EQUITY FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT comparative performance and fee data weight to the various factors. The
regarding the AIM Funds prepared by an Trustees recognized that the advisory
The Board of Trustees (the Board) of AIM independent company, Lipper, Inc. arrangements and resulting advisory fees
Funds Group is required under the (Lipper), under the direction and for the Fund and the other AIM Funds are
Investment Company Act of 1940 to approve supervision of the independent Senior the result of years of review and
annually the renewal of the AIM Select Officer who also prepares a separate negotiation between the Trustees and
Equity Fund (the Fund) investment analysis of this information for the Invesco Aim, that the Trustees may focus
advisory agreement with Invesco Aim Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of
Advisors, Inc. (Invesco Aim). During con- recommendations to the Investments these arrangements in some years than in
tract renewal meetings held on June 18-19, Committee regarding the performance, fees others, and that the Trustees'
2008, the Board as a whole and the disin- and expenses of their assigned funds. The deliberations and conclusions in a
terested or "independent" Trustees, voting Investments Committee considers each particular year may be based in part on
separately, approved the continuance of Sub-Committee's recommendations and makes their deliberations and conclusions of
the Fund's investment advisory agreement its own recommendations regarding the these same arrangements throughout the
for another year, effective July 1, 2008. performance, fees and expenses of the AIM year and in prior years.
In doing so, the Board determined that the Funds to the full Board. The Investments
Fund's investment advisory agreement is in Committee also considers each Sub- FACTORS AND CONCLUSIONS AND SUMMARY
the best interests of the Fund and its Committee's recommendations in making its OF INDEPENDENT WRITTEN FEE EVALUATION
shareholders and that the compensation to annual recommendation to the Board whether
Invesco Aim under the Fund's investment to approve the continuance of each Invesco The discussion below serves as a summary
advisory agreement is fair and Aim Fund's investment advisory agreement of the Senior Officer's independent writ-
reasonable. and sub-advisory agreements for another ten evaluation with respect to the Fund's
year. investment advisory agreement as well as a
The independent Trustees met separately discussion of the material factors and
during their evaluation of the Fund's The independent Trustees are assisted related conclusions that formed the basis
investment advisory agreement with in their annual evaluation of the Fund's for the Board's approval of the Fund's
independent legal counsel from whom they investment advisory agreement by the investment advisory agreement and
received independent legal advice, and the independent Senior Officer. One sub-advisory agreements. Unless
independent Trustees also received responsibility of the Senior Officer is to otherwise stated, information set forth
assistance during their deliberations from manage the process by which the AIM Funds' below is as of June 19, 2008 and does not
the independent Senior Officer, a proposed management fees are negotiated reflect any changes that may have occurred
full-time officer of the AIM Funds who during the annual contract renewal process since that date, including but not
reports directly to the independent to ensure that they are negotiated in a limited to changes to the Fund's
Trustees. manner that is at arms' length and performance, advisory fees, expense
reasonable. Accordingly, the Senior limitations and/or fee waivers.
THE BOARD'S FUND EVALUATION PROCESS Officer must either supervise a
competitive bidding process or prepare an I. Investment Advisory Agreement
The Board's Investments Committee has independent written evaluation. The Senior
established three Sub-Committees that are Officer has recommended that an independ- A. Nature, Extent and Quality of
responsible for overseeing the manage- ent written evaluation be provided and, at Services Provided by Invesco Aim
ment of a number of the series portfolios the direction of the Board, has prepared
of the AIM Funds. This Sub-Committee an independent written evaluation. The Board reviewed the advisory services
structure permits the Trustees to focus on provided to the Fund by Invesco Aim under
the performance of the AIM Funds that have During the annual contract renewal the Fund's investment advisory agreement,
been assigned to them. The Sub-Com- process, the Board considered the factors the performance of Invesco Aim in provid-
mittees meet throughout the year to review discussed below under the heading "Factors ing these services, and the credentials
the performance of their assigned funds, and Conclusions and Summary of Inde- and experience of the officers and
and the Sub-Committees review monthly and pendent Written Fee Evaluation" in employees of Invesco Aim who provide these
quarterly comparative performance evaluating the fairness and services. The Board's review of the
information and periodic asset flow data reasonableness of the Fund's investment qualifications of Invesco Aim to provide
for their assigned funds. These materials advisory agreement and sub-advisory these services included the Board's
are prepared under the direction and agreements at the contract renewal consideration of Invesco Aim's portfolio
supervision of the independent Senior meetings and at their meetings throughout and product review process, various back
Officer. Over the course of each year, the the year as part of their ongoing office support functions provided by
Sub-Committees meet with portfolio oversight of the Fund. The Fund's invest- Invesco Aim and its affiliates, and
managers for their assigned funds and ment advisory agreement and sub-advisory Invesco Aim's equity and fixed income
other members of management and review agreements were considered separately, trading operations. The Board concluded
with these individuals the performance, although the Board also considered the that the nature, extent and quality of the
investment objective(s), policies, common interests of all of the AIM Funds advisory services provided to the Fund by
strategies and limitations of these funds. in their deliberations. The Board Invesco Aim were appropriate and that
considered all of the information provided Invesco Aim currently is providing
In addition to their meetings through- to them and did not identify any satisfactory advisory services in
out the year, the Sub-Committees meet at particular factor that was controlling. accordance with the terms of the Fund's
designated contract renewal meetings each Each Trustee may have evaluated the investment advisory agreement. In
year to conduct an in-depth review of the information provided differently from one addition, based on their ongoing meetings
performance, fees and expenses of their another and attributed different throughout the year with the Fund's
assigned funds. During the contract portfolio manager or managers, the Board
renewal process, the Trustees receive concluded that
continued
20 AIM SELECT EQUITY FUND
these individuals are competent and able focus on fund performance. However, due to D. Economies of Scale and Breakpoints
to continue to carry out their the Fund's underperformance, the Board
responsibilities under the Fund's also concluded that it would be The Board considered the extent to which
investment advisory agreement. appropriate for the Board to continue to there are economies of scale in Invesco
monitor more closely the performance of Aim's provision of advisory services to
In determining whether to continue the the Fund. Although the independent written the Fund. The Board also considered
Fund's investment advisory agreement, the evaluation of the Fund's Senior Officer whether the Fund benefits from such
Board considered the prior relationship only considered Fund performance through economies of scale through contractual
between Invesco Aim and the Fund, as well the most recent calendar year, the Board breakpoints in the Fund's advisory fee
as the Board's knowledge of Invesco Aim's also reviewed more recent Fund performance schedule or through advisory fee waivers
operations, and concluded that it was and this review did not change their or expense limitations. The Board noted
beneficial to maintain the current conclusions. that the Fund's contractual advisory fee
relationship, in part, because of such schedule includes seven breakpoints and
knowledge. The Board also considered the C. Advisory Fees and Fee Waivers that the level of the Fund's advisory
steps that Invesco Aim and its affiliates fees, as a percentage of the Fund's net
have taken over the last several years to The Board compared the Fund's contrac- assets, has decreased as net assets
improve the quality and efficiency of the tual advisory fee rate to the contractual increased because of the breakpoint. Based
services they provide to the AIM Funds in advisory fee rates of funds in the Fund's on this information, the Board concluded
the areas of investment performance, Lipper expense group that are not managed that the Fund's advisory fees
product line diversification, by Invesco Aim, at a common asset level appropriately reflect economies of scale
distribution, fund operations, shareholder and as of the end of the past calendar at current asset levels. The Board also
services and compliance. The Board con- year. The Board noted that the Fund's noted that the Fund shares directly in
cluded that the quality and efficiency of contractual advisory fee rate was below economies of scale through lower fees
the services Invesco Aim and its the median contractual advisory fee rate charged by third party service providers
affiliates provide to the AIM Funds in of funds in its expense group. The Board based on the combined size of all of the
each of these areas generally have also reviewed the methodology used by AIM Funds and affiliates.
improved, and support the Board's approval Lipper in determining contractual fee
of the continuance of the Fund's rates. E. Profitability and Financial
investment advisory agreement. Resources of Invesco Aim
The Board also compared the Fund's
B. Fund Performance effective fee rate (the advisory fee after The Board reviewed information from
any advisory fee waivers and before any Invesco Aim concerning the costs of the
The Board compared the Fund's perform- expense limitations/waivers) to the advisory and other services that Invesco
ance during the past one, three and five advisory fee rates of other clients of Aim and its affiliates provide to the Fund
calendar years to the performance of funds Invesco Aim and its affiliates with and the profitability of Invesco Aim and
in the Fund's performance group that are investment strategies comparable to its affiliates in providing these
not managed by Invesco Aim, and against those of the Fund, including two mutual services. The Board also reviewed
the performance of all funds in the Lipper funds advised by Invesco Aim. The Board information concerning the financial
Multi-Cap Core Funds Index. The Board noted that the Fund's rate was above the condition of Invesco Aim and its
also reviewed the criteria used by Invesco rate for both of the mutual funds, one affiliates. The Board also reviewed with
Aim to identify the Fund's performance being an asset allocation fund which is Invesco Aim the methodology used to
group for inclusion in the Lipper reports. not charged any advisory fees by Invesco prepare the profitability information. The
The Board noted that the Fund's Aim pursuant to that fund's advisory Board considered the overall profitability
performance was in the fifth quintile of agreement. of Invesco Aim, as well as the
its performance group for the one and profitability of Invesco Aim in connection
three year periods and the fourth quintile The Board noted that Invesco Aim has with managing the Fund. The Board noted
for the five year period (the first not proposed any advisory fee waivers or that Invesco Aim continues to operate at a
quintile being the best performing funds expense limitations for the Fund. The net profit, although increased expenses in
and the fifth quintile being the worst Board noted that Invesco Aim has not recent years have reduced the
performing funds). The Board noted that proposed any advisory fee waivers or profitability of Invesco Aim and its
the Fund's performance was below the expense limitations for the Fund. The affiliates. The Board concluded that the
performance of the Index for the one, Board concluded that it was not necessary Fund's fees were fair and reasonable, and
three, and five year periods. The Board at this time to discuss with Invesco Aim that the level of profits realized by
also noted that Invesco Aim acknowledges whether to implement any such waivers or Invesco Aim and its affiliates from
the Fund's underperformance, appointed an expense limitations because, net of providing services to the Fund was not
affiliated sub-adviser to manage the transfer agent fees above the median, most excessive in light of the nature, quality
Fund's assets effective on May 1, 2008 and classes of the Fund's total expenses were and extent of the services provided. The
will continue to focus on the longer term at or below the median total expenses of Board considered whether Invesco Aim is
and business issues that affect the Fund's the funds in the Fund's expense group that financially sound and has the resources
performance. The Board also considered the are not managed by Invesco Aim. necessary to perform its obligations
steps Invesco Aim has taken over the last under the Fund's investment advisory
several years to improve the quality and After taking account of the Fund's agreement, and concluded that Invesco Aim
efficiency of the services that Invesco contractual advisory fee rate, as well as has the financial resources necessary to
Aim provides to the AIM Funds. The Board the comparative advisory fee information fulfill these obligations.
concluded that Invesco Aim continues to be discussed above, the Board concluded that
responsive to the Board's the Fund's advisory fees were fair and
reasonable.
continued
21 AIM SELECT EQUITY FUND
F. Independent Written Evaluation of concluded that, based on their review and types of investments and investment
the Fund's Senior Officer representations made by Invesco Aim, these techniques, and providing investment
arrangements were consistent with advisory services. The Board concluded
The Board noted that, at their direction, regulatory requirements. that the sub-advisory agreements will
the Senior Officer of the Fund, who is benefit the Fund and its shareholders by
independent of Invesco Aim and Invesco The Board considered the fact that the permitting Invesco Aim to utilize the
Aim's affiliates, had prepared an Fund's uninvested cash and cash collat- additional resources and talent of the
independent written evaluation to assist eral from any securities lending arrange- Affiliated Sub-Advisers in managing the
the Board in determining the ments may be invested in money market Fund.
reasonableness of the proposed funds advised by Invesco Aim pursuant to
management fees of the AIM Funds, procedures approved by the Board. The B. Fund Performance
including the Fund. The Board noted that Board noted that Invesco Aim will receive
they had relied upon the Senior Officer's advisory fees from these affiliated money The Board did not view Fund performance as
written evaluation instead of a market funds attributable to such invest- a relevant factor in considering whether
competitive bidding process. In ments, although Invesco Aim has contractu- to approve the sub-advisory agreements for
determining whether to continue the Fund's ally agreed to waive through at least June the Fund, as no Affiliated Sub-Adviser
investment advisory agreement, the Board 30, 2009, the advisory fees payable by the served as a sub-adviser to the Fund prior
considered the Senior Officer's written Fund in an amount equal to 100% of the net to May 1, 2008.
evaluation. advisory fees Invesco Aim receives from
the affiliated money market funds with C. Sub-Advisory Fees
G. Collateral Benefits to Invesco Aim respect to the Fund's investment of
and its Affiliates uninvested cash, but not cash collateral. The Board considered the services to be
The Board considered the contractual provided by the Affiliated Sub-Advisers
The Board considered various other nature of this fee waiver and noted that pursuant to the sub-advisory agreements
benefits received by Invesco Aim and its it remains in effect until at least June and the services to be provided by Invesco
affiliates resulting from Invesco Aim's 30, 2009. The Board concluded that the Aim pursuant to the Fund's investment
relationship with the Fund, including the Fund's investment of uninvested cash and advisory agreement, as well as the
fees received by Invesco Aim and its cash collateral from any securities allocation of fees between Invesco Aim and
affiliates for their provision of lending arrangements in the affiliated the Affiliated Sub-Advisers pursuant to
administrative, transfer agency and money market funds is in the best the sub-advisory agreements. The Board
distribution services to the Fund. The interests of the Fund and its noted that the sub-advisory fees have no
Board considered the performance of shareholders. direct effect on the Fund or its
Invesco Aim and its affiliates in provid- shareholders, as they are paid by Invesco
ing these services and the organizational II. Sub-Advisory Agreements Aim to the Affiliated Sub-Advisers, and
structure employed by Invesco Aim and its that Invesco Aim and the Affiliated Sub-
affiliates to provide these services. The A. Nature, Extent and Quality of Advisers are affiliates. After taking
Board also considered that these services Services Provided by Affiliated account of the Fund's contractual
are provided to the Fund pursuant to Sub-Advisers sub-advisory fee rate, as well as other
written contracts which are reviewed and relevant factors, the Board concluded that
approved on an annual basis by the Board. The Board reviewed the services to be the Fund's sub-advisory fees were fair
The Board concluded that Invesco Aim and provided by Invesco Trimark Ltd., Invesco and reasonable.
its affiliates were providing these Asset Management Deutschland, GmbH,
services in a satisfactory manner and in Invesco Asset Management Limited, In- D. Financial Resources of the
accordance with the terms of their vesco Asset Management (Japan) Limited, Affiliated Sub-Advisers
contracts, and were qualified to continue Invesco Australia Limited, Invesco Global
to provide these services to the Fund. Asset Management (N.A.), Inc., Invesco The Board considered whether each Affili-
Hong Kong Limited, Invesco Institutional ated Sub-Adviser is financially sound and
The Board considered the benefits real- (N.A.), Inc. and Invesco Senior Secured has the resources necessary to perform its
ized by Invesco Aim as a result of Management, Inc. (collectively, the obligations under its respective sub-advi-
portfolio brokerage transactions executed "Affiliated Sub-Advisers") under the sory agreement, and concluded that each
through "soft dollar" arrangements. Under sub-advisory agreements and the Affiliated Sub-Adviser has the financial
these arrangements, portfolio brokerage credentials and experience of the resources necessary to fulfill these
commissions paid by the Fund and/or officers and employees of the Affiliated obligations.
other funds advised by Invesco Aim are Sub-Advisers who will provide these
used to pay for research and execution services. The Board concluded that the
services. The Board noted that soft dollar nature, extent and quality of the services
arrangements shift the payment obligation to be provided by the Affiliated
for the research and execution services Sub-Advisers were appropriate. The Board
from Invesco Aim to the funds and noted that the Affiliated Sub-Advisers,
therefore may reduce Invesco Aim's which have offices and personnel that
expenses. The Board also noted that are geographically dispersed in financial
research obtained through soft dollar ar- centers around the world, have been formed
rangements may be used by Invesco Aim in in part for the purpose of researching
making investment decisions for the Fund and compiling information and making
and may therefore benefit Fund sharehold- recommendations on the markets and
ers. The Board concluded that Invesco economies of various countries and
Aim's soft dollar arrangements were appro- securities of companies located in such
priate. The Board also countries or on various
continued
22 AIM SELECT EQUITY FUND
PROXY RESULTS
A Special Meeting ("Meeting") of Shareholders of AIM Select Equity Fund, an
investment portfolio of AIM Funds Group, a Delaware statutory trust ("Trust"),
was held on February 29, 2008. The Meeting was held for the following purposes:
(1) Elect 13 trustees to the Board of Trustees of the Trust, each of whom will
serve until his or her successor is elected and qualified.
(2) Approve an amendment to the Trust's Agreement and Declaration of Trust that
would permit the Board of Trustees of the Trust to terminate the Trust, the
Fund, and each other series portfolio of the Trust, or a share class without
a shareholder vote.
(3) Approve a new sub-advisory agreement between Invesco Aim Advisors, Inc. and
each of AIM Funds Management, Inc.; Invesco Asset Management Deutschland,
GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco Global Asset Management (N.A.),
Inc.; Invesco Hong Kong Limited; Invesco Institutional (N.A.), Inc.; and
Invesco Senior Secured Management, Inc.
The results of the voting on the above matters were as follows:
<Table>
<Caption>
WITHHELD/
MATTERS VOTES FOR ABSTENTIONS**
- -----------------------------------------------------------------------------------------------------------
(1)* Bob R. Baker...................................................... 136,849,147 4,123,920
Frank S. Bayley................................................... 136,856,960 4,116,107
James T. Bunch.................................................... 136,850,068 4,122,999
Bruce L. Crockett................................................. 136,834,285 4,138,782
Albert R. Dowden.................................................. 136,851,266 4,121,801
Jack M. Fields.................................................... 136,893,917 4,079,150
Martin L. Flanagan................................................ 136,889,028 4,084,039
Carl Frischling................................................... 136,837,466 4,135,601
Prema Mathai-Davis................................................ 136,840,379 4,132,688
Lewis F. Pennock.................................................. 136,853,427 4,119,640
Larry Soll, Ph.D. ................................................ 136,708,623 4,264,444
Raymond Stickel, Jr. ............................................. 136,747,468 4,225,599
Philip A. Taylor.................................................. 136,731,527 4,241,540
</Table>
<Table>
<Caption>
VOTES WITHHELD/ BROKER
VOTES FOR AGAINST ABSTENTIONS NON-VOTES
- ---------------------------------------------------------------------------------------------------------------------------
(2)* Approve an amendment to the Trust's Agreement and
Declaration of Trust that would permit the Board
of Trustees of the Trust to terminate the Trust,
the Fund, and each other series portfolio of the
Trust, or a share class without a shareholder
vote............................................. 89,092,876 12,597,596 4,024,351 35,258,244
(3) Approve a new sub-advisory agreement between
Invesco Aim Advisors, Inc. and each of AIM Funds
Management, Inc.; Invesco Asset Management
Deutschland, GmbH; Invesco Asset Management
Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco
Global Asset Management (N.A.), Inc.; Invesco
Hong Kong Limited; Invesco Institutional (N.A.),
Inc.; and Invesco Senior Secured Management,
Inc. ............................................ 7,544,750 441,959 358,783 2,788,579
</Table>
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Funds Group.
** Includes Broker Non-Votes.
23 AIM SELECT EQUITY FUND
====================================================================================================================================
EDELIVERY
INVESCOAIM.COM/EDELIVERY
REGISTER FOR EDELIVERY - eDelivery is the process of receiving your fund and account information via e-mail. Once your quarterly
statements, tax forms, fund reports, and prospectuses are available, we will send you an e-mail notification containing links to
these documents. For security purposes, you will need to log in to your account to view your statements and tax forms.
WHY SIGN UP? HOW DO I SIGN UP?
Register for eDelivery to: It's easy. Just follow these simple steps:
- - save your Fund the cost of printing and postage. 1. Log in to your account.
- - reduce the amount of paper you receive. 2. Click on the "Service Center" tab.
- - gain access to your documents faster by not waiting for the mail. 3. Select "Register for eDelivery" and complete the consent
- - view your documents online anytime at your convenience. process.
- - save the documents to your personal computer or print them out
for your records.
This service is provided by Invesco Aim Investment Services, Inc.
====================================================================================================================================
FUND HOLDINGS AND PROXY VOTING INFORMATION
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth
quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund
files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your
Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC
Web site at sec.gov. Copies of the 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 Reference Room, including information about duplicating fee charges, by
calling 202 942 8090 or 800 732 0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file
numbers for the Fund are 811-01540 and 002-27334.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities
is available without charge, upon request, from our Client Services department at 800 959 4246 or on the Invesco Aim Web site,
invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is
available at our Web site. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting
Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC Web site, sec.gov.
If used after October 20, 2008, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly
Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco
Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors for
the products and services represented by Invesco Aim; they each provide investment advisory services to
individual and institutional clients and do not sell securities. Invesco Institutional (N.A.), Inc., Invesco
Senior Secured Management, Inc., Invesco Global Asset Management (N.A.), Inc., [INVESCO AIM LOGO] Invesco
Trimark Ltd., Invesco Asset Management (Japan) Ltd. and Invesco Hong Kong Ltd. are affiliated investment
advisors - SERVICE MARK - that serve as the subadvisor for some of the products and services represented by [INVESCO AIM LOGO]
Invesco Aim. Invesco Aim Distributors, Inc. is the distributor for the retail mutual funds, exchange-traded - SERVICE MARK -
funds and U.S. institutional money market funds represented by Invesco Aim. All entities are indirect, wholly
owned subsidiaries of Invesco Ltd.
invescoaim.com SEQ-SAR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM SMALL CAP EQUITY FUND
- SERVICE MARK - Semiannual Report to Shareholders - June 30, 2008
[MOUNTAIN GRAPHIC]
AIM Investments 2 Fund Performance
became INVESCO AIM 3 Letter to Shareholders
on March 31, 2008. 4 Schedule of Investments
8 Financial Statements
For more details, go to 11 Notes to Financial Statements
invescoaim.com 16 Financial Highlights
20 Fund Expenses
21 Approval of Investment Advisory
Agreement
24 Results of Proxy
For the most current month-end Fund performance and commentary, please visit
invescoaim.com.
Unless otherwise noted, all data provided by Invesco Aim.
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
FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY THE TOTAL ANNUAL FUND OPERATING EXPENSE
RATIO SET FORTH IN THE MOST RECENT FUND
FUND VS. INDEXES PROSPECTUS AS OF THE DATE OF THIS REPORT
Cumulative total returns, 12/31/07 to 6/30/08, at net asset value (NAV). Performance FOR CLASS A, CLASS B, CLASS C AND CLASS R
shown does not include applicable contingent deferred sales charges (CDSC) or front-end SHARES WAS 1.37%, 2.12%, 2.12% AND 1.62%,
sales charges, which would have reduced performance. RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
ABOVE MAY VARY FROM THE EXPENSE RATIOS
Class A Shares -4.95% PRESENTED IN OTHER SECTIONS OF THIS REPORT
Class B Shares -5.31 THAT ARE BASED ON EXPENSES INCURRED DURING
Class C Shares -5.31 THE PERIOD COVERED BY THIS REPORT.
Class R Shares -5.04
S&P 500 Index(triangle) (Broad Market Index) -11.90 CLASS A SHARE PERFORMANCE REFLECTS THE
Russell 2000 Index(triangle) (Style-Specific Index) -9.37 MAXIMUM 5.50% SALES CHARGE, AND CLASS B
Lipper Small-Cap Core Funds Index(triangle) (Peer Group Index) -7.04 AND CLASS C SHARE PERFORMANCE REFLECTS THE
APPLICABLE CONTINGENT DEFERRED SALES
(triangle) Lipper Inc. CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
CDSC ON CLASS B SHARES DECLINES FROM 5%
The S&P 500--REGISTERED TRADEMARK-- INDEX is a market capitalization-weighted index BEGINNING AT THE TIME OF PURCHASE TO 0% AT
covering all major areas of the U.S. economy. It is not the 500 largest companies, but THE BEGINNING OF THE SEVENTH YEAR. THE
rather the most widely held 500 companies chosen with respect to market size, CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
liquidity, and their industry. YEAR AFTER PURCHASE. CLASS R SHARES DO NOT
HAVE A FRONT-END SALES CHARGE; RETURNS
The RUSSELL 2000--REGISTERED TRADEMARK-- INDEX measures the performance of the 2,000 SHOWN ARE AT NET ASSET VALUE AND DO NOT
smallest companies in the Russell 3000--REGISTERED TRADEMARK-- Index, which represents REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
approximately 8% of the total market capitalization of the Russell 3000 Index. The ON A TOTAL REDEMPTION OF RETIREMENT PLAN
Russell 2000 Index and the Russell 3000 Index are trademarks/service marks of the ASSETS WITHIN THE FIRST YEAR.
Frank Russell Company. Russell--REGISTERED TRADEMARK-- is a trademark of the Frank
Russell Company. THE PERFORMANCE OF THE FUND'S SHARE
CLASSES WILL DIFFER PRIMARILY DUE TO
The LIPPER SMALL-CAP CORE FUNDS INDEX is an equally weighted representation of the DIFFERENT SALES CHARGE STRUCTURES AND
largest funds in the Lipper Small-Cap Core Funds category. These funds typically have CLASS EXPENSES.
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.
=======================================================================================
==========================================
AVERAGE ANNUAL TOTAL RETURNS SHARE PERFORMANCE AND RESTATED CLASS A
As of 6/30/08, including maximum SHARE PERFORMANCE (FOR PERIODS PRIOR TO
applicable sales charges THE INCEPTION DATE OF CLASS R SHARES) AT
NET ASSET VALUE, ADJUSTED TO REFLECT THE
CLASS A SHARES HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS
Inception (8/31/00) 5.72% R SHARES. CLASS A SHARES' INCEPTION DATE
5 Years 10.11 IS AUGUST 31, 2000.
1 Year -13.43
THE PERFORMANCE DATA QUOTED REPRESENT
CLASS B SHARES PAST PERFORMANCE AND CANNOT GUARANTEE
Inception (8/31/00) 5.74% COMPARABLE FUTURE RESULTS; CURRENT
5 Years 10.29 PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE
1 Year -13.13 VISIT INVESCOAIM.COM FOR THE MOST RECENT
MONTH-END PERFORMANCE. PERFORMANCE FIGURES
CLASS C SHARES REFLECT REINVESTED DISTRIBUTIONS, CHANGES
Inception (8/31/00) 5.74% IN NET ASSET VALUE AND THE EFFECT OF THE
5 Years 10.59 MAXIMUM SALES CHARGE UNLESS OTHERWISE
1 Year -9.83 STATED.
CLASS R SHARES PERFORMANCE FIGURES DO NOT REFLECT
Inception 6.25% DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY
5 Years 11.10 ON FUND DISTRIBUTIONS OR SALE OF FUND
1 Year -8.58 SHARES. INVESTMENT RETURN AND PRINCIPAL
========================================== VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL SHARES.
CLASS R SHARES' INCEPTION DATE IS JUNE 3,
2002. RETURNS SINCE THAT DATE ARE
HISTORICAL RETURNS. ALL OTHER RETURNS ARE
BLENDED RETURNS OF HISTORICAL CLASS R
2 AIM SMALL CAP EQUITY FUND
Dear Fellow Shareholders:
As I write this letter in July 2008, turbulent financial markets are causing
considerable investor anxiety, reminding us again that markets are cyclical and the
[CROCKETT PHOTO] correction of excess is often painful, at least in the short-term. Your Board of
Trustees believes in the wisdom of a long-term perspective and consistent investment
discipline. We continue to put your interests first in the effort to improve investment
performance, contain shareholder costs and uphold the highest ethical standards.
We remain enthusiastic about the global reach and investment expertise that Invesco,
a leading independent global investment management company, brings to the management of
Bruce Crockett AIM Funds as the parent company of the advisors. The diverse investment strategies
deployed throughout the worldwide network of Invesco investment centers has helped
strengthen the management of many AIM Funds. The rebranding of the Funds' management
company as Invesco Aim was followed by the launch of an upgraded, investor-friendly Web
site (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize
stability, endurance, strength and longevity; and a new ad campaign. Emphasizing
Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and Investment News
through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim
Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click
on "Investment Advisory Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes
in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the
movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be
interested to hear your thoughts on this policy.
As always, you are welcome to e-mail your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been
established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund
annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured
that your comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
August 11, 2008
3 AIM SMALL CAP EQUITY FUND
PORTFOLIO COMPOSITION
By sector, based on Net Assets
as of June 30, 2008
<Table>
- -------------------------------------------------------------------------
Information Technology 17.7%
- -------------------------------------------------------------------------
Industrials 16.6
- -------------------------------------------------------------------------
Health Care 13.6
- -------------------------------------------------------------------------
Financials 12.1
- -------------------------------------------------------------------------
Consumer Discretionary 11.5
- -------------------------------------------------------------------------
Energy 9.4
- -------------------------------------------------------------------------
Materials 7.9
- -------------------------------------------------------------------------
Consumer Staples 4.3
- -------------------------------------------------------------------------
Telecommunication Services 2.6
- -------------------------------------------------------------------------
Utilities 2.1
- -------------------------------------------------------------------------
Money Market Funds Plus Other Assets Less Liabilities 2.2
_________________________________________________________________________
=========================================================================
</Table>
SCHEDULE OF INVESTMENTS(a)
June 30, 2008
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.77%(a)
AEROSPACE & DEFENSE-2.21%
AAR CORP.(b)(c) 195,388 $ 2,643,600
- -------------------------------------------------------------------------------
Aeroviroment Inc.(c) 93,528 2,542,091
- -------------------------------------------------------------------------------
Curtiss-Wright Corp. 129,238 5,782,108
===============================================================================
10,967,799
===============================================================================
AIRLINES-0.74%
Allegiant Travel Co.(c) 198,413 3,688,498
===============================================================================
APPAREL RETAIL-1.76%
Citi Trends Inc.(c) 266,425 6,037,190
- -------------------------------------------------------------------------------
Tween Brands, Inc.(c) 162,869 2,680,824
===============================================================================
8,718,014
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.59%
Fossil, Inc.(c) 115,014 3,343,457
- -------------------------------------------------------------------------------
Volcom, Inc.(b)(c) 189,855 4,543,230
===============================================================================
7,886,687
===============================================================================
APPLICATION SOFTWARE-0.93%
Blackbaud, Inc. 215,119 4,603,547
===============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.72%
Affiliated Managers Group, Inc.(c) 48,319 4,351,609
- -------------------------------------------------------------------------------
GAMCO Investors, Inc. Class A 84,509 4,193,337
===============================================================================
8,544,946
===============================================================================
BIOTECHNOLOGY-0.30%
InterMune, Inc.(b)(c) 114,202 1,498,330
===============================================================================
CATALOG RETAIL-0.96%
PC Mall, Inc.(b)(c) 351,855 4,771,154
===============================================================================
COMMUNICATIONS EQUIPMENT-2.03%
Arris Group Inc.(c) 592,475 5,006,414
- -------------------------------------------------------------------------------
Comtech Telecommunications Corp.(c) 102,700 5,032,300
- -------------------------------------------------------------------------------
Lantronix Inc.-Wts. expiring 02/09/11(c)(d)(e) 2,606 0
===============================================================================
10,038,714
===============================================================================
CONSTRUCTION MATERIALS-0.89%
Texas Industries, Inc.(b) 78,722 4,418,666
===============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.40%
CyberSource Corp.(c) 295,007 4,935,467
- -------------------------------------------------------------------------------
Euronet Worldwide, Inc.(b)(c) 184,566 3,119,166
- -------------------------------------------------------------------------------
Wright Express Corp.(c) 154,394 3,828,971
===============================================================================
11,883,604
===============================================================================
DIVERSIFIED CHEMICALS-1.04%
FMC Corp. 66,729 5,167,494
===============================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES-0.28%
EnerNOC, Inc.(b)(c) 76,071 1,365,474
===============================================================================
DIVERSIFIED METALS & MINING-1.02%
Compass Minerals International, Inc. 62,661 5,047,970
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
4 AIM SMALL CAP EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
EDUCATION SERVICES-1.00%
Capella Education Co.(b)(c) 83,015 $ 4,951,845
===============================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.01%
Belden Inc. 140,800 4,770,304
- -------------------------------------------------------------------------------
General Cable Corp.(b)(c) 85,564 5,206,569
===============================================================================
9,976,873
===============================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.06%
OSI Systems, Inc.(c) 153,899 3,296,516
- -------------------------------------------------------------------------------
Rofin-Sinar Technologies, Inc.(b)(c) 64,708 1,954,182
===============================================================================
5,250,698
===============================================================================
ELECTRONIC MANUFACTURING SERVICES-0.81%
Methode Electronics, Inc. 382,842 4,000,699
===============================================================================
ENVIRONMENTAL & FACILITIES SERVICES-3.19%
ABM Industries Inc. 239,439 5,327,518
- -------------------------------------------------------------------------------
Team, Inc.(c) 171,479 5,885,159
- -------------------------------------------------------------------------------
Waste Connections, Inc.(c) 144,658 4,618,930
===============================================================================
15,831,607
===============================================================================
FOOD RETAIL-0.91%
Ruddick Corp. 131,415 4,508,849
===============================================================================
GAS UTILITIES-1.05%
Energen Corp. 66,803 5,212,638
===============================================================================
GENERAL MERCHANDISE STORES-0.44%
Pantry, Inc. (The)(b)(c) 202,659 2,160,345
===============================================================================
HEALTH CARE DISTRIBUTORS-1.34%
Owens & Minor, Inc. 145,380 6,642,412
===============================================================================
HEALTH CARE EQUIPMENT-2.12%
Invacare Corp.(b) 280,506 5,733,542
- -------------------------------------------------------------------------------
Quidel Corp.(c) 289,261 4,778,592
===============================================================================
10,512,134
===============================================================================
HEALTH CARE FACILITIES-1.06%
Skilled Healthcare Group Inc.-Class A(c) 392,912 5,272,879
===============================================================================
HEALTH CARE SERVICES-2.48%
Cross Country Healthcare, Inc.(c) 314,251 4,528,357
- -------------------------------------------------------------------------------
Gentiva Health Services, Inc.(c) 331,595 6,316,885
- -------------------------------------------------------------------------------
IPC The Hospitalist Co.(c) 76,498 1,439,692
===============================================================================
12,284,934
===============================================================================
HEALTH CARE SUPPLIES-0.97%
Haemonetics Corp.(b)(c) 86,700 4,808,382
===============================================================================
HEALTH CARE TECHNOLOGY-0.82%
Omnicell, Inc.(c) 308,942 4,071,856
===============================================================================
HOME ENTERTAINMENT SOFTWARE-0.75%
THQ Inc.(c) 182,834 3,704,217
===============================================================================
HOTELS, RESORTS & CRUISE LINES-0.81%
Ambassadors Group, Inc.(b) 46,886 699,539
- -------------------------------------------------------------------------------
Red Lion Hotels Corp.(c) 418,900 3,338,633
===============================================================================
4,038,172
===============================================================================
HOUSEHOLD APPLIANCES-1.00%
Snap-on Inc. 94,837 4,932,472
===============================================================================
HOUSEWARES & SPECIALTIES-1.04%
Tupperware Brands Corp. 150,698 5,156,886
===============================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-0.74%
Kforce Inc.(c) 433,401 3,679,574
===============================================================================
INDUSTRIAL MACHINERY-5.08%
Chart Industries, Inc.(c) 189,223 9,203,807
- -------------------------------------------------------------------------------
Kadant Inc.(c) 257,172 5,812,087
- -------------------------------------------------------------------------------
RBC Bearings Inc.(c) 133,775 4,457,383
- -------------------------------------------------------------------------------
Valmont Industries, Inc. 54,672 5,701,743
===============================================================================
25,175,020
===============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.64%
Alaska Communications Systems Group Inc.(b) 426,331 5,090,392
- -------------------------------------------------------------------------------
Cincinnati Bell Inc.(c) 1,270,682 5,057,315
- -------------------------------------------------------------------------------
NTELOS Holdings Corp. 114,987 2,917,220
===============================================================================
13,064,927
===============================================================================
INTERNET SOFTWARE & SERVICES-2.99%
Ariba, Inc.(b)(c) 562,951 8,281,009
- -------------------------------------------------------------------------------
DealerTrack Holdings Inc.(b)(c) 95,584 1,348,691
- -------------------------------------------------------------------------------
Open Text Corp. (Canada)(b)(c) 161,621 5,188,034
===============================================================================
14,817,734
===============================================================================
INVESTMENT BANKING & BROKERAGE-1.01%
CMET Finance Holdings, Inc. (Acquired 12/08/2003;
Cost $4,480,000)(c)(d)(e)(f) 44,800 594,944
- -------------------------------------------------------------------------------
KBW Inc.(c) 213,522 4,394,283
===============================================================================
4,989,227
===============================================================================
IT CONSULTING & OTHER SERVICES-1.00%
CACI International Inc.-Class A(c) 108,211 4,952,817
===============================================================================
LIFE SCIENCES TOOLS & SERVICES-2.64%
Bio-Rad Laboratories, Inc.-Class A(c) 52,756 4,267,433
- -------------------------------------------------------------------------------
Dionex Corp.(c) 57,008 3,783,621
- -------------------------------------------------------------------------------
eResearch Technology, Inc.(c) 288,596 5,033,114
===============================================================================
13,084,168
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
5 AIM SMALL CAP EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
METAL & GLASS CONTAINERS-0.94%
AptarGroup, Inc. 101,856 $ 4,272,859
- -------------------------------------------------------------------------------
Bway Holding Co.(c) 47,598 409,819
===============================================================================
4,682,678
===============================================================================
MOVIES & ENTERTAINMENT-1.03%
World Wrestling Entertainment, Inc.-Class A(b) 330,164 5,107,637
===============================================================================
MULTI-UTILITIES-0.57%
Avista Corp. 130,561 2,801,839
===============================================================================
OFFICE REIT'S-0.93%
Alexandria Real Estate Equities, Inc.(b) 47,392 4,613,137
===============================================================================
OIL & GAS EQUIPMENT & SERVICES-4.50%
Complete Production Services, Inc.(c) 184,913 6,734,531
- -------------------------------------------------------------------------------
Lufkin Industries, Inc. 48,264 4,019,426
- -------------------------------------------------------------------------------
NATCO Group Inc.-Class A(c) 121,172 6,607,509
- -------------------------------------------------------------------------------
Oceaneering International, Inc.(c) 64,536 4,972,499
===============================================================================
22,333,965
===============================================================================
OIL & GAS EXPLORATION & PRODUCTION-4.87%
Comstock Resources, Inc.(c) 92,389 7,800,403
- -------------------------------------------------------------------------------
Parallel Petroleum Corp.(c) 235,112 4,732,805
- -------------------------------------------------------------------------------
Penn Virginia Corp. 115,386 8,702,412
- -------------------------------------------------------------------------------
Venoco Inc.(c) 125,375 2,909,954
===============================================================================
24,145,574
===============================================================================
PACKAGED FOODS & MEATS-2.19%
Flowers Foods, Inc. 195,086 5,528,737
- -------------------------------------------------------------------------------
TreeHouse Foods, Inc.(c) 220,244 5,343,120
===============================================================================
10,871,857
===============================================================================
PERSONAL PRODUCTS-1.21%
Alberto-Culver Co. 228,091 5,991,951
===============================================================================
PHARMACEUTICALS-1.83%
ViroPharma Inc.(b)(c) 367,133 4,060,491
- -------------------------------------------------------------------------------
VIVUS, Inc.(b)(c) 753,145 5,031,009
===============================================================================
9,091,500
===============================================================================
PROPERTY & CASUALTY INSURANCE-1.87%
Assured Guaranty Ltd.(b)(c) 256,574 4,615,766
- -------------------------------------------------------------------------------
FPIC Insurance Group, Inc.(c) 102,979 4,667,008
===============================================================================
9,282,774
===============================================================================
REGIONAL BANKS-4.71%
BancFirst Corp. 66,656 2,852,877
- -------------------------------------------------------------------------------
Commerce Bancshares, Inc. 91,312 3,621,434
- -------------------------------------------------------------------------------
Community Trust Bancorp, Inc. 144,868 3,804,234
- -------------------------------------------------------------------------------
First Financial Bankshares, Inc.(b) 81,612 3,738,646
- -------------------------------------------------------------------------------
Glacier Bancorp, Inc.(b) 274,295 4,385,977
- -------------------------------------------------------------------------------
Sterling Bancshares, Inc. 546,007 4,963,203
===============================================================================
23,366,371
===============================================================================
RESTAURANTS-1.77%
DineEquity, Inc.(b) 115,327 4,308,617
- -------------------------------------------------------------------------------
Papa John's International, Inc.(c) 168,149 4,471,082
===============================================================================
8,779,699
===============================================================================
SEMICONDUCTOR EQUIPMENT-2.01%
ATMI, Inc.(c) 188,353 5,258,816
- -------------------------------------------------------------------------------
MKS Instruments, Inc.(c) 215,066 4,709,945
===============================================================================
9,968,761
===============================================================================
SEMICONDUCTORS-2.40%
DSP Group, Inc.(c) 321,019 2,247,133
- -------------------------------------------------------------------------------
Power Integrations, Inc.(c) 151,219 4,780,033
- -------------------------------------------------------------------------------
Semtech Corp.(c) 346,976 4,881,952
===============================================================================
11,909,118
===============================================================================
SPECIALIZED REIT'S-1.81%
LaSalle Hotel Properties 150,612 3,784,880
- -------------------------------------------------------------------------------
Senior Housing Properties Trust 124,200 2,425,626
- -------------------------------------------------------------------------------
Universal Health Realty Income Trust 92,853 2,785,590
===============================================================================
8,996,096
===============================================================================
SPECIALTY CHEMICALS-2.29%
A. Schulman, Inc. 213,017 4,905,782
- -------------------------------------------------------------------------------
H.B. Fuller Co. 217,835 4,888,217
- -------------------------------------------------------------------------------
Zep, Inc. 104,597 1,556,403
===============================================================================
11,350,402
===============================================================================
SPECIALTY STORES-0.05%
Ulta Salon, Cosmetics & Fragrance, Inc.(b)(c) 22,475 252,619
===============================================================================
STEEL-1.74%
Carpenter Technology Corp. 77,559 3,385,450
- -------------------------------------------------------------------------------
Northwest Pipe Co.(c) 94,000 5,245,200
===============================================================================
8,630,650
===============================================================================
SYSTEMS SOFTWARE-0.79%
Double-Take Software, Inc.(c) 285,199 3,918,634
===============================================================================
TECHNOLOGY DISTRIBUTORS-0.59%
Agilysys, Inc. 259,442 2,942,072
===============================================================================
TRUCKING-2.33%
Landstar System, Inc. 101,968 5,630,673
- -------------------------------------------------------------------------------
Marten Transport, Ltd.(c) 371,916 5,939,498
===============================================================================
11,570,171
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
6 AIM SMALL CAP EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
WATER UTILITIES-0.51%
Cascal N.V. (United Kingdom)(b)(c) 204,585 $ 2,516,395
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $453,820,596) 484,806,162
===============================================================================
MONEY MARKET FUNDS-1.80%
Liquid Assets Portfolio-Institutional Class(g) 4,457,091 4,457,091
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 4,457,091 4,457,091
===============================================================================
Total Money Market Funds (Cost $8,914,182) 8,914,182
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-99.57% (Cost $462,734,778) 493,720,344
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-15.46%
Liquid Assets Portfolio-Institutional Class (Cost
$76,635,296)(g)(h) 76,635,296 76,635,296
===============================================================================
TOTAL INVESTMENTS-115.03% (Cost $539,370,074) 570,355,640
===============================================================================
OTHER ASSETS LESS LIABILITIES-(15.03)% (74,520,702)
===============================================================================
NET ASSETS-100.00% $495,834,938
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector 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 MSCI Inc.
and Standard & Poor's.
(b) All or a portion of this security was out on loan at June 30, 2008.
(c) Non-income producing security.
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at June 30, 2008 was $594,944, which represented 0.12% of the
Fund's Net Assets. See Note 1A.
(e) Security considered to be illiquid. The Fund is limited to investing 15%
of net assets in illiquid securities at the time of purchase. The
aggregate value of these securities considered illiquid at June 30, 2008
was $594,944, which represented 0.12% of the Fund's Net Assets.
(f) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The value of this security at June 30,
2008 represented 0.12% of the Fund's Net Assets. Unless otherwise
indicated, this security is not considered to be illiquid.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor.
(h) 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 1I.
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, 2008
(Unaudited)
<Table>
ASSETS:
Investments, at value (Cost
$453,820,596)* $484,806,162
- ------------------------------------------------------
Investments in affiliated money market
funds (Cost $85,549,478) 85,549,478
======================================================
Total investments (Cost
$539,370,074) 570,355,640
======================================================
Cash 1,631,131
- ------------------------------------------------------
Receivables for:
Investments sold 8,399,877
- ------------------------------------------------------
Investments sold to affiliates 409,844
- ------------------------------------------------------
Fund shares sold 1,316,876
- ------------------------------------------------------
Dividends 354,017
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 65,572
- ------------------------------------------------------
Other assets 33,169
======================================================
Total assets 582,566,126
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 8,065,813
- ------------------------------------------------------
Fund shares reacquired 1,412,384
- ------------------------------------------------------
Collateral upon return of securities
loaned 76,635,296
- ------------------------------------------------------
Accrued fees to affiliates 408,540
- ------------------------------------------------------
Accrued other operating expenses 81,552
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 127,603
======================================================
Total liabilities 86,731,188
======================================================
Net assets applicable to shares
outstanding $495,834,938
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $448,345,633
- ------------------------------------------------------
Undistributed net investment income
(loss) (1,199,219)
- ------------------------------------------------------
Undistributed net realized gain 17,702,958
- ------------------------------------------------------
Unrealized appreciation 30,985,566
======================================================
$495,834,938
______________________________________________________
======================================================
NET ASSETS:
Class A $306,145,726
______________________________________________________
======================================================
Class B $ 85,196,305
______________________________________________________
======================================================
Class C $ 44,852,684
______________________________________________________
======================================================
Class R $ 26,890,407
______________________________________________________
======================================================
Institutional Class $ 32,749,816
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 27,475,918
______________________________________________________
======================================================
Class B 8,237,118
______________________________________________________
======================================================
Class C 4,337,507
______________________________________________________
======================================================
Class R 2,459,318
______________________________________________________
======================================================
Institutional Class 2,872,229
______________________________________________________
======================================================
Class A:
Net asset value per share $ 11.14
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $11.14 divided
by 94.50%) $ 11.79
______________________________________________________
======================================================
Class B:
Net asset value and offering price
per share $ 10.34
______________________________________________________
======================================================
Class C:
Net asset value and offering price
per share $ 10.34
______________________________________________________
======================================================
Class R:
Net asset value and offering price
per share $ 10.93
______________________________________________________
======================================================
Institutional Class:
Net asset value and offering price
per share $ 11.40
______________________________________________________
======================================================
</Table>
* At June 30, 2008, securities with an aggregate value of $73,746,895.48 were on
loan to brokers.
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, 2008
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 2,215,883
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $318,549) 478,570
================================================================================================
Total investment income 2,694,453
================================================================================================
EXPENSES:
Advisory fees 1,845,190
- ------------------------------------------------------------------------------------------------
Administrative services fees 77,447
- ------------------------------------------------------------------------------------------------
Custodian fees 1,671
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 380,049
- ------------------------------------------------------------------------------------------------
Class B 452,778
- ------------------------------------------------------------------------------------------------
Class C 232,631
- ------------------------------------------------------------------------------------------------
Class R 62,323
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 678,235
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 318
- ------------------------------------------------------------------------------------------------
Trustees' and officer's fees and benefits 15,779
- ------------------------------------------------------------------------------------------------
Other 50,030
================================================================================================
Total expenses 3,796,451
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (24,203)
================================================================================================
Net expenses 3,772,248
================================================================================================
Net investment income (loss) (1,077,795)
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain from investment securities (includes net gains from securities
sold to affiliates of $4,105,912) 12,708,306
- ------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (41,916,271)
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (29,207,965)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(30,285,760)
________________________________________________________________________________________________
================================================================================================
</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, 2008 and the year ended December 31, 2007
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2008 2007
- -------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,077,795) $ (3,595,022)
- -------------------------------------------------------------------------------------------------------
Net realized gain 12,708,306 54,821,346
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (41,916,271) (32,039,448)
=======================================================================================================
Net increase (decrease) in net assets resulting from operations (30,285,760) 19,186,876
=======================================================================================================
Distributions to shareholders from net realized gains:
Class A -- (29,992,662)
- -------------------------------------------------------------------------------------------------------
Class B -- (10,156,017)
- -------------------------------------------------------------------------------------------------------
Class C -- (5,014,599)
- -------------------------------------------------------------------------------------------------------
Class R -- (2,305,068)
- -------------------------------------------------------------------------------------------------------
Institutional Class -- (3,264,873)
=======================================================================================================
Total distributions from net realized gains -- (50,733,219)
=======================================================================================================
Share transactions-net:
Class A (19,783,310) 119,069,962
- -------------------------------------------------------------------------------------------------------
Class B (16,175,405) (13,915,556)
- -------------------------------------------------------------------------------------------------------
Class C (5,838,058) (747,735)
- -------------------------------------------------------------------------------------------------------
Class R 2,048,604 (682,405)
- -------------------------------------------------------------------------------------------------------
Institutional Class (3,938,861) 23,360,252
=======================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (43,687,030) 127,084,518
=======================================================================================================
Net increase (decrease) in net assets (73,972,790) 95,538,175
=======================================================================================================
NET ASSETS:
Beginning of period 569,807,728 474,269,553
=======================================================================================================
End of period (including undistributed net investment income (loss)
of $(1,199,219) and $(121,424), respectively) $495,834,938 $569,807,728
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM SMALL CAP EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2008
(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 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. 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, American
Depositary Receipts 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 the issuer's 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.
11 AIM SMALL CAP EQUITY FUND
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds as 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, the investment
advisor 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.
The Fund files tax returns in the U.S. Federal jurisdiction and certain
other jurisdictions. Generally the Fund is subject to examinations by such
taxing authorities for up to three years after the filing of the return
for the tax period.
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 by a
significant amount.
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. SECURITIES LENDING -- 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 by the securities lending provider. Such
collateral will be cash or debt securities issued or guaranteed by the
U.S. Government or any of its sponsored agencies. Cash collateral received
in connection with these loans is invested in short-term money market
instruments or affiliated money market funds and is shown as such on the
Schedule of Investments. 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. Dividends received on cash collateral
investments for securities lending transactions, which are net of
compensation to counterparties, is included in Dividends from affiliates
on the Statement of Operations. The aggregate value of securities out on
loan is shown as a footnote on the Statement of Assets and Liabilities.
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 Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
based on the annual rate of the Fund's average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.745%
- -------------------------------------------------------------------
Next $250 million 0.73%
- -------------------------------------------------------------------
Next $500 million 0.715%
- -------------------------------------------------------------------
Next $1.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.685%
- -------------------------------------------------------------------
Next $2.5 billion 0.67%
- -------------------------------------------------------------------
Next $2.5 billion 0.655%
- -------------------------------------------------------------------
Over $10 billion 0.64%
___________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund on February 29, 2008, effective May 1, 2008, between the Advisor and
each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management
Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited,
Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco
Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco
Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the
Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-
Advisor(s) that provide discretionary investment management services to the Fund
based on the percentage of assets allocated to such Sub-Advisor(s).
The Advisor has contractually agreed, through at least June 30, 2009, to waive
the advisory fee payable by the Fund in an amount equal to 100% of the net
advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (but not cash collateral from
securities lending) in such affiliated money market funds.
For the six months ended June 30, 2008, the Advisor waived advisory fees of
$5,809.
At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") 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, 2008, Invesco reimbursed expenses of the Fund in the
amount of $812.
The Trust has entered into a master administrative services agreement with
Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain
administrative costs incurred in providing accounting services to the Fund. For
the six months ended June 30, 2008, 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
Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has
agreed to pay IAIS a fee for providing transfer agency and shareholder services
to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the
course of providing such services. IAIS may make payments to intermediaries that
provide omnibus account services, sub-accounting services and/or networking
services. All fees payable by IAIS 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, 2008, 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 Invesco Aim
Distributors, Inc. ("IADI") 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 IADI 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. Rules of the Financial Industry
Regulatory Authority ("FINRA") 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, 2008, 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, 2008, IADI advised the Fund that IADI retained $28,131 in
front-end sales commissions from the sale of Class A shares and $1,052, $34,934,
$1,725 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
Invesco Aim, IAIS and/or IADI.
NOTE 3--SUPPLEMENTAL INFORMATION
The Fund adopted the provisions of Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" (SFAS 157), effective with the beginning of
the Fund's fiscal year. SFAS 157 establishes a hierarchy that prioritizes the
inputs to valuation methods giving the highest priority to readily available
unadjusted quoted prices in an active market for identical assets (level 1) and
the lowest priority to unobservable inputs (level 3) market prices are not
readily
13 AIM SMALL CAP EQUITY FUND
available or are unreliable. Based on the inputs the securities or other
instruments are tiered into three levels of hierarchy under SFAS 157. Changes in
valuation methods may result in transfers in or out of an investment's assigned
level within the hierarchy,
Level 1 -- Quoted prices in an active market for identical assets.
Level 2 -- Prices are determined using other significant observable inputs.
Observable inputs are inputs that other market participants may use in pricing
a security. These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk and others.
Level 3 -- Prices are determined using significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at the
end of the period), unobservable inputs may be used. Unobservable inputs
reflect the Fund's own assumptions about the factors market participants would
use in determining fair value of the securities or instruments and would be
based on the best available information.
Below is a summary of the tiered input levels, as of the end of the reporting
period, June 30, 2008. The inputs or methods used for valuing securities may not
be an indication of the risk associated with investing in those securities.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $569,759,696
- --------------------------------------
Level 2 --
- --------------------------------------
Level 3 595,944
======================================
$570,355,640
______________________________________
======================================
</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, 2008, the Fund
engaged in securities sales of $10,074,873, which resulted in net realized gains
of $4,105,912, and securities purchases of $6,238,369.
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, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $17,582.
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, 2008, the Fund paid legal fees of $2,176
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--CASH BALANCES
The Fund is permitted to temporarily carry a negative or overdrawn balance in
its account with The State Street Bank and Trust Company ("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 Invesco Aim, not to exceed the contractually agreed upon rate.
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, 2007.
14 AIM SMALL CAP EQUITY FUND
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, 2008 was $140,266,135 and
$191,684,743, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 90,778,634
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (60,193,970)
================================================================================================
Net unrealized appreciation of investment securities $ 30,584,664
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $539,770,976.
</Table>
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008(a) DECEMBER 31, 2007
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,270,962 $ 25,340,651 5,343,108 $ 70,760,228
- -------------------------------------------------------------------------------------------------------------------------
Class B 355,657 3,678,361 517,633 6,341,819
- -------------------------------------------------------------------------------------------------------------------------
Class C 493,926 5,076,422 532,166 6,440,580
- -------------------------------------------------------------------------------------------------------------------------
Class R 650,897 7,060,369 585,378 7,362,480
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 182,120 2,045,136 1,610,396 20,741,905
=========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 2,467,977 28,653,263
- -------------------------------------------------------------------------------------------------------------------------
Class B -- -- 895,442 9,688,676
- -------------------------------------------------------------------------------------------------------------------------
Class C -- -- 435,538 4,712,523
- -------------------------------------------------------------------------------------------------------------------------
Class R -- -- 201,841 2,303,018
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 275,517 3,264,873
=========================================================================================================================
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 543,209 5,969,771 1,161,604 14,986,698
- -------------------------------------------------------------------------------------------------------------------------
Class B (584,337) (5,969,771) (1,235,588) (14,986,698)
=========================================================================================================================
Reacquired:
Class A (4,689,757) (51,093,732) (8,863,106) (114,224,450)
- -------------------------------------------------------------------------------------------------------------------------
Class B (1,371,216) (13,883,995) (3,168,868) (38,474,546)
- -------------------------------------------------------------------------------------------------------------------------
Class C (1,074,241) (10,914,480) (1,819,422) (21,923,364)
- -------------------------------------------------------------------------------------------------------------------------
Class R (471,686) (5,011,765) (822,111) (10,347,903)
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class (525,544) (5,983,997) (50,548) (646,526)
=========================================================================================================================
(4,220,010) $(43,687,030) 9,959,121 $ 127,084,518
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There are entities that are record owners of more than 5% of the
outstanding shares of the Fund and in the aggregate own 19% of the
outstanding shares of the Fund. IADI has an agreement with these entities
to sell Fund shares. The Fund, Invesco Aim and/or Invesco Aim affiliates
may make payments to these entities, which are considered to be related to
the Fund, for providing services to the Fund, Invesco Aim and/or Invesco
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 Invesco Aim.
(b) As of the open 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 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 Fund to the net asset
value of the Fund on the close of business on 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.
15 AIM SMALL CAP EQUITY 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, ------------------------------------------------------------
2008 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.72 $ 12.24 $ 12.26 $ 12.80 $ 12.03 $ 8.23
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.05)(a) (0.07)(a) (0.10) (0.09)(a) (0.09)(a)
- -------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized
and unrealized) (0.57) 0.64 2.16 0.96 1.22 3.89
===============================================================================================================================
Total from investment operations (0.58) 0.59 2.09 0.86 1.13 3.80
===============================================================================================================================
Less distributions from net realized gains -- (1.11) (2.11) (1.40) (0.36) --
===============================================================================================================================
Net asset value, end of period $ 11.14 $ 11.72 $ 12.24 $ 12.26 $ 12.80 $ 12.03
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) (4.95)% 4.92% 16.83% 6.58% 9.45% 46.17%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $306,146 $343,993 $245,868 $218,915 $247,581 $266,284
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.34%(c) 1.37% 1.49% 1.51% 1.53% 1.77%
- -------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.34%(c) 1.43% 1.60% 1.62% 1.64% 1.77%
===============================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.26)%(c) (0.42)% (0.55)% (0.84)% (0.77)% (0.89)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(d) 28% 49% 56% 52% 124% 112%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
</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 actualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$305,709,769.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $144,885,693 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, ------------------------------------------------------------
2008 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.92 $ 11.56 $ 11.77 $ 12.42 $ 11.77 $ 8.11
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.14)(a) (0.17)(a) (0.19) (0.18)(a) (0.15)(a)
- -------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized
and unrealized) (0.53) 0.61 2.07 0.94 1.19 3.81
===============================================================================================================================
Total from investment operations (0.58) 0.47 1.90 0.75 1.01 3.66
===============================================================================================================================
Less distributions from net realized gains -- (1.11) (2.11) (1.40) (0.36) --
===============================================================================================================================
Net asset value, end of period $ 10.34 $ 10.92 $ 11.56 $ 11.77 $ 12.42 $ 11.77
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) (5.31)% 4.16% 15.90% 5.89% 8.64% 45.13%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $85,196 $107,417 $126,111 $131,547 $156,450 $177,811
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.09%(c) 2.12% 2.24% 2.21% 2.27% 2.42%
- -------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.09%(c) 2.18% 2.35% 2.32% 2.29% 2.42%
===============================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.01)%(c) (1.17)% (1.30)% (1.54)% (1.51)% (1.54)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(d) 28% 49% 56% 52% 124% 112%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
</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 $91,053,127.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $144,885,693 in the effort to realign
the Fund's portfolio holdings after the reorganization of AIM Opportunities
I Fund into the Fund.
16 AIM SMALL CAP EQUITY FUND
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.92 $ 11.56 $ 11.76 $ 12.42 $ 11.77 $ 8.11
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.14)(a) (0.17)(a) (0.19) (0.18)(a) (0.15)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) (0.53) 0.61 2.08 0.93 1.19 3.81
============================================================================================================================
Total from investment operations (0.58) 0.47 1.91 0.74 1.01 3.66
============================================================================================================================
Less distributions from net realized gains -- (1.11) (2.11) (1.40) (0.36) --
============================================================================================================================
Net asset value, end of period $ 10.34 $ 10.92 $ 11.56 $ 11.76 $ 12.42 $ 11.77
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) (5.31)% 4.16% 16.00% 5.81% 8.64% 45.13%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $44,853 $53,684 $57,221 $55,009 $65,792 $75,763
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.09%(c) 2.12% 2.24% 2.21% 2.27% 2.42%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.09%(c) 2.18% 2.35% 2.32% 2.29% 2.42%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.01)%(c) (1.17)% (1.30)% (1.54)% (1.51)% (1.54)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 28% 49% 56% 52% 124% 112%
____________________________________________________________________________________________________________________________
============================================================================================================================
</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 $46,781,958.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $144,885,693 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
---------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2008 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.51 $ 12.07 $ 12.15 $ 12.71 $ 11.99 $ 8.22
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.09)(a) (0.11)(a) (0.13) (0.12)(a) (0.11)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) (0.55) 0.64 2.14 0.97 1.20 3.88
============================================================================================================================
Total from investment operations (0.58) 0.55 2.03 0.84 1.08 3.77
============================================================================================================================
Less distributions from net realized gains -- (1.11) (2.11) (1.40) (0.36) --
============================================================================================================================
Net asset value, end of period $ 10.93 $ 11.51 $ 12.07 $ 12.15 $ 12.71 $11.99
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) (5.04)% 4.65% 16.47% 6.48% 9.06% 45.86%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $26,890 $26,251 $27,946 $17,862 $11,817 $2,502
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.59%(c) 1.62% 1.74% 1.71% 1.77% 1.92%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.59%(c) 1.68% 1.85% 1.82% 1.79% 1.92%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.51)%(c) (0.67)% (0.80)% (1.04)% (1.01)% (1.04)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 28% 49% 56% 52% 124% 112%
____________________________________________________________________________________________________________________________
============================================================================================================================
</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 $25,066,269.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year. For the period ending December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $144,885,693 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 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------
YEAR ENDED DECEMBER APRIL 29, 2005
SIX MONTHS ENDED 31, (COMMENCEMENT DATE)
JUNE 30, ------------------- TO DECEMBER 31,
2008 2007 2006 2005
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.96 $ 12.40 $ 12.33 $11.69
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02(a) 0.01(a) 0.01(a) (0.01)
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.58) 0.66 2.17 2.05
===================================================================================================================
Total from investment operations (0.56) 0.67 2.18 2.04
===================================================================================================================
Less distributions from net realized gains -- (1.11) (2.11) (1.40)
===================================================================================================================
Total distributions -- (1.11) (2.11) (1.40)
===================================================================================================================
Net asset value, end of period $ 11.40 $ 11.96 $ 12.40 $12.33
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) (4.68)% 5.50% 17.45% 17.31%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,750 $38,463 $17,122 $4,712
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.79%(c) 0.84% 0.90% 0.87%(d)
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 0.80%(c) 0.89% 1.01% 0.98%(d)
===================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.28%(c) 0.11% 0.04% (0.20)%(d)
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate(e) 28% 49% 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 $34,627,500.
(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 December 31, 2007,
the portfolio turnover calculation excludes the value of securities
purchased of $128,317,933 and sold of $144,885,693 in the effort to realign
the Fund's portfolio holdings after the reorganization of AIM Opportunities
I Fund into the Fund.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On May 23, 2008, the Securities and Exchange Commission ("SEC") publicly posted
its final approval of the 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"),
Invesco Aim Advisors, Inc. ("Invesco Aim") and Invesco Aim Distributors, Inc.
("IADI") 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 Invesco Aim
who may have been harmed by market timing and related activity. The Distribution
Plans provide for the distribution to all eligible investors 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 of the Fair Funds has not yet commenced, management of
Invesco 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 Ltd. ("Invesco"), the
parent company of IFG and Invesco 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 Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI 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 Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI 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, Invesco Aim's time to respond to that Order has been indefinitely
suspended.
18 AIM SMALL CAP EQUITY FUND
NOTE 12--LEGAL PROCEEDINGS--(CONTINUED)
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI
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; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
Employee Retirement Income Security Act of 1974, as amended ("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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
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 Invesco 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 ERISA
purportedly brought on behalf of participants in the Invesco 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. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Court of Appeals reversed the dismissal and remanded this
lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI 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, Invesco Aim and IADI 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, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco 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 Invesco Aim, IADI or the Fund.
19 AIM SMALL CAP EQUITY FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments or
contingent deferred sales charges on redemptions, and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and/or service
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with ongoing costs of investing in other mutual funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) on purchase payments, contingent deferred sales charges on
redemptions, and redemption fees, if any. Therefore, the hypothetical
information is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $950.50 $ 6.50 $1,018.20 $ 6.72 1.34%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 946.90 10.12 1,014.47 10.47 2.09
- ---------------------------------------------------------------------------------------------------
C 1,000.00 946.90 10.12 1,014.47 10.47 2.09
- ---------------------------------------------------------------------------------------------------
R 1,000.00 949.60 7.71 1,016.96 7.97 1.59
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
20 AIM SMALL CAP EQUITY FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM comparative performance and fee data weight to the various factors. The
Funds Group is required under the regarding the AIM Funds prepared by an Trustees recognized that the advisory
Investment Company Act of 1940 to approve independent company, Lipper, Inc. arrangements and resulting advisory fees
annually the renewal of the AIM Small Cap (Lipper), under the direction and for the Fund and the other AIM Funds are
Equity Fund (the Fund) investment advisory supervision of the independent Senior the result of years of review and
agreement with Invesco Aim Advisors, Inc. Officer who also prepares a separate negotiation between the Trustees and
(Invesco Aim). During contract renewal analysis of this information for the Invesco Aim, that the Trustees may focus
meetings held on June 18-19, 2008, the Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of
Board as a whole and the disinterested or recommendations to the Investments these arrangements in some years than in
"independent" Trustees, voting separately, Committee regarding the performance, fees others, and that the Trustees'
approved the continuance of the Fund's and expenses of their assigned funds. The deliberations and conclusions in a
investment advisory agreement for another Investments Committee considers each particular year may be based in part on
year, effective July 1, 2008. In doing so, Sub-Committee's recommendations and makes their deliberations and conclusions of
the Board determined that the Fund's its own recommendations regarding the these same arrangements throughout the
investment advisory agreement is in the performance, fees and expenses of the AIM year and in prior years.
best interests of the Fund and its Funds to the full Board. The Investments
shareholders and that the compensation to Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF
Invesco Aim under the Fund's investment Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION
advisory agreement is fair and reasonable. its annual recommendation to the Board
whether to approve the continuance of each The discussion below serves as a summary
The independent Trustees met separately AIM Fund's investment advisory agreement of the Senior Officer's independent
during their evaluation of the Fund's and sub-advisory agreements for another written evaluation with respect to the
investment advisory agreement with year. Fund's investment advisory agreement as
independent legal counsel from whom they well as a discussion of the material
received independent legal advice, and the The independent Trustees are assisted factors and related conclusions that
independent Trustees also received in their annual evaluation of the Fund's formed the basis for the Board's approval
assistance during their deliberations from investment advisory agreement by the of the Fund's investment advisory
the independent Senior Officer, a independent Senior Officer. One agreement and sub-advisory agreements.
full-time officer of the AIM Funds who responsibility of the Senior Officer is to Unless otherwise stated, information set
reports directly to the independent manage the process by which the AIM Funds' forth below is as of June 19, 2008 and
Trustees. proposed management fees are negotiated does not reflect any changes that may have
during the annual contract renewal process occurred since that date, including but
THE BOARD'S FUND EVALUATION PROCESS to ensure that they are negotiated in a not limited to changes to the Fund's
manner that is at arms' length and performance, advisory fees, expense
The Board's Investments Committee has reasonable. Accordingly, the Senior limitations and/or fee waivers.
established three Sub-Committees that are Officer must either supervise a
responsible for overseeing the management competitive bidding process or prepare an I. Investment Advisory Agreement
of a number of the series portfolios of independent written evaluation. The Senior
the AIM Funds. This Sub-Committee Officer has recommended that an A. Nature, Extent and Quality of
structure permits the Trustees to focus on independent written evaluation be provided Services Provided by Invesco Aim
the performance of the AIM Funds that have and, at the direction of the Board, has
been assigned to them. The Sub-Committees prepared an independent written The Board reviewed the advisory services
meet throughout the year to review the evaluation. provided to the Fund by Invesco Aim under
performance of their assigned funds, and the Fund's investment advisory agreement,
the Sub-Committees review monthly and During the annual contract renewal the performance of Invesco Aim in
quarterly comparative performance process, the Board considered the factors providing these services, and the
information and periodic asset flow data discussed below under the heading "Factors credentials and experience of the officers
for their assigned funds. These materials and Conclusions and Summary of Independent and employees of Invesco Aim who provide
are prepared under the direction and Written Fee Evaluation" in evaluating the these services. The Board's review of the
supervision of the independent Senior fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide
Officer. Over the course of each year, the investment advisory agreement and these services included the Board's
Sub-Committees meet with portfolio sub-advisory agreements at the contract consideration of Invesco Aim's portfolio
managers for their assigned funds and renewal meetings and at their meetings and product review process, various back
other members of management and review throughout the year as part of their office support functions provided by
with these individuals the performance, ongoing oversight of the Fund. The Fund's Invesco Aim, and Invesco Aim's equity and
investment objective(s), policies, investment advisory agreement and fixed income trading operations. The Board
strategies and limitations of these funds. sub-advisory agreements were considered concluded that the nature, extent and
separately, although the Board also quality of the advisory services provided
In addition to their meetings considered the common interests of all of to the Fund by Invesco Aim were
throughout the year, the Sub-Committees the AIM Funds in their deliberations. The appropriate and that Invesco Aim currently
meet at designated contract renewal Board considered all of the information is providing satisfactory advisory
meetings each year to conduct an in-depth provided to them and did not identify any services in accordance with the terms of
review of the performance, fees and particular factor that was controlling. the Fund's investment advisory agreement.
expenses of their assigned funds. During Each Trustee may have evaluated the In addition, based on their ongoing
the contract renewal process, the Trustees information provided differently from one meetings throughout the year with the
receive another and attributed different Fund's portfolio manager or managers, the
Board concluded that these individu-
continued
21 AIM SMALL CAP EQUITY FUND
als are competent and able to continue to C. Advisory Fees and Fee Waivers combined size of all of the AIM Funds and
carry out their responsibilities under the affiliates.
Fund's investment advisory agreement. The Board compared the Fund's contractual
advisory fee rate to the contractual E. Profitability and Financial
In determining whether to continue the advisory fee rates of funds in the Fund's Resources of Invesco Aim
Fund's investment advisory agreement, the expense group that are not managed by
Board considered the prior relationship Invesco Aim, at a common asset level and The Board reviewed information from
between Invesco Aim and the Fund, as well as of the end of the past calendar year. Invesco Aim concerning the costs of the
as the Board's knowledge of Invesco Aim's The Board noted that the Fund's advisory and other services that Invesco
operations, and concluded that it was contractual advisory fee rate was below Aim and its affiliates provide to the Fund
beneficial to maintain the current the median advisory fee rate of funds in and the profitability of Invesco Aim and
relationship, in part, because of such its expense group. The Board also reviewed its affiliates in providing these
knowledge. The Board also considered the the methodology used by Lipper in services. The Board also reviewed
steps that Invesco Aim and its affiliates determining contractual fee rates. information concerning the financial
have taken over the last several years to condition of Invesco Aim and its
improve the quality and efficiency of the The Board also compared the Fund's affiliates. The Board also reviewed with
services they provide to the AIM Funds in effective fee rate (the advisory fee after Invesco Aim the methodology used to
the areas of investment performance, any advisory fee waivers and before any prepare the profitability information. The
product line diversification, expense limitations/waivers) to the Board considered the overall profitability
distribution, fund operations, shareholder advisory fee rates of other clients of of Invesco Aim, as well as the
services and compliance. The Board Invesco Aim and its affiliates with profitability of Invesco Aim in connection
concluded that the quality and efficiency investment strategies comparable to those with managing the Fund. The Board noted
of the services Invesco Aim and its of the Fund, including two mutual funds that Invesco Aim continues to operate at a
affiliates provide to the AIM Funds in advised by Invesco Aim. The Board noted net profit, although increased expenses in
each of these areas have generally that the Fund's rate was below the rate recent years have reduced the
improved, and support the Board's approval for one mutual fund and above the rate for profitability of Invesco Aim and its
of the continuance of the Fund's the second mutual fund. affiliates. The Board concluded that the
investment advisory agreement. Fund's fees were fair and reasonable, and
The Board concluded that it was not that the level of profits realized by
B. Fund Performance necessary at this time to discuss with Invesco Aim and its affiliates from
Invesco Aim whether to implement any fee providing services to the Fund was not
The Board compared the Fund's waivers or expense limitations because the excessive in light of the nature, quality
performance during the past one, three and Fund's total expenses were at or below the and extent of the services provided. The
five calendar years to the performance of median total expenses of all but one share Board considered whether Invesco Aim is
funds in the Fund's performance group that class of the funds in the Fund's Lipper financially sound and has the resources
are not managed by Invesco Aim, and expense group that are not managed by necessary to perform its obligations under
against the performance of all funds in Invesco Aim. the Fund's investment advisory agreement,
the Lipper Small-Cap Core Funds Index. The and concluded that Invesco Aim has the
Board also reviewed the criteria used by After taking account of the Fund's financial resources necessary to fulfill
Invesco Aim to identify the funds in the contractual advisory fee rate, as well as these obligations.
Fund's performance group for inclusion in the comparative advisory fee information
the Lipper reports. The Board noted that discussed above, the Board concluded that F. Independent Written Evaluation of
the Fund's performance was in the second the Fund's advisory fees were fair and the Fund's Senior Officer
quintile of its performance group for the reasonable.
one and three periods and the fourth The Board noted that, at their direction,
quintile for the five year period (the D. Economies of Scale and Breakpoints the Senior Officer of the Fund, who is
first quintile being the best performing independent of Invesco Aim and Invesco
funds and the fifth quintile being the The Board considered the extent to which Aim's affiliates, had prepared an
worst performing funds). The Board noted there are economies of scale in Invesco independent written evaluation to assist
that the Fund's performance was above the Aim's provision of advisory services to the Board in determining the
performance if the Index for the one, the Fund. The Board also considered reasonableness of the proposed management
three and five year periods. The Board whether the Fund benefits from such fees of the AIM Funds, including the Fund.
also considered the steps Invesco Aim has economies of scale through contractual The Board noted that they had relied upon
taken over the last several years to breakpoints in the Fund's advisory fee the Senior Officer's written evaluation
improve the quality and efficiency of the schedule or through advisory fee waivers instead of a competitive bidding process.
services that Invesco Aim provides to the or expense limitations. The Board noted In determining whether to continue the
AIM Funds. The Board concluded that that the Fund's contractual advisory fee Fund's investment advisory agreement, the
Invesco Aim continues to be responsive to schedule includes seven breakpoints and Board considered the Senior Officer's
the Board's focus on fund performance. that the level of the Fund's advisory written evaluation.
Although the independent written fees, as a percentage of the Fund's net
evaluation of the Fund's Senior Officer assets, has decreased as net assets G. Collateral Benefits to Invesco Aim
only considered Fund performance through increased because of the breakpoints. and its Affiliates
the most recent calendar year, the Board Based on this information, the Board
also reviewed more recent Fund performance concluded that the Fund's advisory fees The Board considered various other
and this review did not change their appropriately reflect economies of scale benefits received by Invesco Aim and its
conclusions. at current asset levels. The Board also affiliates resulting from Invesco Aim's
noted that the Fund shares directly in relationship with the Fund, including the
economies of scale through lower fees fees received by Invesco Aim and its
charged by third party service providers affiliates for their provision of
based on the administrative,
continued
22 AIM SMALL CAP EQUITY FUND
transfer agency and distribution services that the Fund's investment of uninvested Aim and the Affiliated Sub-Advisers
to the Fund. The Board considered the cash and cash collateral from any pursuant to the sub-advisory agreements.
performance of Invesco Aim and its securities lending arrangements in the The Board noted that the sub-advisory fees
affiliates in providing these services and affiliated money market funds is in the have no direct effect on the Fund or its
the organizational structure employed by best interests of the Fund and its shareholders, as they are paid by Invesco
Invesco Aim and its affiliates to provide shareholders. Aim to the Affiliated Sub-Advisers, and
these services. The Board also considered that Invesco Aim and the Affiliated
that these services are provided to the II. Sub-Advisory Agreements Sub-Advisers are affiliates. After taking
Fund pursuant to written contracts which A. Nature, Extent and Quality of account of the Fund's contractual
are reviewed and approved on an annual Services Provided by Affiliated sub-advisory fee rate, as well as other
basis by the Board. The Board concluded Sub-Advisers relevant factors, the Board concluded that
that Invesco Aim and its affiliates were the Fund's sub-advisory fees were fair and
providing these services in a satisfactory The Board reviewed the services to be reasonable.
manner and in accordance with the terms of provided by Invesco Trimark Ltd., Invesco
their contracts, and were qualified to Asset Management Deutschland, GmbH, D. Financial Resources of the
continue to provide these services to the Invesco Asset Management Limited, Invesco Affiliated Sub-Advisers
Fund. Asset Management (Japan) Limited, Invesco
Australia Limited, Invesco Global Asset The Board considered whether each
The Board considered the benefits Management (N.A.), Inc., Invesco Hong Kong Affiliated Sub-Adviser is financially
realized by Invesco Aim as a result of Limited, Invesco Institutional (N.A.), sound and has the resources necessary to
portfolio brokerage transactions executed Inc. and Invesco Senior Secured perform its obligations under its
through "soft dollar" arrangements. Under Management, Inc. (collectively, the respective sub-advisory agreement, and
these arrangements, portfolio brokerage "Affiliated Sub-Advisers") under the concluded that each Affiliated Sub-Adviser
commissions paid by the Fund and/or other sub-advisory agreements and the has the financial resources necessary to
funds advised by Invesco Aim are used to credentials and experience of the officers fulfill these obligations.
pay for research and execution services. and employees of the Affiliated
The Board noted that soft dollar Sub-Advisers who will provide these
arrangements shift the payment obligation services. The Board concluded that the
for the research and execution services nature, extent and quality of the services
from Invesco Aim to the funds and to be provided by the Affiliated
therefore may reduce Invesco Aim's Sub-Advisers were appropriate. The Board
expenses. The Board also noted that noted that the Affiliated Sub-Advisers,
research obtained through soft dollar which have offices and personnel that are
arrangements may be used by Invesco Aim in geographically dispersed in financial
making investment decisions for the Fund centers around the world, have been formed
and may therefore benefit Fund in part for the purpose of researching and
shareholders. The Board concluded that compiling information and making
Invesco Aim's soft dollar arrangements recommendations on the markets and
were appropriate. The Board also concluded economies of various countries and
that, based on their review and securities of companies located in such
representations made by Invesco Aim, these countries or on various types of
arrangements were consistent with investments and investment techniques, and
regulatory requirements. providing investment advisory services.
The Board concluded that the sub-advisory
The Board considered the fact that the agreements will benefit the Fund and its
Fund's uninvested cash and cash collateral shareholders by permitting Invesco Aim to
from any securities lending arrangements utilize the additional resources and
may be invested in money market funds talent of the Affiliated Sub-Advisers in
advised by Invesco Aim pursuant to managing the Fund.
procedures approved by the Board. The
Board noted that Invesco Aim will receive B. Fund Performance
advisory fees from these affiliated money
market funds attributable to such The Board did not view Fund performance as
investments, although Invesco Aim has a relevant factor in considering whether
contractually agreed to waive through at to approve the sub-advisory agreements for
least June 30, 2009, the advisory fees the Fund, as no Affiliated Sub-Adviser
payable by the Fund in an amount equal to currently manages any portion of the
100% of the net advisory fees Invesco Aim Fund's assets.
receives from the affiliated money market
funds with respect to the Fund's C. Sub-Advisory Fees
investment of uninvested cash, but not
cash collateral. The Board considered the The Board considered the services to be
contractual nature of this fee waiver and provided by the Affiliated Sub-Advisers
noted that it remains in effect until at pursuant to the sub-advisory agreements
least June 30, 2009. The Board concluded and the services to be provided by Invesco
Aim pursuant to the Fund's investment
advisory agreement, as well as the
allocation of fees between Invesco
continued
23 AIM SMALL CAP EQUITY FUND
Supplement to Semiannual Report dated 6/30/08
AIM SMALL CAP EQUITY FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is
not indicative of future results. More
The following information has been For periods ended 6/30/08 recent returns may be more or less than
prepared to provide Institutional Class Inception 6.75% those shown. All returns assume
shareholders with a performance overview 5 Years 11.82 reinvestment of distributions at NAV.
specific to their holdings. Institutional 1 Year -7.84 Investment return and principal value will
Class shares are offered exclusively to 6 Months* -4.68 fluctuate so your shares, when redeemed,
institutional investors, including defined may be worth more or less than their
contribution plans that meet certain * Cumulative total return that has not original cost. See full report for
criteria. been annualized information on comparative benchmarks.
========================================== Please consult your Fund prospectus for
more information. For the most current
Institutional Class shares' inception date month-end performance, please call 800 451
is April 29, 2005. Returns since that date 4246 or visit invescoaim.com.
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 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.
The total annual Fund operating expense
ratio set forth in the most recent Fund
prospectus as of the date of this
supplement for Institutional Class shares
was 0.83%. The expense ratios presented
above may vary from the expense ratios
presented in other sections of the actual
report that are based on expenses incurred
during the period covered by the report.
Over for information on your Fund's expenses.
THIS SUPPLEMENT 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. [INVESCO AIM LOGO]
- SERVICE MARK -
invescoaim.com SCE-INS-2 Invesco Aim Distributors, Inc.
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management fees
and other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with ongoing costs of investing in other mutual funds. The example is based on
an investment of $1,000 invested at the beginning of the period and held for the
entire period January 1, 2008, through June 30, 2008.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Actual Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the hypothetical information is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------
HYPOTHETICAL
(5% ANNUAL RETURN BEFORE
ACTUAL EXPENSES)
------------------------------------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE
CLASS (01/01/08) (06/30/08)(1) PERIOD(2) (06/30/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $953.20 $3.84 $1,020.93 $3.97 0.79%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period January 1, 2008, through June 30, 2008, 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
182/366 to reflect the most recent fiscal half year.
AIM SMALL CAP EQUITY FUND
PROXY RESULTS
A Special Meeting ("Meeting") of Shareholders of AIM Small Cap Equity Fund, an
investment portfolio of AIM Funds Group, a Delaware statutory trust ("Trust"),
was held on February 29, 2008. The Meeting was held for the following purposes:
(1) Elect 13 trustees to the Board of Trustees of the Trust, each of whom will
serve until his or her successor is elected and qualified.
(2) Approve an amendment to the Trust's Agreement and Declaration of Trust that
would permit the Board of Trustees of the Trust to terminate the Trust, the
Fund, and each other series portfolio of the Trust, or a share class without
a shareholder vote.
(3) Approve a new sub-advisory agreement between Invesco Aim Advisors, Inc. and
each of AIM Funds Management, Inc.; Invesco Asset Management Deutschland,
GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan)
Limited; Invesco Australia Limited; Invesco Global Asset Management (N.A.),
Inc.; Invesco Hong Kong Limited; Invesco Institutional (N.A.), Inc.; and
Invesco Senior Secured Management, Inc.
The results of the voting on the above matters were as follows:
<Table>
<Caption>
WITHHELD/
MATTERS VOTES FOR ABSTENTIONS**
- -----------------------------------------------------------------------------------------------------------
(1)* Bob R. Baker...................................................... 136,849,147 4,123,920
Frank S. Bayley................................................... 136,856,960 4,116,107
James T. Bunch.................................................... 136,850,068 4,122,999
Bruce L. Crockett................................................. 136,834,285 4,138,782
Albert R. Dowden.................................................. 136,851,266 4,121,801
Jack M. Fields.................................................... 136,893,917 4,079,150
Martin L. Flanagan................................................ 136,889,028 4,084,039
Carl Frischling................................................... 136,837,466 4,135,601
Prema Mathai-Davis................................................ 136,840,379 4,132,688
Lewis F. Pennock.................................................. 136,853,427 4,119,640
Larry Soll, Ph.D. ................................................ 136,708,623 4,264,444
Raymond Stickel, Jr. ............................................. 136,747,468 4,225,599
Philip A. Taylor.................................................. 136,731,527 4,241,540
</Table>
<Table>
<Caption>
WITHHELD/ BROKER
VOTES FOR VOTES AGAINST ABSTENTIONS NON-VOTES
- ---------------------------------------------------------------------------------------------------------------------------
(2)* Approve an amendment to the Trust's Agreement
and Declaration of Trust that would permit the
Board of Trustees of the Trust to terminate
the Trust, the Fund, and each other series
portfolio of the Trust, or a share class
without a shareholder vote.................... 89,092,876 12,597,596 4,024,351 35,258,244
(3) Approve a new sub-advisory agreement between
Invesco Aim Advisors, Inc. and each of AIM
Funds Management, Inc.; Invesco Asset
Management Deutschland, GmbH; Invesco Asset
Management Limited; Invesco Asset Management
(Japan) Limited; Invesco Australia Limited;
Invesco Global Asset Management (N.A.), Inc.;
Invesco Hong Kong Limited; Invesco
Institutional (N.A.), Inc.; and Invesco Senior
Secured Management, Inc. ..................... 17,784,186 641,450 607,387 6,257,282
</Table>
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Funds Group.
** Includes Broker Non-Votes.
24 AIM SMALL CAP EQUITY FUND
====================================================================================================================================
EDELIVERY
INVESCOAIM.COM/EDELIVERY
REGISTER FOR EDELIVERY - eDelivery is the process of receiving your fund and account information via e-mail. Once your quarterly
statements, tax forms, fund reports, and prospectuses are available, we will send you an e-mail notification containing links to
these documents. For security purposes, you will need to log in to your account to view your statements and tax forms.
WHY SIGN UP? HOW DO I SIGN UP?
Register for eDelivery to: It's easy. Just follow these simple steps:
- - save your Fund the cost of printing and postage. 1. Log in to your account.
- - reduce the amount of paper you receive. 2. Click on the "Service Center" tab.
- - gain access to your documents faster by not waiting for the mail. 3. Select "Register for eDelivery" and complete the consent
- - view your documents online anytime at your convenience. process.
- - save the documents to your personal computer or print them out
for your records.
This service is provided by Invesco Aim Investment Services, Inc.
====================================================================================================================================
FUND HOLDINGS AND PROXY VOTING INFORMATION
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth
quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund
files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is
available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your
Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC
Web site at sec.gov. Copies of the 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 Reference Room, including information about duplicating fee charges, by
calling 202 942 8090 or 800 732 0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file
numbers for the Fund are 811-01540 and 002-27334.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities
is avail- able without charge, upon request, from our Client Services department at 800 959 4246 or on the Invesco Aim Web site,
invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC Web site,
sec.gov.
Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is
available at our Web site. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting
Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC Web site, sec.gov.
If used after October 20, 2008, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly
Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco
Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors for [INVESCO AIM LOGO]
the products and services represented by Invesco Aim; they each provide investment advisory services to - SERVICE MARK -
individual and institutional clients and do not sell securities. Invesco Institutional (N.A.), Inc., Invesco
Senior Secured Management, Inc., Invesco Global Asset Management (N.A.), Inc., Invesco Trimark Ltd., Invesco
Asset Management (Japan) Ltd. and Invesco Hong Kong Ltd. are affiliated investment advisors that serve as the
subadvisor for some of the products and services represented by Invesco Aim. Invesco Aim Distributors, Inc. is
the distributor for the retail mutual funds, exchange-traded funds and U.S. institutional money market funds
represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd.
invescoaim.com SCE-SAR-1 Invesco Aim Distributors, 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 16, 2008, 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 16, 2008, 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 5, 2008
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 5, 2008
By: /s/ Sidney M. Dilgren
---------------------------------
Sidney M. Dilgren
Principal Financial Officer
Date: September 5, 2008
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.