------------------------
OMB APPROVAL
------------------------
OMB Number: 3235-0570
Expires: August 31, 2011
Estimated average burden
hours per response: 18.9
------------------------
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: 12/31/08
Item 1. Reports to Stockholders.
[Invesco Aim Logo] Aim Basic Balanced Fund
- - Service mark - Annual Report to Shareholders # December 31, 2008
[MOUNTAIN GRAPHIC]
2 Letters to Shareholders
4 Performance Summary
4 Management Discussion
6 Long-Term Fund Performance
8 Supplemental Information
9 Schedule of Investments
16 Financial Statements
19 Notes to Financial Statements
27 Financial Highlights
29 Auditor's Report
30 Fund Expenses
31 Tax Information
32 Trustees and Officers
[TAYLOR PHOTO] Dear Shareholder:
In previous reports, I've talked with you about short-term market volatility. I'd like to take this
opportunity to update you on market developments during calendar year 2008 and provide you with some
perspective and encouragement.
Philip Yaylor Market Overview
At the start of 2008, we saw warning signs of increasing economic ills -- a weakening housing market,
rising inflation and slowing job growth, among others. In response, the U.S. Federal Reserve Board (the Fed)
cut short-term interest rate targets throughout 2008 in an
effort to stimulate economic growth. The Fed reduced its short-term interest rate target from 4.25% to a range
of zero to 0.25% during the year.(1)
In the spring of 2008, more serious factors came to the forefront --
driving unemployment sharply higher(2) and causing major stock market indexes to
hit multi-year lows in the U.S. and overseas.(3) For example the S&P 500 Index,
considered representative of the U.S. stock market, had its worst one-year
performance since 1937.(4) During the second half of 2008, the Fed, the U.S.
Department of the Treasury and other federal agencies took unprecedented action
to rescue the troubled financials sector and domestic automobile industry,
stabilize the stock market and inject liquidity into the credit markets.
How we got here
The cause of this correction was years of lax lending associated with the recent
housing boom. Mortgage loans of questionable quality were bundled into
hard-to-value securities that were bought by, and traded among, financial
institutions. As the value of those securities declined, financial institutions
sought to unload them -- but there were few buyers. With the value of their
assets falling and access to credit tightening, a number of well-established
financial firms faced severe difficulties, and investor uncertainty and market
volatility spiked.
In October 2008, the administration and Congress enacted a plan, the
Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury
to purchase up to $700 billion in troubled mortgage-related assets -- the
largest and most direct effort to resolve a credit crisis in the last half
century. The Fed, in concert with other central banks, cut short-term interest
rate targets and undertook other initiatives intended to restore investor
confidence, expand lending and mitigate the effects of the global credit crisis.
Following his election, President Barack Obama again pledged to act boldly to
stimulate the U.S. economy.
As we enter 2009, the volatility in the stock, fixed-income and credit
markets we saw last year emphasized the importance of three timeless investing
principles.
Investing in volatile markets
Through up markets and down, we believe history shows investors should:
# Invest for the long term. Short-term fluctuations have always been a
reality of the markets. We urge you to stick to your investment plan
and stay focused on your long-term goals.
# Diversify. Although diversification doesn't eliminate the risk of
loss or guarantee a profit, a careful selection of complementary
asset classes may cushion your portfolio against excessive
volatility.
# Stay fully invested. Trying to time the market is a gamble, not an
investment strategy. A sound investment strategy includes viewing
market volatility as a matter of course, not a reason to panic.
A trusted financial advisor can explain more fully the potential value of
following these principles. An experienced advisor who knows your individual
investment goals, financial situation and risk tolerance can be your most
valuable asset during times of market volatility. Your advisor can provide
guidance and can monitor your investments to ensure they're on course.
It's also helpful to remember that many of history's significant buying
opportunities resulted from short-term economic crises that, in their time, were
considered unprecedented. We believe current market uncertainty may represent a
buying opportunity for patient, long-term investors. Rest assured that Invesco
Aim's portfolio managers are working diligently on your behalf to attempt to
capitalize on this situation.
Managing money is our focus
I believe Invesco Aim is uniquely positioned to navigate current difficult
markets. Our parent company, Invesco Ltd., is one of the world's largest and
most diversified global investment managers. Invesco provides clients with
diversified investment strategies from distinct management teams around the
globe and a range of investment products. Invesco's single focus is asset
management -- which means we focus on doing one thing well: managing your money.
That can be reassuring in uncertain times.
While market conditions change often, our commitment to putting
shareholders first, helping clients achieve their investment goals and providing
excellent customer service remains constant.
If you have questions about this report or your account, please contact
one of our client service representatives at 800 959 4246.
Thank you for your continued confidence, and all of us at Invesco Aim look
forward to serving you.
Sincerely,
/S/ Philip Taylor
Philip Taylor
Senior Managing Director, Invesco Ltd.
CEO, Invesco Aim
- ----------
1 U.S. Federal Reserve;
2 Bureau of Labor Statistics;
3 FactSet Research;
4 Wall Street Journal
2. AIM Basic Balanced Fund
[CROCKETT PHOTO] Dear Fellow Shareholders:
Bruce Crokett Since my last letter, continuing troubles in the global economy and financial markets have negatively
affected all investors. The new government promises to move quickly with a stimulus package, yet considerable
anxiety remains about how, when and what kind of a recovery will occur. While no one
likes to see investment values decline as sharply as they have recently, as mutual fund investors we can
find some consolation in the knowledge that our fund investments are more transparent, more comprehensively
governed and more closely regulated than most other kinds of investments. In addition, mutual funds generally are
more diversified than other investments; as shareholders we invest not in a single security but in a
portfolio of multiple securities. The benefits of diversification have been reiterated by the stories of
investors who "lost everything" because they had too many of their assets in one place, whether that place was
a single money manager or their employer's stock. Mutual fund investors also have the opportunity to diversify
further among different types of funds that each deploy a different strategy and focus on different kinds
of securities. These include conservatively managed money market funds, which, relative to other securities,
continue to offer a more safe, liquid, and convenient way to invest short-term assets.
In addition to diversification, investing discipline is essential during
challenging times such as these. Strategies such as dollar-cost-averaging, where
individuals invest a consistent amount at regular intervals, can help investors
acquire more fund shares when prices are low. Periodic rebalancing of asset
allocation plans achieves the same effect. "Buy low, sell high" has long been
the mantra of investment success, but the advice is not always easy to follow
because it requires the discipline to resist prevailing trends. Of course,
investment strategies, such as dollar-cost-averaging and portfolio rebalancing
do not guarantee a profit or eliminate the risk of loss. Investors should
consider their ability to continue investing regardless of fluctuating security
prices.
A long-term view is also important, particularly for assets that are not
needed right away. In the past, it has often proven better to keep long-term
assets invested through a downturn than to miss the beginning of the upward
trend. To develop a diversified and disciplined investing plan that is right for
your individual goals, I encourage you to consult an experienced and trustworthy
investment professional who has the knowledge and the tools to help you
establish and implement the plan, monitor its results and adapt it to changing
goals and circumstances.
Even when working with a personal financial advisor, investors should
supplement the relationship with their own knowledge and awareness of the
investments they hold. Visit the AIM Funds website at invescoaim.com regularly
to find out what is happening in your AIM funds and to read timely market
commentary from Invesco Aim management, strategists and portfolio managers. The
site's "Education and Planning" section can also help you clarify basic
investment concepts, learn how to choose a financial advisor, evaluate different
investment choices and make more informed investment decisions.
As always, your Board of Trustees and Invesco Aim Advisors Inc. are
committed to putting your interests first by controlling costs, monitoring
investment performance and streamlining the investment management process during
these difficult times. Your Board has already begun the annual review and
management contract renewal process with the continuing goal of making AIM funds
one of the best and most cost-effective ways for you to invest your hard-earned
money.
While the investing climate may remain uncertain for a while, economies
and markets are dynamic, and no stage is ever permanent. Please feel free to
contact me in writing with your questions or concerns. You can send an email to
me at bruce@brucecrockett.com.
Best regards,
/s/ Bruce L. Crockett
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3. AIM Basic Balanced Fund
Management's Discussion of Fund Performance
Performance summary
For the fiscal year ended December 31, 2008, all share classes of AIM Basic
Balanced Fund underperformed the Fund's broad market, style-specific and peer
group indexes.+#
Drivers of performance were stock specific. We attribute the Fund's
underperformance versus its indexes mainly to below-market returns from select
equity investments in the financials sector. Select equity investments in the
consumer discretionary and financials sectors were among the largest positive
contributors to Fund performance. The Fund's fixed income holdings declined and
underperformed the Barclays Capital U.S. Aggregate Index during the year.
Your Fund's long-term performance appears later in this report.
Fund vs. Indexes
Total returns, 12/31/07 to 12/31/08, 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 -38.72%
Class B Shares -39.14
Class C Shares -39.18
Class R Shares -38.83
Class Y Shares* -38.68
Investor Class Shares -38.72
S&P 500 Index+ (Broad Market Index) -36.99
Custom Basic Balanced Index# (Style-Specific Index) -21.94
Lipper Mixed-Asset Target Allocation Moderate Funds Indexo+ (Peer Group Index) -27.38
- ------------
+ Lipper Inc.;
# Invesco Aim, Lipper Inc.
* Share class incepted during the fiscal year. See page 7 for a detailed
explanation of Fund performance.
How we invest
We seek to create wealth by maintaining a long-term investment horizon and
investing in companies that are selling at a significant discount to their
estimated intrinsic value -- a value that is based on the estimated future cash
flows generated by the business. The Fund's philosophy is based on key elements
that we believe have extensive empirical evidence:
# Company intrinsic values can be reasonably estimated. Importantly, this
estimated fair business value is independent of the company's stock price.
# Market prices are more volatile than business values, partly because
investors regularly overreact to negative news.
# Long-term investment results are a function of the level and growth of
business value in the portfolio.
Since our application of this strategy is highly disciplined and
relatively unique, it is important to understand the benefits and limitations of
our process. First, the investment strategy is intended to preserve your capital
while growing it at above-market rates over the long term. Second, our
investments have little in common with popular stock market indexes and most of
our peers. And third, the Fund's short-term relative performance will naturally
be different than the stock market and peers and have little information value
since we simply don't own the same stocks.
Our fixed income portfolio investment process is accomplished through the
use of top-down strategies involving duration management, yield-curve position
and sector allocation. In addition, we use bottom-up strategies involving credit
analysis and selection of specific securities.
Market conditions and your Fund
Equity markets declined sharply during the fiscal year as the financial crisis
intensified and the global economy weakened.(1) As painful as bear markets like
this are to live through, we believe they can actually improve long term results
because of the extraordinary investment opportunities they produce.
Financials was the worst performing sector of the equity market during the
fiscal year as the credit crisis intensified and a liquidity crisis emerged.
Fannie Mae and AIG were among the Fund's largest detractors during the year. We
understood the negative impact of credit losses on both companies and believed
they had adequate financial wherewithal to absorb the credit losses that will
persist for years. Ironically, the credit losses remained within the range of
our expectations. However, the rapid loss of investor confidence and the related
liquidity crisis and public policy response surprised us. In the end, the
valuation opportunity that was created by the credit cycle was trumped by a
liquidity crisis at AIG and the unintended consequences of government
intervention at Fannie Mae -- both events inherently unpredictable but lethal.
We sold our positions in these investments at substantial losses.
The Fund's fixed income holdings also declined during the year, and
underperformed the Barclays Capital U.S. Aggregate Index. The underperformance
was mainly due to our exposure to financial companies, including Wachovia and
Lehman Brothers Holdings, which we sold. While our exposure to Lehman and other
financial bonds represented small
Portfolio Composition
By security type
Common Stocks & Other Equity Interests 63.3%
Bonds & Notes 18.3
U.S. Government Sponsored
Mortgage Backed Securities 15.1
Preferred Stocks 4.3
Asset Backed Securities 3.2
U.S. Treasury Notes 0.5
Municipal Obligations 0.5
U.S. Government Sponsored
Agency Securities 0.4
Money Market Funds Plus
Other Assets Less Liabilities -5.6
Top Five Fixed Income Issuers*
1. Federal Home Loan Mortgage Corp. 7.0%
2. Federal National Mortgage 6.7
Association
3. Government National
Mortgage Association 1.5
4. Citicorp Lease-Pass Through 1.0
Trust
5. Time Warner Entertainment 0.8
Co. L.P.
Total Net Assets $609.2 million
Total Number of Holdings* 413
Top 10 Equity Holdings*
1. UnitedHealth Group Inc. 3.6%
2. ASML Holding N.V. 3.1
3. Robert Half International, Inc. 2.5
4. Moody's Corp. 2.4
5. JPMorgan Chase & Co. 2.2
6. Aetna Inc. 2.2
7. Omnicom Group Inc. 2.1
8. Home Depot, Inc. (The) 1.9
9. Target Corp. 1.8
10. Molson Brewing Co.-Class B 1.8
The Fund's holdings are subject to change, and there is no assurance that
the Fund will continue to hold any particular security.
* Excluding money market fund holdings.
4 AIM Basic Balanced Fund
positions, the price declines of these bond issues were substantial. It took
just days for Lehman Brothers to move from an A rating to bankruptcy. Wachovia
bonds, which were A-rated at the time, also experienced declines in 2008. But
our losses in Wachovia proved to be temporary as the company was acquired by
AA-rated Wells Fargo on December 31, 2008.
With such extreme volatility in 2008, we think it is important to remind
our shareholders of our commitment to a portfolio of high quality,
investment-grade securities. The majority of our holdings are rated in the
highest categories of A, AA, or AAA and all fixed-income securities must be
investment-grade at the time of purchase.
Context for results
It's important to remember that what many now consider to be great historic
buying opportunities were at the time quite frightening events, and in economic
terms, many of those episodes seemed far more threatening than our current
situation. History and common sense indicate this crisis will pass, and we
believe it will prove to be a historic buying opportunity for U.S. stocks. The
timing and level of any market bottom is uncertain, but we believe the absolute
return opportunity from recent year-end levels will prove compelling.
The current bear market represents one of the three greatest declines in
the past 60 years.(2) Following the 2000 to 2002 Nasdaq decline, investors
learned what a permanent loss of capital looks and feels like. While the Nasdaq
remains about 69% below its 2000 peak,(3) our losses during the 2000 - 2002 bear
market proved temporary as a new high was achieved in 2004.
What's the reason for the different experience? Our strategy emphasizes
fundamental business value and this value grew from 2000 to 2002 despite a
recession and the bear market in stock prices. Once the market environment
improved, prices reverted to fundamental value. We see a similar situation
unfolding in this bear market. Our estimate of portfolio intrinsic value is
marginally higher today than in 2007, yet the market price of the portfolio has
declined by about 40%.
Portfolio assessment
We believe the single most important indicator of the way AIM Basic Balanced
Fund is positioned for potential future success is not our historical investment
results or popular statistical measures, but rather the difference between
current market prices and the portfolio's estimated intrinsic value -- the
aggregate business value of the portfolio based on our estimate of intrinsic
value for each individual holding. During the year, we believe the estimated
intrinsic value of the portfolio grew despite permanent losses in some of our
financials investments.
At the close of the year, the difference between the market price and the
estimated intrinsic value of the portfolio was near record levels and produced
one of the most favorable capital appreciation opportunities in the Fund's
history, in our opinion. While there is no assurance that market value will ever
reflect our estimate of the portfolio's intrinsic value, we believe the large
gap between price and estimated value may stack the odds in favor of
above-average capital appreciation once capital markets normalize.
In closing
While we are disappointed with our results in 2008, we are also excited about
the opportunities the current crisis has created. As we have pointed out many
times, the distinctive nature of our strategy will naturally produce results
that are either above or below the market in the short term. We understand it
can be distressing to shareholders when results lag the market as they have this
year. We do not have any special insight into the magnitude or duration of this
bear market, but historically, valuation opportunities of this magnitude have
not lasted for very long. Ironically, part of our 2008 underperformance was due
to our efforts to capitalize on this opportunity should it have proved short
lived. Regardless of duration, our process was designed to exploit just such a
period, and we believe patient shareholders may reap the benefits of recent
investments as most of these loses may again prove temporary.
- ------------
1 Lipper Inc.
2 The Leathold Group
3 Bloomberg L.P.
The views and opinions expressed in management's discussion of Fund performance
are those of Invesco Aim Advisors, Inc. These views and opinions are subject to
change at any time based on factors such as market and economic conditions.
These views and opinions may not be relied upon as investment advice or
recommendations, or as an offer for a particular security. The information is
not a complete analysis of every aspect of any market, country, industry,
security or the Fund. Statements of fact are from sources considered reliable,
but Invesco Aim Advisors, Inc. makes no representation or warranty as to their
completeness or accuracy. Although historical performance is no guarantee of
future results, these insights may help you understand our investment management
philosophy.
See important Fund and index disclosures later in this report.
[STANLEY PHOTO] Bret Stanley
Chartered Financial Analyst, senior portfolio manager, is lead manager of AIM Basic Balanced Fund. He
earned a B.B.A. from The University of Texas at Austin and an M.S. from the University of Houston.
[COLEMAN PHOTO] R. Canon Coleman II
Chartered Financial Analyst, portfolio manager, is manager of AIM Basic Balanced Fund. He earned a
B.S. and an M.S. from the University of Florida and an M.B.A. from the Wharton School at the
University of Pennsylvania.
[SEINSHEIMER PHOTO] Matthew Seinsheimer
Chartered Financial Analyst, senior portfolio manager, is manager of AIM Basic Balanced Fund. He earned
a B.B.A. from Southern Methodist University and an M.B.A. from The University of Texas at Austin.
[SIMON PHOTO] Michael Simon
Chartered Financial Analyst, senior portfolio manager, is manager of AIM Basic Balanced Fund.
He earned a B.B.A. from Texas Christian University and an M.B.A. from the University of Chicago.
[BRIEN PHOTO] Cynthia Brien
Chartered Financial Analyst, portfolio manager, is manager of AIM Basic Balanced Fund. She earned a B.B.A.
from The University of Texas at Austin. She joined the team on Jan. 14, 2009, after the close of the
reporting period.
[BURGE PHOTO] Chuck Burge
Senior portfolio manager, is manager of AIM Basic Balanced Fund. Mr. Burge earned a B.S. in economics from
Texas A&M University and an M.B.A. in finance and accounting from Rice University. He joined the team on
Jan. 14, 2009, after the close of the reporting period.
Brendan Gau left the team on Jan. 14, 2009, after the close of the reporting
period.
Mark Gilley left the team on Jan. 14, 2009, after the close of the reporting
period.
Assisted by the Basic Value Team
5 AIM Basic Balanced Fund
Your Fund's Long-Term Performance
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable
sales charges and Fund expenses including management fees. Results for Class B
shares are calculated as if a hypothetical shareholder had liquidated his entire
investment in the Fund at the close of the reporting period and paid the
applicable contingent deferred sales charges. Index results include reinvested
dividends, but they do not reflect sales charges.
Performance of an index of funds reflects fund expenses and management
fees; performance of a market index does not. Performance shown in the chart and
table(s) does not reflect deduction of taxes a shareholder would pay on Fund
distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the
value of the Fund and its indexes. We believe that a logarithmic chart is more
effective than other types of charts in illustrating changes in value during the
early years shown in the chart. The vertical axis, the one that indicates the
dollar value of an investment, is constructed with each segment representing a
percent change in the value of the investment. In this chart, each segment
represents a doubling, or 100% change, in the value of the investment. In other
words, the space between $5,000 and $10,000 is the same size as the space
between $10,000 and $20,000.
6 AIM Basic Balanced Fund
[MOUNTAIN CHART]
Results of a $10,000 Investment -- Oldest Share Classes since Inception
Fund data from 9/28/01, index data from 9/30/01
Lipper
Mixed-Asset
AIM Basic AIM Basic AIM Basic Target Allocation
Balanced Fund- Balanced Fund- Balanced Fund- S&P 500 Custom Basic Moderate Funds
Date Class A Shares Class B Shares Class C Shares Index(2) Balanced Index(1) Index(2)
9/28/01 $ 9450 $ 10000 $ 10000
9/01 9450 10000 10000 $ 10000 $ 10000 $ 10000
10/01 9620 10180 10180 10191 10032 10173
11/01 10055 10630 10630 10972 10326 10519
12/01 10200 10776 10776 11068 10446 10610
1/02 10133 10706 10706 10907 10432 10498
2/02 10057 10616 10616 10697 10482 10439
3/02 10420 10992 10992 11099 10710 10663
4/02 10268 10822 10822 10426 10573 10467
5/02 10249 10802 10812 10350 10640 10450
6/02 9694 10219 10221 9613 10311 9941
7/02 9084 9566 9568 8864 9785 9498
8/02 9217 9697 9708 8922 9896 9640
9/02 8567 9008 9008 7953 9300 9125
10/02 8921 9380 9381 8652 9696 9442
11/02 9390 9862 9863 9161 10062 9796
12/02 9080 9531 9531 8623 9883 9602
1/03 8916 9359 9360 8398 9743 9512
2/03 8743 9168 9178 8272 9641 9457
3/03 8671 9088 9097 8352 9647 9525
4/03 9190 9632 9642 9039 10189 10042
5/03 9855 10318 10328 9515 10659 10476
6/03 9931 10392 10402 9637 10731 10585
7/03 9980 10443 10443 9807 10683 10532
8/03 10231 10696 10696 9997 10811 10671
9/03 10189 10645 10645 9892 10862 10753
10/03 10459 10927 10938 10451 11220 11047
11/03 10642 11109 11120 10543 11323 11128
12/03 11107 11593 11593 11095 11787 11538
1/04 11251 11735 11745 11299 11949 11685
2/04 11434 11916 11927 11456 12154 11823
3/04 11432 11916 11916 11283 12127 11783
4/04 11229 11684 11695 11106 11823 11554
5/04 11219 11674 11684 11258 11877 11573
6/04 11444 11908 11909 11477 12072 11719
7/04 11008 11444 11455 11097 12017 11571
8/04 11028 11464 11465 11142 12212 11705
9/04 11096 11517 11528 11262 12338 11824
10/04 11174 11598 11609 11435 12503 11967
11/04 11553 11982 11992 11897 12842 12258
12/04 11872 12303 12313 12302 13148 12570
1/05 11761 12178 12189 12002 13040 12426
2/05 11872 12293 12304 12254 13269 12582
3/05 11747 12153 12163 12038 13132 12410
4/05 11667 12059 12070 11809 13062 12282
5/05 11838 12237 12247 12185 13307 12544
6/05 11932 12326 12337 12202 13424 12692
7/05 12114 12503 12514 12656 13608 12980
8/05 12043 12420 12430 12540 13642 12989
9/05 12071 12436 12447 12642 13701 13027
10/05 11919 12279 12290 12431 13449 12791
- -----------
1 Invesco Aim, Lipper Inc.
2 Lipper Inc.
[MOUNTAIN CHART]
11/05 12242 12603 12613 12901 13738 13044
12/05 12446 12802 12811 12905 13839 13163
1/06 12741 13095 13104 13247 14162 13474
2/06 12731 13075 13083 13283 14233 13483
3/06 12886 13231 13230 13448 14293 13557
4/06 12957 13295 13304 13629 14500 13677
5/06 12681 13012 13021 13237 14274 13458
6/06 12589 12901 12911 13255 14341 13475
7/06 12671 12975 12985 13336 14628 13607
8/06 12835 13143 13154 13653 14864 13838
9/06 13086 13387 13397 14005 15094 14026
10/06 13375 13684 13693 14461 15431 14356
11/06 13519 13811 13820 14735 15714 14611
12/06 13772 14065 14075 14942 15889 14746
1/07 13928 14203 14213 15168 16008 14890
2/07 13834 14118 14127 14872 15957 14876
3/07 13930 14200 14209 15038 16105 14990
4/07 14369 14637 14647 15704 16497 15377
5/07 14682 14946 14956 16251 16804 15660
6/07 14588 14843 14853 15982 16549 15507
7/07 14231 14467 14478 15487 16145 15251
8/07 14314 14542 14564 15718 16332 15362
9/07 14379 14602 14612 16306 16719 15773
10/07 14685 14903 14913 16565 16780 16025
11/07 14231 14430 14451 15872 16408 15707
12/07 14112 14302 14312 15762 16332 15583
1/08 13622 13794 13804 14817 16049 15116
2/08 13250 13405 13415 14336 15657 14902
3/08 12923 13070 13079 14274 15608 14804
4/08 13458 13601 13610 14969 16052 15270
5/08 13490 13622 13632 15163 15989 15410
6/08 12425 12538 12548 13886 15066 14642
7/08 12436 12538 12548 13769 15028 14428
8/08 12576 12680 12690 13968 15238 14444
9/08 10933 11016 11026 12725 14485 13351
10/08 9170 9226 9237 10588 12844 11584
11/08 8452 8512 8523 9828 12458 10984
12/08 8654 8702 8702 9932 12748 11316
Average Annual Total Returns
As of 12/31/08, including maximum applicable sales charges
Class A Shares
Inception (9/28/01) 1.97%
5 Years -5.95
1 Year -42.08
Class B Shares
Inception (9/28/01) 1.90%
5 Years -5.92
1 Year -42.09
Class C Shares
Inception (9/28/01) 1.90%
5 Years -5.57
1 Year -39.77
Class R Shares
Inception 1.41%
5 Years -5.09
1 Year -38.83
Class Y Shares
Inception 1.20%
5 Years -4.87
1 Year -38.68
Investor Class Shares
Inception 1.21%
5 Years -4.88
1 Year -38.72
Class R shares' inception date is April 30, 2004. Returns since that date are
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.
Class Y shares' inception date is October 3, 2008; returns since that date
are actual returns. All other returns are blended returns of actual Class Y
share performance and restated Class A share performance (for periods prior to
the inception date of Class Y shares) at net asset value. The restated Class A
share performance reflects the Rule 12b-1 fees applicable to Class A shares as
well as any fee waivers or expense reimbursements received by Class A 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 to
Class A shares for the period using blended returns. Class A shares' inception
date is September 28, 2001.
The performance data quoted represent past performance and cannot
guarantee comparable future results; current performance may be lower or higher.
Please visit invescoaim.com for the most recent month-end performance.
Performance figures reflect reinvested distributions, changes in net asset value
and the effect of the maximum sales charge unless otherwise stated. Investment
return and principal will fluctuate so that you may have a gain or a loss when
you sell shares.
The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus as of the date of this report for Class A, Class B, Class C,
Class R, Class Y and Investor Class shares was 1.08%, 1.83%, 1.83%, 1.33%, 0.83%
and 1.08%, respectively. The expense ratios presented above may vary from the
expense ratios presented in other sections of this report that are based on
expenses incurred during the period covered by this report.
Class A share performance reflects the maximum 5.50% sales charge, and
Class B and Class C share performance reflects the applicable contingent
deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares
declines from 5% beginning at the time of purchase to 0% at the beginning of the
seventh year. The CDSC on Class C shares is 1% for the first year after
purchase. Class R shares do not have a front-end sales charge; returns shown are
at net asset value and do not reflect a 0.75% CDSC that may be imposed on a
total redemption of retirement plan assets within the first year. Class Y shares
and Investor Class shares do not have a front-end sales charge or a CDSC;
therefore, performance is at net asset value.
The performance of the Fund's share classes will differ primarily due to
different sales charge structures and class expenses.
Had the advisor not waived fees and/or reimbursed expenses in the past,
performance would have been lower.
7 AIM Basic Balance Fund
AIM Basic Balanced Fund's investment objective is long-term growth of capital
and current income.
# Unless otherwise stated, information presented in this report is as of
December 31, 2008, and is based on total net assets.
# Unless otherwise noted, all data provided by Invesco Aim.
About share classes
# Effective September 30, 2003, only previously established qualified plans
are eligible to purchase Class B shares of any AIM fund.
# Class R shares are available only to certain retirement plans. Please see
the prospectus for more information.
# Class Y shares are available to only certain investors. Please see the
prospectus for more information.
# All Investor Class shares are closed to new investors. Contact your
financial advisor about purchasing our other share classes.
Principal risks of investing in the Fund
# The values of convertible securities in which the Fund invests may be
affected by market interest rates, the risk that the issuer may default on
interest or principal payments, and the value of the underlying common
stock into which these securities may be converted.
# Prices of equity securities change in response to many factors, including
the historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions
and market liquidity.
# Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, relative lack of information, relatively
low market liquidity, and the potential lack of strict financial and
accounting controls and standards.
# The prices of securities held by the fund may decline in response to
market risks.
About indexes used in 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, 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
Advisors, Inc. to benchmark the fund. The index consists of the following
indices: 60% Russell 1000--REGISTERED TRADEMARK-- Value Index and 40%
Barclays Capital U.S. Aggregate 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--REGISTERED TRADEMARK-- Value Index is a
trademark/service mark of the Frank Russell Company. Russell--REGISTERED
TRADEMARK-- is a trademark of the Frank Russell Company. The Barclays
Capital U.S. Aggregate 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%-60% equity securities,
with the remainder invested in bonds, cash, and cash equivalents.
# The Barclays Capital U.S. Aggregate Index covers U.S. investment-grade
fixed-rate bonds with components for government and corporate securities,
mortgage pass-throughs, and asset-backed securities.
# The National Association of Securities Dealers Automated Quotation System
Composite Index (the Nasdaq) is a price-only, market-value-weighted index
comprising all domestic and non-U.S.-based common stocks listed on the
Nasdaq system.
# 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 or fund expenses.
Other information
# The Chartered Financial Analyst --REGISTERED TRADEMARK-- (CFA--REGISTERED
TRADEMARK--) designation is a globally recognized standard for measuring
the competence and integrity of investment professionals.
# The returns shown in management's discussion of Fund performance are based
on net asset values calculated for shareholder transactions. Generally
accepted accounting principles require adjustments to be made to the net
assets of the Fund at period end for financial reporting purposes, and as
such, the net asset values for shareholder transactions and the returns
based on those net asset values may differ from the net asset values and
returns reported in the Financial Highlights.
# Industry classifications used in this report are generally according to
the Global Industry Classification Standard, which was developed by and is
the exclusive property and a service mark of MSCI Inc. and Standard &
Poor's.
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. Fund Nasdaq
Symbols
Fund Nasdaq Symbols
Class A Shares BBLAX
Class B Shares BBLBX
Class C Shares BBLCX
Class R Shares BBLRX
Class Y Shares BBLYX
Investor Class Shares BBLTX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
8 AIM Bsic Balanced Fund
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-63.37%
ADVERTISING-3.19%
Interpublic Group of Cos., Inc. (The)(b)(c) 1,731,267 $ 6,855,818
- ---------------------------------------------------------------------------------
Omnicom Group Inc. 468,137 12,602,248
=================================================================================
19,458,066
=================================================================================
AEROSPACE & DEFENSE-0.25%
Honeywell International Inc. 45,522 1,494,487
=================================================================================
APPAREL RETAIL-0.76%
Gap, Inc. (The) 345,944 4,632,190
=================================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.11%
State Street Corp. 172,158 6,770,974
=================================================================================
BREWERS-1.83%
Molson Coors Brewing Co.-Class B 227,846 11,146,226
=================================================================================
COMMUNICATIONS EQUIPMENT-1.06%
Nokia Oyj-ADR (Finland) 413,338 6,448,073
=================================================================================
COMPUTER HARDWARE-1.79%
Dell Inc.(c) 1,063,702 10,892,309
=================================================================================
CONSTRUCTION MATERIALS-1.15%
Cemex S.A.B. de C.V.-ADR (Mexico)(c) 763,599 6,979,295
=================================================================================
CONSUMER FINANCE-2.91%
American Express Co. 485,946 9,014,298
- ---------------------------------------------------------------------------------
SLM Corp.(c) 975,821 8,684,807
=================================================================================
17,699,105
=================================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.00%
Western Union Co. 423,674 6,075,485
=================================================================================
DEPARTMENT STORES-1.61%
Kohl's Corp.(c) 270,637 9,797,060
=================================================================================
DIVERSIFIED CAPITAL MARKETS-1.26%
UBS AG (Switzerland)(b)(c) 537,614 7,687,880
=================================================================================
EDUCATION SERVICES-1.00%
Apollo Group Inc.-Class A(c) 79,750 6,110,445
=================================================================================
ELECTRONIC MANUFACTURING SERVICES-0.44%
Tyco Electronics Ltd. 166,818 2,704,120
=================================================================================
GENERAL MERCHANDISE STORES-1.83%
Target Corp.(b) 322,900 11,149,737
=================================================================================
HEALTH CARE DISTRIBUTORS-0.82%
Cardinal Health, Inc. 145,513 5,015,833
=================================================================================
HEALTH CARE EQUIPMENT-1.11%
Baxter International Inc. 126,719 6,790,871
=================================================================================
HOME IMPROVEMENT RETAIL-1.88%
Home Depot, Inc. (The) 497,529 11,453,118
=================================================================================
HOUSEHOLD APPLIANCES-1.08%
Whirlpool Corp.(b) 158,500 6,553,975
=================================================================================
HUMAN RESOURCE & EMPLOYMENT
SERVICES-2.52%
Robert Half International, Inc.(b) 738,706 15,379,859
=================================================================================
INDUSTRIAL CONGLOMERATES-1.71%
General Electric Co. 276,422 4,478,036
- ---------------------------------------------------------------------------------
Tyco International Ltd. 275,389 5,948,403
=================================================================================
10,426,439
=================================================================================
INDUSTRIAL MACHINERY-1.82%
Illinois Tool Works Inc. 316,343 11,087,822
=================================================================================
INVESTMENT BANKING & BROKERAGE-2.08%
Merrill Lynch & Co., Inc. 358,227 4,169,762
- ---------------------------------------------------------------------------------
Morgan Stanley 531,695 8,528,388
=================================================================================
12,698,150
=================================================================================
MANAGED HEALTH CARE-5.79%
Aetna Inc. 462,869 13,191,766
- ---------------------------------------------------------------------------------
UnitedHealth Group Inc. 829,181 22,056,215
=================================================================================
35,247,981
=================================================================================
MOVIES & ENTERTAINMENT-0.77%
Walt Disney Co. (The) 206,529 4,686,143
=================================================================================
OIL & GAS DRILLING-0.30%
Transocean Ltd. (Switzerland)(c) 38,392 1,814,022
=================================================================================
OIL & GAS EQUIPMENT & SERVICES-1.89%
Halliburton Co. 315,694 5,739,317
- ---------------------------------------------------------------------------------
Schlumberger Ltd. 136,364 5,772,288
=================================================================================
11,511,605
=================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-4.04%
Bank of America Corp. 226,583 3,190,289
- ---------------------------------------------------------------------------------
Citigroup Inc. 1,182,983 7,937,816
- ---------------------------------------------------------------------------------
JPMorgan Chase & Co. 428,280 13,503,668
=================================================================================
24,631,773
=================================================================================
PACKAGED FOODS & MEATS-0.92%
Unilever N.V. (Netherlands) 229,843 5,596,169
=================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM BASIC BALANCED FUND
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
PHARMACEUTICALS-1.59%
Sanofi-Aventis (France)(b) 152,041 $ 9,703,614
=================================================================================
PROPERTY & CASUALTY INSURANCE-0.70%
XL Capital Ltd.-Class A 1,145,677 4,239,005
=================================================================================
PUBLISHING-1.37%
McGraw-Hill Cos., Inc. (The) 360,859 8,368,320
=================================================================================
REGIONAL BANKS-0.64%
Fifth Third Bancorp(b) 472,023 3,898,910
=================================================================================
SEMICONDUCTOR EQUIPMENT-4.71%
ASML Holding N.V. (Netherlands) 1,057,246 18,958,284
- ---------------------------------------------------------------------------------
KLA-Tencor Corp.(b) 446,011 9,718,580
=================================================================================
28,676,864
=================================================================================
SEMICONDUCTORS-1.32%
Maxim Integrated Products, Inc. 703,943 8,039,029
=================================================================================
SPECIALIZED FINANCE-2.44%
Moody's Corp. 739,034 14,847,193
=================================================================================
SYSTEMS SOFTWARE-2.65%
CA Inc. 461,761 8,556,431
- ---------------------------------------------------------------------------------
Microsoft Corp. 389,240 7,566,826
=================================================================================
16,123,257
=================================================================================
Total Common Stocks & Other Equity Interests
(Cost $555,413,729) 385,835,404
=================================================================================
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES-18.28%
AEROSPACE & DEFENSE-0.38%
Systems 2001 Asset Trust LLC (United
Kingdom)-Series 2001, Class G, Jr. Sec. Gtd.
Notes, (INS-MBIA Insurance Corp.)
6.66%, 09/15/13(d)(e) $ 2,346,608 2,323,142
=================================================================================
BROADCASTING-0.94%
Cox Enterprises, Inc.,
Sr. Unsec. Notes,
7.88%, 09/15/10(e) 645,000 624,991
- ---------------------------------------------------------------------------------
Time Warner Entertainment Co. L.P.,
Sr. Unsec. Gtd. Notes,
10.15%, 05/01/12 4,970,000 5,084,943
=================================================================================
5,709,934
=================================================================================
CABLE & SATELLITE-0.37%
Comcast Holdings Corp.,
Sr. Gtd. Sub. Notes,
10.63%, 07/15/12 2,175,000 2,273,455
=================================================================================
CONSUMER FINANCE-0.92%
American Express Bank FSB,
Sr. Unsec. Notes,
5.50%, 04/16/13 1,150,000 1,097,657
- ---------------------------------------------------------------------------------
American Express Credit Corp.-Series C, Sr. Unsec.
Floating Rate Medium-Term Notes,
1.87%, 05/27/10(f) 820,000 760,983
- ---------------------------------------------------------------------------------
Capital One Capital III,
Jr. Unsec. Gtd. Sub. Notes,
7.69%, 08/15/36 900,000 382,500
- ---------------------------------------------------------------------------------
MBNA Capital-Series A, Jr. Unsec. Gtd. Sub. Trust
Pfd. Capital Securities,
8.28%, 12/01/26 1,492,000 1,201,768
- ---------------------------------------------------------------------------------
SLM Corp.,
Sr. Unsec. Floating Rate Medium-Term Notes,
2.10%, 03/16/09(e)(f) 2,200,000 2,171,138
=================================================================================
5,614,046
=================================================================================
DIVERSIFIED BANKS-2.04%
Bangkok Bank PCL (Hong Kong),
Unsec. Sub. Notes,
9.03%, 03/15/29 (Acquired 4/22/05; Cost
$1,471,124)(e) 1,175,000 969,608
- ---------------------------------------------------------------------------------
BankAmerica Institutional-Series A, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities,
8.07%, 12/31/26(e) 1,790,000 1,412,267
- ---------------------------------------------------------------------------------
BBVA International Preferred S.A. Unipersonal
(Spain),
Jr. Unsec. Gtd. Sub. Notes, 5.92%(g) 2,730,000 1,102,717
- ---------------------------------------------------------------------------------
Centura Capital Trust I, Jr. Gtd. Sub. Trust Pfd.
Capital Securities,
8.85%, 06/01/27(e) 1,460,000 1,524,555
- ---------------------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)-Series 1,
Unsec. Sub. Floating Rate Euro Notes,
2.13%(f)(g) 4,010,000 2,148,710
- ---------------------------------------------------------------------------------
Mizuho Financial Group Cayman Ltd. (Cayman
Islands),
Jr. Unsec. Gtd. Sub. Second Tier Euro Bonds,
8.38%(g) 550,000 526,312
- ---------------------------------------------------------------------------------
National Bank of Canada (Canada),
Unsec. Sub. Floating Rate Euro Deb.,
3.31%, 08/29/87(f) 1,580,000 829,500
- ---------------------------------------------------------------------------------
National Westminster Bank PLC (United
Kingdom)-Series B, Sr. Unsec. Sub. Floating Rate
Euro Notes, 3.31%(f)(g) 1,150,000 588,356
- ---------------------------------------------------------------------------------
RBS Capital Trust III, Unsec. Gtd. Sub. Trust Pfd.
Global Notes, 5.51%(g) 1,140,000 492,698
- ---------------------------------------------------------------------------------
Skandinaviska Enskilda Banken AB (Sweden),
Jr. Unsec. Sub. Notes, 7.50%(e)(g) 900,000 454,500
- ---------------------------------------------------------------------------------
Sovereign Bancorp Inc.,
Sr. Unsec. Floating Rate Global Notes,
2.46%, 03/01/09(f) 1,230,000 1,195,080
- ---------------------------------------------------------------------------------
Wachovia Capital Trust V, Jr. Unsec. Gtd. Sub.
Trust Pfd. Capital Securities,
7.97%, 06/01/27(e) 1,405,000 1,162,637
=================================================================================
12,406,940
=================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
DIVERSIFIED CAPITAL MARKETS-0.08%
UBS AG (Switzerland),
Sr. Unsec. Medium-Term Notes,
5.75%, 04/25/18 $ 520,000 $ 475,767
=================================================================================
DIVERSIFIED METALS & MINING-0.09%
Reynolds Metals Co.,
Sr. Unsec. Unsub. Medium-Term Notes,
7.00%, 05/15/09 509,000 517,291
=================================================================================
HOMEBUILDING-0.47%
D.R. Horton Inc.,
Sr. Unsec. Gtd. Unsub. Notes,
5.00%, 01/15/09 2,865,000 2,858,554
=================================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.34%
Southwestern Bell Telephone L.P.,
Sr. Unsec. Gtd. Unsub. Deb.,
7.20%, 10/15/26 1,926,000 1,804,131
- ---------------------------------------------------------------------------------
Verizon New York Inc.,
Sr. Unsec. Bonds,
7.00%, 12/01/33 2,070,000 1,618,039
- ---------------------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Sr. Unsec. Global
Bonds,
4.63%, 03/15/13 3,400,000 3,083,544
- ---------------------------------------------------------------------------------
Windstream Georgia Communications Corp.,
Sr. Unsec. Deb.,
6.50%, 11/15/13 1,678,000 1,627,778
=================================================================================
8,133,492
=================================================================================
INTERNET RETAIL-0.13%
Expedia, Inc.,
Sr. Unsec. Gtd. Putable Global Notes,
7.46%, 08/15/18 1,065,000 777,450
=================================================================================
INVESTMENT BANKING & BROKERAGE-1.82%
Bear Stearns Cos. Inc. (The),
Sr. Unsec. Unsub. Floating Rate Notes,
4.90%, 07/19/10(f) 3,070,000 2,912,140
- ---------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The),
Sr. Unsec. Global Notes,
6.15%, 04/01/18 585,000 553,060
- ---------------------------------------------------------------------------------
Unsec. Sub. Global Notes,
6.75%, 10/01/37 1,700,000 1,407,139
- ---------------------------------------------------------------------------------
Jefferies Group, Inc.,
Sr. Unsec. Notes,
5.88%, 06/08/14 4,060,000 3,346,012
- ---------------------------------------------------------------------------------
6.45%, 06/08/27 900,000 559,999
- ---------------------------------------------------------------------------------
Merrill Lynch & Co. Inc., Sr. Unsec. Medium-Term
Notes,
6.88%, 04/25/18 860,000 908,218
- ---------------------------------------------------------------------------------
Morgan Stanley-Series F, Sr. Unsec. Medium-Term
Global Notes,
5.95%, 12/28/17 1,660,000 1,418,143
=================================================================================
11,104,711
=================================================================================
LIFE & HEALTH INSURANCE-0.63%
Prudential Financial, Inc.,
Jr. Unsec. Sub. Global Notes,
8.88%, 06/15/38 1,470,000 950,962
- ---------------------------------------------------------------------------------
Prudential Holdings, LLC-Series B, Sr. Sec. Bonds,
(INS-Financial Security Assurance Inc.)
7.25%, 12/18/23(d)(e) 3,240,000 2,890,517
=================================================================================
3,841,479
=================================================================================
MORTGAGE BACKED SECURITIES-0.44%
U.S. Bank N.A.,
Sr. Unsec. Medium-Term Global Notes,
5.92%, 05/25/12 2,518,513 2,653,516
=================================================================================
MOVIES & ENTERTAINMENT-0.09%
Time Warner Cable, Inc.,
Sr. Unsec. Gtd. Global Notes,
6.75%, 07/01/18 590,000 569,214
=================================================================================
MULTI-LINE INSURANCE-0.07%
Liberty Mutual Group, Inc.,
Jr. Gtd. Sub. Notes,
10.75%, 06/15/58(e) 890,000 441,644
=================================================================================
MULTI-SECTOR HOLDINGS-0.27%
Capmark Financial Group, Inc.,
Sr. Unsec. Gtd. Floating Rate Global Notes,
3.04%, 05/10/10(f) 3,290,000 1,665,562
=================================================================================
MULTI-UTILITIES-0.38%
Dominion Resources Capital Trust I, Jr. Unsec.
Gtd. Sub. Trust Pfd. Capital Securities,
7.83%, 12/01/27 2,490,000 2,309,257
=================================================================================
OFFICE ELECTRONICS-0.13%
Xerox Corp.,
Sr. Unsec. Notes,
5.65%, 05/15/13 1,020,000 807,478
=================================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.00%
XTO Energy Inc.,
Sr. Unsec. Unsub. Notes,
5.75%, 12/15/13 20,000 19,381
=================================================================================
OIL & GAS REFINING & MARKETING-0.12%
Western Power Distribution Holdings Ltd. (United
Kingdom),
Sr. Unsec. Unsub. Notes,
7.38%, 12/15/28(e) 900,000 716,684
=================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-1.96%
BankAmerica Capital III,
Jr. Unsec. Gtd. Sub. Floating Rate Trust Pfd.
Capital Securities,
5.32%, 01/15/27(f) 2,210,000 1,190,194
- ---------------------------------------------------------------------------------
Citigroup Inc.,
Sr. Unsec. Global Notes,
6.50%, 08/19/13 140,000 141,680
- ---------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
JPMorgan Chase & Co., Sr. Unsec. Notes,
4.75%, 05/01/13 $ 1,280,000 $ 1,288,664
- ---------------------------------------------------------------------------------
Lazard Group LLC,
Sr. Unsec. Global Notes,
6.85%, 06/15/17 1,270,000 807,206
- ---------------------------------------------------------------------------------
NB Capital Trust IV, Jr. Unsec. Gtd. Sub. Trust
Pfd. Capital Securities,
8.25%, 04/15/27 3,641,000 2,919,336
- ---------------------------------------------------------------------------------
North Fork Capital Trust II, Jr. Unsec. Gtd. Sub.
Trust Pfd. Capital Pass Through Securities,
8.00%, 12/15/27 1,100,000 739,453
- ---------------------------------------------------------------------------------
Old Mutual Capital Funding L.P. (United Kingdom),
Unsec. Gtd. Sub. Euro Bonds, 8.00%(g) 2,320,000 954,100
- ---------------------------------------------------------------------------------
Pemex Finance Ltd. (Mexico)-Series 1999-2, Class
A1, Sr. Unsec. Global Bonds,
9.69%, 08/15/09 1,551,000 1,562,525
- ---------------------------------------------------------------------------------
Regional Diversified Funding,
Sr. Notes,
9.25%, 03/15/30 (Acquired 09/22/04; Cost
$3,504,605)(e) 2,962,222 1,244,133
- ---------------------------------------------------------------------------------
Regional Diversified Funding (Cayman
Islands)-Class A-1a, Sr. Sec. Floating Rate
Notes,
3.87%, 01/25/36 (Acquired 03/21/05; Cost
$596,454)(e)(f) 629,078 185,971
- ---------------------------------------------------------------------------------
Twin Reefs Pass-Through Trust, Floating Rate Pass
Through Ctfs., 2.83% (Acquired 12/07/04-
10/23/06; Cost $1,609,000)(e)(f)(g) 1,610,000 18,113
- ---------------------------------------------------------------------------------
Two-Rock Pass-Through Trust (Bermuda), Floating
Rate Pass Through Ctfs., 3.23% (Acquired
11/10/06; Cost $1,596,882)(e)(f)(g) 1,595,000 33,894
- ---------------------------------------------------------------------------------
Windsor Financing LLC,
Sr. Sec. Gtd. Notes,
5.88%, 07/15/17(e) 890,458 877,871
=================================================================================
11,963,140
=================================================================================
PACKAGED FOODS & MEATS-0.26%
Kraft Foods Inc.,
Sr. Unsec. Notes,
6.13%, 08/23/18 60,000 59,945
- ---------------------------------------------------------------------------------
6.88%, 01/26/39 1,485,000 1,525,602
=================================================================================
1,585,547
=================================================================================
PAPER PRODUCTS-0.07%
International Paper Co.,
Sr. Unsec. Unsub. Notes,
5.13%, 11/15/12 540,000 456,337
=================================================================================
PROPERTY & CASUALTY INSURANCE-1.93%
Chubb Corp. (The),
Sr. Notes,
5.75%, 05/15/18 590,000 582,664
- ---------------------------------------------------------------------------------
First American Capital Trust I, Jr. Gtd. Sub.
Trust Pfd. Capital Securities,
8.50%, 04/15/12 4,705,000 4,830,420
- ---------------------------------------------------------------------------------
North Front Pass-Through Trust,
Sec. Pass Through Ctfs., 5.81%, 12/15/24(e) 2,350,000 1,164,667
- ---------------------------------------------------------------------------------
Oil Casualty Insurance Ltd. (Bermuda),
Unsec. Gtd. Bonds,
8.00%, 09/15/34(e) 3,495,000 2,558,005
- ---------------------------------------------------------------------------------
Oil Insurance Ltd., Notes, 7.56%(e)(g) 6,280,000 2,394,503
- ---------------------------------------------------------------------------------
QBE Insurance Group Ltd. (Australia),
Sr. Unsec. Unsub. Bonds,
9.75%, 03/14/14(e) 245,000 244,662
=================================================================================
11,774,921
=================================================================================
REGIONAL BANKS-0.99%
Cullen/Frost Capital Trust I, Jr. Unsec. Gtd. Sub.
Floating Rate Notes,
3.75%, 03/01/34(f) 4,050,000 1,508,625
- ---------------------------------------------------------------------------------
PNC Capital Trust C, Jr. Unsec. Gtd. Sub. Floating
Rate Trust Pfd. Capital Securities,
2.77%, 06/01/28(f) 1,175,000 586,335
- ---------------------------------------------------------------------------------
Silicon Valley Bank,
Unsec. Sub. Notes,
6.05%, 06/01/17 2,020,000 1,633,141
- ---------------------------------------------------------------------------------
TCF National Bank, Sub. Notes,
5.00%, 06/15/14 1,500,000 1,428,360
- ---------------------------------------------------------------------------------
US AgBank FCB-Series 1, Notes, 6.11% (Acquired
03/15/07; Cost $1,405,000)(e)(g) 1,405,000 871,100
=================================================================================
6,027,561
=================================================================================
REINSURANCE-0.06%
Stingray Pass-Through Trust, Pass Through Ctfs.,
5.90%, 01/12/15 (Acquired 01/07/05-07/19/07;
Cost $2,927,640)(e) 3,000,000 367,500
=================================================================================
RESEARCH & CONSULTING SERVICES-0.50%
ERAC USA Finance Co.,
Sr. Unsec. Gtd. Notes,
7.00%, 10/15/37(e) 2,460,000 1,246,469
- ---------------------------------------------------------------------------------
Unsec. Gtd. Notes,
5.80%, 10/15/12(e) 2,240,000 1,784,892
=================================================================================
3,031,361
=================================================================================
SPECIALIZED REIT'S-0.32%
HCP, Inc.,
Sr. Unsec. Medium-Term Notes,
6.70%, 01/30/18 1,680,000 770,076
- ---------------------------------------------------------------------------------
Health Care REIT Inc.,
Sr. Unsec. Notes,
5.88%, 05/15/15 1,905,000 1,165,641
=================================================================================
1,935,717
=================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM BASIC BALANCED FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
SPECIALTY CHEMICALS-0.15%
Valspar Corp.,
Sr. Unsec. Unsub. Notes,
5.63%, 05/01/12 $ 500,000 $ 474,324
- ---------------------------------------------------------------------------------
6.05%, 05/01/17 500,000 436,835
=================================================================================
911,159
=================================================================================
STEEL-0.22%
United States Steel Corp.,
Sr. Unsec. Notes,
5.65%, 06/01/13 1,900,000 1,357,684
=================================================================================
TOBACCO-0.34%
Philip Morris International Inc.,
Sr. Unsec. Unsub. Global Notes,
5.65%, 05/16/18 2,050,000 2,047,660
=================================================================================
TRUCKING-0.39%
Stagecoach Transport Holdings PLC (The) (United
Kingdom),
Unsec. Unsub. Yankee Notes,
8.63%, 11/15/09 2,300,000 2,377,886
=================================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.38%
Nextel Communications, Inc.-Series D, Sr. Unsec.
Gtd. Notes,
7.38%, 08/01/15 5,090,000 2,137,615
- ---------------------------------------------------------------------------------
Sprint Nextel Corp.,
Sr. Unsec. Bonds,
9.25%, 04/15/22 270,000 188,061
=================================================================================
2,325,676
=================================================================================
Total Bonds & Notes (Cost $156,074,508) 111,381,146
=================================================================================
U.S. GOVERNMENT SPONSORED MORTGAGE-BACKED SECURITIES-15.10%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-7.03%
Pass Through Ctfs.,
5.50%, 05/01/13 to 02/01/37 1,721,808 1,773,582
- ---------------------------------------------------------------------------------
7.00%, 06/01/15 to 06/01/32 3,047,961 3,205,122
- ---------------------------------------------------------------------------------
6.50%, 01/01/16 to 01/01/35 1,959,064 2,038,774
- ---------------------------------------------------------------------------------
6.00%, 03/01/17 to 01/01/34 3,157,788 3,269,184
- ---------------------------------------------------------------------------------
4.50%, 10/01/18 199,793 205,626
- ---------------------------------------------------------------------------------
8.00%, 01/01/27 622,566 660,800
- ---------------------------------------------------------------------------------
7.50%, 11/01/30 to 03/01/32 268,222 284,634
- ---------------------------------------------------------------------------------
5.00%, 10/01/33 242,804 248,768
- ---------------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.00%, 01/01/38(h)(i) 5,832,000 5,960,485
- ---------------------------------------------------------------------------------
5.50%, 01/01/39(h)(i) 24,584,000 25,164,035
=================================================================================
42,811,010
=================================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-6.62%
Pass Through Ctfs.,
8.50%, 03/01/10 to 01/01/23 77,389 82,394
- ---------------------------------------------------------------------------------
7.50%, 11/01/15 to 05/01/32 2,006,200 2,135,814
- ---------------------------------------------------------------------------------
7.00%, 12/01/15 to 09/01/32 1,960,354 2,065,368
- ---------------------------------------------------------------------------------
6.50%, 05/01/16 to 01/01/37 1,168,255 1,219,454
- ---------------------------------------------------------------------------------
5.00%, 11/01/17 to 11/01/18 1,383,282 1,429,020
- ---------------------------------------------------------------------------------
5.50%, 03/01/21 to 11/01/33 208,839 214,628
- ---------------------------------------------------------------------------------
8.00%, 08/01/21 to 10/01/30 340,249 360,753
- ---------------------------------------------------------------------------------
6.00%, 03/01/22 to 03/01/37 150,339 154,864
- ---------------------------------------------------------------------------------
8.50%, 10/01/28(j) 656,861 707,262
- ---------------------------------------------------------------------------------
Pass Through Ctfs., TBA,
5.50%, 01/01/24 to 01/01/39(h) 7,000,000 7,183,124
- ---------------------------------------------------------------------------------
5.00%, 01/01/39(h)(i) 8,000,000 8,168,752
- ---------------------------------------------------------------------------------
6.00%, 01/01/39(h) 12,208,000 12,568,514
- ---------------------------------------------------------------------------------
6.50%, 01/01/39(h)(i) 928,000 963,815
- ---------------------------------------------------------------------------------
5.00%, 02/01/39(h) 3,000,000 3,053,907
=================================================================================
40,307,669
=================================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)-1.45%
Pass Through Ctfs.,
5.00%, 03/15/18 1,058,951 1,111,544
- ---------------------------------------------------------------------------------
8.00%, 08/15/22 to 01/20/31 328,404 349,413
- ---------------------------------------------------------------------------------
7.50%, 06/15/23 to 05/15/32 731,900 776,265
- ---------------------------------------------------------------------------------
8.50%, 11/15/24 to 02/15/25 84,082 90,258
- ---------------------------------------------------------------------------------
6.00%, 03/15/29 to 10/15/33 684,979 709,362
- ---------------------------------------------------------------------------------
7.00%, 01/15/30 to 06/15/37 2,454,838 2,563,464
- ---------------------------------------------------------------------------------
6.50%, 03/15/31 to 02/15/37 2,856,668 2,995,194
- ---------------------------------------------------------------------------------
5.50%, 09/15/33 to 05/15/35 255,978 264,410
=================================================================================
8,859,910
=================================================================================
Total U.S. Government Sponsored Mortgage-
Backed Securities (Cost $91,395,936) 91,978,589
=================================================================================
<Caption>
SHARES
PREFERRED STOCKS-4.33%
OFFICE SERVICES & SUPPLIES-1.64%
Pitney Bowes International Holdings Inc.,-Series
D, 4.85% Pfd.(f) 102 9,987,234
=================================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-2.55%
Auction Pass Through Trust,
Series 2007-T2, Class A, 7.96% Pfd.
(Acquired 12/14/07; Cost $12,525,000)(e)(f) 167 10,020,083
- ---------------------------------------------------------------------------------
Series 2007-T3, Class A, 8.12% Pfd.
(Acquired 10/22/07-02/22/08; Cost
$8,250,000)(e)(f) 110 5,500,055
=================================================================================
15,520,138
=================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM BASIC BALANCED FUND
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
SPECIALIZED FINANCE-0.14%
Agfirst Farm Credit Bank-Class B, 6.59% Pfd.
(Acquired 06/05/07; Cost $1,485,000)(e) 1,485,000 $ 884,006
=================================================================================
Total Preferred Stocks (Cost $32,093,737) 26,391,378
=================================================================================
<Caption>
PRINCIPAL
AMOUNT
ASSET-BACKED SECURITIES-3.20%
COLLATERALIZED MORTGAGE OBLIGATIONS-3.20%
Accredited Mortgage Loan Trust-Series 2003-3,
Class A3, Floating Rate Pass Through Ctfs.,
0.85%, 01/25/34(f) $ 131,947 86,348
- ---------------------------------------------------------------------------------
Banc of America Mortgage Securities Inc.-Series
2003-D, Class 2AI, Floating Rate Pass Through
Ctfs.,
5.14%, 05/25/33(f) 478,507 373,953
- ---------------------------------------------------------------------------------
Citicorp Lease Pass-Through Trust-Series 1999-1,
Class A2, Pass Through Ctfs.,
8.04%, 12/15/19(e) 6,085,000 5,741,423
- ---------------------------------------------------------------------------------
Countrywide Asset-Backed Ctfs.-Series 2004-6,
Class 2A5, Floating Rate Pass Through Ctfs.,
0.86%, 11/25/34(f) 427,519 304,297
- ---------------------------------------------------------------------------------
Countrywide Home Loan Mortgage Pass Through
Trust-Series 2004-HYB7, Class 1A2, Pass Through
Ctfs.,
4.70%, 11/20/34(f) 839,933 445,579
- ---------------------------------------------------------------------------------
Credit Suisse First Boston Mortgage Securities
Corp.,
Series 2004-AR3, Class 5A1, Pass Through Ctfs.,
4.81%, 04/25/34(f) 639,992 469,298
- ---------------------------------------------------------------------------------
Series 2004-AR7, Class 2A1, Pass Through Ctfs.,
4.61%, 11/25/34(f) 849,865 588,290
- ---------------------------------------------------------------------------------
Series 2004-C4, Class A6, Pass Through Ctfs.,
4.69%, 10/15/39 2,850,000 2,367,035
- ---------------------------------------------------------------------------------
GSR Mortgage Loan Trust-Series 2004-5, Class 2A1,
Pass Through Ctfs.,
4.51%, 05/25/34(f) 494,388 341,005
- ---------------------------------------------------------------------------------
Master Asset Securitization Trust-Series 2003-8,
Class 1A1, Pass Through Ctfs.,
5.50%, 09/25/33 2,467,746 2,189,993
- ---------------------------------------------------------------------------------
MLCC Mortgage Investors, Inc.-Series 2003-G, Class
A1, Floating Rate Pass Through Ctfs.,
0.79%, 01/25/29(f) 520,356 345,904
- ---------------------------------------------------------------------------------
Morgan Stanley Capital I-Series 2008-T29, Class
A1, Pass Through Ctfs.,
6.23%, 01/11/43 1,138,787 1,054,267
- ---------------------------------------------------------------------------------
Morgan Stanley Mortgage Loan Trust-Series 2004-
6AR, Class 2A2, Pass Through Ctfs.,
4.88%, 08/25/34(f) 366,915 196,915
- ---------------------------------------------------------------------------------
Nomura Asset Acceptance Corp.-Series 2005-AR1,
Class 2A1, Floating Rate Pass Through Ctfs.,
0.75%, 02/25/35(f) 74,866 36,735
- ---------------------------------------------------------------------------------
Option One Mortgage Securities Corp.-Series 2007-
4A, Floating Rate Notes,
0.57%, 04/25/12 (Acquired 05/11/07; Cost
$1,103,678)(e)(f) 839,196 503,518
- ---------------------------------------------------------------------------------
Specialty Underwriting & Residential
Finance-Series 2003-BC3, Class A, Floating Rate
Pass Through Ctfs.,
0.82%, 08/25/34(f) 8,370 3,451
- ---------------------------------------------------------------------------------
Structured Adjustable Rate Mortgage Loan Trust,
Series 2004-3AC, Class A1, Floating Rate Pass
Through Ctfs.,
4.98%, 03/25/34(f) 841,216 524,038
- ---------------------------------------------------------------------------------
Series 2005-1, Class 1A1, Pass Through Ctfs.,
5.15%, 02/25/35(f) 369,442 171,177
- ---------------------------------------------------------------------------------
Structured Asset Securities Corp.,
Series 2003-37A, Class 7A, Pass Through Ctfs.,
5.87%, 12/25/33(f) 230,668 197,635
- ---------------------------------------------------------------------------------
Series 2004-2AC, Class A1, Floating Rate Pass
Through Ctfs.,
5.32%, 02/25/34(f) 1,519,998 927,756
- ---------------------------------------------------------------------------------
Series 2007-OSI, Class A2, Floating Rate Pass
Through Ctfs.,
0.56%, 06/25/37(f) 1,959,365 1,565,695
- ---------------------------------------------------------------------------------
Vanderbilt Mortgage Finance-Series 2002-B, Class
A4, Pass Through Ctfs.,
5.84%, 02/07/26 1,138,629 1,054,007
=================================================================================
Total Asset-Backed Securities (Cost
$25,055,253) 19,488,319
=================================================================================
U.S. TREASURY NOTES-0.48%
3.50%, 08/15/09 550,000 560,785
- ---------------------------------------------------------------------------------
3.25%, 12/31/09(k) 2,300,000 2,365,766
=================================================================================
Total U.S. Treasury Notes (Cost $2,900,078) 2,926,551
=================================================================================
MUNICIPAL OBLIGATIONS-0.47%
Detroit (City of), Michigan; Series 2005 A-1,
Taxable Capital Improvement Limited Tax GO,
(INS-Ambac Assurance Corp.)
4.96%, 04/01/20(d) 1,550,000 1,135,515
- ---------------------------------------------------------------------------------
Industry (City of), California Urban Development
Agency (Project No. 3); Series 2003, Taxable
Allocation RB, (INS-MBIA Insurance Corp.)
6.10%, 05/01/24(d) 2,060,000 1,756,335
=================================================================================
Total Municipal Obligations (Cost $3,662,669) 2,891,850
=================================================================================
U.S. GOVERNMENT SPONSORED AGENCY SECURITIES-0.38%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-0.05%
Sr. Unsec. Floating Rate Global Notes,
6.08%, 02/17/09(f)(k) 300,000 300,000
=================================================================================
STUDENT LOAN MARKETING ASSOCIATION-0.33%
Series A, Sr. Unsec. Unsub. Medium-Term Notes,
4.00%, 01/15/09 2,000,000 1,997,062
=================================================================================
Total U.S. Government Sponsored Agency
Securities (Cost $2,297,062) 2,297,062
=================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
14 AIM BASIC BALANCED FUND
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
MONEY MARKET FUNDS-4.81%
Liquid Assets Portfolio-Institutional Class(l) 14,660,792 $ 14,660,792
- ---------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(l) 14,660,792 14,660,792
=================================================================================
Total Money Market Funds (Cost $29,321,584) 29,321,584
=================================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-110.39% (Cost $898,214,556) 672,511,883
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-6.75%
Liquid Assets Portfolio-Institutional Class (Cost
$41,114,556)(l)(m) 41,114,556 41,114,556
=================================================================================
TOTAL INVESTMENTS-117.14% (Cost $939,329,112) 713,626,439
=================================================================================
OTHER ASSETS LESS LIABILITIES-(17.14)% (104,443,931)
=================================================================================
NET ASSETS-100.00% $ 609,182,508
=================================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Ctfs. - Certificates
Deb. - Debentures
GO - General Obligation Bonds
Gtd. - Guaranteed
INS - Insurer
Jr. - Junior
Pfd. - Preferred
RB - Revenue Bonds
REIT - Real Estate Investment Trust
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
</Table>
Notes to Schedule of Investments:
(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 December 31, 2008.
(c) Non-income producing security.
(d) Principal and/or interest payments are secured by the bond insurance
company listed.
(e) 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 December 31, 2008 was $49,088,414, which represented 8.06% of the
Fund's Net Assets.
(f) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on December 31, 2008.
(g) Perpetual bond with no specified maturity date.
(h) Security purchased on forward commitment basis.
(i) This security is subject to dollar roll transactions. See Note 1I.
(j) 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.
(k) A portion of the principal balance was pledged as collateral for open
credit default swap contracts. See Note 1N and Note 9.
(l) The money market fund and the Fund are affiliated by having the same
investment advisor.
(m) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 1J.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
15 AIM BASIC BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
<Table>
ASSETS:
Investments, at value (Cost $868,892,972)* $ 643,190,299
- ----------------------------------------------------------------------------------
Investments in affiliated money market funds, at value and cost 70,436,140
==================================================================================
Total investments (Cost $939,329,112) 713,626,439
==================================================================================
Cash 155,834
- ----------------------------------------------------------------------------------
Foreign currencies, at value (Cost $245,796) 255,825
- ----------------------------------------------------------------------------------
Receivables for:
Investments sold 53,268
- ----------------------------------------------------------------------------------
Fund shares sold 444,546
- ----------------------------------------------------------------------------------
Dividends and Interest 3,019,474
- ----------------------------------------------------------------------------------
Premiums paid on swap agreements 1,936,157
- ----------------------------------------------------------------------------------
Investment for trustee deferred compensation and retirement plans 239,472
- ----------------------------------------------------------------------------------
Other assets 69,472
==================================================================================
Total assets 719,800,487
==================================================================================
LIABILITIES:
Payables for:
Investments purchased 62,591,883
- ----------------------------------------------------------------------------------
Credit default swap contracts close-out 2,509,126
- ----------------------------------------------------------------------------------
Fund shares reacquired 1,881,577
- ----------------------------------------------------------------------------------
Dividends 200,833
- ----------------------------------------------------------------------------------
Collateral upon return of securities loaned 41,114,556
- ----------------------------------------------------------------------------------
Variation margin 3,688
- ----------------------------------------------------------------------------------
Accrued fees to affiliates 538,365
- ----------------------------------------------------------------------------------
Accrued other operating expenses 18,295
- ----------------------------------------------------------------------------------
Trustee deferred compensation and retirement plans 461,928
- ----------------------------------------------------------------------------------
Unrealized depreciation on swap agreements 1,297,728
==================================================================================
Total liabilities 110,617,979
==================================================================================
Net assets applicable to shares outstanding $ 609,182,508
==================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,399,275,052
- ----------------------------------------------------------------------------------
Undistributed net investment income (571,025)
- ----------------------------------------------------------------------------------
Undistributed net realized gain (loss) (562,519,519)
- ----------------------------------------------------------------------------------
Unrealized appreciation (depreciation) (227,002,000)
==================================================================================
$ 609,182,508
==================================================================================
NET ASSETS:
Class A $ 351,046,023
==================================================================================
Class B $ 78,959,149
==================================================================================
Class C $ 61,102,369
==================================================================================
Class R $ 5,090,018
==================================================================================
Class Y $ 586,535
==================================================================================
Investor Class $ 112,077,314
==================================================================================
Institutional Class $ 321,100
==================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 44,823,071
==================================================================================
Class B 10,102,185
==================================================================================
Class C 7,811,684
==================================================================================
Class R 650,304
==================================================================================
Class Y 74,927
==================================================================================
Investor Class 14,313,457
==================================================================================
Institutional Class 41,058
==================================================================================
Class A:
Net asset value per share $ 7.83
- ----------------------------------------------------------------------------------
Maximum offering price per share
(Net asset value of $7.83 divided by 94.50%) $ 8.29
==================================================================================
Class B:
Net asset value and offering price per share $ 7.82
==================================================================================
Class C:
Net asset value and offering price per share $ 7.82
==================================================================================
Class R:
Net asset value and offering price per share $ 7.83
==================================================================================
Class Y:
Net asset value and offering price per share $ 7.83
==================================================================================
Investor Class:
Net asset value and offering price per share $ 7.83
==================================================================================
Institutional Class:
Net asset value and offering price per share $ 7.82
==================================================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $41,121,179 were
on loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
16 AIM BASIC BALANCED FUND
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Interest $ 23,978,639
- ------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $143,191) 14,708,703
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $418,419) 727,320
================================================================================================
Total investment income 39,414,662
================================================================================================
EXPENSES:
Advisory fees 5,081,209
- ------------------------------------------------------------------------------------------------
Administrative services fees 275,763
- ------------------------------------------------------------------------------------------------
Custodian fees 111,975
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 1,327,751
- ------------------------------------------------------------------------------------------------
Class B 1,576,706
- ------------------------------------------------------------------------------------------------
Class C 1,001,545
- ------------------------------------------------------------------------------------------------
Class R 38,085
- ------------------------------------------------------------------------------------------------
Investor Class 435,194
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C, R, Y and Investor 3,026,019
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 481
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 47,410
- ------------------------------------------------------------------------------------------------
Other 659,975
================================================================================================
Total expenses 13,582,113
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (85,250)
================================================================================================
Net expenses 13,496,863
================================================================================================
Net investment income 25,917,799
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains (losses) from securities sold to
affiliates of $(1,376,516)) (76,147,206)
- ------------------------------------------------------------------------------------------------
Foreign currencies 110,543
- ------------------------------------------------------------------------------------------------
Futures contracts 793,458
- ------------------------------------------------------------------------------------------------
Swap agreements (7,309,795)
================================================================================================
(82,553,000)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (380,283,719)
- ------------------------------------------------------------------------------------------------
Foreign currencies 10,049
- ------------------------------------------------------------------------------------------------
Futures contracts (31,570)
- ------------------------------------------------------------------------------------------------
Swap agreements 1,363,231
================================================================================================
(378,942,009)
================================================================================================
Net realized and unrealized gain (loss) (461,495,009)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(435,577,210)
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
17 AIM BASIC BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- -----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 25,917,799 $ 28,283,719
- -----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (82,553,000) 125,472,988
- -----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (378,942,009) (114,162,205)
===========================================================================================================
Net increase (decrease) in net assets resulting from operations (435,577,210) 39,594,502
===========================================================================================================
Distributions to shareholders from net investment income:
Class A (17,639,389) (17,116,265)
- -----------------------------------------------------------------------------------------------------------
Class B (3,709,880) (4,563,714)
- -----------------------------------------------------------------------------------------------------------
Class C (2,528,530) (2,316,568)
- -----------------------------------------------------------------------------------------------------------
Class R (240,312) (178,636)
- -----------------------------------------------------------------------------------------------------------
Class Y (9,099) --
- -----------------------------------------------------------------------------------------------------------
Investor Class (5,733,410) (6,039,341)
- -----------------------------------------------------------------------------------------------------------
Institutional Class (15,857) (102,908)
===========================================================================================================
Total distributions from net investment income (29,876,477) (30,317,432)
===========================================================================================================
Share transactions-net:
Class A (68,034,482) (114,679,639)
- -----------------------------------------------------------------------------------------------------------
Class B (91,214,950) (120,698,935)
- -----------------------------------------------------------------------------------------------------------
Class C (24,174,236) (31,327,601)
- -----------------------------------------------------------------------------------------------------------
Class R (2,106,835) 3,699,698
- -----------------------------------------------------------------------------------------------------------
Class Y 717,148 --
- -----------------------------------------------------------------------------------------------------------
Investor Class (30,301,669) (63,494,189)
- -----------------------------------------------------------------------------------------------------------
Institutional Class (5,993,765) 6,717,170
===========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (221,108,789) (319,783,496)
===========================================================================================================
Net increase (decrease) in net assets (686,562,476) (310,506,426)
===========================================================================================================
NET ASSETS:
Beginning of year 1,295,744,984 1,606,251,410
===========================================================================================================
End of year (includes undistributed net investment income of
$(571,025) and $(114,017), respectively) $ 609,182,508 $1,295,744,984
===========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
18 AIM BASIC BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
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 assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class.
The Fund's investment objective is long-term growth of capital and current
income.
The Fund currently consists of seven different classes of shares: Class A,
Class B, Class C, Class R, Class Y, 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, Class Y, 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.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
19 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 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.
20 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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 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.
21 AIM BASIC BALANCED FUND
Interest rate, index, and currency exchange rate swap agreements are
two-party contracts entered into primarily to exchange the returns (or
differentials in rates of returns) earned or realized on particular
predetermined investments or instruments. The gross returns to be
exchanged or "swapped" between the parties are calculated with respect to
a notional amount, i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index.
A CDS is an agreement between two parties ("Counterparties") to exchange
the credit risk of an issuer. A buyer of a CDS is said to buy protection
by paying a fixed payment over the life of the agreement and in some
situations an upfront payment 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 eligible bonds issued by the 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 a fixed payment over the life of the
agreement and an upfront payment, if applicable. 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 "par value" or the full notional
value of the referenced obligation, and the Fund would receive the
eligible bonds issued by the reference entity. In turn, these bonds may be
sold in order to realize a recovery value. Alternatively, the seller of
the CDS and its counterparty may agree to net the notional amount and the
market value of the bonds and make a cash payment equal to the difference
to the buyer of protection. 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. In connection with these agreements, cash
and securities may be identified as collateral in accordance with the
terms of the respective swap agreements to provide assets of value and
recourse in the event of default under the swap agreement or
bankruptcy/insolvency of a party to the swap agreement.
Implied credit spreads represent the current level at which protection
could be bought or sold given the terms of the existing CDS contract and
serve as an indicator of the current status of the payment/performance
risk of the CDS. An implied spread that has widened or increased since
entry into the initial contract may indicate a deteriorating credit
profile and increased risk of default for the reference entity. A
declining or narrowing spread may indicate an improving credit profile or
decreased risk of default for the reference entity. Alternatively, credit
spreads may increase or decrease reflecting the general tolerance for risk
in the credit markets.
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 accrues for the fixed payment
stream and amortizes upfront payments, if any, 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, 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 (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$13,864.
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 year
ended December 31, 2008, Invesco reimbursed expenses of the Fund in the amount
of $5,756.
22 AIM BASIC BALANCED FUND
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 year ended December 31, 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 year
ended December 31, 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, Class Y, 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 year ended December 31, 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 year ended December 31, 2008, IADI
advised the Fund that IADI retained $63,486 in front-end sales commissions from
the sale of Class A shares and $0, $189,978, $5,323 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 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. 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 significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using 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 valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN OTHER
INPUT LEVEL SECURITIES INVESTMENTS*
- ---------------------------------------------------------------
Level 1 $422,013,476 $ (11,627)
- ---------------------------------------------------------------
Level 2 290,368,830 (1,297,728)
- ---------------------------------------------------------------
Level 3 1,244,133 --
===============================================================
$713,626,439 $(1,309,355)
===============================================================
</Table>
* Other investments include futures and swap contracts, which are included at
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 year ended December 31, 2008, the Fund
engaged in securities purchases of $7,796,235 and securities sales of
$11,555,862, which resulted in net realized gains (losses) of $(1,376,516).
23 AIM BASIC BALANCED 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 year
ended December 31, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $65,630.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the year ended December 31, 2008, the Fund paid legal fees of $5,943
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, 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 AT PERIOD-END
<Table>
<Caption>
OPEN FUTURES CONTRACTS
- -------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF MONTH/ APPRECIATION
CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 17 March-2009/Long $ 2,023,930 $ 14,704
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 14 March-2009/Long 1,760,500 (6,188)
=========================================================================================================================
Subtotal $ 3,784,430 $ 8,516
=========================================================================================================================
U.S. Treasury Long Bonds 8 March-2009/Short $(1,104,375) $(20,143)
=========================================================================================================================
Total Futures Contracts $(11,627)
=========================================================================================================================
</Table>
NOTE 9--CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD-END
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS
- ----------------------------------------------------------------------------------------------------------------------------
MARKET VALUE
NOTIONAL UNREALIZED
BUY/SELL (PAY)/RECEIVE EXPIRATION IMPLIED AMOUNT APPRECIATION
REFERENCE ENTITY COUNTERPARTY PROTECTION FIXED RATE DATE CREDIT SPREAD(a) (000) (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch
Assured Guaranty Corp. International Sell 5.00% 03/20/09 34.67% $ 2,645 $ (161,902)
- ----------------------------------------------------------------------------------------------------------------------------
iStar Financial Inc. UBS AG Sell 5.00%(b) 03/20/09 132.46% 2,470 (514,525)
============================================================================================================================
Subtotal $ 5,115 $ (676,427)
============================================================================================================================
CDX North America
Investment Grade
Index -- Series 11 Morgan Stanley Buy (1.50)%(c) 12/20/13 1.95% 45,000 (411,156)
- ----------------------------------------------------------------------------------------------------------------------------
CDX North America
Investment Grade
Index -- Series 11 UBS AG Buy (1.50)%(d) 12/20/13 1.95% 23,000 (210,145)
============================================================================================================================
Subtotal $68,000 $ (621,301)
============================================================================================================================
Total Credit Default Swap Agreements $(1,297,728)
============================================================================================================================
</Table>
(a) Implied credit spreads represent the current level at which protection
could be bought or sold given the terms of the existing credit default swap
contract and serve as an indicator of the current status of the
payment/performance risk of the credit default swap contract. An implied
credit spread that has widened or increased since entry into the initial
contract may indicate a deteriorating credit profile and increased risk of
default for the reference entity. A declining or narrowing spread may
indicate an
24 AIM BASIC BALANCED FUND
improving credit profile or decreased risk of default for the reference
entity. Alternatively, credit spreads may increase or decrease reflecting
the general tolerance for risk in the credit markets.
(b) Unamortized premium at period-end of $43,218.
(c) Unamortized discount at period-end of $669,494.
(d) Unamortized discount at period-end of $1,309,881.
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $29,876,477 $30,317,432
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 1,351,590
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (240,029,322)
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (1,287,700)
- -------------------------------------------------------------------------------------------------
Temporary book/tax differences (448,617)
- -------------------------------------------------------------------------------------------------
Post-October deferrals (1,706,650)
- -------------------------------------------------------------------------------------------------
Capital loss carryforward (547,971,845)
- -------------------------------------------------------------------------------------------------
Shares of beneficial interest 1,399,275,052
=================================================================================================
Total net assets $ 609,182,508
=================================================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2009 $473,602,063
- -----------------------------------------------------------------------------------------------
December 31, 2016 74,369,782
===============================================================================================
Total capital loss carryforward $547,971,845
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $469,953,653 and
$719,998,178, 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 $ 23,529,733
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (263,559,055)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(240,029,322)
================================================================================================
Cost of investments for tax purposes is $953,655,761.
</Table>
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of bond premium
amortization and swap agreements, on December 31, 2008, undistributed net
investment income was increased by $3,501,670, undistributed net realized gain
(loss) was decreased by $1,917,621 and shares of beneficial interest decreased
by $1,584,049. This reclassification had no effect on the net assets of the
Fund.
25 AIM BASIC BALANCED FUND
NOTE 13--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2008(a) 2007
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,151,136 $ 34,378,431 4,209,506 $ 57,162,509
- --------------------------------------------------------------------------------------------------------------------------
Class B 860,761 9,483,004 1,194,220 16,151,409
- --------------------------------------------------------------------------------------------------------------------------
Class C 604,814 6,615,109 732,151 9,919,539
- --------------------------------------------------------------------------------------------------------------------------
Class R 252,311 2,873,158 406,529 5,464,024
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) 74,805 716,446 -- --
- --------------------------------------------------------------------------------------------------------------------------
Investor Class 1,467,355 15,341,044 1,868,750 25,391,431
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 15,500 191,503 518,506 7,064,137
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,650,716 16,477,781 1,194,081 16,101,260
- --------------------------------------------------------------------------------------------------------------------------
Class B 350,099 3,508,213 317,627 4,272,152
- --------------------------------------------------------------------------------------------------------------------------
Class C 231,834 2,286,849 156,224 2,102,325
- --------------------------------------------------------------------------------------------------------------------------
Class R 24,373 240,303 13,284 178,433
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) 1,147 8,725 -- --
- --------------------------------------------------------------------------------------------------------------------------
Investor Class 549,019 5,495,664 430,071 5,801,012
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,618 15,857 7,675 102,643
==========================================================================================================================
Automatic conversion of Class B shares to Class A
shares:
Class A 4,957,172 55,310,388 4,288,570 58,188,297
- --------------------------------------------------------------------------------------------------------------------------
Class B (4,988,510) (55,310,388) (4,301,053) (58,188,297)
==========================================================================================================================
Reacquired:
Class A(b) (15,949,696) (174,201,082) (18,111,387) (246,131,705)
- --------------------------------------------------------------------------------------------------------------------------
Class B (4,328,199) (48,895,779) (6,118,316) (82,934,199)
- --------------------------------------------------------------------------------------------------------------------------
Class C (3,080,195) (33,076,194) (3,194,289) (43,349,465)
- --------------------------------------------------------------------------------------------------------------------------
Class R (452,969) (5,220,296) (143,706) (1,942,759)
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) (1,025) (8,023) -- --
- --------------------------------------------------------------------------------------------------------------------------
Investor Class(b) (4,805,049) (51,138,377) (6,962,193) (94,686,632)
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class (480,349) (6,201,125) (33,081) (449,610)
==========================================================================================================================
Net decrease in share activity (19,893,332) $(221,108,789) (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 8% 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.
(b) Effective upon the commencement date of Class Y shares, October 3, 2008,
the following shares were converted from Class A and Investor Class shares
into Class Y shares of the Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
--------------------------------------------------------------------------------------------------
Class Y 73,651 $ 705,581
--------------------------------------------------------------------------------------------------
Class A (67,736) (648,909)
--------------------------------------------------------------------------------------------------
Investor Class (5,915) (56,672)
--------------------------------------------------------------------------------------------------
</Table>
NOTE 14--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.
26 AIM BASIC BALANCED FUND
NOTE 15--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, NET (BOTH TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $13.27 $0.32(c) $(5.38) $(5.06) $(0.38) $ -- $(0.38)
Year ended 12/31/07 13.26 0.29(c) 0.04 0.33 (0.32) -- (0.32)
Year ended 12/31/06 12.25 0.24(c) 1.05 1.29 (0.28) -- (0.28)
Year ended 12/31/05 11.86 0.16 0.41 0.57 (0.18) -- (0.18)
Year ended 12/31/04 11.50 0.08 0.71 0.79 (0.10) (0.33) (0.43)
- --------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 13.24 0.24(c) (5.37) (5.13) (0.29) -- (0.29)
Year ended 12/31/07 13.23 0.19(c) 0.04 0.23 (0.22) -- (0.22)
Year ended 12/31/06 12.22 0.15(c) 1.04 1.19 (0.18) -- (0.18)
Year ended 12/31/05 11.84 0.08 0.40 0.48 (0.10) -- (0.10)
Year ended 12/31/04 11.49 0.01 0.69 0.70 (0.02) (0.33) (0.35)
- --------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 13.25 0.24(c) (5.38) (5.14) (0.29) -- (0.29)
Year ended 12/31/07 13.24 0.19(c) 0.04 0.23 (0.22) -- (0.22)
Year ended 12/31/06 12.23 0.15(c) 1.04 1.19 (0.18) -- (0.18)
Year ended 12/31/05 11.85 0.08 0.40 0.48 (0.10) -- (0.10)
Year ended 12/31/04 11.49 0.01 0.70 0.71 (0.02) (0.33) (0.35)
- --------------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 12/31/08 13.26 0.29(c) (5.37) (5.08) (0.35) -- (0.35)
Year ended 12/31/07 13.25 0.26(c) 0.04 0.30 (0.29) -- (0.29)
Year ended 12/31/06 12.24 0.21(c) 1.05 1.26 (0.25) -- (0.25)
Year ended 12/31/05 11.87 0.13 0.40 0.53 (0.16) -- (0.16)
Year ended 12/31/04(e) 11.61 0.05 0.60 0.65 (0.06) (0.33) (0.39)
- --------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(e) 9.58 0.06(c) (1.69) (1.63) (0.12) -- (0.12)
- --------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
Year ended 12/31/08 13.27 0.32(c) (5.38) (5.06) (0.38) -- (0.38)
Year ended 12/31/07 13.26 0.29(c) 0.04 0.33 (0.32) -- (0.32)
Year ended 12/31/06 12.25 0.24(c) 1.05 1.29 (0.28) -- (0.28)
Year ended 12/31/05(e) 11.97 0.09 0.30 0.39 (0.11) -- (0.11)
- --------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 13.26 0.37(c) (5.38) (5.01) (0.43) -- (0.43)
Year ended 12/31/07 13.25 0.34(c) 0.04 0.38 (0.37) -- (0.37)
Year ended 12/31/06 12.24 0.30(c) 1.05 1.35 (0.34) -- (0.34)
Year ended 12/31/05 11.86 0.22 0.40 0.62 (0.24) -- (0.24)
Year ended 12/31/04(e) 11.61 0.10 0.61 0.71 (0.13) (0.33) (0.46)
==========================================================================================================================
<Caption>
RATIO OF
RATIO OF EXPENSES
EXPENSES TO AVERAGE NET
TO AVERAGE ASSETS WITHOUT RATIO OF NET
NET ASSETS FEE WAIVERS INVESTMENT
NET ASSET NET ASSETS, WITH FEE WAIVERS AND/OR INCOME
VALUE, END TOTAL END OF PERIOD AND/OR EXPENSES EXPENSES TO AVERAGE PORTFOLIO
OF PERIOD RETURN(a) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(b)
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $ 7.83 (38.72)% $351,046 1.20%(d) 1.20%(d) 2.86%(d) 50%
Year ended 12/31/07 13.27 2.46 676,945 1.08 1.08 2.14 44
Year ended 12/31/06 13.26 10.67 788,003 1.14 1.14 1.93 38
Year ended 12/31/05 12.25 4.85 817,588 1.14 1.14 1.59 90
Year ended 12/31/04 11.86 6.89 68,951 1.47 1.49 0.73 64
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 7.82 (39.14) 78,959 1.95(d) 1.95(d) 2.11(d) 50
Year ended 12/31/07 13.24 1.69 241,041 1.83 1.83 1.39 44
Year ended 12/31/06 13.23 9.86 358,655 1.89 1.89 1.18 38
Year ended 12/31/05 12.22 4.04 517,032 1.88 1.88 0.85 90
Year ended 12/31/04 11.84 6.12 79,968 2.12 2.14 0.08 64
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 7.82 (39.18) 61,102 1.95(d) 1.95(d) 2.11(d) 50
Year ended 12/31/07 13.25 1.69 133,222 1.83 1.83 1.39 44
Year ended 12/31/06 13.24 9.86 163,630 1.89 1.89 1.18 38
Year ended 12/31/05 12.23 4.04 194,027 1.88 1.88 0.85 90
Year ended 12/31/04 11.85 6.21 27,729 2.12 2.14 0.08 64
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 12/31/08 7.83 (38.83) 5,090 1.45(d) 1.45(d) 2.61(d) 50
Year ended 12/31/07 13.26 2.20 10,959 1.33 1.33 1.89 44
Year ended 12/31/06 13.25 10.40 7,293 1.39 1.39 1.68 38
Year ended 12/31/05 12.24 4.47 6,684 1.38 1.38 1.35 90
Year ended 12/31/04(e) 11.87 5.68 19 1.62(f) 1.64(f) 0.58(f) 64
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(e) 7.83 (16.96) 587 1.11(d)(f) 1.11(d)(f) 2.95(d)(f) 50
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
Year ended 12/31/08 7.83 (38.72) 112,077 1.20(d) 1.20(d) 2.86(d) 50
Year ended 12/31/07 13.27 2.46 226,893 1.08 1.08 2.14 44
Year ended 12/31/06 13.26 10.67 288,522 1.14 1.14 1.93 38
Year ended 12/31/05(e) 12.25 3.28 344,015 1.10(f) 1.10(f) 1.63(f) 90
- ----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 7.82 (38.44) 321 0.73(d) 0.73(d) 3.33(d) 50
Year ended 12/31/07 13.26 2.89 6,685 0.69 0.69 2.53 44
Year ended 12/31/06 13.25 11.22 149 0.68 0.68 2.39 38
Year ended 12/31/05 12.24 5.28 34 0.67 0.67 2.06 90
Year ended 12/31/04(e) 11.86 6.15 11 0.93(f) 0.95(f) 1.27(f) 64
==================================================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges and is not annualized for
periods less than one year, if applicable.
(b) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $531,101,
$157,671, $100,155, $7,617, $592, $174,078 and $481 for Class A, Class B,
Class C, Class R, Class Y, Investor Class and Institutional Class shares,
respectively.
(e) Commencement date of April 30, 2004, October 3, 2008, July 15, 2005 and
April 30, 2004 for Class R, Class Y, Investor Class and Institutional Class
shares, respectively.
(f) Annualized.
27 AIM BASIC BALANCED FUND
NOTE 16--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On 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
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 alleging that the defendants permitted
improper market timing and related activity in the AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the 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.
All lawsuits based on allegations of market timing, late trading and related
issues were 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
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.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
28 AIM BASIC BALANCED FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Funds Group
and Shareholders of AIM Basic Balanced Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Basic Balanced Fund (one of the
funds constituting AIM Funds Group, hereafter referred to as the "Fund") at
December 31, 2008, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
February 17, 2009
Houston, Texas
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. With
the exception of the actual ending account value and expenses of the Class Y
Shares, the example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period July 1, 2008, through
December 31, 2008. The actual ending account and expenses of the Class Y shares
in the below example are based on an investment of $1,000 invested as of close
of business October 3, 2008 (commencement date) and held through December 31,
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 (as of close of business
October 3, 2008 through December 31, 2008 for the Class Y shares). Because the
actual ending account value and expense information in the example is not based
upon a six month period for the Class Y shares, the ending account value and
expense information may not provide a meaningful comparison to mutual funds that
provide such information for a full six month 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $696.10 $5.50 $1,018.65 $ 6.55 1.29%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 694.20 8.69 1,014.88 10.33 2.04
- ---------------------------------------------------------------------------------------------------
C 1,000.00 693.60 8.68 1,014.88 10.33 2.04
- ---------------------------------------------------------------------------------------------------
R 1,000.00 695.80 6.56 1,017.39 7.81 1.54
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 830.40 2.50 1,019.56 5.63 1.11
- ---------------------------------------------------------------------------------------------------
Investor 1,000.00 696.10 5.50 1,018.65 6.55 1.29
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008 (as of close of
business October 3, 2008, through December 31, 2008 for the Class Y shares),
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
184/366 to reflect the most recent fiscal half year. For the Class Y shares
actual expenses are equal to the annualized expense ratio indicated above
multiplied by the average account value over the period, multiplied by 90
(as of close of business October 3, 2008, through December 31, 2008)/366.
Because the Class Y shares have not been in existence for a full six month
period, the actual ending account value and expense information shown may
not provide a meaningful comparison to fund expense information of classes
that show such data for a full six month period and, because the actual
ending account value and expense information in the expense example covers a
short time period, return and expense data may not be indicative of return
and expense data for longer time periods.
(3) Hypothetical expenses are equal to the annualized expense ratio indicated
above multiplied by the average account value over the period, multiplied by
184/366 to reflect a one-half year period. The hypothetical ending account
value and expenses may be used to compare ongoing costs of investing in
Class Y shares of the Fund and other funds because such data is based on a
full six month period.
30 AIM BASIC BALANCED FUND
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 July 1, 2008, through December 31, 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $697.80 $3.37 $1,021.17 $4.01 0.79%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 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
184/366 to reflect the most recent fiscal half year.
AIM BASIC BALANCED FUND
Supplement to Annual Report dated 12/31/08
AIM BASIC BALANCED FUND
INSTITUTIONAL CLASS SHARES
The following information has been prepared to provide Institutional Class
shareholders with a performance overview specific to their holdings.
Institutional Class shares are offered exclusively to institutional investors,
including defined contribution plans that meet certain criteria.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 12/31/08
Inception -0.91%
5 Years - .46
1 Year -38.44
Institutional Class shares' inception date is April 30, 2004. Returns since that
date are historical returns. All other returns are blended returns of historical
Institutional Class share performance and restated Class A share performance
(for periods prior to the inception date of Institutional Class shares) at net
asset value (NAV) and reflect the 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.
Please note that past performance is not indicative of future results.
More recent returns may be more or less than those shown. All returns assume
reinvestment of distributions at NAV. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. See full report for information on comparative benchmarks. Please
consult your Fund prospectus for more information. For the most current
month-end performance, please call 800 451 4246 or visit invescoaim.com.
NASDAQ SYMBOL BBLIX
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-1 Invesco Aim Distributors, Inc.
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Qualified Dividend Income* 39.00%
Corporate Dividends Received Deduction* 32.86%
U.S. Treasury Obligations* 0.25%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
ADDITIONAL NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended March 31, 2008, June 30, 2008, September 30, 2008 and
December 31, 2008 were 44.24%, 45.13%, 48.57%, and 46.03%, respectively.
31 AIM BASIC BALANCED FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Funds Group (the "Trust"), is 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 104
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Each officer serves for a one year term or until their successors are
elected and qualified. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); Chairman, Investment
Company Institute; President, Co-Chief Executive Officer,
Co-President, Chief Operating Officer and Chief Financial
Officer, Franklin Resources, Inc. (global investment
management organization)
- --------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim Capital Management, Inc.
(registered investment advisor); Director and President,
INVESCO Funds Group, Inc. (registered investment advisor and
register transfer agent) and AIM GP Canada Inc. (general
partner for a limited partnership); Director, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco Aim Investment Services, Inc. (registered
transfer agent) and INVESCO Distributors, Inc. (registered
broker dealer); Director, President and Chairman, IVZ Callco
Inc. (holding company), INVESCO Inc. (holding company) and
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, AIM
Trimark Corporate Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund company); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
Director and Chairman, Fund Management Company (registered
broker dealer); President and Principal Executive Officer,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments Trust and
Tax-Free Investments Trust only); President, AIM Trimark
Global Fund Inc. and AIM Trimark Canada Fund Inc.; and
Director, Trimark Trust (federally regulated Canadian Trust
Company)
- --------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1987 Chairman, Crockett Technology Associates (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association/Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (property casualty company)
Formerly: Director, CompuDyne Corporation (provider of
product and services to the public security market);
Director, President and Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice President, AB Volvo;
Director of various public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (government affairs company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer, Texana Timber LP
(sustainable forestry company); and Discovery Global
Education Fund (non-profit)
- --------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan is considered an interested person of the Trust because he is
an officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
32 AIM BASIC BALANCED FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
Formerly: Director of Compliance and Assistant General Counsel,
ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General
Counsel and Director of Compliance, ALPS Mutual Funds, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim Capital Management, Inc.;
Chief Operating Officer, Senior Vice President, General Counsel
and Secretary, Liberty Ridge Capital, Inc. (an investment
adviser); Vice President and Secretary, PBHG Funds (an investment
company); Vice President and Secretary, PBHG Insurance Series
Fund (an investment company); Chief Operating Officer, General
Counsel and Secretary, Old Mutual Investment Partners (a broker-
dealer); General Counsel and Secretary, Old Mutual Fund Services
(an administrator); General Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder servicing center); Executive
Vice President, General Counsel and Secretary, Old Mutual
Capital, Inc. (an investment adviser); and Vice President and
Secretary, Old Mutual Advisors Funds (an investment company)
- --------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited,
IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO North American Holdings,
Inc.; and Vice President, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1992 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust only)
- --------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco Aim Private Asset Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering Compliance Officer, Fund
Management Company; and Manager of the Fraud Prevention
Department, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, The AIM Family of Funds--Registered
Trademark--, Invesco Global Asset Management (N.A.), Inc.
(registered investment advisor), Invesco Institutional (N.A.),
Inc., (registered investment advisor), INVESCO Private Capital
Investments, Inc. (holding company), Invesco Private Capital,
Inc. (registered investment advisor) and Invesco Senior Secured
Management, Inc. (registered investment advisor); and Vice
President, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
33 AIM BASIC BALANCED FUND
[GO PAPERLESS GRAPHIC]
Go Paperless with eDelivery
Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund
reports and prospectuses with a service that's all about eeees:
- - environmentally friendly. Go green by reducing the number of trees used to
produce paper.
- - economical. Help reduce your fund's printing and delivery expenses and put
more capital back in your fund's returns.
- - efficient. Stop waiting for regular mail. Your documents will be sent via
email as soon as they're available.
- - easy. Download, save and print files using your home computer with a few
clicks of your mouse.
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 website 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 email
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 website, invescoaim.com. On the home page, scroll
down and click on Proxy Policy. The information is also available on the SEC
website, 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
website. 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 website, sec.gov.
If used after April 20, 2009, 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.
Please refer to each fund's prospectus for information on the fund's
subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the
retail mutual funds, exchange-traded funds and institutional money market funds
and the subdistributor for the STIC Global Funds represented by Invesco Aim. All
entities are indirect, wholly owned subsidiaries of Invesco Ltd.
It is anticipated that the businesses of the affiliated investment adviser
firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.,
Invesco Private Asset Management, Inc. and Invesco Global Asset Management
(N.A.), Inc. -- will be combined into Invesco Institutional (N.A.), Inc., and
the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or
about Aug. 1, 2009. Additional information will be posted at invescoaim.com on
or about Aug. 1, 2009.
[INVESCO AIM LOGO]
- - service mark -
invescoaim.com BBA-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM AIM EUROPEAN SMALL COMPANY FUND
- -SERVICE MARK- Annual Report to Shareholders # December 31, 2008
[MOUNTAIN GRAPHIC]
2 Letters to Shareholders
4 Performance Summary
4 Management Discussion
6 Long-Term Fund Performance
8 Supplemental Information
9 Schedule of Investments
11 Financial Statements
14 Notes to Financial Statements
20 Financial Highlights
22 Auditor's Report
23 Fund Expenses
24 Tax Information
25 Trustees and Officers
[PHOTO OF TAYLOR]
PHILIP TAYLOR
Dear Shareholder:
In previous reports, I've talked with you about short-term market volatility.
I'd like to take this opportunity to update you on market developments during
calendar year 2008 and provide you with some perspective and encouragement.
MARKET OVERVIEW
At the start of 2008, we saw warning signs of increasing economic ills -- a
weakening housing market, rising inflation and slowing job growth, among others.
In response, the U.S. Federal Reserve Board (the Fed) cut short-term interest
rate targets throughout 2008 in an effort to stimulate economic growth. The Fed
reduced its short-term interest rate target from 4.25% to a range of zero to
0.25% during the year.(1)
In the spring of 2008, more serious factors came to the forefront --
driving unemployment sharply higher(2) and causing major stock market indexes to
hit multi-year lows in the U.S. and overseas.(3) For example, the S&P 500 Index,
considered representative of the U.S. stock market, had its worst one-year
performance since 1937.(4) During the second half of 2008, the Fed, the U.S.
Department of the Treasury and other federal agencies took unprecedented action
to rescue the troubled financials sector and domestic automobile industry,
stabilize the stock market and inject liquidity into the credit markets.
HOW WE GOT HERE
The cause of this correction was years of lax lending associated with the recent
housing boom. Mortgage loans of questionable quality were bundled into
hard-to-value securities that were bought by, and traded among, financial
institutions. As the value of those securities declined, financial institutions
sought to unload them -- but there were few buyers. With the value of their
assets falling and access to credit tightening, a number of well-established
financial firms faced severe difficulties, and investor uncertainty and market
volatility spiked.
In October 2008, the administration and Congress enacted a plan, the
Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury
to purchase up to $700 billion in troubled mortgage-related assets -- the
largest and most direct effort to resolve a credit crisis in the last half
century. The Fed, in concert with other central banks, cut short-term interest
rate targets and undertook other initiatives intended to restore investor
confidence, expand lending and mitigate the effects of the global credit crisis.
Following his election, President Barack Obama again pledged to act boldly to
stimulate the U.S. economy.
As we enter 2009, the volatility in the stock, fixed-income and credit
markets we saw last year emphasized the importance of three timeless investing
principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
# INVEST FOR THE LONG TERM. Short-term fluctuations have always been a
reality of the markets. We urge you to stick to your investment plan
and stay focused on your long-term goals.
# DIVERSIFY. Although diversification doesn't eliminate the risk of
loss or guarantee a profit, a careful selection of complementary
asset classes may cushion your portfolio against excessive
volatility.
# STAY FULLY INVESTED. Trying to time the market is a gamble, not an
investment strategy. A sound investment strategy includes viewing
market volatility as a matter of course, not a reason to panic.
A trusted financial advisor can explain more fully the potential value of
following these principles. An experienced advisor who knows your individual
investment goals, financial situation and risk tolerance can be your most
valuable asset during times of market volatility. Your advisor can provide
guidance and can monitor your investments to ensure they're on course.
It's also helpful to remember that many of history's significant buying
opportunities resulted from short-term economic crises that, in their time, were
considered unprecedented. We believe current market uncertainty may represent a
buying opportunity for patient, long-term investors. Rest assured that Invesco
Aim's portfolio managers are working diligently on your behalf to attempt to
capitalize on this situation.
MANAGING MONEY IS OUR FOCUS
I believe Invesco Aim is uniquely positioned to navigate current difficult
markets. Our parent company, Invesco Ltd., is one of the world's largest and
most diversified global investment managers. Invesco provides clients with
diversified investment strategies from distinct management teams around the
globe and a range of investment products. Invesco's single focus is asset
management -- which means we focus on doing one thing well: managing your money.
That can be reassuring in uncertain times.
While market conditions change often, our commitment to putting
shareholders first, helping clients achieve their investment goals and providing
excellent customer service remains constant.
If you have questions about this report or your account, please contact
one of our client service representatives at 800 959 4246.
Thank you for your continued confidence, and all of us at Invesco Aim look
forward to serving you.
Sincerely,
/S/ PHILIP TAYLOR
Philip Taylor
Senior Managing Director, Invesco Ltd.
CEO, Invesco Aim
1 U.S. Federal Reserve;
2 Bureau of Labor Statistics;
3 FactSet Research;
4 Wall Street Journal
2 AIM EUROPEAN SMALL COMPANY FUND
[PHOTO OF CROCKETT]
BRUCE CROCKETT
Dear Fellow Shareholders:
Since my last letter, continuing troubles in the global economy and financial
markets have negatively affected all investors. The new government promises to
move quickly with a stimulus package, yet considerable anxiety remains about
how, when and what kind of a recovery will occur. While no one likes to see
investment values decline as sharply as they have recently, as mutual fund
investors we can find some consolation in the knowledge that our fund
investments are more transparent, more comprehensively governed and more closely
regulated than most other kinds of investments. In addition, mutual funds
generally are more diversified than other investments; as shareholders we invest
not in a single security but in a portfolio of multiple securities. The benefits
of diversification have been reiterated by the stories of investors who "lost
everything" because they had too many of their assets in one place, whether that
place was a single money manager or their employer's stock. Mutual fund
investors also have the opportunity to diversify further among different types
of funds that each deploy a different strategy and focus on different kinds of
securities. These include conservatively managed money market funds, which,
relative to other securities, continue to offer a more safe, liquid, and
convenient way to invest short-term assets.
In addition to diversification, investing discipline is essential during
challenging times such as these. Strategies such as dollar-cost-averaging, where
individuals invest a consistent amount at regular intervals, can help investors
acquire more fund shares when prices are low. Periodic rebalancing of asset
allocation plans achieves the same effect. "Buy low, sell high" has long been
the mantra of investment success, but the advice is not always easy to follow
because it requires the discipline to resist prevailing trends. Of course,
investment strategies, such as dollar-cost-averaging and portfolio rebalancing
do not guarantee a profit or eliminate the risk of loss. Investors should
consider their ability to continue investing regardless of fluctuating security
prices.
A long-term view is also important, particularly for assets that are not
needed right away. In the past, it has often proven better to keep long-term
assets invested through a downturn than to miss the beginning of the upward
trend. To develop a diversified and disciplined investing plan that is right for
your individual goals, I encourage you to consult an experienced and trustworthy
investment professional who has the knowledge and the tools to help you
establish and implement the plan, monitor its results and adapt it to changing
goals and circumstances.
Even when working with a personal financial advisor, investors should
supplement the relationship with their own knowledge and awareness of the
investments they hold. Visit the Invesco Aim website at invescoaim.com regularly
to find out what is happening in your AIM funds and to read timely market
commentary from Invesco Aim management, strategists and portfolio managers. The
site's "Education and Planning" section can also help you clarify basic
investment concepts, learn how to choose a financial advisor, evaluate different
investment choices and make more informed investment decisions. Invesco Aim's
redesigned public home page recently received a Gold Award for its user-friendly
navigation and graphics from The Mutual Funds Monitor Awards, sponsored by
Corporate Insight.
As always, your Board of Trustees and Invesco Aim are committed to putting
your interests first by controlling costs, monitoring investment performance and
streamlining the investment management process during these difficult times.
Your Board has already begun the annual review and management contract renewal
process with the continuing goal of making AIM funds one of the best and most
cost-effective ways for you to invest your hard-earned money.
While the investing climate may remain uncertain for a while, economies
and markets are dynamic, and no stage is ever permanent. Please feel free to
contact me in writing with your questions or concerns. You can send an email to
me at bruce@brucecrockett.com.
Best regards,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM EUROPEAN SMALL COMPANY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY
Global equity markets were turbulent throughout 2008. Most markets registered
double-digit losses+ as global growth slowed and a number of financial
institutions worldwide fell victim to the broadening credit crisis. Within this
environment, investors' risk-averse nature caused them to shun smaller
capitalization companies.
AIM European Small Company Fund Class A shares at net asset value (NAV)
modestly outperformed the Fund's style-specific index but underperformed the
broad market index.+ Favorable stock selection in the U.K. gave the Fund at NAV
a competitive edge over the style-specific index. However, our focus on European
smaller cap stocks, which were harder hit over the period, detracted from
performance versus the large cap-oriented, developed-market MSCI EAFE Index.
Your Fund's long-term performance appears later in this report.
FUND VS. INDEXES
Total returns, 12/31/07 to 12/31/08, 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 -52.80%
Class B Shares -53.09
Class C Shares -53.15
Class Y Shares* -52.76
MSCI EAFE Index+ (Broad Market Index) -43.38
MSCI Europe Small Cap Index+(Style-Specific Index) -54.24
+Lipper European Funds Index+(Peer Group Index) -47.79
+ Lipper Inc.
* Share class incepted during the Fiscal year. See page 7 for a detailed
explanation of Fund performance.
HOW WE INVEST
When selecting stocks for your Fund, we employ a disciplined investment strategy
that emphasizes fundamental research, supported by both quantitative analysis
and portfolio construction techniques. Our EQV (earnings, quality, valuation)
strategy focuses primarily on identifying quality companies that have
experienced, or exhibit the potential for, accelerating or above-average
earnings growth but whose stock prices do not fully reflect these attributes.
We select investments for the Fund by using a bottom-up investment
approach, which means that we construct the Fund primarily on a stock-by-stock
basis. We focus on the strengths of individual companies rather than sectors,
countries or market-cap trends.
We believe disciplined sell decisions are key to successful investing. We
consider selling a stock for one of the following reasons:
# A company's fundamentals deteriorate, or it posts disappointing earnings.
# A stock's price seems overvalued.
# A more attractive opportunity becomes available.
MARKET CONDITIONS AND YOUR FUND
It was a very difficult year for financial markets. During the year, the banking
system came under extreme pressure with a number of major banks facing
insolvency. Although global equity prices have shown signs of recovery from
their mid-October depressed lows, the world's major stock markets finished the
calendar year in negative territory, with losses of over 50% in most markets.(1)
European equities ended the period at one of their lowest levels since
2005,(1) as the severity of the banking crisis heightened further at the end of
one of the most turbulent years in financial market history. Governments and
central banks in Europe and the U.S. found themselves bailing out banks, shoring
up depositors' confidence in their savings accounts and pumping liquidity into
the financial system as the fallout from the financial crisis spread. As credit
is the grease of the broader economic machine, economies across Europe, as well
as globally, slowed significantly as we moved through the year. Investor
sentiment remained fragile as weak corporate earnings news offered little
support to equity markets.
AIM European Small Company Fund did not emerge unscathed from the
financial carnage of 2008, ending the year with a double-digit decline. As
unprecedented problems in the financials sector unfolded, and eventually spread
to every nook and cranny of economic life, share prices of smaller
capitalization companies came under immense pressure -- even more so than their
large-cap counterparts. Hedge funds were forced to liquidate positions, often
within very short time periods. This fight to liquidity and safety negatively
affected the returns of small- and
PORTFOLIO COMPOSITION
By sector
Industrials 43.1%
Consumer Discretionary 23.2
Financials 9.9
Materials 8.6
Information Technology 5.5
Consumer Staples 4.5
Energy 2.2
Health Care 1.5
Money Market Funds Plus
Other Assets Less Liabilities 1.5
TOP FIVE COUNTRIES*
1. United Kingdom 30.8%
2. Switzerland 17.1
3. Germany 14.6
4. Ireland 7.8
5. Greece 6.1
Total Net Assets $ 107.0 million
Total Number of Holdings* 47
TOP 10 EQUITY HOLDINGS*
1. Fuchs Petrolub AG-Pfd. 5.4%
2. Mobilezone Holding A.G. 4.3
3. Paddy Power PLC 4.0
4. Schweiter AG 4.0
5. Homeserve PLC 3.9
6. Takkt AG 3.8
7. Mitie Group PLC 3.6
8. Lancashire Holdings Ltd. 3.5
9. Ultra Electronics Holdings PLC 3.3
10. Kier Group PLC 3.3
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
* Excluding money market fund holdings.
4 AIM EUROPEAN SMALL COMPANY FUND
mid-cap stocks, and was reflected in the Fund's absolute results. An already
difficult situation was exacerbated by a surprise strengthening of the U.S.
dollar. Relative results were modestly better. Class A shares of the Fund at net
asset value held up better than the style-specific benchmark, the MSCI Europe
Small Cap Index, by 1.44%.(1) Stock selection in the U.K. and a modest cash
exposure in a declining market were drivers of this relative result. However, it
is challenging to claim success from an absolute return perspective in the midst
of this severe bear market.
No country or sector escaped the downturn during 2008, and our investments
were unable to produce positive contributions at the sector or country level.
From an absolute performance perspective, our U.K. investments detracted from
performance the most, followed by Greece, the Netherlands and Germany. From a
sector perspective, holdings in the industrials and consumer discretionary
sectors were the hardest hit and were key detractors from absolute results.
Detractors included Finnish tire manufacturer NOKIAN RENKAAT, Greek lottery and
gaming systems manufacturer INTRALOT and Norwegian oil services company
PETROLEUM GEO SERVICES. We sold Petroleum Geo Services due to weakening
fundamentals.
Despite the severe downturn, there were some bright spots of positive
performance within the Fund's holdings, including U.K. based reinsurer
LANCASHIRE HOLDINGS and German based e-commerce managed services provider D+S
Europe AG. We took our profits in D+S EUROPE AG and sold the stock during the
year.
At year end, the Fund's largest overweight positions were in the consumer
discretionary and industrials sectors. We were keenly aware of the challenges
consumers faced, but strong local franchises trading at decade-low valuations
became increasingly more available in these sectors. The Fund's largest
underweight positions were in the financials, health care and energy sectors.
We primarily focused on companies with strong balance sheets. At the close
of the year, a large portion of our holdings had zero net debt. Strong balance
sheets give companies flexibility, which is always valuable but particularly so
in today's highly uncertain environment.
As always, we continued to strongly emphasize cash generation and
attractive valuations. In fact, at the end of the year, European small-caps
traded at a significant discount to European large-caps. Even more staggering
was the valuation discount of European small-caps versus the U.S.
small-cap universe.(2)
Volatile markets can test an investor's resolve, and 2008 was one of the
most turbulent periods in many years. Your Fund's managers are among the largest
shareholders, and we too were disappointed with our results in 2008. However, we
are also excited about the opportunities the current crisis has created.
Although small-cap investing was challenging over the year, huge swings in the
market led to attractive investment opportunities.
We welcome new investors in the Fund and express our appreciation to all
our shareholders for your continued investment in AIM European Small Company
Fund.
1 Lipper Inc.
2 Citigroup Investment Research
The views and opinions expressed in management's discussion of Fund performance
are those of Invesco Aim Advisors, Inc. These views and opinions are subject to
change at any time based on factors such as market and economic conditions.
These views and opinions may not be relied upon as investment advice or
recommendations, or as an offer for a particular security. The information is
not a complete analysis of every aspect of any market, country, industry,
security or the Fund. Statements of fact are from sources considered reliable,
but Invesco Aim Advisors, Inc. makes no representation or warranty as to their
completeness or accuracy. Although historical performance is no guarantee of
future results, these insights may help you understand our investment management
philosophy.
See important Fund and index disclosures later in this report.
[PHOTO OF HOLZER]
JASON HOLZER
Chartered Financial Analyst, senior portfolio manager, is lead manager of AIM
European Small respect to the Fund's small- and mid-cap investments. Mr. Holzer
joined Invesco Aim in 1996. He earned a B.A. in quantitative economics and an
M.S. in engineering economic systems from Stanford University.
[PHOTO OF ENDRESEN]
BORGE ENDRESEN
Chartered Financial Analyst, portfolio manager, is manager of AIM European Small
Company Fund. Mr. Endresen joined Invesco Aim in 1999. He graduated summa cum
laude from the University of Oregon with a B.S. in finance. Mr. Endresen also
earned an M.B.A. from The University of Texas at Austin.
Assisted by the Europe/Canada Team
5 AIM EUROPEAN SMALL COMPANY FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable
sales charges and Fund expenses including management fees. Results for Class B
shares are calculated as if a hypothetical shareholder had liquidated his entire
investment in the Fund at the close of the reporting period and paid the
applicable contingent deferred sales charges. Index results include reinvested
dividends, but they do not reflect sales charges.
Performance of an index of funds reflects fund expenses and management fees;
performance of a market index does not. Performance shown in the chart and
table(s) does not reflect deduction of taxes a shareholder would pay on Fund
distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the
value of the Fund and its indexes. We believe that a logarithmic chart is more
effective than other types of charts in illustrating changes in value during the
early years shown in the chart. The vertical axis, the one that indicates the
dollar value of an investment, is constructed with each segment representing a
percent change in the value of the investment. In this chart, each segment
represents a doubling, or 100% change, in the value of the investment. In other
words, the space between $5,000 and $10,000 is the same size as the space
between $10,000 and $20,000, and so on.
6 AIM EUROPEAN SMALL COMPANY FUND
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT - OLDEST SHARE CLASSES SINCE INCEPTION
Fund and index data from 8/31/00
AIM AIM AIM
European Small European Small European Small
Company Fund- Company Fund- Company Fund- MSCI Europe Lipper European
Date Class A Shares Class B Shares Class C Shares MSCI EAFE Index(1) Small Cap Index(1) Funds Index(1)
8/31/00 $ 9450 $ 10000 $ 10000 $ 10000 $ 10000 $ 10000
9/00 9223 9760 9760 9513 9759 9484
10/00 8722 9230 9220 9288 9285 9196
11/00 8118 8580 8570 8940 9075 8704
12/00 8710 9212 9202 9258 9593 9357
1/01 8890 9392 9392 9253 10107 9328
2/01 8149 8600 8600 8559 9716 8542
3/01 7048 7435 7435 7989 8828 7792
4/01 7332 7726 7726 8544 9355 8308
5/01 7209 7595 7595 8242 9333 7988
6/01 6877 7244 7244 7905 8895 7662
7/01 6753 7104 7104 7761 8752 7585
8/01 6839 7194 7194 7565 8823 7390
9/01 5851 6141 6141 6799 7341 6561
10/01 6336 6652 6652 6973 7815 6791
11/01 6611 6933 6933 7230 8452 7085
12/01 6830 7174 7164 7273 8598 7236
1/02 6820 7154 7154 6886 8451 6918
2/02 7001 7334 7324 6935 8479 6923
3/02 7323 7675 7666 7343 9051 7270
4/02 7675 8036 8037 7358 9328 7250
5/02 7855 8217 8217 7451 9401 7254
6/02 7903 8267 8268 7155 9076 7060
7/02 7257 7585 7576 6448 8100 6323
8/02 7276 7605 7595 6434 7973 6280
9/02 6573 6863 6852 5743 7105 5502
10/02 6782 7073 7073 6051 7398 5924
11/02 7019 7325 7314 6326 7721 6204
12/02 7000 7295 7294 6113 7528 5975
1/03 6820 7104 7104 5858 7292 5714
2/03 6687 6964 6963 5724 7001 5496
3/03 6858 7134 7133 5611 6987 5429
4/03 7466 7766 7765 6161 7988 6111
5/03 8206 8529 8518 6535 8880 6561
6/03 8349 8679 8669 6693 9065 6614
7/03 8738 9070 9060 6855 9473 6740
8/03 8947 9281 9281 7020 9806 6791
9/03 9659 10023 10013 7236 10260 6943
10/03 10380 10766 10755 7687 11109 7382
11/03 10808 11198 11196 7858 11532 7707
12/03 11477 11880 11878 8472 12150 8254
1/04 12286 12712 12710 8592 12898 8495
2/04 12858 13295 13292 8790 13477 8759
3/04 12544 12964 12961 8840 13152 8477
4/04 12411 12824 12822 8640 12858 8342
5/04 12582 12984 12982 8669 12870 8428
6/04 13030 13446 13434 8859 13338 8591
7/04 12639 13035 13032 8571 12778 8290
8/04 12858 13255 13252 8609 12747 8313
9/04 13506 13907 13904 8834 13363 8678
10/04 14211 14629 14626 9136 13911 8985
1 Lipper Inc.
[MOUNTAIN CHART]
11/04 15535 15984 15980 9760 15320 9630
12/04 16489 16949 16955 10188 16125 10077
1/05 17025 17493 17499 10001 16367 9962
2/05 18447 18940 18946 10433 17261 10527
3/05 18174 18652 18649 10171 16893 10222
4/05 17834 18294 18291 9932 16309 9959
5/05 17814 18263 18260 9937 16420 9953
6/05 18758 19218 19215 10068 16862 10175
7/05 20062 20542 20548 10377 17822 10672
8/05 21144 21639 21635 10639 18431 11019
9/05 21738 22223 22230 11113 18890 11259
10/05 20405 20858 20856 10789 17789 10780
11/05 20893 21340 21338 11052 18204 10997
12/05 22508 22966 22975 11567 19178 11477
1/06 24646 25141 25137 12277 21143 12359
2/06 25809 26310 26316 12250 21663 12481
3/06 27678 28200 28195 12653 22784 13013
4/06 29859 30396 30402 13258 24284 13757
5/06 28987 29490 29484 12743 23232 13182
6/06 28106 28573 28579 12742 22814 13084
7/06 27743 28190 28184 12868 22589 13217
8/06 28190 28627 28621 13222 23215 13603
9/06 27618 28026 28020 13242 23608 13682
10/06 29695 30114 30116 13758 24902 14288
11/06 31699 32123 32125 14169 26601 14904
12/06 33332 33758 33757 14613 27853 15491
1/07 34235 34656 34641 14712 28426 15778
2/07 35029 35425 35424 14831 28539 15685
3/07 36966 37370 37355 15209 29948 16387
4/07 38759 39164 39159 15885 31657 17323
5/07 39984 40378 40369 16163 32101 17706
6/07 39708 40075 40054 16183 31603 17699
7/07 40034 40380 40359 15945 31388 17291
8/07 38604 38902 38881 15695 30050 17144
9/07 39122 39407 39399 16535 29939 18140
10/07 41481 41744 41735 17185 32167 18984
11/07 36997 37211 37203 16620 29438 18256
12/07 35964 36147 36142 16246 28561 18113
1/08 31465 31603 31599 14745 25477 16345
2/08 34140 34264 34260 14956 26802 16497
3/08 34314 34411 34424 14799 27074 16504
4/08 35021 35106 35102 15602 27549 17116
5/08 35098 35156 35152 15754 27887 17574
6/08 32079 32132 32111 14466 25526 15977
7/08 29831 29867 29847 14001 24218 15409
8/08 28888 28890 28871 13434 23566 14646
9/08 23902 23898 23882 11491 18871 12570
10/08 17391 17369 17358 9173 13585 9670
11/08 16384 16344 16351 8677 12413 8994
12/08 16969 16971 16939 9199 13071 9458
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/08, including maximum applicable sales charges
CLASS A SHARES
Inception (8/31/00) 6.55%
5 Years 6.92
1 Year -55.39
CLASS B SHARES
Inception (8/31/00) 6.55%
5 Years 7.21
1 Year -54.50
CLASS C SHARES
Inception (8/31/00) 6.53%
5 Years 7.35
1 Year -53.43
CLASS Y SHARES
Inception 7.29%
5 Years 8.15
1 Year -52.76
CLASS Y SHARES' INCEPTION DATE IS OCTOBER 3, 2008; RETURNS SINCE THAT DATE ARE
ACTUAL RETURNS. ALL OTHER RETURNS ARE BLENDED RETURNS OF ACTUAL CLASS Y SHARE
PERFORMANCE AND RESTATED CLASS A SHARE PERFORMANCE (FOR PERIODS PRIOR TO THE
INCEPTION DATE OF CLASS Y SHARES) AT NET ASSET VALUE. THE RESTATED CLASS A SHARE
PERFORMANCE REFLECTS THE RULE 12B-1 FEES APPLICABLE TO CLASS A SHARES AS WELL AS
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RECEIVED BY CLASS A SHARES. CLASS A
SHARES' INCEPTION DATE IS AUGUST 31, 2000.
THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT GUARANTEE
COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE
VISIT INVESCOAIM.COM FOR THE MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE
FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE AND THE
EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU
SELL SHARES.
THE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT FUND
PROSPECTUS AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C AND CLASS
Y SHARES WAS 1.44%, 2.19%, 2.19% AND 1.19%, RESPECTIVELY. THE EXPENSE RATIOS
PRESENTED ABOVE MAY VARY FROM THE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS OF
THIS REPORT THAT ARE BASED ON EXPENSES INCURRED DURING THE PERIOD COVERED BY
THIS REPORT.
CLASS A SHARE PERFORMANCE REFLECTS THE MAXIMUM 5.50% SALES CHARGE, AND CLASS B
AND CLASS C SHARE PERFORMANCE REFLECTS THE APPLICABLE CONTINGENT DEFERRED SALES
CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CDSC ON CLASS B SHARES DECLINES FROM
5% BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE SEVENTH YEAR.
THE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST YEAR AFTER PURCHASE. CLASS Y
SHARES DO NOT HAVE A FRONT-END SALES CHARGE OR A CDSC; THEREFORE, PERFORMANCE IS
AT NET ASSET VALUE.
THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER PRIMARILY DUE TO
DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES.
A REDEMPTION FEE OF 2% WILL BE IMPOSED ON CERTAIN REDEMPTIONS OR EXCHANGES OUT
OF THE FUND WITHIN 31 DAYS OF PURCHASE. EXCEPTIONS TO THE REDEMPTION FEE ARE
LISTED IN THE FUND'S PROSPECTUS.
HAD THE ADVISOR NOT WAIVED FEES AND/ OR REIMBURSED EXPENSES IN THE PAST,
PERFORMANCE WOULD HAVE BEEN LOWER.
7 AIM EUROPEAN SMALL COMPANY FUND
AIM European Small Company Fund's investment objective is long-term growth of
capital.
# Unless otherwise stated, information presented in this report is as of
December 31, 2008, and is based on total net assets.
# Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES
# Effective September 30, 2003, only previously established qualified plans
are eligible to purchase Class B shares of any AIM fund.
# Class Y shares are available to only certain investors. Please see the
prospectus for more information.
# Effective Feb. 1, 2008, the Fund reopened to all investors. The Fund had
been in limited offering since March 28, 2005.
PRINCIPAL RISKS OF INVESTING IN THE FUND
# The values of convertible securities in which the Fund invests may be
affected by market interest rates, the risk that the issuer may default on
interest or principal payments, and the value of the underlying common
stock into which these securities may be converted.
# Investing in developing countries can add additional risk, such as high
rates of inflation or sharply devalued currencies against the U.S. dollar.
Transaction costs are often higher, and there may be delays in settlement
procedures.
# Prices of equity securities change in response to many factors, including
the historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions
and market liquidity.
# Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, relative lack of information, relatively
low market liquidity, and the potential lack of strict financial and
accounting controls and standards.
# The prices of securities held by the Fund may decline in response to
market risks.
# Nondiversification increases the risk that the value of the Fund's shares
may vary more widely, and the Fund may be subject to greater investment
and credit risk than if it invested more broadly.
# Investing in a fund that invests in smaller companies involves risks not
associated with investing in more established companies, such as business
risk, stock price fluctuations and illiquidity.
ABOUT INDEXES USED IN THIS REPORT
# 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.
OTHER INFORMATION
# The Chartered Financial ANALYST -- REGISTERED TRADEMARK-- (CFA--REGISTERED
TRADEMARK--) designation is a globally recognized standard for measuring
the competence and integrity of investment professionals.
# The returns shown in management's discussion of Fund performance are based
on net asset values calculated for shareholder transactions. Generally
accepted accounting principles require adjustments to be made to the net
assets of the Fund at period end for financial reporting purposes, and as
such, the net asset values for shareholder transactions and the returns
based on those net asset values may differ from the net asset values and
returns reported in the Financial Highlights.
# Industry classifications used in this report are generally according to
the Global Industry Classification Standard, which was developed by and is
the exclusive property and a service mark of MSCI Inc. and Standard &
Poor's.
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 NASDAQ SYMBOLS
Class A Shares ESMAX
Class B Shares ESMBX
Class C Shares ESMCX
Class Y Shares ESMYX
8 AIM EUROPEAN SMALL COMPANY FUND
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY
INTERESTS-93.07%
AUSTRIA-2.23%
Andritz AG 92,992 $ 2,388,407
==============================================================================
BRAZIL-2.04%
Ocean Wilsons Holdings Ltd. 325,000 2,181,054
==============================================================================
FINLAND-1.78%
Nokian Renkaat Oyj 169,350 1,907,928
==============================================================================
FRANCE-1.71%
Alten(b) 34,787 743,706
- ------------------------------------------------------------------------------
Sword Group 78,300 1,085,022
==============================================================================
1,828,728
==============================================================================
GERMANY-9.19%
ElringKlinger AG 130,245 1,264,387
- ------------------------------------------------------------------------------
P&I Personal & Informatik AG 49,050 693,549
- ------------------------------------------------------------------------------
Symrise AG 136,497 1,937,219
- ------------------------------------------------------------------------------
Takkt AG 356,300 4,009,213
- ------------------------------------------------------------------------------
Wirecard AG(b) 323,520 1,927,437
==============================================================================
9,831,805
==============================================================================
GREECE-6.05%
Intralot S.A. 741,692 3,107,986
- ------------------------------------------------------------------------------
Jumbo S.A. 553,000 3,368,523
==============================================================================
6,476,509
==============================================================================
IRELAND-7.83%
CPL Resources PLC 719,700 1,055,541
- ------------------------------------------------------------------------------
DCC PLC 206,652 3,016,408
- ------------------------------------------------------------------------------
Paddy Power PLC 229,288 4,301,219
==============================================================================
8,373,168
==============================================================================
ISRAEL-0.13%
Advanced Vision Technology Ltd.(b) 43,922 133,124
==============================================================================
ITALY-1.35%
Cementir Holding S.p.A. 411,639 1,445,786
==============================================================================
NETHERLANDS-5.90%
Aalberts Industries N.V. 477,803 3,429,796
- ------------------------------------------------------------------------------
Koninklijke BAM Groep N.V.(c) 9,880 89,273
- ------------------------------------------------------------------------------
Koninklijke BAM Groep N.V. 188,000 1,698,713
- ------------------------------------------------------------------------------
USG People N.V. 83,413 1,089,733
==============================================================================
6,307,515
==============================================================================
NORWAY-4.31%
ODIM A.S.A.(b) 191,828 820,946
- ------------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A.(b) 459,307 2,352,523
- ------------------------------------------------------------------------------
Veidekke A.S.A. 441,300 1,440,236
==============================================================================
4,613,705
==============================================================================
SWEDEN-2.70%
Oriflame Cosmetics S.A.-SDR 62,550 1,830,868
- ------------------------------------------------------------------------------
Poolia A.B.-Class B 396,300 1,061,309
==============================================================================
2,892,177
==============================================================================
SWITZERLAND-17.10%
Aryzta AG(b) 85,639 2,751,273
- ------------------------------------------------------------------------------
Conzzeta AG 1,343 1,947,533
- ------------------------------------------------------------------------------
Daetwyler Holding AG(b) 54,477 2,215,230
- ------------------------------------------------------------------------------
Dufry Group 33,520 930,168
- ------------------------------------------------------------------------------
Galenica AG 5,040 1,631,146
- ------------------------------------------------------------------------------
Mobilezone Holding AG 720,714 4,554,834
- ------------------------------------------------------------------------------
Schweiter AG 12,121 4,262,059
==============================================================================
18,292,243
==============================================================================
UNITED KINGDOM-30.75%
Amlin PLC 313,321 1,653,444
- ------------------------------------------------------------------------------
Homeserve PLC 290,906 4,178,235
- ------------------------------------------------------------------------------
IG Group Holdings PLC 566,475 2,126,985
- ------------------------------------------------------------------------------
Inchcape PLC 529,101 285,305
- ------------------------------------------------------------------------------
Informa PLC 294,054 1,056,400
- ------------------------------------------------------------------------------
Kier Group PLC 263,548 3,501,501
- ------------------------------------------------------------------------------
Lancashire Holdings Ltd. 599,682 3,732,718
- ------------------------------------------------------------------------------
Mears Group PLC 766,454 2,958,475
- ------------------------------------------------------------------------------
Mitie Group PLC 1,292,214 3,893,974
- ------------------------------------------------------------------------------
Morgan Sindall PLC 171,000 1,357,536
- ------------------------------------------------------------------------------
Savills PLC 938,263 3,062,759
- ------------------------------------------------------------------------------
Spectris PLC 163,018 1,280,496
- ------------------------------------------------------------------------------
Ultra Electronics Holdings PLC 214,250 3,557,773
- ------------------------------------------------------------------------------
Zetar PLC(b) 111,000 251,004
==============================================================================
32,896,605
==============================================================================
Total Common Stocks & Other Equity Interests
(Cost $136,354,072) 99,568,754
==============================================================================
PREFERRED STOCKS-5.45%
GERMANY-5.45%
Fuchs Petrolub AG-Pfd. (Cost $4,575,608) 120,673 5,825,425
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM EUROPEAN SMALL COMPANY FUND
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
MONEY MARKET FUNDS-0.68%
Liquid Assets Portfolio-Institutional Class(d) 363,372 $ 363,372
- ------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 363,372 363,372
==============================================================================
Total Money Market Funds (Cost $726,744) 726,744
==============================================================================
TOTAL INVESTMENTS-99.20% (Cost $141,656,424) 106,120,923
==============================================================================
OTHER ASSETS LESS LIABILITIES-0.80% 859,027
==============================================================================
NET ASSETS-100.00% $106,979,950
==============================================================================
</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) Non-income producing security.
(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 value of this security at December
31, 2008 represented 0.08% of the Fund's Net Assets.
(d) 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.
10 AIM EUROPEAN SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$140,929,680) $105,394,179
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 726,744
======================================================
Total investments (Cost
$141,656,424) 106,120,923
======================================================
Foreign currencies, at value (Cost
$1,313,013) 1,322,392
- ------------------------------------------------------
Receivables for:
Investments sold 39,337
- ------------------------------------------------------
Fund shares sold 150,093
- ------------------------------------------------------
Dividends 423,984
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 18,561
- ------------------------------------------------------
Other assets 26,447
======================================================
Total assets 108,101,737
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 803,224
- ------------------------------------------------------
Dividends 56,891
- ------------------------------------------------------
Accrued fees to affiliates 107,641
- ------------------------------------------------------
Accrued other operating expenses 109,596
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 44,435
======================================================
Total liabilities 1,121,787
======================================================
Net assets applicable to shares
outstanding $106,979,950
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $151,415,815
- ------------------------------------------------------
Undistributed net investment income 273,832
- ------------------------------------------------------
Undistributed net realized gain (loss) (9,198,565)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (35,511,132)
======================================================
$106,979,950
======================================================
NET ASSETS:
Class A $ 72,543,970
======================================================
Class B $ 12,541,439
======================================================
Class C $ 15,453,465
======================================================
Class Y $ 6,441,076
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 11,121,305
======================================================
Class B 2,030,097
======================================================
Class C 2,498,913
======================================================
Class Y 985,708
======================================================
Class A:
Net asset value per share $ 6.52
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $6.52 divided
by 94.50%) $ 6.90
======================================================
Class B:
Net asset value and offering price
per share $ 6.18
======================================================
Class C:
Net asset value and offering price
per share $ 6.18
======================================================
Class Y:
Net asset value and offering price
per share $ 6.53
======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM EUROPEAN SMALL COMPANY FUND
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $710,420) $ 8,902,297
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $26,138) 532,550
================================================================================================
Total investment income 9,434,847
================================================================================================
EXPENSES:
Advisory fees 2,437,082
- ------------------------------------------------------------------------------------------------
Administrative services fees 82,394
- ------------------------------------------------------------------------------------------------
Custodian fees 230,613
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 477,584
- ------------------------------------------------------------------------------------------------
Class B 308,083
- ------------------------------------------------------------------------------------------------
Class C 376,455
- ------------------------------------------------------------------------------------------------
Transfer agent fees 615,456
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 23,935
- ------------------------------------------------------------------------------------------------
Other 243,217
================================================================================================
Total expenses 4,794,819
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (37,023)
================================================================================================
Net expenses 4,757,796
================================================================================================
Net investment income 4,677,051
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 10,430,645
- ------------------------------------------------------------------------------------------------
Foreign currencies (567,826)
================================================================================================
9,862,819
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (188,271,062)
- ------------------------------------------------------------------------------------------------
Foreign currencies (33,769)
================================================================================================
(188,304,831)
================================================================================================
Net realized and unrealized gain (loss) (178,442,012)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(173,764,961)
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM EUROPEAN SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,677,051 $ 4,105,847
- ---------------------------------------------------------------------------------------------------------
Net realized gain 9,862,819 109,308,048
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (188,304,831) (66,083,522)
=========================================================================================================
Net increase (decrease) in net assets resulting from operations (173,764,961) 47,330,373
=========================================================================================================
Distributions to shareholders from net investment income:
Class A (3,339,942) (4,275,440)
- ---------------------------------------------------------------------------------------------------------
Class B (365,809) (282,518)
- ---------------------------------------------------------------------------------------------------------
Class C (442,511) (326,815)
- ---------------------------------------------------------------------------------------------------------
Class Y (257,406) --
=========================================================================================================
Total distributions from net investment income (4,405,668) (4,884,773)
=========================================================================================================
Distributions to shareholders from net realized gains:
Class A (25,728,528) (65,212,926)
- ---------------------------------------------------------------------------------------------------------
Class B (4,731,385) (12,297,030)
- ---------------------------------------------------------------------------------------------------------
Class C (5,723,447) (14,225,259)
- ---------------------------------------------------------------------------------------------------------
Class Y (1,982,867) --
=========================================================================================================
Total distributions from net realized gains (38,166,227) (91,735,215)
=========================================================================================================
Share transactions-net:
Class A (53,821,449) (45,038,679)
- ---------------------------------------------------------------------------------------------------------
Class B (12,232,580) (6,989,742)
- ---------------------------------------------------------------------------------------------------------
Class C (11,583,496) (11,634,802)
- ---------------------------------------------------------------------------------------------------------
Class Y 10,815,261 --
=========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (66,822,264) (63,663,223)
=========================================================================================================
Net increase (decrease) in net assets (283,159,120) (112,952,838)
=========================================================================================================
NET ASSETS:
Beginning of year 390,139,070 503,091,908
=========================================================================================================
End of year (includes undistributed net investment income of $273,832
and $549,543, respectively) $ 106,979,950 $ 390,139,070
=========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM EUROPEAN SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
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 assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class.
The Fund's investment objective is long-term growth of capital.
The Fund currently consists of four different classes of shares: Class A,
Class B, Class C and Class Y. 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 Y 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 February 1, 2008, the Fund's shares are open to investors. Prior to
February 1, 2008, the Fund's shares were closed to investors.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close
of the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on
that day. Securities traded in the over-the-counter market are valued
based on 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
14 AIM EUROPEAN 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 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. 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 or exchanges of shares
within 31 days of purchase. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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
15 AIM EUROPEAN SMALL COMPANY FUND
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, 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 (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$25,085.
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 year
ended December 31, 2008, Invesco reimbursed expenses of the Fund in the amount
of $1,700.
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 year ended December 31, 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 year
ended December 31, 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, Class C and Class Y 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
16 AIM EUROPEAN SMALL COMPANY FUND
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
year ended December 31, 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 year ended December 31, 2008, IADI
advised the Fund that IADI retained $87,787 in front-end sales commissions from
the sale of Class A shares and $16,528, $95,135 and $21,381 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 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. 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 significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using 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 valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $ 34,043,760
- --------------------------------------
Level 2 72,077,163
- --------------------------------------
Level 3 --
======================================
$106,120,923
======================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended December 31, 2008, the Fund
engaged in securities purchases of $58,817.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the year
ended December 31, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $10,238.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the year ended December 31, 2008, the Fund paid legal fees of $3,985
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.
17 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, 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--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $ 4,405,710 $ 4,884,773
- --------------------------------------------------------------------------------------------------------
Long-term capital gain 38,166,185 91,735,215
========================================================================================================
Total distributions $42,571,895 $96,619,988
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 482,412
- ------------------------------------------------------------------------------------------------
Undistributed long-term gain 2,817
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (35,570,069)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation -- other investments 24,369
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (52,885)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (9,322,509)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 151,415,815
================================================================================================
Total net assets $106,979,950
================================================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward at period-end.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $43,693,724 and
$149,412,338, 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 $ 8,627,876
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (44,197,945)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(35,570,069)
================================================================================================
Cost of investments for tax purposes is $141,690,992
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and proxy costs, on December 31, 2008, undistributed net investment
income was decreased by $547,094, undistributed net realized gain (loss) was
decreased by $8,017,131 and shares of beneficial interest increased by
$8,564,225. This reclassification had no effect on the net assets of the Fund.
18 AIM EUROPEAN SMALL COMPANY FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
2008(a) 2007
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,151,259 $ 83,623,298 1,978,085 $ 61,465,926
- --------------------------------------------------------------------------------------------------------------------------
Class B 321,519 6,064,879 131,158 3,911,352
- --------------------------------------------------------------------------------------------------------------------------
Class C 734,254 14,462,902 467,646 13,942,919
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) 666,147 8,948,934 -- --
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 4,409,056 27,556,645 2,828,388 64,714,500
- --------------------------------------------------------------------------------------------------------------------------
Class B 806,287 4,773,216 539,376 11,806,919
- --------------------------------------------------------------------------------------------------------------------------
Class C 976,337 5,789,678 614,471 13,456,950
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) 357,384 2,237,224 -- --
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 313,907 4,966,705 250,450 7,377,129
- --------------------------------------------------------------------------------------------------------------------------
Class B (356,213) (4,966,705) (260,985) (7,377,129)
==========================================================================================================================
Reacquired:(c)
Class A(b) (10,052,036) (169,968,097) (5,770,926) (178,596,234)
- --------------------------------------------------------------------------------------------------------------------------
Class B (1,056,866) (18,103,970) (519,630) (15,330,884)
- --------------------------------------------------------------------------------------------------------------------------
Class C (1,874,030) (31,836,076) (1,321,525) (39,034,671)
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) (37,823) (370,897) -- --
==========================================================================================================================
Net increase (decrease) in share activity (640,818) $ (66,822,264) (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 15% 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) Effective upon the commencement date of Class Y shares, October 3, 2008,
the following shares were converted from Class A shares into Class Y
shares of the Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Class Y 575,494 $ 8,367,684
- ---------------------------------------------------------------------------------------------------
Class A (575,494) (8,367,684)
===================================================================================================
</Table>
(c) Net of redemption fees of $36,086 and $10,905 which were allocated among
the classes based on relative net assets of each class for the years ended
December 31, 2008 and 2007, respectively.
19 AIM EUROPEAN SMALL COMPANY FUND
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET NET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $22.87 $ 0.35(d) $(12.60) $(12.25) $(0.47) $(3.63) $(4.10)
Year ended 12/31/07 27.72 0.30(d) 1.88 2.18 (0.43) (6.60) (7.03)
Year ended 12/31/06 21.68 0.21 10.08 10.29 (0.27) (3.98) (4.25)
Year ended 12/31/05 16.94 0.11(d) 6.03 6.14 (0.07) (1.33) (1.40)
Year ended 12/31/04 12.05 (0.05)(d) 5.30 5.25 -- (0.36) (0.36)
- --------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 21.87 0.20(d) (11.98) (11.78) (0.28) (3.63) (3.91)
Year ended 12/31/07 26.73 0.06(d) 1.83 1.89 (0.15) (6.60) (6.75)
Year ended 12/31/06 21.02 (0.01) 9.76 9.75 (0.06) (3.98) (4.04)
Year ended 12/31/05 16.52 (0.03)(d) 5.86 5.83 -- (1.33) (1.33)
Year ended 12/31/04 11.84 (0.14)(d) 5.18 5.04 -- (0.36) (0.36)
- --------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 21.88 0.20(d) (11.99) (11.79) (0.28) (3.63) (3.91)
Year ended 12/31/07 26.73 0.06(d) 1.84 1.90 (0.15) (6.60) (6.75)
Year ended 12/31/06 21.03 (0.01) 9.75 9.74 (0.06) (3.98) (4.04)
Year ended 12/31/05 16.53 (0.03)(d) 5.86 5.83 -- (1.33) (1.33)
Year ended 12/31/04 11.84 (0.14)(d) 5.19 5.05 -- (0.36) (0.36)
- --------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(f) 14.54 0.04(d) (3.95) (3.91) (0.47) (3.63) (4.10)
==========================================================================================================================
<Caption>
Ratio of Ratio of
expenses expenses
to average to average net Ratio of net
net assets assets without investment
NET ASSET Net assets, with fee waivers fee waivers income (loss)
VALUE, END Total end of period and/or expenses and/or expenses to average
OF PERIOD(a) Return(b) (000s omitted) absorbed absorbed net assets
- -------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $ 6.52 (52.80)% $ 72,544 1.63%(e) 1.64%(e) 1.92%(e)
Year ended 12/31/07 22.87 7.88 281,248 1.43 1.45 0.97
Year ended 12/31/06 27.72 48.07 360,688 1.54 1.57 0.67
Year ended 12/31/05 21.68 36.48 286,882 1.63 1.68 0.57
Year ended 12/31/04 16.94 43.67 161,014 2.00 2.03 (0.38)
- -------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 6.18 (53.09) 12,541 2.38(e) 2.39(e) 1.17(e)
Year ended 12/31/07 21.87 7.06 50,639 2.18 2.20 0.22
Year ended 12/31/06 26.73 46.98 64,827 2.29 2.32 (0.08)
Year ended 12/31/05 21.02 35.51 51,108 2.35 2.38 (0.15)
Year ended 12/31/04 16.52 42.67 26,540 2.65 2.68 (1.03)
- -------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 6.18 (53.15) 15,453 2.38(e) 2.39(e) 1.17(e)
Year ended 12/31/07 21.88 7.10 58,252 2.18 2.20 0.22
Year ended 12/31/06 26.73 46.90 77,576 2.29 2.32 (0.08)
Year ended 12/31/05 21.03 35.49 59,930 2.35 2.38 (0.15)
Year ended 12/31/04 16.53 42.75 27,983 2.65 2.68 (1.03)
- -------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(f) 6.53 (25.69) 6,441 1.67(e)(g) 1.67(e)(g) 1.90(e)(g)
=========================================================================================================================
<Caption>
Portfolio
turnover(c)
- ---------------------------------------------
CLASS A
Year ended 12/31/08 18%
Year ended 12/31/07 20
Year ended 12/31/06 35
Year ended 12/31/05 72
Year ended 12/31/04 71
- ---------------------------------------------
CLASS B
Year ended 12/31/08 18
Year ended 12/31/07 20
Year ended 12/31/06 35
Year ended 12/31/05 72
Year ended 12/31/04 71
- ---------------------------------------------
CLASS C
Year ended 12/31/08 18
Year ended 12/31/07 20
Year ended 12/31/06 35
Year ended 12/31/05 72
Year ended 12/31/04 71
- ---------------------------------------------
CLASS Y
Year ended 12/31/08(f) 18
=============================================
</Table>
(a) Includes redemption fees added to shares of beneficial interest which were
less than $0.005 per share.
(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, if applicable.
(c) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Calculated using average shares outstanding.
(e) Ratios are based on average daily net assets (000's omitted) of $191,033,
$30,808, $37,646 and $6,124 for Class A, Class B, Class C and Class Y
shares, respectively.
(f) Commencement date of October 3, 2008.
(g) Annualized.
20 AIM EUROPEAN 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
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 alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the 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.
All lawsuits based on allegations of market timing, late trading and related
issues were 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
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.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
21 AIM EUROPEAN SMALL COMPANY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Funds Group
and Shareholders of AIM European Small Company Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM European Small Company Fund
(one of the funds constituting AIM Funds Group, hereafter referred to as the
"Fund") at December 31, 2008, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2008 by
correspondence with the custodian and broker, provide a reasonable basis for our
opinion.
PRICEWATERHOUSECOOPERS LLP
February 17, 2009
Houston, Texas
22 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. With
the exception of the actual ending account value and expenses of the Class Y
Shares, the example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period July 1, 2008, through
December 31, 2008. The actual ending account and expenses of the Class Y shares
in the below example are based on an investment of $1,000 invested as of close
of business October 3, 2008 (commencement date) and held through December 31,
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 (as of close of business
October 3, 2008 through December 31, 2008 for the Class Y shares). Because the
actual ending account value and expense information in the example is not based
upon a six month period for the Class Y shares, the ending account value and
expense information may not provide a meaningful comparison to mutual funds that
provide such information for a full six month 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
ACTUAL BEFORE EXPENSES)
---------------------------------------------------
ENDING ENDING
BEGINNING ACCOUNT EXPENSES ACCOUNT EXPENSES ANNUALIZED
ACCOUNT VALUE VALUE PAID DURING VALUE PAID DURING EXPENSE
CLASS (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2,3) RATIO
- --------------------------------------------------------------------------------------------------
A $1,000.00 $529.20 $6.77 $1,016.29 $ 8.92 1.76%
- --------------------------------------------------------------------------------------------------
B 1,000.00 527.70 9.64 1,012.52 12.70 2.51
- --------------------------------------------------------------------------------------------------
C 1,000.00 527.40 9.64 1,012.52 12.70 2.51
- --------------------------------------------------------------------------------------------------
Y 1,000.00 743.10 3.58 1,016.74 8.47 1.67
- --------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008 (as of close of
business October 3, 2008, through December 31, 2008 for the Class Y shares),
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
184/366 to reflect the most recent fiscal half year. For the Class Y shares
actual expenses are equal to the annualized expense ratio indicated above
multiplied by the average account value over the period, multiplied by 90
(as of close of business October 3, 2008, through December 31, 2008)/366.
Because the Class Y shares have not been in existence for a full six month
period, the actual ending account value and expense information shown may
not provide a meaningful comparison to fund expense information of classes
that show such data for a full six month period and, because the actual
ending account value and expense information in the expense example covers a
short time period, return and expense data may not be indicative of return
and expense data for longer time periods.
(3) Hypothetical expenses are equal to the annualized expense ratio indicated
above multiplied by the average account value over the period, multiplied by
184/366 to reflect a one-half year period. The hypothetical ending account
value and expenses may be used to compare ongoing costs of investing in
Class Y shares of the Fund and other funds because such data is based on a
full six month period.
23 AIM EUROPEAN SMALL COMPANY FUND
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $ 46,751,185
Qualified Dividend Income* 100%
Corporate Dividends Received
Deduction* 0%
Foreign Taxes 0.0665 Per Share
Foreign Source Income 0.9606 Per Share
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended March 31, 2008, June 30, 2008, September 30, 2008 and
December 31, 2008 were 99.67%, 99.85%, 99.89%, and 99.92%, respectively.
24 AIM EUROPEAN SMALL COMPANY FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Funds Group (the "Trust"), is 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 104
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Each officer serves for a one year term or until their successors are
elected and qualified. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); Chairman, Investment
Company Institute; President, Co-Chief Executive Officer,
Co-President, Chief Operating Officer and Chief Financial
Officer, Franklin Resources, Inc. (global investment
management organization)
- --------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim Capital Management, Inc.
(registered investment advisor); Director and President,
INVESCO Funds Group, Inc. (registered investment advisor and
register transfer agent) and AIM GP Canada Inc. (general
partner for a limited partnership); Director, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco Aim Investment Services, Inc. (registered
transfer agent) and INVESCO Distributors, Inc. (registered
broker dealer); Director, President and Chairman, IVZ Callco
Inc. (holding company), INVESCO Inc. (holding company) and
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, AIM
Trimark Corporate Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund company); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
Director and Chairman, Fund Management Company (registered
broker dealer); President and Principal Executive Officer,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments Trust and
Tax-Free Investments Trust only); President, AIM Trimark
Global Fund Inc. and AIM Trimark Canada Fund Inc.; and
Director, Trimark Trust (federally regulated Canadian Trust
Company)
- --------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1987 Chairman, Crockett Technology Associates (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association/Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (property casualty company)
Formerly: Director, CompuDyne Corporation (provider of
product and services to the public security market);
Director, President and Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice President, AB Volvo;
Director of various public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (government affairs company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer, Texana Timber LP
(sustainable forestry company); and Discovery Global
Education Fund (non-profit)
- --------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan is considered an interested person of the Trust because he is
an officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
25 AIM EUROPEAN SMALL COMPANY FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
Formerly: Director of Compliance and Assistant General Counsel,
ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General
Counsel and Director of Compliance, ALPS Mutual Funds, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim Capital Management, Inc.;
Chief Operating Officer, Senior Vice President, General Counsel
and Secretary, Liberty Ridge Capital, Inc. (an investment
adviser); Vice President and Secretary, PBHG Funds (an investment
company); Vice President and Secretary, PBHG Insurance Series
Fund (an investment company); Chief Operating Officer, General
Counsel and Secretary, Old Mutual Investment Partners (a broker-
dealer); General Counsel and Secretary, Old Mutual Fund Services
(an administrator); General Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder servicing center); Executive
Vice President, General Counsel and Secretary, Old Mutual
Capital, Inc. (an investment adviser); and Vice President and
Secretary, Old Mutual Advisors Funds (an investment company)
- --------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited,
IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO North American Holdings,
Inc.; and Vice President, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1992 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust only)
- --------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco Aim Private Asset Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering Compliance Officer, Fund
Management Company; and Manager of the Fraud Prevention
Department, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, The AIM Family of Funds--Registered
Trademark--, Invesco Global Asset Management (N.A.), Inc.
(registered investment advisor), Invesco Institutional (N.A.),
Inc., (registered investment advisor), INVESCO Private Capital
Investments, Inc. (holding company), Invesco Private Capital,
Inc. (registered investment advisor) and Invesco Senior Secured
Management, Inc. (registered investment advisor); and Vice
President, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Inc. Invesco Aim Distributors, Inc. PricewaterhouseCoopers LLP
Suite 100 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046-1173 Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE INDEPENDENT TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens TRUSTEES Invesco Aim Investment State Street Bank and Trust
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Americas Houston, TX 77210-4739 Boston, MA 02110-2801
New York, NY 10036-2714
26 AIM EUROPEAN SMALL COMPANY FUND
[GO PAPERLESS GRAPHIC]
GO PAPERLESS WITH EDELIVERY
Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund
reports and prospectuses with a service that's all about eeees:
# ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of trees used to
produce paper.
# ECONOMICAL. Help reduce your fund's printing and delivery expenses and put
more capital back in your fund's returns.
# EFFICIENT. Stop waiting for regular mail. Your documents will be sent
via email as soon as they're available.
# EASY. Download, save and print files using your home computer with a few
clicks of your mouse.
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 flies 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 website 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 email
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 website, invescoaim.com. On the home page, scroll
down and click on Proxy Policy. The information is also available on the SEC
website, 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
website. 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 website, sec.gov.
If used after April 20, 2009, 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 Power
Shares 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.
Please refer to each fund's prospectus for information on the fund's
subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the
retail mutual funds, exchange-traded funds and institutional money market funds
and the subdistributor for the STIC Global Funds represented by Invesco Aim. All
entities are indirect, wholly owned subsidiaries of Invesco Ltd.
[INVESCO AIM LOGO]
- -SERVICE MARK-
It is anticipated that the businesses of the affiliated investment adviser
firms -- Invesco Aim Advisors, Inc., INVESCO AIM Capital Management, Inc.,
Invesco Private Asset Management, Inc. and Invesco Global Asset Management
(N.A.), Inc. -- will be combined into Invesco Institutional (N.A.), Inc., and
the consolidated adviser firm will be renamed Invesco Advisers, Inc.,- SERVICE
MARK -on or about Aug. 1, 2009. Additional information will be posted at
invescoaim.com on or about Aug. 1, 2009.
invescoaim.com ESC-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM GLOBAL CORE EQUITY FUND
- - SERVICE MARK - Annual Report to Shareholders - December 31, 2008
Effective July 24, 2008, AIM Global Value Fund was renamed
AIM Global Core Equity Fund.
[MOUNTAIN GRAPHIC]
2 Letters to Shareholders
4 Performance Summary
4 Management Discussion
6 Long-Term Fund Performance
8 Supplemental Information
9 Schedule of Investments
12 Financial Statements
15 Notes to Financial Statements
22 Financial Highlights
24 Auditor's Report
25 Fund Expenses
26 Tax Information
27 Trustees and Officers
[TAYLOR PHOTO]
Philip Taylor
Dear Shareholder:
In previous reports, I've talked with you about short-term market volatility.
I'd like to take this opportunity to update you on market developments during
calendar year 2008 and provide you with some perspective and encouragement.
MARKET OVERVIEW
At the start of 2008, we saw warning signs of increasing economic ills - a
weakening housing market, rising inflation and slowing job growth, among others.
In response, the U.S. Federal Reserve Board (the Fed) cut short-term interest
rate targets throughout 2008 in an effort to stimulate economic growth. The Fed
reduced its short-term interest rate target from 4.25% to a range of zero to
0.25% during the year.(1)
In the spring of 2008, more serious factors came to the forefront -
driving unemployment sharply higher(2) and causing major stock market indexes to
hit multi-year lows in the U.S. and overseas.(3) For example, the S&P 500
Index, considered representative of the U.S. stock market, had its worst
one-year performance since 1937.(4) During the second half of 2008, the Fed, the
U.S. Department of the Treasury and other federal agencies took unprecedented
action to rescue the troubled financials sector and domestic automobile
industry, stabilize the stock market and inject liquidity into the credit
markets.
HOW WE GOT HERE
The cause of this correction was years of lax lending associated with the recent
housing boom. Mortgage loans of questionable quality were bundled into
hard-to-value securities that were bought by, and traded among, financial
institutions. As the value of those securities declined, financial institutions
sought to unload them - but there were few buyers. With the value of their
assets falling and access to credit tightening, a number of well-established
financial firms faced severe difficulties, and investor uncertainty and market
volatility spiked.
In October 2008, the administration and Congress enacted a plan, the
Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury
to purchase up to $700 billion in troubled mortgage-related assets - the largest
and most direct effort to resolve a credit crisis in the last half century. The
Fed, in concert with other central banks, cut short-term interest rate targets
and undertook other initiatives intended to restore investor confidence, expand
lending and mitigate the effects of the global credit crisis. Following his
election, President Barack Obama again pledged to act boldly to stimulate the
U.S. economy.
As we enter 2009, the volatility in the stock, fixed-income and credit
markets we saw last year emphasized the importance of three timeless investing
principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
- INVEST FOR THE LONG TERM. Short-term fluctuations have always been a
reality of the markets. We urge you to stick to your investment plan
and stay focused on your long-term goals.
- DIVERSIFY. Although diversification doesn't eliminate the risk of
loss or guarantee a profit, a careful selection of complementary
asset classes may cushion your portfolio against excessive
volatility.
- STAY FULLY INVESTED. Trying to time the market is a gamble, not an
investment strategy. A sound investment strategy includes viewing
market volatility as a matter of course, not a reason to panic.
A trusted financial advisor can explain more fully the potential value of
following these principles. An experienced advisor who knows your individual
investment goals, financial situation and risk tolerance can be your most
valuable asset during times of market volatility. Your advisor can provide
guidance and can monitor your investments to ensure they're on course.
It's also helpful to remember that many of history's significant buying
opportunities resulted from short-term economic crises that, in their time, were
considered unprecedented. We believe current market uncertainty may represent a
buying opportunity for patient, long-term investors. Rest assured that Invesco
Aim's portfolio managers are working diligently on your behalf to attempt to
capitalize on this situation.
MANAGING MONEY IS OUR FOCUS
I believe Invesco Aim is uniquely positioned to navigate current difficult
markets. Our parent company, Invesco Ltd., is one of the world's largest and
most diversified global investment managers. Invesco provides clients with
diversified investment strategies from distinct management teams around the
globe and a range of investment products. Invesco's single focus is asset
management -- which means we focus on doing one thing well: managing your money.
That can be reassuring in uncertain times.
While market conditions change often, our commitment to putting
shareholders first, helping clients achieve their investment goals and providing
excellent customer service remains constant.
If you have questions about this report or your account, please contact
one of our client service representatives at 800 959 4246. Thank you for
your continued confidence, and all of us at Invesco Aim look forward to
serving you.
Sincerely,
/S/ PHILIP TAYLOR
Philip Taylor
Senior Managing Director, Invesco Ltd.
CEO, Invesco Aim
1 U.S. Federal Reserve;
2 Bureau of Labor Statistics;
3 FactSet Research;
4 Wall Street Journal
2 AIM GLOBAL CORE EQUITY FUND
[CROCKETT PHOTO]
Bruce Crockett
Dear Fellow Shareholders:
Since my last letter, continuing troubles in the global economy and financial
markets have negatively affected all investors. The new government promises to
move quickly with a stimulus package, yet considerable anxiety remains about
how, when and what kind of a recovery will occur. While no one likes to see
investment values decline as sharply as they have recently, as mutual fund
investors we can find some consolation in the knowledge that our fund
investments are more transparent, more comprehensively governed and more closely
regulated than most other kinds of investments. In addition, mutual funds
generally are more diversified than other investments; as shareholders we invest
not in a single security but in a portfolio of multiple securities. The benefits
of diversification have been reiterated by the stories of investors who "lost
everything" because they had too many of their assets in one place, whether that
place was a single money manager or their employer's stock. Mutual fund
investors also have the opportunity to diversify further among different types
of funds that each deploy a different strategy and focus on different kinds of
securities. These include conservatively managed money market funds, which,
relative to other securities, continue to offer a more safe, liquid, and
convenient way to invest short-term assets.
In addition to diversification, investing discipline is essential during
challenging times such as these. Strategies such as dollar-cost-averaging, where
individuals invest a consistent amount at regular intervals, can help investors
acquire more fund shares when prices are low. Periodic rebalancing of asset
allocation plans achieves the same effect. "Buy low, sell high" has long been
the mantra of investment success, but the advice is not always easy to follow
because it requires the discipline to resist prevailing trends. Of course,
investment strategies, such as dollar-cost-averaging and portfolio rebalancing
do not guarantee a profit or eliminate the risk of loss. Investors should
consider their ability to continue investing regardless of fluctuating security
prices.
A long-term view is also important, particularly for assets that are not
needed right away. In the past, it has often proven better to keep long-term
assets invested through a downturn than to miss the beginning of the upward
trend. To develop a diversified and disciplined investing plan that is right for
your individual goals, I encourage you to consult an experienced and trustworthy
investment professional who has the knowledge and the tools to help you
establish and implement the plan, monitor its results and adapt it to changing
goals and circumstances.
Even when working with a personal financial advisor, investors should
supplement the relationship with their own knowledge and awareness of the
investments they hold. Visit the Invesco Aim website at invescoaim.com regularly
to find out what is happening in your AIM funds and to read timely market
commentary from Invesco Aim management, strategists and portfolio managers. The
site's "Education and Planning" section can also help you clarify basic
investment concepts, learn how to choose a financial advisor, evaluate different
investment choices and make more informed investment decisions. Invesco Aim's
redesigned public home page recently received a Gold Award for its user-friendly
navigation and graphics from The Mutual Funds Monitor Awards, sponsored by
Corporate Insight.
As always, your Board of Trustees and Invesco Aim are committed to putting
your interests first by controlling costs, monitoring investment performance and
streamlining the investment management process during these difficult times.
Your Board has already begun the annual review and management contract renewal
process with the continuing goal of making AIM funds one of the best and most
cost-effective ways for you to invest your hard-earned money.
While the investing climate may remain uncertain for a while, economies
and markets are dynamic, and no stage is ever permanent. Please feel free to
contact me in writing with your questions or concerns. You can send an email to
me at bruce@brucecrockett.com.
Best regards,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM GLOBAL CORE EQUITY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY
For the fiscal year ended December 31,2008, Class A shares of AIM Global Core
Equity Fund, at net asset value, slightly outperformed the MSCI World Index and
the Lipper Global Large-Cap Core Funds Index.#
Our focus on investing in what we believe are well-established,
large-capitalization companies with superior Financial attributes contributed to
the Fund's relative out performance. Stock selection in the financials sector
helped relative performance the most, while holdings in materials were the
largest detractors.
Your Fund's long-term performance appears later in this report.
FUND VS. INDEXES
Total returns, 12/31/07 to 12/31/08, 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 -39.03%
Class B Shares -39.48
Class C Shares -39.52
Class Y Shares (*) -39.03
MSCI World Index(#) (Broad Market/Style-Specific Index) -40.71
MSCI World Value Index (#**) (Former Style-Specific Index) -40.39
Lipper Global Large-Cap Core Funds Index (#) (Peer Group Index) -39.14
Lipper Global Multi-Cap Value Funds Index (#**) (Former Peer Group Index) -37.26
- ----------
# Lipper Inc.
* Share class incepted during the Fiscal year. See page 7 for a detailed
explanation of Fund performance.
** In conjunction with the Fund's change from global value to global core,
the Fund has elected to use the MSCI World Index instead of the MSCI World
Value index as its Style-Specific Index and the Lipper Global Large-Cap
Core Funds Index instead of the Lipper Global Multi-Cap Value Funds Index
as its Peer Group Index.
HOW WE INVEST
Effective July 9, 2008, a team of investment professionals from Invesco Global
Asset Management took over management of AIM Global Value Fund, and the Fund was
renamed AIM Global Core Equity Fund on July 24, 2008. The Fund's new investment
team includes portfolio managers Ingrid Baker, W. Lindsay Davidson, Michele
Garren, Erik Granade and Kent Starke. The Fund's new name more accurately
reflects its positioning in the global core space. Along with the change of
management and name, the Fund's style-specific benchmark changed to the MSCI
World Index, and the peer benchmark changed to the Lipper Global Large-Cap Core
Funds Index.
The new investment strategy involves investing primarily in stocks of
larger capitalization global companies with a record of stable earnings and
strong balance sheets. Our research focuses on companies that offer long-term
potential for higher share price resulting from growth and improved financial
outlook. We strive to maintain a consistent investment discipline through
varying market conditions and an appropriate level of overall diversification.
However, individual holdings are selected based on their own merits, not on
projections of country or sector performance.
MARKET CONDITIONS AND YOUR FUND
Global equity markets, in general, declined sharply during 2008.(1) The severity
of the global financial crisis led to unprecedented government and central bank
intervention, which was coordinated worldwide. All developed countries within
the MSCI World Index finished the period in negative territory, while emerging
markets such as China posted even larger declines. In this environment, the Fund
provided downside protection relative to the MSCI World Index and benefited from
the quality of stock selection.
While financials detracted significantly from absolute returns, our stock
selection and underweight position in the sector versus the benchmark benefited
Fund performance. Stock selection in consumer staples also helped relative
performance for the year. The largest contributor to overall performance was
Spanish financial services company BANCO SANTANDER. U.S. semiconductor company
QLOGIC was also among the largest contributors to performance during the period.
We sold our position in QLogic during the reporting period. In addition, our
small cash position helped the Fund's performance versus the MSCI World Index in
a falling market environment.
On an absolute basis, all sectors posted declines during the period with
our financials and information technology holdings detracting the most from
PORTFOLIO COMPOSITION
By sector
Energy 16.4%
Financials 15.1
Information Technology 14.8
Health Care 12.2
Industrials 8.0
Consumer Staples 7.9
Consumer Discretionary 7.2
Telecommunication Services 5.6
Utilities 5.3
Materials 5.1
Money Market Funds Plus
Other Assets Less Liabilities 2.4
TOP FIVE COUNTRIES(*)
1. United States 32.8%
2. Japan 16.2
3. United Kingdom 12.1
4. Netherlands 6.5
5. Switzerland 5.3
Total Net Assets $ 89.5 million
Total Number of Holdings (*) 113
TOP 10 EQUITY HOLDINGS(*)
1. Johnson & Johnson 3.1%
2. Royal Dutch Shell PLC-Class-B 2.1
3. ConocoPhillips 2.1
4. Chevron Corp. 2.0
5. Heineken N.V 2.0
6. Oracle Corp. 1.9
7. Telefonaktiebolaget LM Ericsson-Class B 1.9
8. Mitsubishi UFJ Financial Group, Inc. 1.9
9. Nokia Oyj-ADR 1.8
10. Banco Santander S.A. 1.8
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
- ----------
* Excluding money market fund holdings.
4 AIM GLOBAL CORE EQUITY FUND
overall performance. In terms of relative performance, our stock selection in
the materials sector was the largest detractor. Global financial services
company BARCLAYS and MOTOROLA, a world leader in global communications, also
numbered among the major detractors from performance during the period. We sold
our position in Motorola during the reporting period. From a geographical
perspective, all regions represented in the Fund declined during the period,
with Europe and the U.S. detracting the most from absolute returns.
While extraordinary government intervention efforts domestically and
abroad may lead to more stability in capital markets, we believe the underlying
weakness in housing and credit conditions may weigh on the broader global
economy for some time. Although global equity prices have already experienced
declines similar to prior bear markets, we cannot rule out the prospect of
further declines due to the severity of current conditions. To date we believe
our investment methodology has provided good relative returns in this type of
climate, given our preference for investing in companies with proven financial
strength.
We welcome new investors who joined the Fund during the 2008 and would
like to thank all of our shareholders for your investment in AIM Global Core
Equity Fund.
1 Lipper Inc.
The views and opinions expressed in management's discussion of Fund performance
are those of Invesco Aim Advisors, Inc. These views and opinions are subject to
change at any time based on factors such as market and economic conditions.
These views and opinions may not be relied upon as investment advice or
recommendations, or as an offer for a particular security. The information is
not a complete analysis of every aspect of any market, country, industry,
security or the Fund. Statements of fact are from sources considered reliable,
but Invesco Aim Advisors, Inc. makes no representation or warranty as to their
completeness or accuracy. Although historical performance is no guarantee of
future results, these insights may help you understand our investment management
philosophy.
See important Fund and index disclosures later in this report.
[BAKER PHOTO]
INGRID BAKER
Chartered Financial Analyst, portfolio manager, is manager of AIM Global Core
Equity Fund. Ms. Baker began her investment career in 1990 and joined Invesco
Ltd. in 1999. She earned a B.A. in international politics from Oberlin College
and earned an M.B A. in finance from the University of Navarra in Spain.
[DAVIDSON PHOTO]
W. LINDSAY DAVIDSON
Portfolio manager, is manager of AIM Global Core Equity Fund. Mr. Davidson began
his investment career in 1974 and has served as a portfolio manager with Invesco
Ltd. and its affiliates since 1984. A native of St. Andrews, Scotland, Mr.
Davidson earned his degree in economics with honors from Edinburgh University.
[GARREN PHOTO]
MICHELE GARREN
Chartered Financial Analyst, portfolio manager, is manager of AIM Global Core
Equity Fund. Ms. Garren began her investment career in 1987 and joined Invesco
Ltd. in 1997. She earned a B.B.A. in finance from Southern Methodist University
and an M.B A. in finance from New York University.
[GRANADE PHOTO]
ERIK GRANADE
Chartered Financial Analyst, portfolio manager, is manager of AIM Global Core
Equity Fund. Mr. Granade began his investment career in 1986 and has been a
portfolio manager with Invesco Ltd. and its affiliates since 1996. He earned a
B.A. in economics from Trinity College in Hartford, Connecticut.
[STARKE PHOTO]
KENT STARKE
Portfolio manager, is manager of AIM Global Core Equity Fund. Mr. Starke began
his investment career in 1983 and joined Invesco Ltd. in 1992. He has been with
the international equity product team since its inception. Mr. Starke earned a
B.B.A. from the University of Georgia and an M.S. in finance from Georgia State
University.
5 AIM Global Core Equity Fund
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable
sales charges and Fund expenses including management fees. Results for Class B
shares are calculated as if a hypothetical shareholder had liquidated his entire
investment in the Fund at the close of the reporting period and paid the
applicable contingent deferred sales charges. Index results include reinvested
dividends, but they do not reflect sales charges. Performance of an index of
funds reflects fund expenses and management fees; performance of a market index
does not. Performance shown in the chart and table(s) does not reflect deduction
of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
Since the last reporting period, and in conjunction with the Fund's change
from global value to global core, the Fund has elected to use the MSCI World
Index instead of the MSCI World Value index as its Style-Specific Index and the
Lipper Global Large-Cap Core Funds Index instead of the Lipper Global Multi-Cap
Value Funds Index as its Peer Group Index. The Fund will no longer measure its
performance against the former indexes. However, SEC guidelines require that we
compare the Fund's performance to both the old and the new indexes for a period
of one year.
This chart, which is a logarithmic chart, presents the fluctuations in the
value of the Fund and its indexes. We believe that a logarithmic chart is more
effective than other types of charts in illustrating changes in value during the
early years shown in the chart. The vertical axis, the one that indicates the
dollar value of an investment, is constructed with each segment representing a
percent change in the value of the investment. In this chart, each segment
represents a doubling, or 100% change, in the value of the investment. In other
words, the space between $5,000 and $10,000 is the same size as the space
between $10,000 and $20,000.
6 AIM Global Core Equity Fund
[MOUNTAIN CHART]
RESULTS OF A $ 10,000 INVESTMENT -- OLDEST SHARE CLASSES SINCE INCEPTION
Fund data from 12/29/00,index data from 12/31/00
AIM AIM AIM
Global Core Global Core Global Core Lipper Global Lipper Global
Equity Fund- Equity Fund- Equity Fund- MSCI MSCI Multi-Cap Value Large-Cap Core
Date Class A Shares Class B Shares Class C Shares World Index(1) World Value Index(1) Funds Index(1) Funds Index(1)
12/29/00 $ 9450 $ 10000 $ 10000
12/00 9450 10000 10000 $ 10000 $ 10000 $ 10000 $ 10000
1/01 10026 10600 10610 10193 10100 10121 10158
2/01 8873 9380 9390 9330 9605 9811 9353
3/01 8184 8640 8650 8716 9112 9313 8722
4/01 9204 9720 9730 9358 9726 9778 9347
5/01 9223 9740 9751 9236 9664 9780 9266
6/01 8930 9420 9431 8946 9392 9565 8960
7/01 8740 9220 9231 8826 9279 9398 8770
8/01 8466 8930 8931 8401 8949 9171 8361
9/01 8116 8560 8561 7660 8117 8305 7611
10/01 8655 9120 9121 7806 8098 8415 7794
11/01 9241 9730 9731 8266 8445 8735 8248
12/01 9308 9791 9793 8318 8507 8892 8391
1/02 9062 9531 9532 8065 8267 8677 8144
2/02 8987 9451 9452 7994 8105 8663 8106
3/02 9478 9961 9963 8362 8647 9117 8459
4/02 9383 9851 9863 8062 8393 9077 8173
5/02 9355 9822 9822 8076 8462 9174 8155
6/02 9034 9472 9473 7584 7923 8655 7687
7/02 8316 8722 8723 6944 7148 7845 7042
8/02 8279 8682 8682 6956 7174 7913 7073
9/02 7891 8262 8262 6190 6307 7154 6373
10/02 8619 9022 9022 6647 6745 7423 6766
11/02 8884 9292 9302 7004 7229 7802 7025
12/02 8557 8941 8942 6664 6811 7630 6730
1/03 8472 8851 8852 6460 6640 7453 6474
2/03 8377 8741 8752 6347 6482 7266 6316
3/03 8330 8691 8691 6326 6387 7128 6274
4/03 8689 9062 9071 6887 7060 7786 6777
5/03 9218 9602 9611 7279 7568 8306 7157
6/03 9351 9752 9751 7404 7721 8439 7256
7/03 9294 9681 9681 7554 7884 8676 7368
8/03 9672 10062 10071 7716 8065 8992 7526
9/03 9823 10222 10221 7762 8116 9044 7531
10/03 10504 10922 10921 8222 8595 9568 7927
11/03 10608 11022 11022 8347 8733 9776 8052
12/03 11307 11737 11747 8870 9407 10334 8532
1/04 11625 12071 12071 9012 9518 10592 8640
2/04 11807 12253 12253 9163 9720 10837 8780
3/04 11701 12132 12142 9102 9688 10762 8750
4/04 11316 11727 11725 8916 9485 10533 8506
5/04 11344 11747 11756 8990 9550 10550 8507
6/04 11479 11878 11888 9182 9826 10802 8629
7/04 11325 11716 11725 8882 9652 10495 8330
8/04 11528 11918 11928 8921 9763 10531 8364
9/04 12251 12659 12668 9090 9937 10776 8505
10/04 12453 12851 12861 9312 10180 11026 8699
11/04 13157 13571 13581 9801 10733 11676 9107
12/04 13286 13702 13713 10175 11149 12128 9446
1/05 13135 13545 13555 9946 10946 11972 9239
(1) Lipper Inc.
[MOUNTAIN CHART]
2/05 13896 14323 14335 10261 11359 12391 9497
3/05 13765 14176 14187 10063 11138 12160 9299
4/05 13355 13745 13756 9843 10895 11850 9116
5/05 13535 13924 13934 10018 11002 12079 9274
6/05 13775 14166 14177 10104 11141 12276 9316
7/05 14115 14503 14503 10457 11458 12743 9644
8/05 14186 14567 14577 10536 11529 12867 9738
9/05 14416 14798 14809 10810 11873 13234 9923
10/05 14065 14430 14430 10548 11550 12933 9717
11/05 14535 14893 14903 10899 11945 13396 9976
12/05 14803 15166 15176 11141 12214 13840 10177
1/06 15629 15998 16007 11638 12741 14495 10622
2/06 15565 15920 15929 11621 12835 14510 10548
3/06 15988 16342 16351 11876 13080 14932 10788
4/06 16263 16620 16629 12237 13572 15403 11173
5/06 15977 16320 16330 11819 13167 14796 10721
6/06 15913 16242 16251 11815 13181 14766 10707
7/06 16145 16465 16472 11889 13447 14813 10817
8/06 16621 16942 16950 12198 13788 15165 11036
9/06 16876 17198 17206 12343 13993 15350 11201
10/06 17141 17453 17460 12796 14521 15830 11616
11/06 17511 17819 17827 13109 14867 16312 11909
12/06 17921 18215 18235 13376 15277 16780 12212
1/07 18164 18459 18467 13534 15397 17005 12363
2/07 18054 18331 18351 13463 15334 16910 12231
3/07 18220 18493 18501 13710 15600 17331 12460
4/07 18719 18990 18999 14315 16291 18090 13016
5/07 19052 19303 19324 14716 16730 18662 13444
6/07 18852 19095 19103 14602 16540 18580 13401
7/07 18153 18377 18385 14279 16009 18262 13110
8/07 18109 18331 18339 14268 15945 18213 13113
9/07 18464 18666 18675 14946 16589 18853 13832
10/07 19374 19581 19590 15405 16949 19463 14322
11/07 18475 18655 18663 14775 16096 18549 13744
12/07 18335 18509 18518 14585 15797 18291 13580
1/08 16705 16847 16857 13470 14736 17146 12518
2/08 16391 16522 16531 13392 14418 16980 12406
3/08 16019 16124 16135 13264 14323 16763 12440
4/08 16390 16509 16520 13961 15033 17356 13093
5/08 16938 17051 17062 14174 14988 17613 13305
6/08 15925 16004 16014 13043 13562 16143 12278
7/08 15377 15450 15460 12725 13324 15856 11924
8/08 15191 15257 15267 12546 13190 15653 11717
9/08 13806 13849 13858 11054 11870 14003 10389
10/08 11326 11368 11366 8958 9670 11489 8467
11/08 10570 10585 10596 8378 9156 10862 7938
12/08 11182 11201 11199 8647 9417 11476 8265
Average Annual Total Returns
As of 12/31/08, including maximum applicable sales charges
CLASS A SHARES
Inception (12/29/00) 1.41%
5 Years -1.34
l Year -42.40
CLASS B SHARES
Inception (12/29/00) 1.43%
5 Years -1.26
l Year -42.49
CLASS C SHARES
Inception (12/29/00) 1.42%
5 Years -0.95
l Year -40.12
CLASS Y SHARES
Inception 2.12%
5 Years -0.23
l Year -39.03
CLASS Y SHARES' INCEPTION DATE IS OCTOBER 3, 2008; RETURNS SINCE THAT DATE ARE
ACTUAL RETURNS. ALL OTHER RETURNS ARE BLENDED RETURNS OF ACTUAL CLASS Y SHARE
PERFORMANCE AND RESTATED CLASS A SHARE PERFORMANCE (FOR PERIODS PRIOR TO THE
INCEPTION DATE OF CLASS Y SHARES) AT NET ASSET VALUE. THE RESTATED CLASS A SHARE
PERFORMANCE REFLECTS THE RULE 12B-1 FEES APPLICABLE TO CLASS A SHARES AS WELL AS
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RECEIVED BY CLASS A SHARES. CLASS A
SHARES INCEPTION DATE IS DECEMBER 29,2000.
THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT
GUARANTEE COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER.
PLEASE VISIT INVESCOAIM.COM FOR THE MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE
AND THE EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS
WHEN YOU SELL SHARES.
THE NET ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT
FUND PROSPECTUS AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C AND
CLASS Y SHARES WAS 1.45%, 2.20%, 2.20% AND 1.20%, RESPECTIVELY.(1) THE TOTAL
ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT FUND PROSPECTUS
AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C AND CLASS Y SHARES
WAS 1.46%, 2.21%, 2.21% AND 1.21%, RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
ABOVE MAY VARY FROM THE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS OF THIS
REPORT THAT ARE BASED ON EXPENSES INCURRED DURING THE PERIOD COVERED BY THIS
REPORT.
CLASS A SHARE PERFORMANCE REFLECTS THE MAXIMUM 5.50% SALES CHARGE, AND
CLASS B AND CLASS C SHARE PERFORMANCE REFLECTS THE APPLICABLE CONTINGENT
DEFERRED SALES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CDSC ON CLASS B SHARES
DECLINES FROM 5% BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE
SEVENTH YEAR. THE CDSC ON CLASS C SHARES IS 1 % FOR THE FIRST YEAR AFTER
PURCHASE. CLASS Y SHARES DO NOT HAVE A FRONT-END SALES CHARGE OR A CDSC;
THEREFORE, PERFORMANCE IS AT NET ASSET VALUE.
THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER PRIMARILY DUE TO
DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES.
A REDEMPTION FEE OF 2% WILL BE IMPOSED ON CERTAIN REDEMPTIONS OR EXCHANGES
OUT OF THE FUND WITHIN 31 DAYS OF PURCHASE. EXCEPTIONS TO THE REDEMPTION FEE ARE
LISTED IN THE FUND'S PROSPECTUS.
HAD THE ADVISOR NOT WAIVED FEES AND/OR REIMBURSED EXPENSES IN THE PAST,
PERFORMANCE WOULD HAVE BEEN LOWER.
1 Total annual operating expenses less any contractual fee waivers and/or
expense reimbursements by the advisor in effect through at least June 30,
2009. See current prospectus for more information.
7 AIM Global Core Equity Fund
AIM GLOBAL CORE EQUITY FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF
CAPITAL.
- - Unless otherwise stated, information presented in this report is as of
December 31, 2008, and is based on total net assets.
- - Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES
- - Effective September 30, 2003, only previously established qualified plans
are eligible to purchase Class B shares of any AIM fund.
- - Class Y shares are available to only certain investors. Please see the
prospectus for more information
PRINCIPAL RISKS OF INVESTING IN THE FUND
- - The values of convertible securities in which the Fund invests may be
affected by market interest rates, the risk that the issuer may default on
interest or principal payments, and the value of the underlying common
stock into which these securities may be converted.
- - Investing in developing countries can add additional risk, such as high
rates of inflation or sharply devalued currencies against the U.S. dollar.
Transaction costs are often higher, and there may be delays in settlement
procedures.
- - Prices of equity securities change in response to many factors, including
the historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions
and market liquidity.
- - Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, relative lack of information, relatively
low market liquidity, and the potential lack of strict financial and
accounting controls and standards.
- - The Fund may invest in lower quality debt securities, commonly known as
"junk bonds." Compared to higher quality debt securities, junk bonds
involve greater risk of default or price changes due to changes in credit
quality of the issuer because they are generally unsecured and may be
subordinated to other creditors' claims. Credit ratings on junk bonds do
not necessarily reflect their actual market risk.
- - Small- and mid-cap companies tend to be more vulnerable to adverse
developments and more volatile than larger companies. Investments in these
sized companies may involve special risks, including those associated with
dependence on a small management group, little or no operating history,
little or no track record of success, limited product lines, less publicly
available information, illiquidity, restricted resale or less frequent
trading.
- - The prices of securities held by the Fund may decline in response to
market risks.
- - The Fund may use enhanced investment techniques such as short sales. Short
sales carry the risk of buying a security back at a higher price at which
the Fund's exposure is unlimited.
- - The Fund may engage in active and frequent trading of portfolio securities
to achieve its investment objective. If a fund does trade in this way, it
may incur increased costs, which can lower the actual return of the fund.
Active trading may also increase short term gains and losses, which may
affect taxes that must be paid.
ABOUT INDEXES USED IN THIS REPORT
- - The MSCI WORLD INDEX-SERVICE MARK -- is a free float-adjusted market
capitalization 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
perform ance.
- - The LIPPER GLOBAL LARGE-CAP CORE FUNDS INDEX is an equally weighted
representation of the largest funds in the Lipper Global Large-Cap Core
Funds category. These funds typically have an 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 BMI.
- - 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, rice-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.
OTHER INFORMATION
- - The Chartered Financial Analyst -- REGISTERED TRADEMARK --
(CFA--REGISTERED TRADEMARK--) designation is a globally recognized
standard for measuring the competence and integrity of investment
professionals.
- - The returns shown in management's discussion of Fund performance are based
on net asset values calculated for shareholder transactions. Generally
accepted accounting principles require adjustments to be made to the net
assets of the Fund at period end for financial reporting purposes, and as
such, the net asset values for shareholder transactions and the returns
based on those net asset values may differ from the net asset values and
returns reported in the Financial Highlights.
- - Industry classifications used in this report are generally according to
the Global Industry Classification Standard, which was developed by and is
the exclusive property and a service mark of MSCI Inc. and Standard &
Poor's.
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 NASDAQ SYMBOLS
Class A Shares AWSAX
Class B Shares AWSBX
Class C Shares AWSCX
Class Y Shares AWSYX
8 AIM GLOBAL CORE EQUITY FUND
SCHEDULE OF INVESTMENTS
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.55%
AUSTRALIA-0.84%
BHP Billiton Ltd. 35,219 $ 756,414
=============================================================================
BERMUDA-1.54%
PartnerRe Ltd. 19,313 1,376,438
=============================================================================
BRAZIL-0.58%
Companhia Energetica de Minas Gerais S.A.-ADR 8,885 122,080
- -----------------------------------------------------------------------------
Companhia Vale do Rio Doce-ADR 8,030 97,243
- -----------------------------------------------------------------------------
Empresa Brasileira de Aeronautica S.A.-ADR 5,200 84,292
- -----------------------------------------------------------------------------
Natura Cosmeticos S.A. 10,400 86,272
- -----------------------------------------------------------------------------
Petroleo Brasileiro S.A.-ADR 5,190 127,103
=============================================================================
516,990
=============================================================================
CHINA-0.31%
China Construction Bank Corp.-Class H 96,000 53,125
- -----------------------------------------------------------------------------
China COSCO Holdings Co. Ltd.-Class H 106,000 74,693
- -----------------------------------------------------------------------------
CNOOC Ltd. 157,575 149,741
=============================================================================
277,559
=============================================================================
EGYPT-0.08%
Orascom Telecom Holding S.A.E.-GDR 2,552 69,644
=============================================================================
FINLAND-1.84%
Nokia Oyj-ADR 105,477 1,645,441
=============================================================================
FRANCE-5.17%
Publicis Groupe 38,493 995,671
- -----------------------------------------------------------------------------
Sanofi-Aventis 21,834 1,393,497
- -----------------------------------------------------------------------------
Societe Generale 13,837 704,214
- -----------------------------------------------------------------------------
Total S.A. 28,018 1,534,894
=============================================================================
4,628,276
=============================================================================
GERMANY-3.85%
BASF S.E. 21,080 837,012
- -----------------------------------------------------------------------------
Bayerische Motoren Werke AG 23,052 712,033
- -----------------------------------------------------------------------------
Commerzbank AG 48,523 464,783
- -----------------------------------------------------------------------------
E.ON AG 35,174 1,429,244
=============================================================================
3,443,072
HONG KONG-1.74%
Cheung Kong (Holdings) Ltd. 67,000 638,771
- -----------------------------------------------------------------------------
Denway Motors Ltd. 526,000 164,951
- -----------------------------------------------------------------------------
Hutchison Whampoa Ltd. 149,000 751,596
=============================================================================
1,555,318
=============================================================================
INDIA-0.24%
Reliance Communications Ltd. 17,813 83,537
- -----------------------------------------------------------------------------
State Bank of India-GDR 2,359 129,745
=============================================================================
213,282
=============================================================================
INDONESIA-0.25%
PT Astra International Tbk 66,500 65,759
- -----------------------------------------------------------------------------
PT Bank Rakyat Indonesia 123,000 53,292
- -----------------------------------------------------------------------------
PT Telekomunikasi Indonesia 172,000 109,657
=============================================================================
228,708
=============================================================================
ISRAEL-0.18%
Makhteshim-Agan Industries Ltd. 33,352 108,793
- -----------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR 1,162 49,466
=============================================================================
158,259
=============================================================================
ITALY-1.33%
Eni S.p.A. 49,901 1,188,191
=============================================================================
JAPAN-16.16%
Canon Inc. 35,300 1,107,205
- -----------------------------------------------------------------------------
FUJIFILM Holdings Corp. 37,500 824,616
- -----------------------------------------------------------------------------
Mitsubishi UFJ Financial Group, Inc. 268,000 1,661,545
- -----------------------------------------------------------------------------
Murata Manufacturing Co., Ltd. 27,900 1,092,771
- -----------------------------------------------------------------------------
Nippon Telegraph and Telephone Corp. 186 998,830
- -----------------------------------------------------------------------------
NOK Corp. 43,800 309,022
- -----------------------------------------------------------------------------
NTT DoCoMo, Inc. 604 1,189,676
- -----------------------------------------------------------------------------
Seven & I Holdings Co., Ltd. 37,100 1,269,985
- -----------------------------------------------------------------------------
SMC Corp. 13,700 1,400,490
- -----------------------------------------------------------------------------
Sony Corp. 24,900 540,854
- -----------------------------------------------------------------------------
Sumitomo Chemical Co., Ltd. 189,000 644,507
- -----------------------------------------------------------------------------
Takeda Pharmaceutical Co. Ltd. 24,500 1,269,824
- -----------------------------------------------------------------------------
Tokyo Electron Ltd. 31,700 1,112,329
- -----------------------------------------------------------------------------
Toyota Motor Corp. 31,900 1,043,314
=============================================================================
14,464,968
=============================================================================
MEXICO-0.17%
Cemex S.A.B. de C.V.-CPO 63,300 57,849
- -----------------------------------------------------------------------------
Fomento Economico Mexicano, S.A.B. de C.V.-ADR 3,200 96,416
=============================================================================
154,265
=============================================================================
NETHERLANDS-6.47%
Heineken N.V. 57,129 1,763,731
- -----------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V. 60,988 1,191,915
- -----------------------------------------------------------------------------
TNT N.V. 67,652 1,300,269
- -----------------------------------------------------------------------------
Unilever N.V. 63,046 1,535,031
=============================================================================
5,790,946
=============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM GLOBAL CORE EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
NORWAY-0.86%
StatoilHydro A.S.A. 46,400 $ 769,352
=============================================================================
RUSSIA-0.19%
Gazprom-ADR 5,693 81,125
- -----------------------------------------------------------------------------
LUKOIL-ADR 2,600 86,060
=============================================================================
167,185
=============================================================================
SOUTH AFRICA-0.43%
Barloworld Ltd. 19,496 86,795
- -----------------------------------------------------------------------------
Sasol Ltd. 2,702 80,488
- -----------------------------------------------------------------------------
Standard Bank Group Ltd. 17,095 151,036
- -----------------------------------------------------------------------------
Steinhoff International Holdings Ltd. 52,569 69,853
=============================================================================
388,172
=============================================================================
SOUTH KOREA-0.64%
Daelim Industrial Co., Ltd. 2,525 92,700
- -----------------------------------------------------------------------------
Hyundai Motor Co. 1,975 63,578
- -----------------------------------------------------------------------------
LG Electronics Inc. 1,314 80,218
- -----------------------------------------------------------------------------
Lotte Shopping Co., Ltd. 531 89,605
- -----------------------------------------------------------------------------
POSCO 427 126,134
- -----------------------------------------------------------------------------
Samsung Electronics Co., Ltd. 333 120,918
=============================================================================
573,153
=============================================================================
SPAIN-1.82%
Banco Santander S.A. 167,740 1,626,742
=============================================================================
SWEDEN-1.90%
Telefonaktiebolaget LM Ericsson-Class B 219,121 1,697,671
=============================================================================
SWITZERLAND-5.33%
Credit Suisse Group AG 24,910 681,404
- -----------------------------------------------------------------------------
Holcim Ltd. 15,510 891,276
- -----------------------------------------------------------------------------
Novartis AG 17,125 856,331
- -----------------------------------------------------------------------------
Swisscom AG 3,728 1,201,123
- -----------------------------------------------------------------------------
Zurich Financial Services AG 5,280 1,143,876
=============================================================================
4,774,010
=============================================================================
TAIWAN-0.49%
AU Optronics Corp.-ADR 10,924 83,896
- -----------------------------------------------------------------------------
Chinatrust Financial Holding Co. Ltd. 204,695 88,326
- -----------------------------------------------------------------------------
HTC Corp. 18,000 181,712
- -----------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.-ADR 10,600 83,740
=============================================================================
437,674
=============================================================================
THAILAND-0.21%
Bangkok Bank PCL-NVDR 30,700 62,462
- -----------------------------------------------------------------------------
PTT PCL 24,700 127,355
=============================================================================
189,817
=============================================================================
TURKEY-0.07%
Turkiye Is Bankasi-Class C 24,734 66,656
=============================================================================
UNITED KINGDOM-12.07%
Barclays PLC 373,756 854,998
- -----------------------------------------------------------------------------
BP PLC 171,193 1,331,025
- -----------------------------------------------------------------------------
Centrica PLC 265,891 1,036,766
- -----------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR 28,598 1,065,848
- -----------------------------------------------------------------------------
HSBC Holdings PLC 134,472 1,305,994
- -----------------------------------------------------------------------------
Kingfisher PLC 300,841 597,018
- -----------------------------------------------------------------------------
National Grid PLC 136,734 1,371,173
- -----------------------------------------------------------------------------
Royal Dutch Shell PLC-Class B 74,104 1,892,448
- -----------------------------------------------------------------------------
Vodafone Group PLC 662,080 1,352,448
=============================================================================
10,807,718
=============================================================================
UNITED STATES-32.79%
3M Co. 24,884 1,431,825
- -----------------------------------------------------------------------------
Alcoa Inc. 41,968 472,560
- -----------------------------------------------------------------------------
Anadarko Petroleum Corp. 32,943 1,269,953
- -----------------------------------------------------------------------------
Apache Corp. 11,885 885,789
- -----------------------------------------------------------------------------
Avon Products, Inc. 51,945 1,248,238
- -----------------------------------------------------------------------------
Bank of America Corp. 78,365 1,103,379
- -----------------------------------------------------------------------------
Bank of New York Mellon Corp. 46,796 1,325,731
- -----------------------------------------------------------------------------
Best Buy Co., Inc. 49,025 1,378,093
- -----------------------------------------------------------------------------
Boston Scientific Corp. 108,448 839,388
- -----------------------------------------------------------------------------
Chevron Corp. 24,512 1,813,153
- -----------------------------------------------------------------------------
ConocoPhillips 35,283 1,827,659
- -----------------------------------------------------------------------------
Dow Chemical Co. (The) 36,397 549,231
- -----------------------------------------------------------------------------
Gannett Co., Inc. 43,400 347,200
- -----------------------------------------------------------------------------
International Business Machines Corp. 9,500 799,520
- -----------------------------------------------------------------------------
Johnson & Johnson 45,812 2,740,932
- -----------------------------------------------------------------------------
Merck & Co. Inc. 51,736 1,572,774
- -----------------------------------------------------------------------------
Microsoft Corp. 49,285 958,100
- -----------------------------------------------------------------------------
Northrop Grumman Corp. 17,456 786,218
- -----------------------------------------------------------------------------
NVIDIA Corp. 165,272 1,333,745
- -----------------------------------------------------------------------------
Oracle Corp. 97,678 1,731,831
- -----------------------------------------------------------------------------
Pfizer Inc. 63,881 1,131,333
- -----------------------------------------------------------------------------
PG&E Corp. 21,016 813,529
- -----------------------------------------------------------------------------
Philip Morris International Inc. 24,512 1,066,517
- -----------------------------------------------------------------------------
Seagate Technology 97,800 433,254
- -----------------------------------------------------------------------------
Valero Energy Corp. 68,783 1,488,464
=============================================================================
29,348,416
=============================================================================
Total Common Stocks & Other Equity Interests
(Cost $116,003,665) 87,314,337
=============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM GLOBAL CORE EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------------
PREFERRED STOCKS-0.06%
BRAZIL-0.06%
Banco Bradesco S.A., Pfd. (Cost $115,492) 5,600 $ 55,125
=============================================================================
MONEY MARKET FUNDS-2.38%
Liquid Assets Portfolio-Institutional Class(a) 1,064,504 1,064,504
- -----------------------------------------------------------------------------
Premier Portfolio-Institutional Class(a) 1,064,504 1,064,504
=============================================================================
Total Money Market Funds (Cost $2,129,008) 2,129,008
=============================================================================
TOTAL INVESTMENTS-99.99% (Cost $118,248,165) 89,498,470
=============================================================================
OTHER ASSETS LESS LIABILITIES-0.01% 10,854
=============================================================================
NET ASSETS-100.00% $89,509,324
=============================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
CPO - Certificates of Ordinary Participation
GDR - Global Depositary Receipt
NVDR - Non-Voting Depositary Receipt
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) 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.
11 AIM GLOBAL CORE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$116,119,157) $ 87,369,462
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 2,129,008
======================================================
Total investments (Cost
$118,248,165) 89,498,470
======================================================
Foreign currencies, at value (Cost
$176,096) 174,969
- ------------------------------------------------------
Receivables for:
Fund shares sold 42,255
- ------------------------------------------------------
Dividends 248,480
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 15,967
- ------------------------------------------------------
Other assets 32,447
======================================================
Total assets 90,012,588
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 318,947
- ------------------------------------------------------
Dividends 730
- ------------------------------------------------------
Accrued fees to affiliates 79,482
- ------------------------------------------------------
Accrued other operating expenses 74,464
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 29,641
======================================================
Total liabilities 503,264
======================================================
Net assets applicable to shares
outstanding $ 89,509,324
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $144,349,239
- ------------------------------------------------------
Undistributed net investment income (52,841)
- ------------------------------------------------------
Undistributed net realized gain (loss) (26,027,656)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (28,759,418)
======================================================
$ 89,509,324
======================================================
NET ASSETS:
Class A $ 60,767,460
======================================================
Class B $ 15,675,257
======================================================
Class C $ 12,604,380
======================================================
Class Y $ 344,725
======================================================
Institutional Class $ 117,502
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 6,355,868
======================================================
Class B 1,693,389
======================================================
Class C 1,360,814
======================================================
Class Y 36,048
======================================================
Institutional Class 12,232
======================================================
Class A:
Net asset value per share $ 9.56
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $9.56 divided
by 94.50%) $ 10.12
======================================================
Class B:
Net asset value and offering price
per share $ 9.26
======================================================
Class C:
Net asset value and offering price
per share $ 9.26
======================================================
Class Y:
Net asset value and offering price
per share $ 9.56
======================================================
Institutional Class:
Net asset value and offering price
per share $ 9.61
======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM GLOBAL CORE EQUITY FUND
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $329,169) $ 4,819,205
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $66,144) 556,425
================================================================================================
Total investment income 5,375,630
================================================================================================
EXPENSES:
Advisory fees 1,689,680
- ------------------------------------------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------------------------------------------
Custodian fees 58,504
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 239,871
- ------------------------------------------------------------------------------------------------
Class B 306,029
- ------------------------------------------------------------------------------------------------
Class C 221,934
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C and Y 532,554
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 364
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 22,374
- ------------------------------------------------------------------------------------------------
Other 259,757
================================================================================================
Total expenses 3,381,067
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (34,114)
================================================================================================
Net expenses 3,346,953
================================================================================================
Net investment income 2,028,677
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains from securities sold to affiliates of
$72,568) (20,232,664)
- ------------------------------------------------------------------------------------------------
Foreign currencies (1,942,761)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts (788,851)
- ------------------------------------------------------------------------------------------------
Option contracts written 91,007
================================================================================================
(22,873,269)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (net of foreign taxes of $129) (67,194,632)
- ------------------------------------------------------------------------------------------------
Foreign currencies 1,457
- ------------------------------------------------------------------------------------------------
Foreign currency contracts (873,604)
================================================================================================
(68,066,779)
================================================================================================
Net realized and unrealized gain (loss) (90,940,048)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(88,911,371)
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM GLOBAL CORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,028,677 $ 3,487,366
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) (22,873,269) 4,298,075
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (68,066,779) (1,029,315)
=========================================================================================================
Net increase (decrease) in net assets resulting from operations (88,911,371) 6,756,126
=========================================================================================================
Distributions to shareholders from net investment income:
Class A (248,175) (1,860,686)
- ---------------------------------------------------------------------------------------------------------
Class B (67,584) (223,283)
- ---------------------------------------------------------------------------------------------------------
Class C (52,990) (152,179)
- ---------------------------------------------------------------------------------------------------------
Class Y (1,388) --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (471) (2,095,499)
=========================================================================================================
Total distributions from net investment income (370,608) (4,331,647)
=========================================================================================================
Distributions to shareholders from net realized gains:
Class A (11,400) (4,652,489)
- ---------------------------------------------------------------------------------------------------------
Class B (3,154) (1,758,838)
- ---------------------------------------------------------------------------------------------------------
Class C (2,778) (1,198,736)
- ---------------------------------------------------------------------------------------------------------
Class Y (65) --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (22) (3,634,288)
=========================================================================================================
Total distributions from net realized gains (17,419) (11,244,351)
=========================================================================================================
Share transactions-net:
Class A (32,638,564) (6,728,890)
- ---------------------------------------------------------------------------------------------------------
Class B (19,581,910) (14,221,922)
- ---------------------------------------------------------------------------------------------------------
Class C (11,341,439) (9,504,540)
- ---------------------------------------------------------------------------------------------------------
Class Y 413,060 --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (94,179,465) 65,524,804
=========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (157,328,318) 35,069,452
=========================================================================================================
Net increase (decrease) in net assets (246,627,716) 26,249,580
=========================================================================================================
NET ASSETS:
Beginning of year 336,137,040 309,887,460
=========================================================================================================
End of year (includes undistributed net investment income of $(52,841)
and $(1,866,700), respectively) $ 89,509,324 $336,137,040
=========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
14 AIM GLOBAL CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
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 assets, liabilities and operations of each
portfolio are accounted for separately. Information presented in these financial
statements pertains only to the Fund. Matters affecting each portfolio or class
will be voted on exclusively by the shareholders of such portfolio or class.
The Fund's primary investment objective is long-term growth of capital.
The Fund currently consists of five different classes of shares: Class A,
Class B, Class C, Class Y 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.
Class Y and 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.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close
of the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on
that day. Securities traded in the over-the-counter market are valued
based on 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
15 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 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 or exchanges of shares
within 31 days of purchase. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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
16 AIM GLOBAL CORE EQUITY FUND
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. 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, if any.
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, 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 (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$22,911.
17 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 year
ended December 31, 2008, Invesco reimbursed expenses of the Fund in the amount
of $1,629.
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 year ended December 31, 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 year
ended December 31, 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 Y 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 year ended December 31, 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 year ended December 31, 2008, IADI
advised the Fund that IADI retained $17,860 in front-end sales commissions from
the sale of Class A shares and $855, $59,946 and $4,033 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 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. 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 significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using 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 valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $39,174,306
- --------------------------------------
Level 2 50,324,164
- --------------------------------------
Level 3 --
======================================
$89,498,470
======================================
</Table>
18 AIM GLOBAL CORE EQUITY FUND
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended December 31, 2008, the Fund
engaged in securities sales of $1,671,000, which resulted in net realized gains
of $72,568.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the year
ended December 31, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $9,574.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the year ended December 31, 2008, the Fund paid legal fees of $3,766
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, 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--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>
19 AIM GLOBAL CORE EQUITY FUND
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- ------------------------------------------------------------------------------------------------------
Ordinary income $370,608 $ 5,296,806
- ------------------------------------------------------------------------------------------------------
Long-term capital gain 17,419 10,279,192
======================================================================================================
Total distributions $388,027 $15,575,998
======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments $(29,851,011)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (9,723)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (36,912)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (21,962,314)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (2,979,955)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 144,349,239
================================================================================================
Total net assets $ 89,509,324
================================================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $21,962,314
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $290,682,998 and
$434,150,587, 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 $ 1,826,795
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (31,677,806)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(29,851,011)
================================================================================================
Cost of investments for tax purposes is $119,349,481.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on December 31, 2008, undistributed net
investment income was increased by $155,790, undistributed net realized gain
(loss) was increased by $1,619,545 and shares of beneficial interest decreased
by $1,775,335. This reclassification had no effect on the net assets of the
Fund.
20 AIM GLOBAL CORE EQUITY FUND
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2008(a) 2007
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 549,432 $ 7,016,789 2,333,811 $ 38,668,393
- -------------------------------------------------------------------------------------------------------------------------
Class B 143,125 1,781,280 652,181 10,492,639
- -------------------------------------------------------------------------------------------------------------------------
Class C 209,965 2,622,475 818,145 13,161,513
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) 39,811 447,162 -- --
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 629,719 9,126,292 3,637,243 60,833,946
=========================================================================================================================
Issued as reinvestment of dividends:
Class A 26,640 245,007 389,392 6,132,925
- -------------------------------------------------------------------------------------------------------------------------
Class B 7,420 66,113 119,309 1,833,783
- -------------------------------------------------------------------------------------------------------------------------
Class C 6,033 53,964 83,493 1,284,116
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) 158 1,453 -- --
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 53 493 363,335 5,729,787
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 598,100 7,691,413 473,239 7,815,385
- -------------------------------------------------------------------------------------------------------------------------
Class B (626,702) (7,691,413) (487,035) (7,815,385)
=========================================================================================================================
Reacquired:(c)
Class A(b) (3,686,791) (47,591,773) (3,577,959) (59,345,593)
- -------------------------------------------------------------------------------------------------------------------------
Class B (1,085,287) (13,737,890) (1,162,019) (18,732,959)
- -------------------------------------------------------------------------------------------------------------------------
Class C (1,106,924) (14,017,878) (1,481,903) (23,950,169)
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) (3,921) (35,555) -- --
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class (7,706,338) (103,306,250) (66,013) (1,038,929)
=========================================================================================================================
Net increase (decrease) in share activity (12,005,507) $(157,328,318) 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 14% 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) Effective upon the commencement date of Class Y shares, October 3, 2008,
the following shares were converted from Class A shares into Class Y shares
of the Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
-------------------------------------------------------------------------------------------------
Class Y 37,776 $ 426,494
-------------------------------------------------------------------------------------------------
Class A (37,776) (426,494)
=================================================================================================
</Table>
(c) Net of redemption fees of $1,664 and $7,024 which were allocated among the
classes based on relative net assets of each class for the years ended
December 31, 2008 and 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.
21 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>
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS)(A) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $15.75 $ 0.12 $(6.27) $(6.15) $(0.04) $(0.00) $(0.04)
Year ended 12/31/07 16.14 0.18 0.19 0.37 (0.22) (0.54) (0.76)
Year ended 12/31/06 13.97 0.14 2.82 2.96 (0.17) (0.62) (0.79)
Year ended 12/31/05 13.28 0.13 1.38 1.51 (0.16) (0.66) (0.82)
Year ended 12/31/04 11.74 0.01(f) 2.04 2.05 (0.03) (0.48) (0.51)
- -------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 15.37 0.03 (6.10) (6.07) (0.04) (0.00) (0.04)
Year ended 12/31/07 15.73 0.05 0.20 0.25 (0.07) (0.54) (0.61)
Year ended 12/31/06 13.65 0.02 2.75 2.77 (0.07) (0.62) (0.69)
Year ended 12/31/05 13.02 0.03 1.34 1.37 (0.08) (0.66) (0.74)
Year ended 12/31/04 11.57 (0.07)(f) 2.00 1.93 (0.00) (0.48) (0.48)
- -------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 15.38 0.03 (6.11) (6.08) (0.04) (0.00) (0.04)
Year ended 12/31/07 15.74 0.05 0.20 0.25 (0.07) (0.54) (0.61)
Year ended 12/31/06 13.66 0.02 2.75 2.77 (0.07) (0.62) (0.69)
Year ended 12/31/05 13.03 0.03 1.34 1.37 (0.08) (0.66) (0.74)
Year ended 12/31/04 11.58 (0.07)(f) 2.00 1.93 (0.00) (0.48) (0.48)
- -------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(g) 11.29 0.02 (1.71) (1.69) (0.04) (0.00) (0.04)
- -------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 15.77 0.22 (6.34) (6.12) (0.04) (0.00) (0.04)
Year ended 12/31/07 16.17 0.26 0.19 0.45 (0.31) (0.54) (0.85)
Year ended 12/31/06 13.98 0.22 2.83 3.05 (0.24) (0.62) (0.86)
Year ended 12/31/05(g) 13.90 0.04 0.86 0.90 (0.16) (0.66) (0.82)
=========================================================================================================================
<Table>
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSET NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
VALUE, END TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE
OF PERIOD(B) RETURN(C) (000S OMITTED) ABSORBED ABSORBED NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $ 9.56 (39.03)% $ 60,767 1.58%(e) 1.59%(e) 0.96%(e)
Year ended 12/31/07 15.75 2.31 139,688 1.44 1.47 1.08
Year ended 12/31/06 16.14 21.16 149,283 1.53 1.58 0.88
Year ended 12/31/05 13.97 11.35 93,363 1.62 1.67 0.91
Year ended 12/31/04 13.28 17.50 36,092 2.00 2.20 0.10(f)
- -------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 9.26 (39.48) 15,675 2.33(e) 2.34(e) 0.21(e)
Year ended 12/31/07 15.37 1.62 50,018 2.19 2.22 0.33
Year ended 12/31/06 15.73 20.27 65,013 2.28 2.33 0.13
Year ended 12/31/05 13.65 10.51 49,827 2.33 2.38 0.20
Year ended 12/31/04 13.02 16.77 24,675 2.65 2.85 (0.55)(f)
- -------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 9.26 (39.52) 12,604 2.33(e) 2.34(e) 0.21(e)
Year ended 12/31/07 15.38 1.62 34,626 2.19 2.22 0.33
Year ended 12/31/06 15.74 20.26 44,587 2.28 2.33 0.13
Year ended 12/31/05 13.66 10.50 24,316 2.33 2.38 0.20
Year ended 12/31/04 13.03 16.75 10,021 2.65 2.85 (0.55)(f)
- -------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(g) 9.56 (14.95) 345 1.67(e)(h) 1.67(e)(h) 0.87(e)(h)
- -------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 9.61 (38.79) 118 0.97(e) 0.98(e) 1.57(e)
Year ended 12/31/07 15.77 2.84 111,805 0.93 0.96 1.59
Year ended 12/31/06 16.17 21.81 51,005 0.98 1.03 1.43
Year ended 12/31/05(g) 13.98 6.48 2,542 1.09(h) 1.14(h) 1.44(h)
=========================================================================================================================
<Table>
<Caption>
PORTFOLIO
TURNOVER(D)
- -------------------------------------------
CLASS A
Year ended 12/31/08 146%
Year ended 12/31/07 35
Year ended 12/31/06 24
Year ended 12/31/05 51
Year ended 12/31/04 129
- -------------------------------------------
CLASS B
Year ended 12/31/08 146
Year ended 12/31/07 35
Year ended 12/31/06 24
Year ended 12/31/05 51
Year ended 12/31/04 129
- -------------------------------------------
CLASS C
Year ended 12/31/08 146
Year ended 12/31/07 35
Year ended 12/31/06 24
Year ended 12/31/05 51
Year ended 12/31/04 129
- -------------------------------------------
CLASS Y
Year ended 12/31/08(g) 146
- -------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 146
Year ended 12/31/07 35
Year ended 12/31/06 24
Year ended 12/31/05(g) 51
===========================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes redemption fees added to shares of beneficial interest, which were
less than $0.005 per share.
(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, if applicable.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(e) Ratios are based on average daily net assets (000's omitted) of $95,948,
$30,603, $22,193, $349 and $62,382 for Class A, Class B, Class C, Class Y
and Institutional Class shares, respectively.
(f) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2, 2004.
Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets excluding the special dividend are
$(0.02) and (0.14)%; $(0.10) and (0.79)%; $(0.10) and (0.79)% for Class A,
Class B and Class C shares, respectively.
(g) Commencement date of Class Y and Institutional Class shares was October 3,
2008 and October 25, 2005, respectively.
(h) Annualized.
22 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
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 alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the 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.
All lawsuits based on allegations of market timing, late trading and related
issues were 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
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.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
23 AIM GLOBAL CORE EQUITY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Funds Group
and Shareholders of AIM Global Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Global Core Equity Fund
(formerly known as AIM Global Value Fund, one of the funds constituting AIM
Funds Group, hereafter referred to as the "Fund") at December 31, 2008, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2008 by correspondence with the
custodian and broker, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 17, 2009
Houston, Texas
24 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. With
the exception of the actual ending account value and expenses of the Class Y
Shares, the example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period July 1, 2008, through
December 31, 2008. The actual ending account and expenses of the Class Y shares
in the below example are based on an investment of $1,000 invested as of close
of business October 3, 2008 (commencement date) and held through December 31,
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 (as of close of business
October 3, 2008 through December 31, 2008 for the Class Y shares). Because the
actual ending account value and expense information in the example is not based
upon a six month period for the Class Y shares, the ending account value and
expense information may not provide a meaningful comparison to mutual funds that
provide such information for a full six month 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $701.90 $ 7.23 $1,016.64 $ 8.57 1.69%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 699.90 10.43 1,012.87 12.35 2.44
- ---------------------------------------------------------------------------------------------------
C 1,000.00 699.40 10.42 1,012.87 12.35 2.44
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 850.50 3.80 1,016.74 8.47 1.67
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008 (as of close of
business October 3, 2008 through December 31, 2008 for the Class Y shares),
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
184/366 to reflect the most recent fiscal half year. For the Class Y shares
actual expenses are equal to the annualized expense ratio indicated above
multiplied by the average account value over the period, multiplied by 90
(as of close of business October 3, 2008, through December 31, 2008)/366.
Because the Class Y shares have not been in existence for a full six month
period, the actual ending account value and expense information shown may
not provide a meaningful comparison to fund expense information of classes
that show such data for a full six month period and, because the actual
ending account value and expense information in the expense example covers a
short time period, return and expense data may not be indicative of return
and expense data for longer time periods.
(3) Hypothetical expenses are equal to the annualized expense ratio indicated
above multiplied by the average account value over the period, multiplied by
184/366 to reflect a one-half year period. The hypothetical ending account
value and expenses may be used to compare ongoing costs of investing in
Class Y shares of the Fund and other funds because such data is based on a
full six month period.
25 AIM GLOBAL CORE EQUITY FUND
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 July 1, 2008, through December 31, 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $704.40 $4.37 $1,020.01 $5.18 1.02%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 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
184/366 to reflect the most recent fiscal half year.
AIM GLOBAL CORE EQUITY FUND
Supplement to Annual Report dated 12/31/08
AIM GLOBAL CORE EQUITY FUND
INSTITUTIONAL CLASS SHARES
The following information has been prepared to provide Institutional Class
shareholders with a performance overview specific to their holdings.
Institutional Class shares are offered exclusively to institutional investors,
including defined contribution plans that meet certain criteria.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 12/31/08
Inception 2.34%
5 Years 0.12
1 Year -38.67
Institutional Class shares' inception date is October 25, 2005. Returns since
that date are historical returns. All other returns are blended returns of
historical Institutional Class share performance and restated Class A share
performance (for periods prior to the inception date of Institutional Class
shares) at net asset value (NAV) and reflect the Rule 12b-1 fees applicable to
Class A shares. Class A shares' inception date is December 29, 2000.
Institutional Class shares have no sales charge; therefore, performance is
at NAV. Performance of Institutional Class shares will differ from performance
of other share classes primarily due to differing sales charges and class
expenses.
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.
A redemption fee of 2% will be imposed on certain redemptions or exchanges
out of the Fund within 31 days of purchase. Exceptions to the redemption fee are
listed in the Fund's prospectus.
Had the advisor not waived fees and/or reimbursed expenses in the past,
performance would have been lower.
Please note that past performance is not indicative of future results.
More recent returns may be more or less than those shown. All returns assume
reinvestment of distributions at NAV. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. See full report for information on comparative benchmarks. Please
consult your Fund prospectus for more information. For the most current
month-end performance, please call 800 451 4246 or visit invescoaim.com.
- ----------
1 Total annual operating expenses less any contractual fee waivers and/or
expense reimbursements by the advisor in effect through at least June 30,
2009. See current prospectus for more information.
NASDAQ SYMBOL AWSIX
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-1 Invesco Aim Distributors, Inc.
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $ 17,419
Qualified Dividend Income* 100.00%
Corporate Dividends Received Deduction* 45.96%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
ADDITIONAL NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended March 31, 2008, June 30, 2008, September 30, 2008 and
December 31, 2008 were 70.49%, 71.25%, 64.26%, and 63.33%, respectively.
26 AIM GLOBAL CORE EQUITY FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Funds Group (the "Trust"), is 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 104
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Each officer serves for a one year term or until their successors are
elected and qualified. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); Chairman, Investment
Company Institute; President, Co-Chief Executive Officer,
Co-President, Chief Operating Officer and Chief Financial
Officer, Franklin Resources, Inc. (global investment
management organization)
- --------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim Capital Management, Inc.
(registered investment advisor); Director and President,
INVESCO Funds Group, Inc. (registered investment advisor and
register transfer agent) and AIM GP Canada Inc. (general
partner for a limited partnership); Director, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco Aim Investment Services, Inc. (registered
transfer agent) and INVESCO Distributors, Inc. (registered
broker dealer); Director, President and Chairman, IVZ Callco
Inc. (holding company), INVESCO Inc. (holding company) and
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, AIM
Trimark Corporate Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund company); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
Director and Chairman, Fund Management Company (registered
broker dealer); President and Principal Executive Officer,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments Trust and
Tax-Free Investments Trust only); President, AIM Trimark
Global Fund Inc. and AIM Trimark Canada Fund Inc.; and
Director, Trimark Trust (federally regulated Canadian Trust
Company)
- --------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1987 Chairman, Crockett Technology Associates (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association/Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (property casualty company)
Formerly: Director, CompuDyne Corporation (provider of
product and services to the public security market);
Director, President and Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice President, AB Volvo;
Director of various public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (government affairs company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer, Texana Timber LP
(sustainable forestry company); and Discovery Global
Education Fund (non-profit)
- --------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan is considered an interested person of the Trust because he is
an officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
27 AIM GLOBAL CORE EQUITY FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
Formerly: Director of Compliance and Assistant General Counsel,
ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General
Counsel and Director of Compliance, ALPS Mutual Funds, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim Capital Management, Inc.;
Chief Operating Officer, Senior Vice President, General Counsel
and Secretary, Liberty Ridge Capital, Inc. (an investment
adviser); Vice President and Secretary, PBHG Funds (an investment
company); Vice President and Secretary, PBHG Insurance Series
Fund (an investment company); Chief Operating Officer, General
Counsel and Secretary, Old Mutual Investment Partners (a broker-
dealer); General Counsel and Secretary, Old Mutual Fund Services
(an administrator); General Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder servicing center); Executive
Vice President, General Counsel and Secretary, Old Mutual
Capital, Inc. (an investment adviser); and Vice President and
Secretary, Old Mutual Advisors Funds (an investment company)
- --------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited,
IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO North American Holdings,
Inc.; and Vice President, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1992 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust only)
- --------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco Aim Private Asset Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering Compliance Officer, Fund
Management Company; and Manager of the Fraud Prevention
Department, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, The AIM Family of Funds--Registered
Trademark--, Invesco Global Asset Management (N.A.), Inc.
(registered investment advisor), Invesco Institutional (N.A.),
Inc., (registered investment advisor), INVESCO Private Capital
Investments, Inc. (holding company), Invesco Private Capital,
Inc. (registered investment advisor) and Invesco Senior Secured
Management, Inc. (registered investment advisor); and Vice
President, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
28 AIM GLOBAL CORE EQUITY FUND
[GO PAPERLESS
GRAPHIC]
GO PAPERLESS WITH EDELIVERY
Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund
reports and prospectuses with a service that's all about eeees:
- - ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of trees used to
produce paper.
- - ECONOMICAL. Help reduce your fund's printing and delivery expenses and put
more capital back in your fund's returns.
- - EFFICIENT. Stop waiting for regular mail. Your documents will be sent via
email as soon as they're available.
- - EASY. Download, save and print files using your home computer with a few
clicks of your mouse.
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 website 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 email
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 website, invescoaim.com. On the home page, scroll
down and click on Proxy Policy. The information is also available on the SEC
website, 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
website. 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 website, sec.gov.
If used after April 20, 2009, 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.
Please refer to each fund's prospectus for information on the fund's
subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the
retail mutual funds, exchange-traded funds and institutional money market funds
and the subdistributor for the STIC Global Funds represented by Invesco Aim. All
entities are indirect, wholly owned subsidiaries of Invesco Ltd.
It is anticipated that the businesses of the affiliated investment adviser
firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.,
Invesco Private Asset Management, Inc. and Invesco Global Asset Management
(N.A.), Inc. -- will be combined into Invesco Institutional (N.A.), Inc., and
the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or
about Aug. 1, 2009. Additional information will be posted at invescoaim.com on
or about Aug. 1, 2009.
[INVESCO AIM
LOGO]
-SERVICE MARK-
invescoaim.com GCE-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM INTERNATIONAL SMALL COMPANY FUND
-SERVICE MARK- Annual Report to Shareholders - December 31, 2008
[MOUNTAIN GRAPHIC]
2 Letters to Shareholders
4 Performance Summary
4 Management Discussion
6 Long-Term Fund Performance
8 Supplemental Information
9 Schedule of Investments
11 Financial Statements
14 Notes to Financial Statements
20 Financial Highlights
22 Auditor's Report
23 Fund Expenses
24 Tax Information
25 Trustees and Officers
[TAYLOR PHOTO]
Philip Taylor
Dear Shareholder:
In previous reports, I've talked with you about short-term market volatility.
I'd like to take this opportunity to update you on market developments during
calendar year 2008 and provide you with some perspective and encouragement.
MARKET OVERVIEW
At the start of 2008, we saw warning signs of increasing economic ills -- a
weakening housing market, rising inflation and slowing job growth, among others.
In response, the U.S. Federal Reserve Board (the Fed) cut short-term interest
rate targets throughout 2008 in an effort to stimulate economic growth. The Fed
reduced its short-term interest rate target from 4.25% to a range of zero to
0.25% during the year. (1)
In the spring of 2008, more serious factors came to the forefront --
driving unemployment sharply higher (2) and causing major stock market indexes
to hit multi-year lows in the U.S. and overseas. (3) For example, the S&P 500
Index, considered representative of the U.S. stock market, had its worst
one-year performance since 1937. (4) During the second half of 2008, the Fed,
the U.S. Department of the Treasury and other federal agencies took
unprecedented action to rescue the troubled financials sector and domestic
automobile industry, stabilize the stock market and inject liquidity into the
credit markets.
HOW WE GOT HERE
The cause of this correction was years of lax lending associated with the recent
housing boom. Mortgage loans of questionable quality were bundled into
hard-to-value securities that were bought by, and traded among, financial
institutions. As the value of those securities declined, financial institutions
sought to unload them -- but there were few buyers. With the value of their
assets falling and access to credit tightening, a number of well-established
financial firms faced severe difficulties, and investor uncertainty and market
volatility spiked.
In October 2008, the administration and Congress enacted a plan, the
Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury
to purchase up to $700 billion in troubled mortgage-related assets -- the
largest and most direct effort to resolve a credit crisis in the last half
century. The Fed, in concert with other central banks, cut short-term interest
rate targets and undertook other initiatives intended to restore investor
confidence, expand lending and mitigate the effects of the global credit crisis.
Following his election, President Barack Obama again pledged to act boldly to
stimulate the U.S. economy.
As we enter 2009, the volatility in the stock, fixed-income and credit
markets we saw last year emphasized the importance of three timeless investing
principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
- INVEST FOR THE LONG TERM. Short-term fluctuations have always been a
reality of the markets. We urge you to stick to your investment plan
and stay focused on your long-term goals.
- DIVERSIFY. Although diversification doesn't eliminate the risk of loss
or guarantee a profit, a careful selection of complementary asset
classes may cushion your portfolio against excessive volatility.
- STAY FULLY INVESTED. Trying to time the market is a gamble, not an
investment strategy. A sound investment strategy includes viewing
market volatility as a matter of course, not a reason to panic.
A trusted financial advisor can explain more fully the potential value of
following these principles. An experienced advisor who knows your individual
investment goals, financial situation and risk tolerance can be your most
valuable asset during times of market volatility. Your advisor can provide
guidance and can monitor your investments to ensure they're on course.
It's also helpful to remember that many of history's significant buying
opportunities resulted from short-term economic crises that, in their time, were
considered unprecedented. We believe current market uncertainty may represent a
buying opportunity for patient, long-term investors. Rest assured that Invesco
Aim's portfolio managers are working diligently on your behalf to attempt to
capitalize on this situation.
MANAGING MONEY IS OUR FOCUS
I believe Invesco Aim is uniquely positioned to navigate current difficult
markets. Our parent company, Invesco Ltd., is one of the world's largest and
most diversified global investment managers. Invesco provides clients with
diversified investment strategies from distinct management teams around the
globe and a range of investment products. Invesco's single focus is asset
management -- which means we focus on doing one thing well: managing your money.
That can be reassuring in uncertain times.
While market conditions change often, our commitment to putting
shareholders first, helping clients achieve their investment goals and providing
excellent customer service remains constant.
If you have questions about this report or your account, please contact
one of our client service representatives at 800 959 4246.
Thank you for your continued confidence, and all of us at Invesco Aim look
forward to serving you.
Sincerely,
/s/ PHILIP TAYLOR
Philip Taylor
Senior Managing Director, Invesco Ltd.
CEO, Invesco Aim
- ------------
1 U.S. Federal Reserve; 2 Bureau of Labor Statistics; 3 FactSet Research; 4 Wall
Street Journal
2 AIM INTERNATIONAL SMALL COMPANY FUND
[CROCKETT PHOTO]
Bruce Crockett
Dear Fellow Shareholders:
Since my last letter, continuing troubles in the global economy and financial
markets have negatively affected all investors. The new government promises to
move quickly with a stimulus package, yet considerable anxiety remains about
how, when and what kind of a recovery will occur. While no one likes to see
investment values decline as sharply as they have recently, as mutual fund
investors we can find some consolation in the knowledge that our fund
investments are more transparent, more comprehensively governed and more closely
regulated than most other kinds of investments. In addition, mutual funds
generally are more diversified than other investments; as shareholders we invest
not in a single security but in a portfolio of multiple securities. The benefits
of diversification have been reiterated by the stories of investors who "lost
everything" because they had too many of their assets in one place, whether that
place was a single money manager or their employer's stock. Mutual fund
investors also have the opportunity to diversify further among different types
of funds that each deploy a different strategy and focus on different kinds of
securities. These include conservatively managed money market funds, which,
relative to other securities, continue to offer a more safe, liquid, and
convenient way to invest short-term assets.
In addition to diversification, investing discipline is essential during
challenging times such as these. Strategies such as dollar-cost-averaging, where
individuals invest a consistent amount at regular intervals, can help investors
acquire more fund shares when prices are low. Periodic rebalancing of asset
allocation plans achieves the same effect. "Buy low, sell high" has long been
the mantra of investment success, but the advice is not always easy to follow
because it requires the discipline to resist prevailing trends. Of course,
investment strategies, such as dollar-cost-averaging and portfolio rebalancing
do not guarantee a profit or eliminate the risk of loss. Investors should
consider their ability to continue investing regardless of fluctuating security
prices.
A long-term view is also important, particularly for assets that are not
needed right away. In the past, it has often proven better to keep long-term
assets invested through a downturn than to miss the beginning of the upward
trend. To develop a diversified and disciplined investing plan that is right for
your individual goals, I encourage you to consult an experienced and trustworthy
investment professional who has the knowledge and the tools to help you
establish and implement the plan, monitor its results and adapt it to changing
goals and circumstances.
Even when working with a personal financial advisor, investors should
supplement the relationship with their own knowledge and awareness of the
investments they hold. Visit the Invesco Aim website at invescoaim.com regularly
to find out what is happening in your AIM funds and to read timely market
commentary from Invesco Aim management, strategists and portfolio managers. The
site's "Education and Planning" section can also help you clarify basic
investment concepts, learn how to choose a financial advisor, evaluate different
investment choices and make more informed investment decisions. Invesco Aim's
redesigned public home page recently received a Gold Award for its user-friendly
navigation and graphics from The Mutual Funds Monitor Awards, sponsored by
Corporate Insight.
As always, your Board of Trustees and Invesco Aim are committed to putting
your interests first by controlling costs, monitoring investment performance and
streamlining the investment management process during these difficult times.
Your Board has already begun the annual review and management contract renewal
process with the continuing goal of making AIM funds one of the best and most
cost-effective ways for you to invest your hard-earned money.
While the investing climate may remain uncertain for a while, economies
and markets are dynamic, and no stage is ever permanent. Please feel free to
contact me in writing with your questions or concerns. You can send an email to
me at bruce@brucecrockett.com.
Best regards,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM INTERNATIONAL SMALL COMPANY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY
Global equity markets were turbulent throughout 2008. Most markets registered
double-digit losses as global growth slowed and a number of financial
institutions worldwide fell victim to the broadening credit crisis.# Within this
environment, investors' risk-averse nature caused them to shun smaller
capitalization companies. AIM International Small Company Fund underperformed
its style-specific benchmark, the MSCI World Ex-US Small Cap Index.# The Fund's
significant underweight position in the stronger Japanese market accounted for a
majority of the Fund's relative results.
Your Fund's long-term performance appears later in this report.
FUND VS. INDEXES
Total returns, 12/31/07 to 12/31/08, 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 - 54.24%
Class B Shares - 54.61
Class C Shares - 54.58
Class Y Shares* - 54.19
MSCI EAFE Index# (Broad Market Index) - 43.38
MSCI World Ex-US Small Cap Index#
(Style-Specific Index) - 48.03
Lipper International Small/Mid-Cap Growth
Funds Index# (Peer Group Index) - 50.70
- ----------
# Lipper Inc.
* Share class incepted during the fiscal year. See page 7 for a detailed
explanation of Fund performance.
HOW WE INVEST
When selecting stocks for your Fund, we employ a disciplined investment strategy
that emphasizes fundamental research, supported by both quantitative analysis
and portfolio construction techniques. Our EQV (Earnings, Quality, Valuation)
strategy focuses primarily on identifying quality companies that have
experienced, or exhibit the potential for, accelerating or above-average
earnings growth but whose stock prices do not fully reflect these attributes.
While research responsibilities within the portfolio management team are
focused by geographic region, we select investments for the Fund by using a
bottom-up investment approach, which means that we construct the Fund primarily
on a stock-by-stock basis. We focus on the strengths of individual companies
rather than sectors, countries or market-cap trends.
We believe disciplined sell decisions are key to successful investing. We
consider selling a stock for one of the following reasons:
- - A company's fundamentals deteriorate, or it posts disappointing earnings.
- - A stock's price seems overvalued.
- - A more attractive opportunity becomes available.
MARKET CONDITIONS AND YOUR FUND
It was a very difficult year for financial markets. During the year, the banking
system came under extreme pressure with a number of major banks facing
insolvency. Although global equity prices have shown signs of recovery from
their mid-October depressed lows, the world's major stock markets finished the
calendar year in negative territory, with losses of over 50% in most
markets. (1)
European equities remained under pressure over the period as further
weakness in the macroeconomic outlook manifested itself and the financials
sector turmoil continued. As credit is the grease of the broader economic
machine, economies across Europe, as well as globally, slowed significantly as
we moved through the year. Asian equities were volatile as well, falling sharply
toward the end of the year. (2) While there were sporadic attempts to rally,
weakness remained the dominant trend during the year.
Emerging markets stocks tumbled from record highs (1) as global recession
concerns deepened and commodity prices fell sharply. (3) There were concerns
that some countries could start to default on their foreign loans.
AIM International Small Company Fund did not emerge unscathed from the
carnage of 2008, ending the year with a double-digit decline. As unprecedented
problems in the financials sector unfolded, and eventually spread to every nook
and cranny of economic life, share prices of smaller capitalization companies
came under immense pressure -- even more so than their large-cap counterparts.
Hedge funds were forced to liquidate positions, often within very short time
periods. This flight to liquidity and safety negatively affected the returns of
small- and mid-cap stocks, which was reflected in the Fund's absolute results.
An already difficult situation was exacerbated by a surprise strengthening
of the U.S. dollar. No country or sector escaped the downturn during 2008, and
PORTFOLIO COMPOSITION
By sector
Consumer Discretionary 23.1%
Industrials 23.1
Financials 17.5
Consumer Staples 10.0
Utilities 6.1
Materials 5.6
Information Technology 3.7
Energy 2.7
Health Care 2.1
Telecommunication Services 2.1
Money Market Funds Plus
Other Assets Less Liabilities 4.0
TOP FIVE COUNTRIES*
1. United Kingdom 17.3%
2. Malaysia 9.4
3. Brazil 6.8
4. Hong Kong 6.6
5. Canada 6.3
Total Net Assets $ 259.3 million
Total Number of Holdings* 63
TOP 10 EQUITY HOLDINGS*
1. IGB Corp. Berhad 4.9%
2. First Pacific Co. Ltd. 4.1
3. Mitie Group PLC 3.4
4. Parkson Holdings Berhad 3.4
5. Equatorial Energia S.A. 2.9
6. Paddy Power PLC 2.8
7. American Banknote S.A. 2.6
8. Fuchs Petrolub AG-Pfd. 2.4
9. Homeserve PLC 2.4
10. Kier Group PLC 2.3
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
- ----------
* Excluding money market fund holdings.
4 AIM INTERNATIONAL SMALL COMPANY FUND
our investments were unable to produce any positive contributions at the sector
or region level.
Relative results did not fare much better. The Fund at net asset value
underperformed its style-specific index, the MSCI World Ex-US Small Cap Index,
by approximately 6%. (1) Our significant underweight exposure to the more
resilient Japanese market -- 6% for the Fund versus 25% for the style-specific
index -- hurt relative performance. It was difficult for us to find attractive
investment opportunities in Japan. We continued to focus on quality fundamentals
and shunned the companies in Japan that generated low returns on capital.
Despite a decrease in Japanese valuation, it was still expensive relative to
valuations outside Japan as valuations of non- Japanese markets decreased even
more.
From a sector perspective, the Fund underperformed by the widest margin in
the consumer discretionary sector, a segment that was hard hit due to reduced
consumer spending. Our holdings in the automobile, hotels and leisure and media
industries tumbled, negatively affecting both absolute and relative results.
Detractors included Finnish tire manufacturer NOKIAN RENKAAT, Chinese auto parts
manufacturer XINYI GLASS, Greek lottery and gaming systems manufacturer INTRALOT
and Greek toy manufacturer JUMBO SA.
Another area of weakness for the Fund was the economically sensitive
industrials sector, where our holdings underperformed those of the
style-specific index. Key detractors within this sector included U.K.-based
HOMESERVE PLC and Brazilian homebuilder DURATEX SA.
In contrast, the Fund's underweight exposure in health care and
information technology (IT) led to outperformance relative to the style-specific
index in these sectors. Despite the severe downturn, there were some bright
spots of positive performance among Fund holdings, including Taiwan-based HUNG
POO REAL ESTATE and U.K.-based reinsurer LANCASHIRE HOLDINGS.
At year end, the Fund's largest overweight positions were in the consumer
discretionary, consumer staples and utilities sectors. The Fund's largest
underweight positions were in the health care and IT sectors.
We primarily focused on companies with strong balance sheets. At the close
of the year, a large portion of our holdings had zero net debt. Strong balance
sheets give companies flexibility, which is always valuable but particularly so
in today's highly uncertain environment.
As always, we continued to strongly emphasize cash generation and
attractive valuations. The opportunity set in the international small cap
universe at the end of the year looked very attractive both in absolute and
relative terms. In fact, international small caps were generally trading at
approximately a one-third valuation discount versus domestic (U.S.) small cap
peers despite having far higher and better quality returns. (4)
Volatile markets can test an investor's resolve, and 2008 was one of the
most turbulent periods for many years. However, turbulent markets can create
investment opportunities. We welcome new investors who joined the Fund during
2008 and would like to express to all our shareholders our appreciation for your
continued investment in AIM International Small Company Fund.
- ----------
1 Lipper Inc.
2 FactSet Research Systems Inc.
3 Bloomberg L.P.
4 Thomson Financial, Compustat, Russell and MSCI Inc.
The views and opinions expressed in management's discussion of Fund performance
are those of Invesco Aim Advisors, Inc. These views and opinions are subject to
change at any time based on factors such as market and economic conditions.
These views and opinions may not be relied upon as investment advice or
recommendations, or as an offer for a particular security. The information is
not a complete analysis of every aspect of any market, country, industry,
security or the Fund. Statements of fact are from sources considered reliable,
but Invesco Aim Advisors, Inc. makes no representation or warranty as to their
completeness or accuracy. Although historical performance is no guarantee of
future results, these insights may help you understand our investment management
philosophy.
See important Fund and index disclosures later in this report.
[HOLZER PHOTO]
JASON HOLZER
Chartered Financial Analyst, senior portfolio manager, is lead manager of AIM
International Small Company Fund with respect to the Fund's European and
Canadian investments. Mr. Holzer joined Invesco Aim in 1996. He earned a B.A. in
quantitative economics and an M.S. in engineering-economic systems from Stanford
University.
[CAO PHOTO]
SHUXIN CAO
Chartered Financial Analyst, portfolio manager, is lead manager of AIM
International Small Company Fund with respect to the Fund's Asia Pacific and
Latin American investments. He joined Invesco Aim in 1997. Mr. Cao graduated
from Tianjin Foreign Language Institute with a B.A. in English. He also earned
an M.B.A. from Texas A&M University and is a Certified Public Accountant.
[ENDRESEN PHOTO]
BORGE ENDRESEN
Chartered Financial Analyst, portfolio manager, is manager of AIM International
Small Company Fund. Mr. Endresen joined Invesco Aim in 1999. He graduated summa
cum laude from the University of Oregon with a B.S. in finance. Mr. Endresen
also earned an M.B.A. from The University of Texas at Austin.
Assisted by the Asia Pacific/Latin America Team and the Europe/Canada Team
5 AIM INTERNATIONAL SMALL COMPANY FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable
sales charges and Fund expenses including management fees. Results for Class B
shares are calculated as if a hypothetical shareholder had liquidated his entire
investment in the Fund at the close of the reporting period and paid the
applicable contingent deferred sales charges. Index results include reinvested
dividends, but they do not reflect sales charges. Performance of an index of
funds reflects fund expenses and management fees; performance of a market index
does not. Performance shown in the chart and table(s) does not reflect deduction
of taxes a shareholder would pay on Fund distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the
value of the Fund and its indexes. We believe that a logarithmic chart is more
effective than other types of charts in illustrating changes in value during the
early years shown in the chart. The vertical axis, the one that indicates the
dollar value of an investment, is constructed with each segment representing a
percent change in the value of the investment. In this chart, each segment
represents a doubling, or 100% change, in the value of the investment. In other
words, the space between $4,000 and $8,000 is the same size as the space between
$8,000 and $16,000, and so on.
6 AIM INTERNATIONAL SMALL COMPANY FUND
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASSES SINCE INCEPTION
Fund and Index data from 8/31/00
Lipper
AIM International AIM International AIM International International
Small Company Small Company Small Company MSCI World Small/Mid-Cap
Fund- Fund- Fund- Ex-US Growth Funds
Date Class A Shares Class B Shares Class C Shares MSCI EAFE Index (1) Small Cap Index (1) Index (1)
8/31/00 $9450 $10000 $10000 $10000 $10000 $10000
9/00 8930 9450 9450 9513 9515 9454
10/00 8250 8720 8730 9288 8844 8743
11/00 7172 7581 7590 8940 8762 7864
12/00 7532 7951 7950 9258 8838 8051
1/01 8146 8591 8600 9253 9098 8163
2/01 7126 7511 7520 8559 8897 7653
3/01 6237 6570 6580 7989 8270 6818
4/01 6577 6931 6930 8544 8986 7151
5/01 6719 7080 7079 8242 8997 7145
6/01 6577 6930 6919 7905 8740 6839
7/01 6502 6850 6839 7761 8390 6539
8/01 6388 6720 6709 7565 8467 6375
9/01 5557 5841 5839 6799 7372 5539
10/01 6076 6381 6379 6973 7736 5805
11/01 6502 6821 6819 7230 8042 6065
12/01 6742 7071 7070 7273 7898 6095
1/02 6752 7071 7070 6886 7750 5954
2/02 6837 7171 7159 6935 7873 5967
3/02 7245 7591 7580 7343 8417 6260
4/02 7379 7731 7720 7358 8666 6303
5/02 7616 7971 7970 7451 9071 6424
6/02 7626 7981 7970 7155 8699 6174
7/02 6932 7251 7240 6448 7992 5597
8/02 6876 7191 7180 6434 7899 5541
9/02 6296 6571 6570 5743 7291 5027
10/02 6410 6691 6690 6051 7231 5083
11/02 6552 6831 6830 6326 7434 5236
12/02 6562 6841 6840 6113 7313 5148
1/03 6638 6911 6910 5858 7234 5030
2/03 6629 6901 6900 5724 7181 4928
3/03 6705 6981 6970 5611 7111 4887
4/03 7227 7511 7510 6161 7763 5325
5/03 7883 8201 8189 6535 8450 5794
6/03 8158 8481 8479 6693 8890 5961
7/03 8481 8801 8799 6855 9159 6179
8/03 8890 9231 9219 7020 9761 6503
9/03 9460 9811 9799 7236 10319 6737
10/03 10438 10821 10809 7687 11142 7317
11/03 10770 11152 11149 7858 11152 7388
12/03 11491 11892 11880 8472 11833 7831
1/04 12034 12452 12439 8592 12342 8099
2/04 12594 13032 13019 8790 12715 8307
3/04 12661 13082 13079 8840 13205 8454
4/04 12233 12642 12629 8640 12734 8234
5/04 12052 12453 12439 8669 12582 8106
6/04 12385 12783 12769 8859 13233 8380
7/04 12090 12463 12459 8571 12649 8006
8/04 12290 12674 12659 8609 12715 8016
9/04 12946 13334 13329 8834 13062 8374
10/04 13497 13905 13889 9136 13609 8625
- ----------
1 Lipper Inc.
[MOUNTAIN CHART]
11/04 14734 15165 15158 9760 14629 9245
12/04 15607 16049 16043 10188 15311 9669
1/05 15859 16302 16297 10001 15547 9729
2/05 16785 17246 17240 10433 16207 10231
3/05 16427 16870 16865 10171 15944 9973
4/05 16002 16423 16418 9932 15494 9705
5/05 16147 16566 16560 9937 15531 9752
6/05 16747 17176 17160 10068 15943 10046
7/05 17837 18271 18256 10377 16636 10610
8/05 18388 18830 18815 10639 17146 10944
9/05 19140 19582 19575 11113 17841 11510
10/05 18118 18526 18520 10789 17191 11006
11/05 19315 19734 19728 11052 17764 11469
12/05 20637 21070 21063 11567 19145 12347
1/06 22890 23363 23344 12277 20510 13427
2/06 23282 23744 23734 12250 20253 13290
3/06 24699 25180 25161 12653 21205 14122
4/06 26651 27154 27136 13258 22192 14966
5/06 25574 26035 26029 12743 20965 14068
6/06 24620 25054 25037 12742 20455 13630
7/06 24659 25076 25069 12868 19955 13457
8/06 25113 25530 25513 13222 20539 13842
9/06 24480 24864 24858 13242 20483 13784
10/06 26211 26607 26590 13758 21297 14484
11/06 27569 27959 27952 14169 22213 15146
12/06 28520 28909 28893 14613 22870 15719
1/07 28911 29279 29278 14712 23337 15922
2/07 29527 29885 29872 14831 23746 16057
3/07 30755 31111 31097 15209 24533 16599
4/07 32363 32719 32705 15885 25479 17268
5/07 34244 34600 34585 16163 25856 17957
6/07 34066 34403 34388 16183 25800 18053
7/07 34587 34899 34883 15945 25641 18184
8/07 33380 33660 33659 15695 24289 17418
9/07 35082 35353 35342 16535 24837 18434
10/07 37362 37629 37632 17185 26514 19782
11/07 33663 33882 33884 16620 24334 18148
12/07 33482 33688 33677 16246 23621 17819
1/08 29886 30050 30040 14745 21331 16070
2/08 31347 31501 31491 14956 22344 16697
3/08 30081 30207 30197 14799 22098 16253
4/08 31275 31379 31383 15602 22635 16874
5/08 31425 31504 31509 15754 23093 17383
6/08 28292 28351 28339 14466 21309 16110
7/08 26815 26868 26857 14001 20235 14963
8/08 25606 25635 25640 13434 19487 14204
9/08 21132 21138 21128 11491 16059 11964
10/08 15763 15752 15757 9173 12095 8718
11/08 14629 14613 14618 8677 11509 8165
12/08 15320 15321 15289 9199 12276 8784
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/08, including maximum applicable sales charges
CLASS A SHARES
Inception (8/31/00) 5.25%
5 Years 4.73
1 Year - 56.76
CLASS B SHARES
Inception (8/31/00) 5.25%
5 Years 4.91
1 Year - 56.67
CLASS C SHARES
Inception (8/31/00) 5.23%
5 Years 5.17
1 Year - 55.00
CLASS Y SHARES
Inception 5.98%
5 Years 5.94
1 Year - 54.19
CLASS Y SHARES' INCEPTION DATE IS OCTOBER 3, 2008; RETURNS SINCE THAT DATE ARE
ACTUAL RETURNS. ALL OTHER RETURNS ARE BLENDED RETURNS OF ACTUAL CLASS Y SHARE
PERFORMANCE AND RESTATED CLASS A SHARE PERFORMANCE (FOR PERIODS PRIOR TO THE
INCEPTION DATE OF CLASS Y SHARES) AT NET ASSET VALUE. THE RESTATED CLASS A SHARE
PERFORMANCE REFLECTS THE RULE 12B-1 FEES APPLICABLE TO CLASS A SHARES AS WELL AS
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RECEIVED BY CLASS A SHARES. CLASS A
SHARES' INCEPTION DATE IS AUGUST 31, 2000.
THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT
GUARANTEE COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER.
PLEASE VISIT INVESCOAIM.COM FOR THE MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE
AND THE EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS
WHEN YOU SELL SHARES.
THE NET ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT
FUND PROSPECTUS AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C AND
CLASS Y SHARES WAS 1.48%, 2.23%, 2.23% AND 1.23%, RESPECTIVELY. (1) THE TOTAL
ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT FUND PROSPECTUS
AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C AND CLASS Y SHARES
WAS 1.49%, 2.24%, 2.24% AND 1.24%, RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
ABOVE MAY VARY FROM THE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS OF THIS
REPORT THAT ARE BASED ON EXPENSES INCURRED DURING THE PERIOD COVERED BY THIS
REPORT.
CLASS A SHARE PERFORMANCE REFLECTS THE MAXIMUM 5.50% SALES CHARGE, AND
CLASS B AND CLASS C SHARE PERFORMANCE REFLECTS THE APPLICABLE CONTINGENT
DEFERRED SALES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CDSC ON CLASS B SHARES
DECLINES FROM 5% BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE
SEVENTH YEAR. THE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST YEAR AFTER
PURCHASE. CLASS Y SHARES DO NOT HAVE A FRONT-END SALES CHARGE OR A CDSC;
THEREFORE, PERFORMANCE IS AT NET ASSET VALUE.
THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER PRIMARILY DUE TO
DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES.
A REDEMPTION FEE OF 2% WILL BE IMPOSED ON CERTAIN REDEMPTIONS OR EXCHANGES
OUT OF THE FUND WITHIN 31 DAYS OF PURCHASE. EXCEPTIONS TO THE REDEMPTION FEE ARE
LISTED IN THE FUND'S PROSPECTUS.
HAD THE ADVISOR NOT WAIVED FEES AND/OR REIMBURSED EXPENSES IN THE PAST,
PERFORMANCE WOULD HAVE BEEN LOWER.
- ------------------
1 Total annual operating expenses less any contractual fee waivers and/or
expense reimbursements by the advisor in effect through at least June 30,
2009. See current prospectus for more information.
7 AIM INTERNATIONAL SMALL COMPANY FUND
AIM INTERNATIONAL SMALL COMPANY FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH
OF CAPITAL.
- - Unless otherwise stated, information presented in this report is as of
December 31, 2008, and is based on total net assets.
- - Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES
- - Effective September 30, 2003, only previously established qualified plans
are eligible to purchase Class B shares of any AIM fund.
- - Class Y shares are available to only certain investors. Please see the
prospectus for more information.
- - Effective Nov. 3, 2008, the Fund reopened to all investors. The Fund had
been in limited offering since March 14, 2005.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- - The values of convertible securities in which the Fund invests may be
affected by market interest rates, the risk that the issuer may default on
interest or principal payments, and the value of the underlying common
stock into which these securities may be converted.
- - Investing in developing countries can add additional risk, such as high
rates of inflation or sharply devalued currencies against the U.S. dollar.
Transaction costs are often higher, and there may be delays in settlement
procedures.
- - Prices of equity securities change in response to many factors, including
the historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions
and market liquidity.
- - Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, relative lack of information, relatively
low market liquidity, and the potential lack of strict financial and
accounting controls and standards.
- - The prices of initial public offering (IPO) securities may go up and down
more than prices of equity securities of companies with longer trading
histories. In addition, companies offering securities in IPOs may have
less experienced management or limited operating histories. There can be
no assurance that the Fund will have favorable IPO investment
opportunities.
- - Since a large percentage of the Fund's assets may be invested in
securities of a limited number of companies, each investment has a greater
effect on the Fund's overall performance, and any change in the value of
those securities could significantly affect the value of your investment
in the Fund.
- - The prices of securities held by the Fund may decline in response to
market risks.
- - Nondiversification increases the risk that the value of the Fund's shares
may vary more widely, and the Fund may be subject to greater investment
and credit risk than if it invested more broadly.
- - Investing in a fund that invests in smaller companies involves risks not
associated with investing in more established companies, such as business
risk, stock price fluctuations and illiquidity.
ABOUT INDEXES USED IN THIS REPORT
- - 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.
OTHER INFORMATION
- - The Chartered Financial Analyst --REGISTERED TRADEMARK-- (CFA--REGISTERED
TRADEMARK--) designation is a globally recognized standard for measuring
the competence and integrity of investment professionals.
- - CPA--REGISTERED TRADEMARK-- and Certified Public Accountant --REGISTERED
TRADEMARK-- are trademarks owned by the American Institute of Certified
Public Accountants.
- - The returns shown in management's discussion of Fund performance are based
on net asset values calculated for shareholder transactions. Generally
accepted accounting principles require adjustments to be made to the net
assets of the Fund at period end for financial reporting purposes, and as
such, the net asset values for shareholder transactions and the returns
based on those net asset values may differ from the net asset values and
returns reported in the Financial Highlights.
- - Industry classifications used in this report are generally according to
the Global Industry Classification Standard, which was developed by and is
the exclusive property and a service mark of MSCI Inc. and Standard &
Poor's.
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 NASDAQ SYMBOLS
Class A Shares IEGAX
Class B Shares IEGBX
Class C Shares IEGCX
Class Y Shares IEGYX
8 AIM INTERNATIONAL SMALL COMPANY FUND
SCHEDULE OF INVESTMENTS
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-92.81%
AUSTRIA-1.25%
Andritz AG 125,760 $ 3,230,020
===============================================================================
BRAZIL-6.25%
American Banknote S.A.(a) 325,900 1,523,417
- -------------------------------------------------------------------------------
American Banknote S.A. 1,100,600 5,144,746
- -------------------------------------------------------------------------------
Equatorial Energia S.A. 1,732,800 7,631,234
- -------------------------------------------------------------------------------
OdontoPrev S.A.(a) 139,600 1,400,550
- -------------------------------------------------------------------------------
OdontoPrev S.A. 51,500 516,678
===============================================================================
16,216,625
===============================================================================
CANADA-6.08%
Genesis Land Development Corp.(b) 1,208,400 1,191,863
- -------------------------------------------------------------------------------
Groupe Aeroplan, Inc. 349,200 2,517,145
- -------------------------------------------------------------------------------
Onex Corp. 221,600 3,333,152
- -------------------------------------------------------------------------------
Reitmans (Canada) Ltd.-Class A 391,700 3,770,030
- -------------------------------------------------------------------------------
Sherritt International Corp. 610,207 1,554,795
- -------------------------------------------------------------------------------
Total Energy Trust Ltd. 598,190 1,843,762
- -------------------------------------------------------------------------------
Transat A.T. Inc.-Class A(c) 160,300 1,554,712
===============================================================================
15,765,459
===============================================================================
CHINA-1.19%
Xinyi Glass Holdings Co. Ltd. 11,460,000 3,098,570
===============================================================================
FINLAND-1.38%
Nokian Renkaat Oyj 318,000 3,582,646
===============================================================================
GERMANY-3.78%
MTU Aero Engines Holding AG 62,367 1,727,071
- -------------------------------------------------------------------------------
Symrise AG 244,507 3,470,139
- -------------------------------------------------------------------------------
Wirecard AG(b) 773,129 4,606,072
===============================================================================
9,803,282
===============================================================================
GREECE-4.05%
Intralot S.A. 1,172,600 4,913,663
- -------------------------------------------------------------------------------
Jumbo S.A. 918,000 5,591,870
===============================================================================
10,505,533
===============================================================================
HONG KONG-6.62%
First Pacific Co. Ltd. 30,146,000 10,518,686
- -------------------------------------------------------------------------------
Paliburg Holdings Ltd. 22,942,170 3,670,629
- -------------------------------------------------------------------------------
Paliburg Holdings Ltd.-Wts., expiring 11/08/10 25,491,300 101,962
- -------------------------------------------------------------------------------
Regal Hotels International Holdings Ltd. 10,367,400 2,876,025
===============================================================================
17,167,302
===============================================================================
IRELAND-4.55%
DCC PLC 318,895 4,654,770
- -------------------------------------------------------------------------------
Paddy Power PLC 380,171 7,131,637
===============================================================================
11,786,407
===============================================================================
ISRAEL-0.65%
Israel Discount Bank-Class A 1,855,973 1,684,262
===============================================================================
ITALY-1.19%
Cementir Holding S.p.A. 882,224 3,098,606
===============================================================================
JAPAN-4.84%
EXEDY Corp. 357,400 3,568,148
- -------------------------------------------------------------------------------
Nippon Ceramic Co., Ltd. 508,700 4,986,295
- -------------------------------------------------------------------------------
Nishio Rent All Co., Ltd. 242,200 1,748,080
- -------------------------------------------------------------------------------
Noritsu Koki Co., Ltd. 312,000 2,254,665
===============================================================================
12,557,188
===============================================================================
MALAYSIA-9.36%
IGB Corp. Berhad 31,876,900 12,759,169
- -------------------------------------------------------------------------------
Lion Diversified Holdings Berhad(c) 25,132,200 2,566,238
- -------------------------------------------------------------------------------
Parkson Holdings Berhad 7,727,360 8,940,572
===============================================================================
24,265,979
===============================================================================
NETHERLANDS-4.52%
Aalberts Industries N.V. 586,484 4,209,937
- -------------------------------------------------------------------------------
Koninklijke BAM Groep N.V.(a) 65,000 587,321
- -------------------------------------------------------------------------------
Koninklijke BAM Groep N.V. 487,688 4,406,606
- -------------------------------------------------------------------------------
USG People N.V. 192,124 2,509,967
===============================================================================
11,713,831
===============================================================================
NEW ZEALAND-1.58%
Freightways Ltd. 2,172,027 4,097,140
===============================================================================
NORWAY-1.95%
Petroleum Geo-Services A.S.A.(b) 519,400 2,134,150
- -------------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A.(b) 571,623 2,927,794
===============================================================================
5,061,944
===============================================================================
PHILIPPINES-5.21%
First Gen Corp. 8,958,200 1,901,912
- -------------------------------------------------------------------------------
Globe Telecom, Inc. 326,650 5,310,400
- -------------------------------------------------------------------------------
Manila Water Co. 15,698,500 4,508,778
- -------------------------------------------------------------------------------
PNOC Energy Development Corp.(a) 4,405,000 182,336
- -------------------------------------------------------------------------------
PNOC Energy Development Corp. 38,508,000 1,593,960
===============================================================================
13,497,386
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM INTERNATIONAL SMALL COMPANY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
SOUTH KOREA-3.61%
CJ Corp.(b) 63,059 $ 2,060,137
- -------------------------------------------------------------------------------
Lotte Confectionery Co., Ltd. 5,291 5,531,797
- -------------------------------------------------------------------------------
Qrix Communications Inc.(c) 732,732 1,774,310
===============================================================================
9,366,244
===============================================================================
SWEDEN-1.53%
Oriflame Cosmetics S.A.-SDR 135,400 3,963,221
===============================================================================
SWITZERLAND-3.68%
Aryzta AG(b) 185,041 5,944,701
- -------------------------------------------------------------------------------
Galenica AG 11,083 3,586,903
===============================================================================
9,531,604
===============================================================================
TAIWAN-1.28%
Hung Poo Real Estate Development Corp. 4,518,243 3,316,973
===============================================================================
THAILAND-0.99%
Siam Commercial Bank PCL 1,822,100 2,568,554
===============================================================================
UNITED KINGDOM-17.27%
Amlin PLC 867,451 4,577,671
- -------------------------------------------------------------------------------
Homeserve PLC 424,217 6,092,958
- -------------------------------------------------------------------------------
IG Group Holdings PLC 1,060,852 3,983,259
- -------------------------------------------------------------------------------
Inchcape PLC 1,201,736 648,007
- -------------------------------------------------------------------------------
Informa PLC 833,435 2,994,148
- -------------------------------------------------------------------------------
Kier Group PLC 452,426 6,010,937
- -------------------------------------------------------------------------------
Lancashire Holdings Ltd. 934,000 5,813,679
- -------------------------------------------------------------------------------
Mitie Group PLC 2,967,423 8,942,069
- -------------------------------------------------------------------------------
Savills PLC 1,752,153 5,719,529
===============================================================================
44,782,257
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $398,745,415) 240,661,033
===============================================================================
PREFERRED STOCKS-3.18%
BRAZIL-0.56%
Duratex S.A.-Pfd. 227,400 1,450,918
===============================================================================
CANADA-0.20%
FirstService Corp.-Series 1, 7% Pfd. 36,320 508,480
===============================================================================
GERMANY-2.42%
Fuchs Petrolub AG-Pfd. 130,100 6,280,509
===============================================================================
Total Preferred Stocks (Cost $12,667,648) 8,239,907
===============================================================================
MONEY MARKET FUNDS-3.76%
Liquid Assets Portfolio-Institutional Class(d) 4,878,761 4,878,761
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 4,878,761 4,878,761
===============================================================================
Total Money Market Funds (Cost $9,757,522) 9,757,522
===============================================================================
TOTAL INVESTMENTS-99.75% (Cost $421,170,585) 258,658,462
===============================================================================
OTHER ASSETS LESS LIABILITIES-0.25% 645,710
===============================================================================
NET ASSETS-100.00% $259,304,172
_______________________________________________________________________________
===============================================================================
</Table>
Investment Abbreviations:
<Table>
Pfd. - Preferred
SDR - Swedish Depositary Receipt
Wts. - Warrants
</Table>
Notes to Schedule of Investments:
(a) 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 December 31, 2008 was $3,693,624, which represented 1.42% of the Fund's
Net Assets.
(b) Non-income producing security.
(c) 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 aggregate value of these securities
as of December 31, 2008 was $5,895,260, which represented 2.27% of the
Fund's Net Assets. See Note 4.
(d) 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.
10 AIM INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$394,651,096) $ 244,779,990
- -------------------------------------------------------
Investments in affiliates, at value
(Cost $26,519,489) 13,878,472
=======================================================
Total investments (Cost
$421,170,585) 258,658,462
=======================================================
Foreign currencies, at value (Cost
$2,930,977) 2,970,481
- -------------------------------------------------------
Receivables for:
Investments sold 65,996
- -------------------------------------------------------
Fund shares sold 516,756
- -------------------------------------------------------
Dividends 332,709
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 20,329
- -------------------------------------------------------
Other assets 28,755
=======================================================
Total assets 262,593,488
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 2,463,200
- -------------------------------------------------------
Dividends 70,631
- -------------------------------------------------------
Accrued fees to affiliates 220,712
- -------------------------------------------------------
Accrued other operating expenses 470,262
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 64,511
=======================================================
Total liabilities 3,289,316
=======================================================
Net assets applicable to shares
outstanding $ 259,304,172
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 444,038,003
- -------------------------------------------------------
Undistributed net investment income (1,431,921)
- -------------------------------------------------------
Undistributed net realized gain (loss) (20,828,517)
- -------------------------------------------------------
Unrealized appreciation (depreciation) (162,473,393)
=======================================================
$ 259,304,172
_______________________________________________________
=======================================================
NET ASSETS:
Class A $ 189,189,077
_______________________________________________________
=======================================================
Class B $ 19,323,093
_______________________________________________________
=======================================================
Class C $ 28,391,205
_______________________________________________________
=======================================================
Class Y $ 6,638,332
_______________________________________________________
=======================================================
Institutional Class $ 15,762,465
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 20,596,029
_______________________________________________________
=======================================================
Class B 2,168,977
_______________________________________________________
=======================================================
Class C 3,186,745
_______________________________________________________
=======================================================
Class Y 721,799
_______________________________________________________
=======================================================
Institutional Class 1,726,569
_______________________________________________________
=======================================================
Class A:
Net asset value per share $ 9.19
- -------------------------------------------------------
Maximum offering price per share
(Net asset value of $9.19 divided
by 94.50%) $ 9.72
_______________________________________________________
=======================================================
Class B:
Net asset value and offering price
per share $ 8.91
_______________________________________________________
=======================================================
Class C:
Net asset value and offering price
per share $ 8.91
_______________________________________________________
=======================================================
Class Y:
Net asset value and offering price
per share $ 9.20
_______________________________________________________
=======================================================
Institutional Class:
Net asset value and offering price
per share $ 9.13
_______________________________________________________
=======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $1,832,997) $ 16,478,337
- ------------------------------------------------------------------------------------------------
Dividends from affiliates (includes securities lending income of $149,714) 1,367,315
================================================================================================
Total investment income 17,845,652
================================================================================================
EXPENSES:
Advisory fees 5,491,804
- ------------------------------------------------------------------------------------------------
Administrative services fees 170,229
- ------------------------------------------------------------------------------------------------
Custodian fees 742,585
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 1,110,252
- ------------------------------------------------------------------------------------------------
Class B 460,877
- ------------------------------------------------------------------------------------------------
Class C 750,062
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C and Y 1,171,668
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 2,119
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 34,854
- ------------------------------------------------------------------------------------------------
Other 338,034
================================================================================================
Total expenses 10,272,484
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (75,663)
================================================================================================
Net expenses 10,196,821
================================================================================================
Net investment income 7,648,831
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (14,764,421)
- ------------------------------------------------------------------------------------------------
Foreign currencies (1,367,521)
================================================================================================
(16,131,942)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (net of foreign taxes on holdings of $645,814) (406,789,554)
- ------------------------------------------------------------------------------------------------
Foreign currencies (31,204)
================================================================================================
(406,820,758)
================================================================================================
Net realized and unrealized gain (loss) (422,952,700)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(415,303,869)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 7,648,831 $ 9,806,533
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) (16,131,942) 184,675,828
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (406,820,758) (47,336,530)
=========================================================================================================
Net increase (decrease) in net assets resulting from operations (415,303,869) 147,145,831
=========================================================================================================
Distributions to shareholders from net investment income:
Class A (6,462,996) (9,525,197)
- ---------------------------------------------------------------------------------------------------------
Class B (306,690) (473,898)
- ---------------------------------------------------------------------------------------------------------
Class C (465,730) (760,926)
- ---------------------------------------------------------------------------------------------------------
Class Y (218,002) --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (704,614) (722,704)
=========================================================================================================
Total distributions from net investment income (8,158,032) (11,482,725)
=========================================================================================================
Distributions to shareholders from net realized gains:
Class A (13,195,998) (136,361,072)
- ---------------------------------------------------------------------------------------------------------
Class B (1,403,160) (16,097,917)
- ---------------------------------------------------------------------------------------------------------
Class C (2,133,238) (25,848,347)
- ---------------------------------------------------------------------------------------------------------
Class Y (445,334) --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (1,094,398) (7,976,274)
=========================================================================================================
Total distributions from net realized gains (18,272,128) (186,283,610)
=========================================================================================================
Share transactions-net:
Class A (178,801,758) 96,431,720
- ---------------------------------------------------------------------------------------------------------
Class B (24,673,696) (5,743,754)
- ---------------------------------------------------------------------------------------------------------
Class C (41,774,712) 6,561,535
- ---------------------------------------------------------------------------------------------------------
Class Y 9,319,745 --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (1,808,025) 27,049,040
=========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (237,738,446) 124,298,541
=========================================================================================================
Net increase (decrease) in net assets (679,472,475) 73,678,037
=========================================================================================================
NET ASSETS:
Beginning of year 938,776,647 865,098,610
=========================================================================================================
End of year (includes undistributed net investment income of
$(1,431,921) and $(11,603), respectively) $ 259,304,172 $ 938,776,647
_________________________________________________________________________________________________________
=========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
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 assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class.
The Fund's investment objective is long-term growth of capital.
The Fund currently consists of five different classes of shares: Class A,
Class B, Class C, Class Y 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.
Class Y and 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.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close
of the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on
that day. Securities traded in the over-the-counter market are valued
based on 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
14 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 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 or exchanges of shares
within 31 days of purchase. 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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
15 AIM INTERNATIONAL SMALL COMPANY FUND
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.
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, 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 (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$49,081.
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 year
ended December 31, 2008, Invesco reimbursed expenses of the Fund in the amount
of $2,067.
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 year ended December 31, 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 year
ended December 31, 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 Y 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
16 AIM INTERNATIONAL SMALL COMPANY FUND
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 year ended December 31, 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 year ended December 31, 2008, IADI
advised the Fund that IADI retained $15,967 in front-end sales commissions from
the sale of Class A shares and $3,492, $118,981 and $22,665 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 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. 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 significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using 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 valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $ 68,381,388
- --------------------------------------
Level 2 190,277,074
- --------------------------------------
Level 3 --
======================================
$258,658,462
______________________________________
======================================
</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 year ended
December 31, 2008.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
12/31/07 AT COST FROM SALES (DEPRECIATION) 12/31/08 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------
Joongang Construction Co.,
Ltd.(a) $ 7,359,124 $-- $(3,377,669) $ 891,492 $ -- $ -- $(4,872,947)
- ----------------------------------------------------------------------------------------------------------------------
Lion Diversified Holdings
Berhad 14,447,896 -- -- (11,881,658) 2,566,238 69,359 --
- ----------------------------------------------------------------------------------------------------------------------
Qrix Communication Inc.(a) 7,777,613 -- (1,401,832) (3,843,039) 1,774,310 93,645 (758,432)
- ----------------------------------------------------------------------------------------------------------------------
Transat A.T Inc-Class A 5,638,004 -- -- (4,083,292) 1,554,712 54,197 --
======================================================================================================================
Total Investments in Other
Affiliates $35,222,637 $-- $(4,779,501) $(18,916,497) $5,895,260 $217,201 $(5,631,379)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) As of December 31, 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
17 AIM INTERNATIONAL SMALL COMPANY FUND
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended December 31, 2008, the Fund
engaged in securities purchases of $131,334.
NOTE 6--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the year
ended December 31, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $24,515.
NOTE 7--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the year ended December 31, 2008, the Fund paid legal fees of $5,031
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, 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--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $ 8,611,595 $ 37,337,028
- --------------------------------------------------------------------------------------------------------
Long-term capital gain 17,818,565 160,429,307
========================================================================================================
Total distributions $26,430,160 $197,766,335
________________________________________________________________________________________________________
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 175,900
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (163,319,479)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation -- other investments 38,730
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (73,762)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (21,555,220)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 444,038,003
================================================================================================
Total net assets $ 259,304,172
________________________________________________________________________________________________
================================================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
The Fund does not have a capital loss carryforward at period-end.
18 AIM INTERNATIONAL SMALL COMPANY FUND
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $105,121,273 and
$323,328,704, 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 $ 5,869,781
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (169,189,260)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(163,319,479)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $421,977,941.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, on December 31, 2008, undistributed net investment income was
decreased by $911,117, undistributed net realized gain (loss) was decreased by
$4,361,810 and shares of beneficial interest increased by $5,272,927. This
reclassification had no effect on the net assets of the Fund.
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
2008(a) 2007
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,944,341 $ 66,066,363 6,063,332 $ 164,125,842
- --------------------------------------------------------------------------------------------------------------------------
Class B 84,951 1,385,365 139,730 3,619,677
- --------------------------------------------------------------------------------------------------------------------------
Class C 293,097 5,060,685 773,005 20,084,980
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) 673,854 8,934,904 -- --
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 267,690 5,185,640 752,485 20,235,812
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 2,075,136 18,136,233 5,902,557 130,565,065
- --------------------------------------------------------------------------------------------------------------------------
Class B 192,454 1,630,847 735,895 15,645,130
- --------------------------------------------------------------------------------------------------------------------------
Class C 285,598 2,421,874 1,144,087 24,323,328
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) 72,497 634,351 -- --
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 207,259 1,799,012 393,085 8,698,978
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 398,719 6,695,311 337,998 8,867,674
- --------------------------------------------------------------------------------------------------------------------------
Class B (419,058) (6,695,311) (350,686) (8,867,674)
==========================================================================================================================
Reacquired:(c)
Class A(b) (16,756,417) (269,699,665) (7,695,805) (207,126,861)
- --------------------------------------------------------------------------------------------------------------------------
Class B (1,285,848) (20,994,597) (618,496) (16,140,887)
- --------------------------------------------------------------------------------------------------------------------------
Class C (3,156,900) (49,257,271) (1,466,329) (37,846,773)
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) (24,552) (249,510) -- --
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class (629,201) (8,792,677) (67,675) (1,885,750)
==========================================================================================================================
Net increase (decrease) in share activity (13,776,380) $(237,738,446) 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 24% 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.
19 AIM INTERNATIONAL SMALL COMPANY FUND
(b) Effective upon the commencement date of Class Y shares, October 3, 2008,
the following shares were converted from Class A into Class Y shares of the
Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
----------------------------------------------------------------------------------------------------
Class Y 637,414 $ 8,522,224
----------------------------------------------------------------------------------------------------
Class A (637,414) (8,522,224)
____________________________________________________________________________________________________
====================================================================================================
</Table>
(c) Net of redemption fees of $49,115 and $57,535 allocated among the classes
based on relative net assets of each class for the years ended December 31,
2008 and 2007, respectively.
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET ON SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, NET (BOTH TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD INCOME (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $22.45 $ 0.24(d) $(12.47) $(12.23) $(0.34) $(0.69) $(1.03)
Year ended 12/31/07 24.13 0.32(d) 3.79 4.11 (0.38) (5.41) (5.79)
Year ended 12/31/06 20.52 0.23(d) 7.54 7.77 (0.23) (3.93) (4.16)
Year ended 12/31/05 16.17 0.07 5.12 5.19 (0.05) (0.79) (0.84)
Year ended 12/31/04 12.08 (0.03)(d) 4.34 4.31 (0.00) (0.22) (0.22)
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 21.58 0.11(d) (11.94) (11.83) (0.15) (0.69) (0.84)
Year ended 12/31/07 23.37 0.11(d) 3.67 3.78 (0.16) (5.41) (5.57)
Year ended 12/31/06 19.95 0.04(d) 7.32 7.36 (0.01) (3.93) (3.94)
Year ended 12/31/05 15.81 (0.05) 4.98 4.93 -- (0.79) (0.79)
Year ended 12/31/04 11.89 (0.11)(d) 4.25 4.14 -- (0.22) (0.22)
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 21.57 0.11(d) (11.93) (11.82) (0.15) (0.69) (0.84)
Year ended 12/31/07 23.36 0.11(d) 3.67 3.78 (0.16) (5.41) (5.57)
Year ended 12/31/06 19.94 0.04(d) 7.32 7.36 (0.01) (3.93) (3.94)
Year ended 12/31/05 15.81 (0.05) 4.97 4.92 -- (0.79) (0.79)
Year ended 12/31/04 11.89 (0.11)(d) 4.25 4.14 -- (0.22) (0.22)
- -----------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(f) 13.37 0.03(d) (3.17) (3.14) (0.34) (0.69) (1.03)
- -----------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 22.47 0.32(d) (12.52) (12.20) (0.45) (0.69) (1.14)
Year ended 12/31/07 24.14 0.43(d) 3.80 4.23 (0.49) (5.41) (5.90)
Year ended 12/31/06 20.52 0.33(d) 7.55 7.88 (0.33) (3.93) (4.26)
Year ended 12/31/05(f) 18.73 0.03 2.61 2.64 (0.06) (0.79) (0.85)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSET NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
VALUE, END TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE
OF PERIOD(a) RETURN(b) (000S OMITTED) ABSORBED ABSORBED NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $ 9.19 (54.24)% $189,189 1.57%(e) 1.58%(e) 1.38%(e)
Year ended 12/31/07 22.45 17.39 694,568 1.47 1.50 1.16
Year ended 12/31/06 24.13 38.18 635,318 1.54 1.58 0.93
Year ended 12/31/05 20.52 32.21 451,630 1.61 1.64 0.42
Year ended 12/31/04 16.17 35.83 257,579 1.83 1.85 (0.19)
- -------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 8.91 (54.61) 19,323 2.32(e) 2.33(e) 0.63(e)
Year ended 12/31/07 21.58 16.54 77,598 2.22 2.25 0.41
Year ended 12/31/06 23.37 37.20 86,236 2.29 2.33 0.18
Year ended 12/31/05 19.95 31.28 76,626 2.35 2.38 (0.32)
Year ended 12/31/04 15.81 34.94 47,942 2.48 2.50 (0.84)
- -------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 8.91 (54.58) 28,391 2.32(e) 2.33(e) 0.63(e)
Year ended 12/31/07 21.57 16.53 124,359 2.22 2.25 0.41
Year ended 12/31/06 23.36 37.21 124,161 2.29 2.33 0.18
Year ended 12/31/05 19.94 31.22 102,861 2.35 2.38 (0.32)
Year ended 12/31/04 15.81 34.94 47,818 2.48 2.50 (0.84)
- -------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(f) 9.20 (23.08) 6,638 1.63(e)(g) 1.63(e)(g) 1.32(e)(g)
- -------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 9.13 (54.02) 15,762 1.13(e) 1.14(e) 1.82(e)
Year ended 12/31/07 22.47 17.90 42,253 1.08 1.11 1.55
Year ended 12/31/06 24.14 38.73 19,384 1.14 1.18 1.33
Year ended 12/31/05(f) 20.52 14.19 972 1.18(g) 1.21(g) 0.85(g)
_________________________________________________________________________________________________________________________
=========================================================================================================================
<Caption>
PORTFOLIO
TURNOVER(c)
- -------------------------------------------
CLASS A
Year ended 12/31/08 19%
Year ended 12/31/07 40
Year ended 12/31/06 69
Year ended 12/31/05 60
Year ended 12/31/04 87
- -------------------------------------------
CLASS B
Year ended 12/31/08 19
Year ended 12/31/07 40
Year ended 12/31/06 69
Year ended 12/31/05 60
Year ended 12/31/04 87
- -------------------------------------------
CLASS C
Year ended 12/31/08 19
Year ended 12/31/07 40
Year ended 12/31/06 69
Year ended 12/31/05 60
Year ended 12/31/04 87
- -------------------------------------------
CLASS Y
Year ended 12/31/08(f) 19
- -------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 19
Year ended 12/31/07 40
Year ended 12/31/06 69
Year ended 12/31/05(f) 60
___________________________________________
===========================================
</Table>
(a) Includes redemption fees added to shares of beneficial interest which were
less than $0.005 per share.
(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, if applicable.
(c) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Calculated using average shares outstanding.
(e) Ratios are based on average daily net assets (000's omitted) of $444,101,
$46,088, $75,006, $6,648 and $32,581 for Class A, Class B, Class C, Class
Y, and Institutional Class shares, respectively.
(f) Commencement date of Class Y and Institutional Class shares was October 3,
2008 and October 25, 2005, respectively.
(g) Annualized.
20 AIM INTERNATIONAL SMALL COMPANY FUND
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the 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.
All lawsuits based on allegations of market timing, late trading and related
issues were 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
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.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
21 AIM INTERNATIONAL SMALL COMPANY FUND
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Funds Group
and Shareholders of AIM International Small Company Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM International Small Company
Fund (one of the funds constituting AIM Funds Group, hereafter referred to as
the "Fund") at December 31, 2008, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2008 by correspondence with the custodian and broker, provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 17, 2009
Houston, Texas
22 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. With
the exception of the actual ending account value and expenses of the Class Y
Shares, the example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period July 1, 2008, through
December 31, 2008. The actual ending account and expenses of the Class Y shares
in the below example are based on an investment of $1,000 invested as of close
of business October 3, 2008 (commencement date) and held through December 31,
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 (as of close of business
October 3, 2008 through December 31, 2008 for the Class Y shares). Because the
actual ending account value and expense information in the example is not based
upon a six month period for the Class Y shares, the ending account value and
expense information may not provide a meaningful comparison to mutual funds that
provide such information for a full six month 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $541.60 $6.43 $1,016.79 $ 8.42 1.66%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 539.40 9.33 1,013.02 12.19 2.41
- ---------------------------------------------------------------------------------------------------
C 1,000.00 539.70 9.33 1,013.02 12.19 2.41
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 769.20 3.55 1,016.94 8.26 1.63
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008 (as of close of
business October 3, 2008, through December 31, 2008 for the Class Y shares),
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
184/366 to reflect the most recent fiscal half year. For the Class Y shares
actual expenses are equal to the annualized expense ratio indicated above
multiplied by the average account value over the period, multiplied by 90
(as of close of business October 3, 2008, through December 31, 2008)/366.
Because the Class Y shares have not been in existence for a full six month
period, the actual ending account value and expense information shown may
not provide a meaningful comparison to fund expense information of classes
that show such data for a full six month period and, because the actual
ending account value and expense information in the expense example covers a
short time period, return and expense data may not be indicative of return
and expense data for longer time periods.
(3) Hypothetical expenses are equal to the annualized expense ratio indicated
above multiplied by the average account value over the period, multiplied by
184/366 to reflect a one-half year period. The hypothetical ending account
value and expenses may be used to compare ongoing costs of investing in
Class Y shares of the Fund and other funds because such data is based on a
full six month period.
23 AIM INTERNATIONAL SMALL COMPANY FUND
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 July 1, 2008, through December 31, 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $542.90 $4.58 $1,019.20 $5.99 1.18%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 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
184/366 to reflect the most recent fiscal half year.
AIM INTERNATIONAL SMALL COMPANY FUND
Supplement to Annual Report dated 12/31/08
AIM INTERNATIONAL SMALL COMPANY FUND
INSTITUTIONAL CLASS SHARES
The following information has been prepared to provide Institutional Class
shareholders with a performance overview specific to their holdings.
Institutional Class shares are offered exclusively to institutional investors,
including defined contribution plans that meet certain criteria.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 12/31/08
Inception 6.14%
5 Years 6.21
1 Year -54.02
Institutional Class shares' inception date is October 25, 2005. Returns since
that date are historical returns. All other returns are blended returns of
historical Institutional Class share performance and restated Class A share
performance (for periods prior to the inception date of Institutional Class
shares) at net asset value (NAV) and reflect the 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 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.
A redemption fee of 2% will be imposed on certain redemptions or exchanges
out of the Fund within 31 days of purchase. Exceptions to the redemption fee are
listed in the Fund's prospectus.
Had the advisor not waived fees and/or reimbursed expenses in the past,
performance would have been lower.
Please note that past performance is not indicative of future results.
More recent returns may be more or less than those shown. All returns assume
reinvestment of distributions at NAV. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. See full report for information on comparative benchmarks. Please
consult your Fund prospectus for more information. For the most current
month-end performance, please call 800 451 4246 or visit invescoaim.com.
- ----------
1 Total annual operating expenses less any contractual fee waivers and/or
expense reimbursements by the advisor in effect through at least June 30,
2009. See current prospectus for more information.
NASDAQ SYMBOL IEGIX
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-1 Invesco Aim Distributors, Inc.
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $ 23,123,565
Qualified Dividend Income* 82.00%
Corporate Dividends Received
Deduction* 0%
Foreign Taxes $0.0608 per share
Foreign Source Income $0.7392 per share
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
ADDITIONAL NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended March 31, 2008, June 30, 2008, September 30, 2008 and
December 31, 2008 were 99.92%, 99.93%, 99.93%, and 99.90%, respectively.
24 AIM INTERNATIONAL SMALL COMPANY FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Funds Group (the "Trust"), is 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 104
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Each officer serves for a one year term or until their successors are
elected and qualified. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); Chairman, Investment
Company Institute; President, Co-Chief Executive Officer,
Co-President, Chief Operating Officer and Chief Financial
Officer, Franklin Resources, Inc. (global investment
management organization)
- --------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim Capital Management, Inc.
(registered investment advisor); Director and President,
INVESCO Funds Group, Inc. (registered investment advisor and
register transfer agent) and AIM GP Canada Inc. (general
partner for a limited partnership); Director, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco Aim Investment Services, Inc. (registered
transfer agent) and INVESCO Distributors, Inc. (registered
broker dealer); Director, President and Chairman, IVZ Callco
Inc. (holding company), INVESCO Inc. (holding company) and
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, AIM
Trimark Corporate Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund company); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
Director and Chairman, Fund Management Company (registered
broker dealer); President and Principal Executive Officer,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments Trust and
Tax-Free Investments Trust only); President, AIM Trimark
Global Fund Inc. and AIM Trimark Canada Fund Inc.; and
Director, Trimark Trust (federally regulated Canadian Trust
Company)
- --------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1987 Chairman, Crockett Technology Associates (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association/Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (property casualty company)
Formerly: Director, CompuDyne Corporation (provider of
product and services to the public security market);
Director, President and Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice President, AB Volvo;
Director of various public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (government affairs company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer, Texana Timber LP
(sustainable forestry company); and Discovery Global
Education Fund (non-profit)
- --------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan is considered an interested person of the Trust because he is
an officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
25 AIM INTERNATIONAL SMALL COMPANY FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
Formerly: Director of Compliance and Assistant General Counsel,
ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General
Counsel and Director of Compliance, ALPS Mutual Funds, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim Capital Management, Inc.;
Chief Operating Officer, Senior Vice President, General Counsel
and Secretary, Liberty Ridge Capital, Inc. (an investment
adviser); Vice President and Secretary, PBHG Funds (an investment
company); Vice President and Secretary, PBHG Insurance Series
Fund (an investment company); Chief Operating Officer, General
Counsel and Secretary, Old Mutual Investment Partners (a broker-
dealer); General Counsel and Secretary, Old Mutual Fund Services
(an administrator); General Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder servicing center); Executive
Vice President, General Counsel and Secretary, Old Mutual
Capital, Inc. (an investment adviser); and Vice President and
Secretary, Old Mutual Advisors Funds (an investment company)
- --------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited,
IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO North American Holdings,
Inc.; and Vice President, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1992 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust only)
- --------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco Aim Private Asset Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering Compliance Officer, Fund
Management Company; and Manager of the Fraud Prevention
Department, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, The AIM Family of Funds--Registered
Trademark--, Invesco Global Asset Management (N.A.), Inc.
(registered investment advisor), Invesco Institutional (N.A.),
Inc., (registered investment advisor), INVESCO Private Capital
Investments, Inc. (holding company), Invesco Private Capital,
Inc. (registered investment advisor) and Invesco Senior Secured
Management, Inc. (registered investment advisor); and Vice
President, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
26 AIM INTERNATIONAL SMALL COMPANY FUND
[GO PAPERLESS GRAPHIC]
GO PAPERLESS WITH EDELIVERY
Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund
reports and prospectuses with a service that's all about eeees:
- - ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of trees used
to produce paper.
- - ECONOMICAL. Help reduce your fund's printing and delivery expenses and
put more capital back in your fund's returns.
- - EFFICIENT. Stop waiting for regular mail. Your documents will be sent via
email as soon as they're available.
- - EASY. Download, save and print files using your home computer with a few
clicks of your mouse.
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 website 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 email
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 website, invescoaim.com. On the home page, scroll
down and click on Proxy Policy. The information is also available on the SEC
website, 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
website. 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 website, sec.gov.
If used after April 20, 2009, 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.
Please refer to each fund's prospectus for information on the fund's
subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the
retail mutual funds, exchange-traded funds and institutional money market funds
and the subdistributor for the STIC Global Funds represented by Invesco Aim. All
entities are indirect, wholly owned subsidiaries of Invesco Ltd.
It is anticipated that the businesses of the affiliated investment adviser
firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.,
Invesco Private Asset Management, Inc. and Invesco Global Asset Management
(N.A.), Inc. -- will be combined into Invesco Institutional (N.A.), Inc., and
the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or
about Aug. 1, 2009. Additional information will be posted at invescoaim.com on
or about Aug. 1, 2009.
[INVESCO AIM LOGO]
-SERVICE MARK-
invescoaim.com ISC-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM MID CAP BASIC VALUE FUND
- - SERVICE MARK - Annual Report to Shareholders - December 31, 2008
[MOUNTAIN GRAPHIC]
2 Letters to Shareholders
4 Performance Summary
4 Management Discussion
6 Long-Term Fund Performance
8 Supplemental Information
9 Schedule of Investments
11 Financial Statements
14 Notes to Financial Statements
20 Financial Highlights
22 Auditor's Report
23 Fund Expenses
24 Tax Information
25 Trustees and Officers
[TAYLOR PHOTO]
Philip Taylor
Dear Shareholder:
In previous reports, I've talked with you about short-term market volatility.
I'd like to take this opportunity to update you on market developments during
calendar year 2008 and provide you with some perspective and encouragement.
MARKET OVERVIEW
At the start of 2008, we saw warning signs of increasing economic ills -- a
weakening housing market, rising inflation and slowing job growth, among others.
In response, the U.S. Federal Reserve Board (the Fed) cut short-term interest
rate targets throughout 2008 in an effort to stimulate economic growth. The Fed
reduced its short-term interest rate target from 4.25% to a range of zero to
0.25% during the year.(1)
In the spring of 2008, more serious factors came to the forefront --
driving unemployment sharply higher(2) and causing major stock market indexes to
hit multi-year lows in the U.S. and overseas.(3) For example, the S&P 500 Index,
considered representative of the U.S. stock market, had its worst one-year
performance since 1937.(4) During the second half of 2008, the Fed, the U.S.
Department of the Treasury and other federal agencies took unprecedented action
to rescue the troubled financials sector and domestic automobile industry,
stabilize the stock market and inject liquidity into the credit markets.
HOW WE GOT HERE
The cause of this correction was years of lax lending associated with the recent
housing boom. Mortgage loans of questionable quality were bundled into
hard-to-value securities that were bought by, and traded among, financial
institutions. As the value of those securities declined, financial institutions
sought to unload them - but there were few buyers. With the value of their
assets falling and access to credit tightening, a number of well-established
financial firms faced severe difficulties, and investor uncertainty and market
volatility spiked.
In October 2008, the administration and Congress enacted a plan, the
Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury
to purchase up to $700 billion in troubled mortgage-related assets -- the
largest and most direct effort to resolve a credit crisis in the last half
century. The Fed, in concert with other central banks, cut short-term interest
rate targets and undertook other initiatives intended to restore investor
confidence, expand lending and mitigate the effects of the global credit crisis.
Following his election, President Barack Obama again pledged to act boldly to
stimulate the U.S. economy.
As we enter 2009, the volatility in the stock, fixed-income and credit
markets we saw last year emphasized the importance of three timeless investing
principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
- INVEST FOR THE LONG TERM. Short-term fluctuations have always been a
reality of the markets. We urge you to stick to your investment plan
and stay focused on your long-term goals.
- DIVERSIFY. Although diversification doesn't eliminate the risk of
loss or guarantee a profit, a careful selection of complementary
asset classes may cushion your portfolio against excessive
volatility.
- STAY FULLY INVESTED. Trying to time the market is a gamble, not an
investment strategy. A sound investment strategy includes viewing
market volatility as a matter of course, not a reason to panic.
A trusted financial advisor can explain more fully the potential value of
following these principles. An experienced advisor who knows your individual
investment goals, financial situation and risk tolerance can be your most
valuable asset during times of market volatility. Your advisor can provide
guidance and can monitor your investments to ensure they're on course.
It's also helpful to remember that many of history's significant buying
opportunities resulted from short-term economic crises that, in their time, were
considered unprecedented. We believe current market uncertainty may represent a
buying opportunity for patient, long-term investors. Rest assured that Invesco
Aim's portfolio managers are working diligently on your behalf to attempt to
capitalize on this situation.
MANAGING MONEY IS OUR FOCUS
I believe Invesco Aim is uniquely positioned to navigate current difficult
markets. Our parent company, Invesco Ltd., is one of the world's largest and
most diversified global investment managers. Invesco provides clients with
diversified investment strategies from distinct management teams around the
globe and a range of investment products. Invesco's single focus is asset
management -- which means we focus on doing one thing well: managing your money.
That can be reassuring in uncertain times.
While market conditions change often, our commitment to putting
shareholders first, helping clients achieve their investment goals and providing
excellent customer service remains constant.
If you have questions about this report or your account, please contact
one of our client service representatives at 800 959 4246.
Thank you for your continued confidence, and all of us at Invesco Aim look
forward to serving you.
Sincerely,
/s/ PHILIP TAYLOR
Philip Taylor
Senior Managing Director, Invesco Ltd.
CEO, Invesco Aim
1 U.S. Federal Reserve;
2 Bureau of Labor Statistics;
3 FactSet Research;
4 Wall Street Journal
2 AIM MID CAP BASIC VALUE FUND
[CROCKETT PHOTO]
Bruce Crockett
Dear Fellow Shareholders:
Since my last letter, continuing troubles in the global economy and financial
markets have negatively affected all investors. The new government promises to
move quickly with a stimulus package, yet considerable anxiety remains about
how, when and what kind of a recovery will occur. While no one likes to see
investment values decline as sharply as they have recently, as mutual fund
investors we can find some consolation in the knowledge that our fund
investments are more transparent, more comprehensively governed and more closely
regulated than most other kinds of investments. In addition, mutual funds
generally are more diversified than other investments; as shareholders we invest
not in a single security but in a portfolio of multiple securities. The benefits
of diversification have been reiterated by the stories of investors who "lost
everything" because they had too many of their assets in one place, whether that
place was a single money manager or their employer's stock. Mutual fund
investors also have the opportunity to diversify further among different types
of funds that each deploy a different strategy and focus on different kinds of
securities. These include conservatively managed money market funds, which,
relative to other securities, continue to offer a more safe, liquid, and
convenient way to invest short-term assets.
In addition to diversification, investing discipline is essential during
challenging times such as these. Strategies such as dollar-cost-averaging, where
individuals invest a consistent amount at regular intervals, can help investors
acquire more fund shares when prices are low. Periodic rebalancing of asset
allocation plans achieves the same effect. "Buy low, sell high" has long been
the mantra of investment success, but the advice is not always easy to follow
because it requires the discipline to resist prevailing trends. Of course,
investment strategies, such as dollar-cost-averaging and portfolio rebalancing
do not guarantee a profit or eliminate the risk of loss. Investors should
consider their ability to continue investing regardless of fluctuating security
prices.
A long-term view is also important, particularly for assets that are not
needed right away. In the past, it has often proven better to keep long-term
assets invested through a downturn than to miss the beginning of the upward
trend. To develop a diversified and disciplined investing plan that is right for
your individual goals, I encourage you to consult an experienced and trustworthy
investment professional who has the knowledge and the tools to help you
establish and implement the plan, monitor its results and adapt it to changing
goals and circumstances.
Even when working with a personal financial advisor, investors should
supplement the relationship with their own knowledge and awareness of the
investments they hold. Visit the Invesco Aim website at invescoaim.com regularly
to find out what is happening in your AIM funds and to read timely market
commentary from Invesco Aim management, strategists and portfolio managers. The
site's "Education and Planning" section can also help you clarify basic
investment concepts, learn how to choose a financial advisor, evaluate different
investment choices and make more informed investment decisions. Invesco Aim's
redesigned public home page recently received a Gold Award for its user-friendly
navigation and graphics from The Mutual Funds Monitor Awards, sponsored by
Corporate Insight.
As always, your Board of Trustees and Invesco Aim are committed to putting
your interests first by controlling costs, monitoring investment performance and
streamlining the investment management process during these difficult times.
Your Board has already begun the annual review and management contract renewal
process with the continuing goal of making AIM funds one of the best and most
cost-effective ways for you to invest your hard-earned money.
While the investing climate may remain uncertain for a while, economies
and markets are dynamic, and no stage is ever permanent. Please feel free to
contact me in writing with your questions or concerns. You can send an email to
me at bruce@brucecrockett.com.
Best regards,
/s/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM MID CAP BASIC VALUE FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY
For the fiscal year ended December 31, 2008, all share classes of AIM Mid Cap
Basic Value Fund, at net asset value (NAV), underperformed the Russell Midcap
Value Index, the S&P 500 Index and the Lipper Mid-Cap Value Funds Index.#
Drivers of performance were primarily stock specific. We attribute the
Fund's underperformance versus its indexes mainly to below-market returns from
select investments in the financials and consumer discretionary sectors. Other
investments in the consumer discretionary and industrials sectors were among the
largest positive contributors to Fund performance during the year.
Your Fund's long-term performance appears later in this report.
FUND VS. INDEXES
Total returns, 12/31/07 to 12/31/08, 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 -51.38%
Class B Shares -51.76
Class C Shares -51.72
Class R Shares -51.46
Class Y Shares* -51.38
S&P 500 Index# (Broad Market Index) -36.99
Russell Midcap Value Index# (Style-Specific Index) -38.44
Lipper Mid-Cap Value Funds Index# (Peer Group Index) -39.71
# Lipper Inc.
* Share class incepted during the fiscal year. See page 7 for a detailed
explanation of Fund performance.
HOW WE INVEST
We seek to create wealth by maintaining a long-term investment horizon and
investing in companies that are selling at a significant discount to their
estimated intrinsic value -- a value that is based on the estimated future cash
flows generated by the business. The Fund's philosophy is based on key elements
that we believe have extensive empirical evidence:
- - Company intrinsic values can be reasonably estimated. Importantly, this
estimated fair business value is independent of the company's stock price.
- - Market prices are more volatile than business values, partly because
investors regularly overreact to negative news.
- - Long-term investment results are a function of the level and growth of
business value in the portfolio.
PORTFOLIO COMPOSITION
By sector
Consumer Discretionary 24.8%
Information Technology 22.2
Financials 19.3
Health Care 18.7
Industrials 6.7
Consumer Staples 5.7
Money Market Funds Plus
Other Assets Less Liabilities 2.6
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
* Excluding money market fund holdings.
Since our application of this strategy is highly disciplined and
relatively unique, it is important to understand the benefits and limitations of
our process. First, the investment strategy is intended to preserve your capital
while growing it at above-market rates over the long term. Second, our
investments have little in common with popular stock market indexes and most of
our peers. And third, the Fund's short-term relative performance will naturally
be different than the stock market and peers and have little information value
since we simply don't own the same stocks.
MARKET CONDITIONS AND YOUR FUND
Equity markets declined sharply during the fiscal year as the financial crisis
intensified and the global economy weakened. (1)
TOP FIVE INDUSTRIES
1. Semiconductor Equipment 9.7%
2. Managed Health Care 6.8
3. Apparel Retail 6.6
4. Health Care Distributors 6.1
5. Specialized Finance 5.2
Total Net Assets $98.0 million
Total Number of Holdings* 43
The financials sector was the largest detractor to the Fund during the
fiscal year as the credit crisis intensified and a liquidity crisis emerged.
Financial holdings XL CAPITAL and NATIONAL FINANCIAL PARTNERS (NFP) were among
the largest detractors from Fund performance. Along with many other companies,
XL Capital suffered from credit-related concerns during the year. We believe the
company is undervalued, given its equity base and global reinsurance platform.
We continued to own XL Capital at year end.
NFP, an owner of life insurance and benefit agencies, had its
acquisition-driven business model called into question after the company posted
disappointing revenue and earnings throughout the year. As the credit crisis
intensified, NFP also faced the prospect of violating certain debt covenants,
although amendments received late in the year diminished this risk and increased
operating flexibility. Consequently, we believe NFP can navigate the sluggish
sales environment and exit the year with lower debt and an intact franchise that
is worth substantially more than the current stock price.
Outside of financials, apparel company LIZ CLAIBORNE was also a
significant detractor to performance in 2008. Liz Claiborne's stock fell in 2008
as its financial results worsened due to weakness in consumer spending.
Furthermore, with tighter credit markets, investors also feared that Liz
Claiborne would not be able to refinance the portion of its debt that matures in
2009. We remained owners of the stock at year end as we believe the company may
successfully refinance its debt, and we see value and profit growth opportunity
in its brands, including Juicy Couture, Lucky Brand and Liz Claiborne New York
under new designer Isaac Mizrahi.
APOLLO GROUP, an operator of for-profit schools, including the University
of Phoenix, was the largest single contributor
TOP 10 EQUITY HOLDINGS*
1. ASML Holding N.V. 5.6%
2. Molson Coors Brewing Co.-Class B 4.3
3. Moody's Corp. 4.1
4. Robert Half International, Inc. 3.9
5. KLA-Tencor Corp. 3.6
6. Aetna Inc. 3.5
7. Tempur-Pedic International Inc. 3.5
8. Dell Inc. 3.4
9. Abercrombie & Fitch Co.-Class A 3.3
10. Coventry Health Care, Inc. 3.3
4 AIM MID CAP BASIC VALUE FUND
to Fund performance in 2008. We bought shares of Apollo Group at a significant
discount to our assessment of its intrinsic value in spring 2008 after the
company reported disappointing short-term financial results. At that time,
investors also feared that students would lack access to federal loans for
college, a development we viewed as unlikely or, at worst, short-term in nature.
As financial results improved and worries over federal loans faded, Apollo
Group's stock rose significantly, ending the year up more than 70% from our
average purchase price.
While bear markets like the current one are painful to live through, we
believe they can actually improve long-term results because of the extraordinary
investment opportunities that arise due to investor fear and short-term focus.
At year end, we saw compelling investment opportunities across many different
sectors.
CONTEXT FOR RESULTS
It's important to remember that what many now consider to be great historic
buying opportunities were at the time quite frightening events. History and
common sense indicate this crisis will pass, and we believe it will prove to be
a historic buying opportunity for U.S. stocks. The timing and level of any
market bottom is uncertain, but we believe the absolute return opportunity from
recent year-end levels will prove compelling.
The current bear market represents one of the three greatest declines in
the past 60 years. (2) Following the 2000 to 2002 Nasdaq decline, investors
learned what a permanent loss of capital looks and feels like. While the Nasdaq
remains about 69% below its 2000 peak, (3) our losses during 2002 proved
temporary as a new high was achieved in 2003.
What's the reason for the different experience? Our strategy emphasizes
fundamental business value and this value grew during this period despite a
recession and the bear market in stock prices. Once the market environment
improved, prices reverted to fundamental value. We see a similar situation
unfolding in this bear market. Our estimate of portfolio intrinsic value is
marginally higher today than in 2007, yet the market price of the portfolio has
declined by about 50%.
PORTFOLIO ASSESSMENT
We believe the single most important indicator of the way AIM Mid Cap Basic
Value Fund is positioned for potential future success is not our recent
investment results nor popular statistical measures, but rather the difference
between current market prices and the portfolio's estimated intrinsic value --
the aggregate business value of the portfolio based on our estimate of intrinsic
value for each individual holding. During the year, we believe the estimated
intrinsic value of the portfolio grew slightly despite permanent losses in some
of our financial sector investments.
At the close of the year, the difference between the market price and the
estimated intrinsic value of the portfolio was at record levels and has produced
the most favorable capital appreciation opportunity in the Fund's history, in
our opinion. While there is no assurance that market value will ever reflect our
estimate of the portfolio's intrinsic value, we believe the large gap between
price and estimated value may stack the odds in favor of above-average capital
appreciation once capital markets normalize.
IN CLOSING
We are among the largest shareholders of the Fund, and we too are disappointed
with our results in 2008. Yet, looking forward, we are excited about the
opportunities the current crisis has created. As we have pointed out many times,
the distinctive nature of our strategy will naturally produce results that are
either above or below the market in the short term. We understand it can be
distressing to shareholders when results lag the market as they have this year.
We do not have any special insight into the magnitude or duration of this bear
market, but historically, valuation opportunities of this magnitude have not
lasted for very long. Ironically, part of our 2008 underperformance was due to
our efforts to capitalize on these valuation opportunities should they have
proved short lived. Regardless of duration, our process is designed to exploit
this type of period, and we believe patient shareholders may reap the benefits
of recent investments as most of these recent losses may again prove temporary.
We thank you for your investment in AIM Mid Cap Basic Value Fund and for
sharing our long-term investment horizon.
1 Lipper Inc.
2 The Leuthold Group
3 Bloomberg L.P.
The views and opinions expressed in management's discussion of Fund performance
are those of Invesco Aim Advisors, Inc. These views and opinions are subject to
change at any time based on factors such as market and economic conditions.
These views and opinions may not be relied upon as investment advice or
recommendations, or as an offer for a particular security. The information is
not a complete analysis of every aspect of any market, country, industry,
security or the Fund. Statements of fact are from sources considered reliable,
but Invesco Aim Advisors, Inc. makes no representation or warranty as to their
completeness or accuracy. Although historical performance is no guarantee of
future results, these insights may help you understand our investment management
philosophy.
See important Fund and index disclosures later in this report.
[COLEMAN PHOTO]
R. CANON COLEMAN II
Chartered Financial Analyst, portfolio manager, is lead manager of AIM Mid Cap
Basic Value Fund. Mr. Coleman earned a B.S. and an M.S. in accounting from the
University of Florida. He also earned an M.B.A. from the Wharton School at the
University of Pennsylvania.
[CHAPMAN PHOTO]
MICHAEL CHAPMAN
Chartered Financial Analyst, portfolio manager, is manager of AIM Mid Cap Basic
Value Fund. Mr. Chapman earned a B.S. in petroleum engineering and an M.A. in
energy and mineral resources from The University of Texas at Austin.
[EDWARDS PHOTO]
JONATHAN EDWARDS
Portfolio manager, is manager of AIM Mid Cap Basic Value Fund. Mr. Edwards
earned a B.S. in economics from Texas A&M University and an M.B.A. from The
University of Texas at Austin.
[SIMON PHOTO]
MICHAEL SIMON
Chartered Financial Analyst, senior portfolio manager, is manager of AIM Mid Cap
Basic Value Fund. Mr. Simon earned a B.B. A. in finance from Texas Christian
University and an M.B.A. from the University of Chicago.
[STANLEY PHOTO]
BRET STANLEY
Chartered Financial Analyst, senior portfolio manager, is manager of AIM Mid Cap
Basic Value Fund. Mr. Stanley earned a B.B.A. in finance from The University of
Texas at Austin and an M.S. in finance from the University of Houston.
Assisted by the Basic Value Team
5 AIM MID CAP BASIC VALUE FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable
sales charges and Fund expenses including management fees. Results for Class B
shares are calculated as if a hypothetical shareholder had liquidated his entire
investment in the Fund at the close of the reporting period and paid the
applicable contingent deferred sales charges. Index results include reinvested
dividends, but they do not reflect sales charges.
Performance of an index of funds reflects fund expenses and management
fees; performance of a market index does not. Performance shown in the chart and
table(s) does not reflect deduction of taxes a shareholder would pay on Fund
distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the
value of the Fund and its indexes. We believe that a logarithmic chart is more
effective than other types of charts in illustrating changes in value during the
early years shown in the chart. The vertical axis, the one that indicates the
dollar value of an investment, is constructed with each segment representing a
percent change in the value of the investment. In this chart, each segment
represents a doubling, or 100% change, in the value of the investment. In other
words, the space between $5,000 and $10,000 is the same size as the space
between $10,000 and $20,000, and so on.
6 AIM MID CAP BASIC VALUE FUND
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT - OLDEST SHARE CLASSES SINCE INCEPTION
Fund and index data from 12/31/01
AIM AIM AIM
Mid Cap Basic Mid Cap Basic Mid Cap Basic
Value Fund- Value Fund- Value Fund- Russell Midcap Lipper Mid-Cap
Date Class A Shares Class B Shares Class C Shares S&P 500 Index(1) Value Index(1) Value Funds Index(1)
- -------- -------------- -------------- -------------- ---------------- -------------- --------------------
12/31/01 $ 9450 $ 10000 $ 10000 $ 10000 $ 10000 $ 10000
1/02 9431 9980 9970 9854 10101 9959
2/02 9507 10050 10040 9664 10265 9995
3/02 10357 10949 10939 10028 10790 10623
4/02 10121 10700 10690 9420 10783 10594
5/02 9999 10560 10550 9351 10766 10439
6/02 9101 9600 9600 8685 10286 9701
7/02 8099 8540 8541 8008 9279 8750
8/02 8137 8570 8570 8061 9387 8774
9/02 7211 7589 7590 7185 8439 8007
10/02 7494 7889 7890 7817 8707 8278
11/02 8279 8709 8700 8277 9256 8946
12/02 7778 8179 8180 7791 9036 8534
1/03 7637 8019 8019 7587 8785 8327
2/03 7410 7779 7780 7473 8640 8141
3/03 7410 7779 7780 7545 8669 8174
4/03 7968 8360 8350 8167 9328 8801
5/03 8847 9279 9270 8597 10149 9593
6/03 8931 9359 9360 8706 10220 9741
7/03 9480 9929 9930 8860 10538 10048
8/03 9820 10278 10280 9032 10912 10498
9/03 9499 9938 9930 8937 10827 10343
10/03 10066 10528 10520 9442 11622 11060
11/03 10208 10669 10660 9525 11959 11405
12/03 10661 11139 11130 10024 12475 11870
1/04 10992 11469 11469 10208 12804 12212
2/04 11275 11769 11760 10350 13121 12554
3/04 11304 11789 11780 10194 13142 12535
4/04 11228 11700 11690 10034 12586 12199
5/04 11313 11790 11780 10171 12909 12362
6/04 11597 12080 12070 10369 13369 12811
7/04 11078 11519 11519 10026 13007 12313
8/04 10832 11269 11259 10066 13217 12277
9/04 11115 11559 11550 10175 13601 12689
10/04 11115 11539 11539 10331 13916 12885
11/04 11928 12379 12379 10749 14856 13712
12/04 12400 12870 12860 11114 15432 14190
1/05 12126 12580 12569 10843 15073 13842
2/05 12343 12800 12789 11071 15599 14278
3/05 12173 12611 12609 10876 15552 14159
4/05 11786 12211 12199 10669 15142 13552
5/05 12240 12671 12659 11009 15768 14170
6/05 12664 13111 13099 11024 16283 14524
7/05 13109 13551 13539 11434 17059 15181
8/05 12920 13351 13339 11330 16926 15082
9/05 13015 13440 13439 11422 17155 15142
10/05 12939 13350 13349 11231 16630 14653
11/05 13506 13920 13919 11655 17217 15273
12/05 13685 14100 14089 11660 17384 15432
1/06 14044 14459 14459 11968 18138 16124
2/06 13996 14409 14399 12001 18310 16088
1 Lipper Inc.
[MOUNTAIN CHART]
3/06 14233 14639 14629 12150 18709 16478
4/06 14298 14699 14689 12313 18889 16672
5/06 13533 13900 13899 11959 18494 16178
6/06 13315 13669 13658 11975 18605 16112
7/06 13117 13459 13448 12049 18499 15881
8/06 13636 13978 13968 12335 19018 16253
9/06 13778 14118 14108 12653 19261 16533
10/06 14278 14618 14607 13065 20041 17153
11/06 14467 14808 14797 13313 20688 17749
12/06 14842 15173 15173 13500 20899 17848
1/07 15379 15721 15709 13704 21543 18313
2/07 15411 15745 15732 13436 21671 18448
3/07 15712 16041 16028 13586 21914 18667
4/07 16474 16817 16804 14188 22602 19394
5/07 17236 17570 17557 14683 23380 20174
6/07 17247 17581 17567 14439 22714 19872
7/07 16314 16623 16610 13992 21448 18893
8/07 16044 16327 16312 14201 21382 18781
9/07 16399 16681 16678 14732 21908 19295
10/07 17086 17377 17362 14966 21991 19599
11/07 16550 16807 16790 14340 20832 18541
12/07 16224 16469 16453 14241 20601 18493
1/08 15630 15863 15848 13387 19663 17520
2/08 15036 15244 15229 12952 19014 17122
3/08 13850 14032 14031 12896 18821 16815
4/08 14574 14765 14751 13524 19968 17790
5/08 14811 14992 14978 13699 20676 18592
6/08 12676 12821 12820 12545 18833 17084
7/08 13114 13262 13249 12440 18617 16639
8/08 13613 13755 13741 12620 19149 16977
9/08 12330 12442 12441 11497 17416 14975
10/08 8746 8833 8819 9566 13453 11796
11/08 7548 7609 7608 8879 12092 10654
12/08 7888 7945 7946 8973 12681 11150
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/08, including maximum applicable sales charges
CLASS A SHARES
Inception (12/31/01) -3.33%
5 Years -6.91
1 Year -54.07
CLASS B SHARES
Inception (12/31/01) -3.23%
5 Years -6.79
1 Year -53.79
CLASS C SHARES
Inception (12/31/01) -3.23%
5 Years -6.52
1 Year -52.13
CLASS R SHARES
Inception -2.73%
5 Years -6.03
1 Year -51.46
CLASS Y SHARES
Inception -2.55%
5 Years -5.85
1 Year -51.38
CLASS R SHARES' INCEPTION DATE IS APRIL 30, 2004. RETURNS SINCE THAT DATE ARE
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 DECEMBER 31, 2001.
CLASS Y SHARES' INCEPTION DATE IS OCTOBER 3, 2008; RETURNS SINCE THAT DATE
ARE ACTUAL RETURNS. ALL OTHER RETURNS ARE BLENDED RETURNS OF ACTUAL CLASS Y
SHARE PERFORMANCE AND RESTATED CLASS A SHARE PERFORMANCE (FOR PERIODS PRIOR TO
THE INCEPTION DATE OF CLASS Y SHARES) AT NET ASSET VALUE. THE RESTATED CLASS A
SHARE PERFORMANCE REFLECTS THE RULE 12B-1 FEES APPLICABLE TO CLASS A SHARES AS
WELL AS ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RECEIVED BY CLASS A SHARES.
CLASS A SHARES INCEPTION DATE IS DECEMBER 31, 2001.
THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT
GUARANTEE COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER.
PLEASE VISIT INVESCOAIM.COM FOR THE MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE
AND THE EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. INVESTMENT
RETURN AND PRINCIPAL WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR A LOSS WHEN
YOU SELL SHARES.
THE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT
FUND PROSPECTUS AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C,
CLASS R AND CLASS Y SHARES WAS 1.43%, 2.18%, 2.18%, 1.68% AND 1.18%,
RESPECTIVELY. THE EXPENSE RATIOS PRESENTED ABOVE MAY VARY FROM THE EXPENSE
RATIOS PRESENTED IN OTHER SECTIONS OF THIS REPORT THAT ARE BASED ON EXPENSES
INCURRED DURING THE PERIOD COVERED BY THIS REPORT.
CLASS A SHARE PERFORMANCE REFLECTS THE MAXIMUM 5.50% SALES CHARGE, AND
CLASS B AND CLASS C SHARE PERFORMANCE REFLECTS THE APPLICABLE CONTINGENT
DEFERRED SALES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CDSC ON CLASS B SHARES
DECLINES FROM 5% BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE
SEVENTH YEAR. THE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST YEAR AFTER
PURCHASE. CLASS R SHARES DO NOT HAVE A FRONT-END SALES CHARGE; RETURNS SHOWN ARE
AT NET ASSET VALUE AND DO NOT REFLECT A 0.75% CDSC THAT MAY BE IMPOSED ON A
TOTAL REDEMPTION OF RETIREMENT PLAN ASSETS WITHIN THE FIRST YEAR. CLASS Y SHARES
DO NOT HAVE A FRONT-END SALES CHARGE OR A CDSC; THEREFORE, PERFORMANCE IS AT NET
ASSET VALUE.
THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER PRIMARILY DUE TO
DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES.
7 AIM MID CAP BASIC VALUE FUND
AIM MID CAP BASIC VALUE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF
CAPITAL.
- - Unless otherwise stated, information presented in this report is as of
December 31, 2008, and is based on total net assets.
- - Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES
- - Effective September 30, 2003, only previously established qualified plans
are eligible to purchase Class B shares of any AIM fund.
- - Class R shares are available only to certain retirement plans. Please
see the prospectus for more information.
- - Class Y shares are available to only certain investors. Please see the
prospectus for more information.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- - Since a large percentage of the Fund's assets may be invested in
securities of a limited number of companies, each investment has a greater
effect on the Fund's overall performance, and any change in the value of
those securities could significantly affect the value of your investment
in the Fund.
- - Prices of equity securities change in response to many factors, including
the historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions
and market liquidity.
- - Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, relative lack of information, relatively
low market liquidity, and the potential lack of strict financial and
accounting controls and standards.
- - The Fund may use enhanced investment techniques such as leveraging and
derivatives. Leveraging entails risks such as magnifying changes in the
value of the portfolio's securities. Derivatives are subject to
counterparty risk -- the risk that the other party will not complete the
transaction with the Fund.
- - There is no guarantee that the investment techniques and risk analysis
used by the Fund's portfolio managers will produce the desired results.
- - The prices of securities held by the fund may decline in response to
market risks.
- - The Fund invests in "value" stocks, which can continue to be inexpensive
for long periods of time and may never realize their full value.
ABOUT INDEXES USED IN 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, but rather the most widely
held 500 companies chosen with respect to market size, liquidity, and
their industry.
- - The RUSSELL MIDCAP--REGISTERED TRADEMARK-- VALUE INDEX measures the
performance of those Russell Midcap companies with lower price-to-book
ratios and lower forecasted growth values. The Russell Midcap Value Index
is a trademark/service mark of the Frank Russell Company.
Russell--REGISTERED TRADEMARK-- is a trademark of the Frank Russell
Company.
- - The LIPPER MID-CAP VALUE FUNDS INDEX is an equally weighted representation
of the largest funds in the Lipper Mid-Cap Value Funds category. These
funds have a below-average price-to-earnings ratio, price-to-book ratio,
and three-year sales-per-share growth value, compared to the S&P MidCap
400 Index.
- - The NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATION SYSTEM
COMPOSITE INDEX (the Nasdaq) is a price-only, market-value-weighted index
comprising all domestic and non-U.S.-based common stocks listed on the
Nasdaq system.
- - 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 or fund expenses.
OTHER INFORMATION
- - The Chartered Financial Analyst --REGISTERED TRADEMARK-- (CFA--REGISTERED
TRADEMARK--) designation is a globally recognized standard for measuring
the competence and integrity of investment professionals.
- - The returns shown in management's discussion of Fund performance are based
on net asset values calculated for shareholder transactions. Generally
accepted accounting principles require adjustments to be made to the net
assets of the Fund at period end for financial reporting purposes, and as
such, the net asset values for shareholder transactions and the returns
based on those net asset values may differ from the net asset values and
returns reported in the Financial Highlights.
- - Industry classifications used in this report are generally according to
the Global Industry Classification Standard, which was developed by and is
the exclusive property and a service mark of MSCI Inc. and Standard &
Poor's.
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 NASDAQ SYMBOLS
Class A Shares MDCAX
Class B Shares MDCBX
Class C Shares MDCVX
Class R Shares MDCRX
Class Y Shares MDCYX
8 AIM MID CAP BASIC VALUE FUND
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS-97.34%
ADVERTISING-4.29%
Interpublic Group of Cos., Inc. (The)(b)(c) 785,658 $ 3,111,206
- -------------------------------------------------------------------------------
Omnicom Group Inc. 40,600 1,092,952
===============================================================================
4,204,158
===============================================================================
APPAREL RETAIL-6.59%
Abercrombie & Fitch Co.-Class A(b) 138,400 3,192,888
- -------------------------------------------------------------------------------
American Eagle Outfitters, Inc. 78,690 736,538
- -------------------------------------------------------------------------------
J. Crew Group, Inc.(b)(c) 112,529 1,372,854
- -------------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(b) 85,700 1,160,378
===============================================================================
6,462,658
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.38%
Liz Claiborne, Inc.(b)(c) 521,124 1,354,922
===============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.20%
Legg Mason, Inc.(b) 98,400 2,155,944
===============================================================================
BREWERS-4.31%
Molson Coors Brewing Co.-Class B 86,286 4,221,111
===============================================================================
COMMUNICATIONS EQUIPMENT-2.14%
Plantronics, Inc. 159,196 2,101,387
===============================================================================
COMPUTER HARDWARE-4.53%
Dell Inc.(c) 325,412 3,332,219
- -------------------------------------------------------------------------------
Sun Microsystems, Inc.(c) 290,100 1,108,182
===============================================================================
4,440,401
===============================================================================
CONSTRUCTION & ENGINEERING-2.82%
Shaw Group Inc. (The)(c) 135,106 2,765,620
===============================================================================
CONSUMER FINANCE-3.23%
American Express Co. 64,600 1,198,330
- -------------------------------------------------------------------------------
SLM Corp.(c) 221,400 1,970,460
===============================================================================
3,168,790
===============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.18%
VeriFone Holdings, Inc.(b)(c) 424,634 2,080,706
- -------------------------------------------------------------------------------
Western Union Co. 72,467 1,039,177
===============================================================================
3,119,883
===============================================================================
EDUCATION SERVICES-2.94%
Apollo Group Inc.-Class A(c) 37,548 2,876,928
===============================================================================
HEALTH CARE DISTRIBUTORS-6.13%
Cardinal Health, Inc. 83,794 2,888,379
- -------------------------------------------------------------------------------
McKesson Corp. 80,562 3,120,166
===============================================================================
6,008,545
===============================================================================
HEALTH CARE EQUIPMENT-1.66%
Advanced Medical Optics, Inc.(b)(c) 202,745 1,340,144
- -------------------------------------------------------------------------------
Symmetry Medical Inc.(c) 35,718 284,673
===============================================================================
1,624,817
===============================================================================
HEALTH CARE SUPPLIES-1.97%
Cooper Cos., Inc. (The) 117,559 1,927,968
===============================================================================
HOME FURNISHINGS-3.48%
Tempur-Pedic International Inc.(b)(c) 481,729 3,415,459
===============================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-3.87%
Robert Half International, Inc.(b) 182,065 3,790,593
===============================================================================
INSURANCE BROKERS-0.72%
National Financial Partners Corp.(c) 231,414 703,499
===============================================================================
INTERNET SOFTWARE & SERVICES-0.67%
DealerTrack Holdings Inc.(c) 55,500 659,895
===============================================================================
INVESTMENT BANKING & BROKERAGE-3.92%
FBR Capital Markets Corp.(c) 609,493 2,962,136
- -------------------------------------------------------------------------------
Morgan Stanley 54,800 878,992
===============================================================================
3,841,128
===============================================================================
LIFE SCIENCES TOOLS & SERVICES-2.16%
Waters Corp.(c) 57,850 2,120,203
===============================================================================
MANAGED HEALTH CARE-6.75%
Aetna Inc. 120,216 3,426,156
- -------------------------------------------------------------------------------
Coventry Health Care, Inc.(c) 214,108 3,185,927
===============================================================================
6,612,083
===============================================================================
MOVIES & ENTERTAINMENT-3.16%
Viacom Inc.-Class B(c) 162,700 3,101,062
===============================================================================
PERSONAL PRODUCTS-1.39%
Bare Escentuals, Inc.(b)(c) 260,000 1,359,800
===============================================================================
PROPERTY & CASUALTY INSURANCE-1.28%
XL Capital Ltd.-Class A 338,812 1,253,604
===============================================================================
PUBLISHING-2.96%
McGraw-Hill Cos., Inc. (The) 124,900 2,896,431
===============================================================================
REGIONAL BANKS-2.72%
Zions Bancorp 108,645 2,662,889
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM MID CAP BASIC VALUE FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-9.67%
ASML Holding N.V. (Netherlands) 305,703 $ 5,481,794
- -------------------------------------------------------------------------------
Brooks Automation, Inc.(c) 82,516 479,418
- -------------------------------------------------------------------------------
KLA-Tencor Corp.(b) 161,347 3,515,751
===============================================================================
9,476,963
===============================================================================
SEMICONDUCTORS-2.03%
Maxim Integrated Products, Inc. 174,393 1,991,568
===============================================================================
SPECIALIZED FINANCE-5.19%
CIT Group, Inc. 236,796 1,075,054
- -------------------------------------------------------------------------------
Moody's Corp. 199,849 4,014,966
===============================================================================
5,090,020
===============================================================================
Total Common Stocks (Cost $163,326,211) 95,408,329
===============================================================================
MONEY MARKET FUNDS-3.41%
Liquid Assets Portfolio-Institutional Class(d) 1,671,128 1,671,128
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 1,671,128 1,671,128
===============================================================================
Total Money Market Funds (Cost $3,342,256) 3,342,256
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-100.75% (Cost $166,668,467) 98,750,585
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-15.69%
Liquid Assets Portfolio-Institutional Class (Cost
$15,374,845)(d)(e) 15,374,845 15,374,845
===============================================================================
TOTAL INVESTMENTS-116.44%
(Cost $182,043,312) 114,125,430
===============================================================================
OTHER ASSETS LESS LIABILITIES-(16.44)% (16,115,382)
===============================================================================
NET ASSETS-100.00% $ 98,010,048
===============================================================================
</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 December 31, 2008.
(c) Non-income producing security.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(e) 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.
10 AIM MID CAP BASIC VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$163,326,211)* $ 95,408,329
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 18,717,101
======================================================
Total investments (Cost
$182,043,312) 114,125,430
======================================================
Receivables for:
Investments sold 1,263,275
- ------------------------------------------------------
Fund shares sold 218,678
- ------------------------------------------------------
Dividends 64,153
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 13,492
- ------------------------------------------------------
Other assets 27,690
======================================================
Total assets 115,712,718
======================================================
LIABILITIES:
Payables for:
Investments purchased 1,862,341
- ------------------------------------------------------
Fund shares reacquired 301,491
- ------------------------------------------------------
Dividends 8,012
- ------------------------------------------------------
Collateral upon return of securities
loaned 15,374,845
- ------------------------------------------------------
Accrued fees to affiliates 70,939
- ------------------------------------------------------
Accrued other operating expenses 54,918
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 30,124
======================================================
Total liabilities 17,702,670
======================================================
Net assets applicable to shares
outstanding $ 98,010,048
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $186,662,097
- ------------------------------------------------------
Undistributed net investment income 290,486
- ------------------------------------------------------
Undistributed net realized gain (loss) (21,020,248)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (67,922,287)
======================================================
$ 98,010,048
======================================================
NET ASSETS:
Class A $ 46,084,705
======================================================
Class B $ 12,168,141
======================================================
Class C $ 7,772,556
======================================================
Class R $ 1,032,227
======================================================
Class Y $ 3,006,458
======================================================
Institutional Class $ 27,945,961
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 8,153,795
======================================================
Class B 2,294,986
======================================================
Class C 1,466,022
======================================================
Class R 184,615
======================================================
Class Y 531,973
======================================================
Institutional Class 4,795,584
======================================================
Class A:
Net asset value per share $ 5.65
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $5.65 divided
by 94.50%) $ 5.98
======================================================
Class B:
Net asset value and offering price
per share $ 5.30
======================================================
Class C:
Net asset value and offering price
per share $ 5.30
======================================================
Class R:
Net asset value and offering price
per share $ 5.59
======================================================
Class Y:
Net asset value and offering price
per share $ 5.65
======================================================
Institutional Class:
Net asset value and offering price
per share $ 5.83
======================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $15,283,177 were
on loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM MID CAP BASIC VALUE FUND
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $26,066) $ 2,557,613
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $373,885) 563,042
================================================================================================
Total investment income 3,120,655
================================================================================================
EXPENSES:
Advisory fees 1,358,147
- ------------------------------------------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------------------------------------------
Custodian fees 11,457
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 217,225
- ------------------------------------------------------------------------------------------------
Class B 266,950
- ------------------------------------------------------------------------------------------------
Class C 159,993
- ------------------------------------------------------------------------------------------------
Class R 6,573
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C, R and Y 532,706
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 1,018
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 21,208
- ------------------------------------------------------------------------------------------------
Other 224,144
================================================================================================
Total expenses 2,849,421
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (22,530)
================================================================================================
Net expenses 2,826,891
================================================================================================
Net investment income 293,764
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains (losses) from securities sold to
affiliates of $(218,327)) (19,684,220)
- ------------------------------------------------------------------------------------------------
Foreign currencies 11,636
================================================================================================
(19,672,584)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (100,201,231)
- ------------------------------------------------------------------------------------------------
Foreign currencies (4,416)
================================================================================================
(100,205,647)
================================================================================================
Net realized and unrealized gain (loss) (119,878,231)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(119,584,467)
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM MID CAP BASIC VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 293,764 $ 1,213,784
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (19,672,584) 32,018,457
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (100,205,647) (11,242,671)
==========================================================================================================
Net increase (decrease) in net assets resulting from operations (119,584,467) 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 (6,597,218) (10,506,012)
- ----------------------------------------------------------------------------------------------------------
Class B (1,873,715) (4,087,313)
- ----------------------------------------------------------------------------------------------------------
Class C (1,230,219) (2,383,619)
- ----------------------------------------------------------------------------------------------------------
Class R (146,463) (92,324)
- ----------------------------------------------------------------------------------------------------------
Class Y (421,912) --
- ----------------------------------------------------------------------------------------------------------
Institutional Class (3,865,939) (5,850,220)
==========================================================================================================
Total distributions from net realized gains (14,135,466) (22,919,488)
==========================================================================================================
Share transactions-net:
Class A (4,959,698) 2,313,585
- ----------------------------------------------------------------------------------------------------------
Class B (11,111,315) (10,356,322)
- ----------------------------------------------------------------------------------------------------------
Class C (5,584,349) (1,352,665)
- ----------------------------------------------------------------------------------------------------------
Class R 1,146,395 652,416
- ----------------------------------------------------------------------------------------------------------
Class Y 4,418,452 --
- ----------------------------------------------------------------------------------------------------------
Institutional Class (1,483,236) 23,538,871
==========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (17,573,751) 14,795,885
==========================================================================================================
Net increase (decrease) in net assets (151,293,684) 12,763,898
==========================================================================================================
NET ASSETS:
Beginning of year 249,303,732 236,539,834
==========================================================================================================
End of year (includes undistributed net investment income of $290,486
and $84,406, respectively) $ 98,010,048 $249,303,732
==========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM MID CAP BASIC VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
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 assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class.
The Fund's investment objective is long-term growth of capital.
The Fund currently consists of six different classes of shares: Class A, Class
B, Class C, Class R, Class Y 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.
Class R, Class Y 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.
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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
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.
14 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 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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
15 AIM MID CAP BASIC VALUE FUND
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.
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, 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 (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$8,891.
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 year
ended December 31, 2008, Invesco reimbursed expenses of the Fund in the amount
of $1,664.
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 year ended December 31, 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 year
ended December 31, 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, Class Y 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-
16 AIM MID CAP BASIC VALUE FUND
based sales charges that may be paid by any class of shares of the Fund. For the
year ended December 31, 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 year ended December 31, 2008, IADI
advised the Fund that IADI retained $28,075 in front-end sales commissions from
the sale of Class A shares and $755, $32,755, $2,807 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 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. 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 significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using 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 valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $108,643,636
- --------------------------------------
Level 2 5,481,794
- --------------------------------------
Level 3 --
======================================
$114,125,430
======================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended December 31, 2008, the Fund
engaged in securities purchases of $2,184,735 and securities sales of $895,134,
which resulted in net realized gains (losses) of $(218,327).
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the year
ended December 31, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $11,975.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the year ended December 31, 2008, the Fund paid legal fees of $3,626
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.
17 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, 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--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $ 118,653 $ 4,512,925
- --------------------------------------------------------------------------------------------------------
Long-term capital gain 14,016,813 19,508,632
========================================================================================================
Total distributions $14,135,466 $24,021,557
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 326,751
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (68,960,635)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (4,405)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (36,265)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (10,235,890)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (9,741,605)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 186,662,097
================================================================================================
Total net assets $ 98,010,048
================================================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $10,235,890
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $138,239,283 and
$168,163,484, 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 $ 7,350,571
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (76,311,206)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(68,960,635)
================================================================================================
Cost of investments for tax purposes is $183,086,065.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, proxy costs and distributions, on December 31, 2008, undistributed
net investment income was decreased by $87,684, undistributed net realized gain
(loss) was increased by $107,016 and shares of beneficial interest decreased by
$19,332. This reclassification had no effect on the net assets of the Fund.
18 AIM MID CAP BASIC VALUE FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,359,622 $ 26,015,711 2,160,406 $ 32,888,783
- ------------------------------------------------------------------------------------------------------------------------
Class B 323,182 3,297,888 482,044 6,979,030
- ------------------------------------------------------------------------------------------------------------------------
Class C 311,827 3,220,819 454,282 6,524,442
- ------------------------------------------------------------------------------------------------------------------------
Class R 143,551 1,614,230 47,353 721,142
- ------------------------------------------------------------------------------------------------------------------------
Class Y(b) 477,456 4,142,899 -- --
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 557,279 6,669,608 1,564,505 23,793,276
========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,194,290 6,377,219 774,788 10,537,114
- ------------------------------------------------------------------------------------------------------------------------
Class B 361,966 1,813,448 298,586 3,878,626
- ------------------------------------------------------------------------------------------------------------------------
Class C 236,702 1,185,876 170,194 2,209,130
- ------------------------------------------------------------------------------------------------------------------------
Class R 27,739 146,463 7,010 94,634
- ------------------------------------------------------------------------------------------------------------------------
Class Y(b) 79,010 421,912 -- --
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 702,898 3,865,939 467,873 6,484,715
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 542,357 5,868,490 387,795 5,834,239
- ------------------------------------------------------------------------------------------------------------------------
Class B (570,605) (5,868,490) (404,613) (5,834,239)
========================================================================================================================
Reacquired:
Class A(b) (4,369,450) (43,221,118) (3,118,165) (46,946,551)
- ------------------------------------------------------------------------------------------------------------------------
Class B (1,038,340) (10,354,161) (1,064,161) (15,379,739)
- ------------------------------------------------------------------------------------------------------------------------
Class C (995,252) (9,991,044) (700,064) (10,086,237)
- ------------------------------------------------------------------------------------------------------------------------
Class R (62,929) (614,298) (10,758) (163,360)
- ------------------------------------------------------------------------------------------------------------------------
Class Y(b) (24,493) (146,359) -- --
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,206,689) (12,018,783) (417,049) (6,739,120)
========================================================================================================================
Net increase (decrease) in share activity (949,879) $(17,573,751) 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, 27% 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) Effective upon the commencement date of Class Y shares, October 3, 2008,
the following shares were converted from Class A shares into Class Y shares
of the Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
----------------------------------------------------------------------------------------------------
Class Y 372,931 $ 3,557,760
----------------------------------------------------------------------------------------------------
Class A (372,931) (3,557,760)
====================================================================================================
</Table>
19 AIM MID CAP BASIC VALUE FUND
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET NET ON SECURITIES NET DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH INCREASE FROM TOTAL FROM FROM NET FROM NET
BEGINNING INCOME REALIZED AND PAYMENTS INVESTMENT INVESTMENT REALIZED
OF PERIOD (LOSS) UNREALIZED) BY AFFILIATES OPERATIONS INCOME GAINS
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $13.67 $ 0.01(c) $(7.09) -- $(7.08) $ -- $(0.94)
Year ended 12/31/07 13.83 0.09 1.19 -- 1.28 (0.06) (1.38)
Year ended 12/31/06 14.48 (0.04)(c) 1.25 -- 1.21 -- (1.86)
Year ended 12/31/05 13.12 (0.07) 1.43 -- 1.36 -- --
Year ended 12/31/04 11.28 (0.10)(c) 1.93 0.01 1.84 -- --
- --------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 13.05 (0.06)(c) (6.75) -- (6.81) -- (0.94)
Year ended 12/31/07 13.30 (0.03) 1.16 -- 1.13 -- (1.38)
Year ended 12/31/06 14.10 (0.15)(c) 1.21 -- 1.06 -- (1.86)
Year ended 12/31/05 12.87 (0.16) 1.39 -- 1.23 -- --
Year ended 12/31/04 11.14 (0.18)(c) 1.90 0.01 1.73 -- --
- --------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 13.04 (0.06)(c) (6.74) -- (6.80) -- (0.94)
Year ended 12/31/07 13.30 (0.03) 1.15 -- 1.12 -- (1.38)
Year ended 12/31/06 14.09 (0.15)(c) 1.22 -- 1.07 -- (1.86)
Year ended 12/31/05 12.86 (0.16) 1.39 -- 1.23 -- --
Year ended 12/31/04 11.13 (0.18)(c) 1.90 0.01 1.73 -- --
- --------------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 12/31/08 13.57 (0.01)(c) (7.03) -- (7.04) -- (0.94)
Year ended 12/31/07 13.75 0.03 1.20 -- 1.23 (0.03) (1.38)
Year ended 12/31/06 14.44 (0.08)(c) 1.25 -- 1.17 -- (1.86)
Year ended 12/31/05 13.11 (0.05) 1.38 -- 1.33 -- --
Year ended 12/31/04(f) 11.88 (0.08)(c) 1.30 0.01 1.23 -- --
- --------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(f) 9.54 0.00(c) (2.95) -- (2.95) -- (0.94)
- --------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 13.94 0.09(c) (7.26) -- (7.17) -- (0.94)
Year ended 12/31/07 14.08 0.16 1.23 -- 1.39 (0.15) (1.38)
Year ended 12/31/06 14.62 0.05(c) 1.27 -- 1.32 -- (1.86)
Year ended 12/31/05 13.17 0.01 1.44 -- 1.45 -- --
Year ended 12/31/04(f) 11.88 (0.02)(c) 1.30 0.01 1.29 -- --
==========================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET
NET ASSETS ASSETS WITHOUT
NET ASSET NET ASSETS, WITH FEE WAIVERS FEE WAIVERS
TOTAL VALUE, END TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES
DISTRIBUTIONS OF PERIOD RETURN(a) (000S OMITTED) ABSORBED ABSORBED
- -----------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $(0.94) $ 5.65 (51.38)% $ 46,085 1.56%(d) 1.57%(d)
Year ended 12/31/07 (1.44) 13.67 9.30 115,198 1.43 1.46
Year ended 12/31/06 (1.86) 13.83 8.47 113,672 1.52 1.58
Year ended 12/31/05 -- 14.48 10.37 127,775 1.51 1.57
Year ended 12/31/04 -- 13.12 16.31(e) 115,164 1.67 1.69
- -----------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 (0.94) 5.30 (51.76) 12,168 2.31(d) 2.32(d)
Year ended 12/31/07 (1.38) 13.05 8.53 42,012 2.18 2.21
Year ended 12/31/06 (1.86) 13.30 7.63 51,970 2.27 2.33
Year ended 12/31/05 -- 14.10 9.56 69,594 2.21 2.27
Year ended 12/31/04 -- 12.87 15.53(e) 63,374 2.32 2.34
- -----------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 (0.94) 5.30 (51.72) 7,773 2.31(d) 2.32(d)
Year ended 12/31/07 (1.38) 13.04 8.45 24,950 2.18 2.21
Year ended 12/31/06 (1.86) 13.30 7.70 26,435 2.27 2.33
Year ended 12/31/05 -- 14.09 9.56 29,946 2.21 2.27
Year ended 12/31/04 -- 12.86 15.54(e) 27,601 2.32 2.34
- -----------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 12/31/08 (0.94) 5.59 (51.46) 1,032 1.81(d) 1.82(d)
Year ended 12/31/07 (1.41) 13.57 9.01 1,035 1.68 1.71
Year ended 12/31/06 (1.86) 13.75 8.22 449 1.77 1.83
Year ended 12/31/05 -- 14.44 10.15 175 1.71 1.77
Year ended 12/31/04(f) -- 13.11 10.35(e) 33 1.78(g) 1.80(g)
- -----------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(f) (0.94) 5.65 (30.34) 3,006 1.50(d)(g) 1.51(d)(g)
- -----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 (0.94) 5.83 (51.02) 27,946 0.91(d) 0.92(d)
Year ended 12/31/07 (1.53) 13.94 9.91 66,109 0.87 0.90
Year ended 12/31/06 (1.86) 14.08 9.15 44,013 0.92 0.98
Year ended 12/31/05 -- 14.62 11.01 25,174 0.92 0.98
Year ended 12/31/04(f) -- 13.17 10.86(e) 7,530 1.03(g) 1.05(g)
=======================================================================================================================
<Caption>
RATIO OF NET
INVESTMENT
INCOME (LOSS)
TO AVERAGE PORTFOLIO
NET ASSETS TURNOVER(b)
- ----------------------------------------------------------
CLASS A
Year ended 12/31/08 0.13%(d) 78%
Year ended 12/31/07 0.55 44
Year ended 12/31/06 (0.30) 46
Year ended 12/31/05 (0.51) 29
Year ended 12/31/04 (0.85) 34
- ----------------------------------------------------------
CLASS B
Year ended 12/31/08 (0.62)(d) 78
Year ended 12/31/07 (0.20) 44
Year ended 12/31/06 (1.05) 46
Year ended 12/31/05 (1.21) 29
Year ended 12/31/04 (1.50) 34
- ----------------------------------------------------------
CLASS C
Year ended 12/31/08 (0.62)(d) 78
Year ended 12/31/07 (0.20) 44
Year ended 12/31/06 (1.05) 46
Year ended 12/31/05 (1.21) 29
Year ended 12/31/04 (1.50) 34
- ----------------------------------------------------------
CLASS R
Year ended 12/31/08 (0.12)(d) 78
Year ended 12/31/07 0.30 44
Year ended 12/31/06 (0.55) 46
Year ended 12/31/05 (0.71) 29
Year ended 12/31/04(f) (0.96)(g) 34
- ----------------------------------------------------------
CLASS Y
Year ended 12/31/08(f) 0.19(d)(g) 78
- ----------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 0.78(d) 78
Year ended 12/31/07 1.11 44
Year ended 12/31/06 0.30 46
Year ended 12/31/05 (0.08) 29
Year ended 12/31/04(f) (0.21)(g) 34
==========================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges and is not annualized for
periods less than one year, if applicable.
(b) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $86,890,
$26,695, $15,999, $1,315, $2,731 and $50,753 for Class A, Class B, Class C,
Class R, Class Y and Institutional Class shares, respectively.
(e) 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%, 15.44%, 15.45%, 10.27% and 10.77% for Class A,
Class B, Class C, Class R and Institutional Class shares, respectively.
(f) Commencement date of Class R and Institutional Class shares was April 30,
2004. Commencement date of Class Y shares was October 3, 2008.
(g) Annualized.
20 AIM MID CAP BASIC VALUE FUND
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
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 alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the 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.
All lawsuits based on allegations of market timing, late trading and related
issues were 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
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.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
21 AIM MID CAP BASIC VALUE FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Funds Group
and Shareholders of AIM Mid Cap Basic Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Mid Cap Basic Value Fund (one
of the funds constituting AIM Funds Group, hereafter referred to as the "Fund")
at December 31, 2008, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
February 17, 2009
Houston, Texas
22 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. With
the exception of the actual ending account value and expenses of the Class Y
Shares, the example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period July 1, 2008, through
December 31, 2008. The actual ending account and expenses of the Class Y shares
in the below example are based on an investment of $1,000 invested as of close
of business October 3, 2008 (commencement date) and held through December 31,
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 (as of close of business
October 3, 2008 through December 31, 2008 for the Class Y shares). Because the
actual ending account value and expense information in the example is not based
upon a six month period for the Class Y shares, the ending account value and
expense information may not provide a meaningful comparison to mutual funds that
provide such information for a full six month 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $622.30 $6.73 $1,016.84 $ 8.36 1.65%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 619.60 9.77 1,013.07 12.14 2.40
- ---------------------------------------------------------------------------------------------------
C 1,000.00 619.60 9.77 1,013.07 12.14 2.40
- ---------------------------------------------------------------------------------------------------
R 1,000.00 621.40 7.74 1,015.58 9.63 1.90
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 696.60 3.13 1,017.60 7.61 1.50
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008 (as of close of
business October 3, 2008, through December 31, 2008 for the Class Y shares),
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
184/366 to reflect the most recent fiscal half year. For the Class Y shares
actual expenses are equal to the annualized expense ratio indicated above
multiplied by the average account value over the period, multiplied by 90
(as of close of business October 3, 2008, through December 31, 2008)/366.
Because the Class Y shares have not been in existence for a full six month
period, the actual ending account value and expense information shown may
not provide a meaningful comparison to fund expense information of classes
that show such data for a full six month period and, because the actual
ending account value and expense information in the expense example covers a
short time period, return and expense data may not be indicative of return
and expense data for longer time periods.
(3) Hypothetical expenses are equal to the annualized expense ratio indicated
above multiplied by the average account value over the period, multiplied by
184/366 to reflect a one-half year period. The hypothetical ending account
value and expenses may be used to compare ongoing costs of investing in
Class Y shares of the Fund and other funds because such data is based on a
full six month period.
23 AIM MID CAP BASIC VALUE FUND
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 July 1, 2008, through December 31, 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $624.70 $3.76 $1,020.51 $4.67 0.92%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 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
184/366 to reflect the most recent fiscal half year.
AIM MID CAP BASIC VALUE FUND
Supplement to Annual Report dated 12/31/08
AIM MID CAP BASIC VALUE FUND
INSTITUTIONAL CLASS SHARES
The following information has been prepared to provide Institutional Class
shareholders with a performance overview specific to their holdings.
Institutional Class shares are offered exclusively to institutional investors,
including defined contribution plans that meet certain criteria.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 12/31/08
Inception -2.15%
5 Years -5.30
1 Year -51.02
Institutional Class shares' inception date is April 30, 2004. Returns
since that date are historical returns. All other returns are blended returns of
historical Institutional Class share performance and restated Class A share
performance (for periods prior to the inception date of Institutional Class
shares) at net asset value (NAV) and reflect the 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.
Please note that past performance is not indicative of future results.
More recent returns may be more or less than those shown. All returns assume
reinvestment of distributions at NAV. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. See full report for information on comparative benchmarks. Please
consult your Fund prospectus for more information. For the most current
month-end performance, please call 800 451 4246 or visit invescoaim.com.
NASDAQ SYMBOL MDICX
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-1 Invesco Aim Distributors, Inc.
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $14,016,813
Qualified Dividend Income* 84.97%
Corporate Dividends Received Deduction* 76.84%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
ADDITIONAL NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended March 31, 2008, June 30, 2008, September 30, 2008 and
December 31, 2008 were 4.73%, 6.70%, 8.44%, and 9.49%, respectively.
24 AIM MID CAP BASIC VALUE FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Funds Group (the "Trust"), is 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 104
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Each officer serves for a one year term or until their successors are
elected and qualified. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); Chairman, Investment
Company Institute; President, Co-Chief Executive Officer,
Co-President, Chief Operating Officer and Chief Financial
Officer, Franklin Resources, Inc. (global investment
management organization)
- --------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim Capital Management, Inc.
(registered investment advisor); Director and President,
INVESCO Funds Group, Inc. (registered investment advisor and
register transfer agent) and AIM GP Canada Inc. (general
partner for a limited partnership); Director, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco Aim Investment Services, Inc. (registered
transfer agent) and INVESCO Distributors, Inc. (registered
broker dealer); Director, President and Chairman, IVZ Callco
Inc. (holding company), INVESCO Inc. (holding company) and
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, AIM
Trimark Corporate Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund company); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
Director and Chairman, Fund Management Company (registered
broker dealer); President and Principal Executive Officer,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments Trust and
Tax-Free Investments Trust only); President, AIM Trimark
Global Fund Inc. and AIM Trimark Canada Fund Inc.; and
Director, Trimark Trust (federally regulated Canadian Trust
Company)
- --------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1987 Chairman, Crockett Technology Associates (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association/Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (property casualty company)
Formerly: Director, CompuDyne Corporation (provider of
product and services to the public security market);
Director, President and Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice President, AB Volvo;
Director of various public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (government affairs company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer, Texana Timber LP
(sustainable forestry company); and Discovery Global
Education Fund (non-profit)
- --------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan is considered an interested person of the Trust because he is
an officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
25 AIM MID CAP BASIC VALUE FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
Formerly: Director of Compliance and Assistant General Counsel,
ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General
Counsel and Director of Compliance, ALPS Mutual Funds, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim Capital Management, Inc.;
Chief Operating Officer, Senior Vice President, General Counsel
and Secretary, Liberty Ridge Capital, Inc. (an investment
adviser); Vice President and Secretary, PBHG Funds (an investment
company); Vice President and Secretary, PBHG Insurance Series
Fund (an investment company); Chief Operating Officer, General
Counsel and Secretary, Old Mutual Investment Partners (a broker-
dealer); General Counsel and Secretary, Old Mutual Fund Services
(an administrator); General Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder servicing center); Executive
Vice President, General Counsel and Secretary, Old Mutual
Capital, Inc. (an investment adviser); and Vice President and
Secretary, Old Mutual Advisors Funds (an investment company)
- --------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited,
IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO North American Holdings,
Inc.; and Vice President, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1992 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust only)
- --------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco Aim Private Asset Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering Compliance Officer, Fund
Management Company; and Manager of the Fraud Prevention
Department, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, The AIM Family of Funds--Registered
Trademark--, Invesco Global Asset Management (N.A.), Inc.
(registered investment advisor), Invesco Institutional (N.A.),
Inc., (registered investment advisor), INVESCO Private Capital
Investments, Inc. (holding company), Invesco Private Capital,
Inc. (registered investment advisor) and Invesco Senior Secured
Management, Inc. (registered investment advisor); and Vice
President, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
26 AIM MID CAP BASIC VALUE FUND
[GO PAPERLESS
GRAPHIC]
GO PAPERLESS WITH EDELIVERY
Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund
reports and prospectuses with a service that's all about eeees:
- - ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of trees used to
produce paper.
- - ECONOMICAL. Help reduce your fund's printing and delivery expenses and put
more capital back in your fund's returns.
- - EFFICIENT. Stop waiting for regular mail. Your documents will be sent via
email as soon as they're available.
- - EASY. Download, save and print files using your home computer with a few
clicks of your mouse.
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 website 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 email
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 website, invescoaim.com. On the home page,
scroll down and click on Proxy Policy. The information is also available on the
SEC website, 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
website. 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 website, sec.gov.
If used after April 20, 2009, 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.
Please refer to each fund's prospectus for information on the fund's
subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the
retail mutual funds, exchange-traded funds and institutional money market funds
and the subdistributor for the STIC Global Funds represented by Invesco Aim. All
entities are indirect, wholly owned subsidiaries of Invesco Ltd.
It is anticipated that the businesses of the affiliated investment adviser firms
- - Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- - will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
[INVESCO AIM LOGO] - SERVICE MARK -
invescoaim.com MCBV-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM SELECT EQUITY FUND
- - SERVICE MARK - Annual Report to Shareholders - December 31, 2008
[MOUNTAIN GRAPHIC]
2 Letters to Shareholders
4 Performance Summary
4 Management Discussion
6 Long-Term Fund Performance
8 Supplemental Information
9 Schedule of Investments
11 Financial Statements
14 Notes to Financial Statements
20 Financial Highlights
22 Auditor's Report
23 Fund Expenses
24 Tax Information
25 Trustees and Officers
[PHOTO OF TAYLOR]
Philip Taylor
Dear Shareholder:
In previous reports, I've talked with you about short-term market volatility.
I'd like to take this opportunity to update you on market developments during
calendar year 2008 and provide you with some perspective and encouragement.
MARKET OVERVIEW
At the start of 2008, we saw warning signs of increasing economic ills -- a
weakening housing market, rising inflation and slowing job growth, among others.
In response, the U.S. Federal Reserve Board (the Fed) cut short-term interest
rate targets throughout 2008 in an effort to stimulate economic growth. The Fed
reduced its short-term interest rate target from 4.25% to a range of zero to
0.25% during the year.(1)
In the spring of 2008, more serious factors came to the forefront --
driving unemployment sharply higher(2) and causing major stock market indexes
to hit multi-year lows in the U.S. and overseas.(3)
For example, the S&P 500 Index, considered representative of the U.S. stock
market, had its worst one-year performance since 1937.(4) During the second
half of 2008, the Fed, the U.S. Department of the Treasury and other federal
agencies took unprecedented action to rescue the troubled financials sector and
domestic automobile industry, stabilize the stock market and inject liquidity
into the credit markets.
HOW WE GOT HERE
The cause of this correction was years of lax lending associated with the recent
housing boom. Mortgage loans of questionable quality were bundled into
hard-to-value securities that were bought by, and traded among, financial
institutions. As the value of those securities declined, financial institutions
sought to unload them -- but there were few buyers. With the value of their
assets falling and access to credit tightening, a number of well-established
financial firms faced severe difficulties, and investor uncertainty and market
volatility spiked.
In October 2008, the administration and Congress enacted a plan, the
Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury
to purchase up to $700 billion in troubled mortgage-related assets -- the
largest and most direct effort to resolve a credit crisis in the last half
century. The Fed, in concert with other central banks, cut short-term interest
rate targets and undertook other initiatives intended to restore investor
confidence, expand lending and mitigate the effects of the global credit crisis.
Following his election, President Barack Obama again pledged to act boldly to
stimulate the U.S. economy.
As we enter 2009, the volatility in the stock, fixed-income and credit
markets we saw last year emphasized the importance of three timeless investing
principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
# INVEST FOR THE LONG TERM. Short-term fluctuations have always been a
reality of the markets. We urge you to stick to your investment plan
and stay focused on your long-term goals.
# DIVERSIFY. Although diversification doesn't eliminate the risk of loss
or guarantee a profit, a careful selection of complementary asset
classes may cushion your portfolio against excessive volatility.
# STAY FULLY INVESTED. Trying to time the market is a gamble, not an
investment strategy. A sound investment strategy includes viewing
market volatility as a matter of course, not a reason to panic.
A trusted financial advisor can explain more fully the potential value of
following these principles. An experienced advisor who knows your individual
investment goals, financial situation and risk tolerance can be your most
valuable asset during times of market volatility. Your advisor can provide
guidance and can monitor your investments to ensure they're on course.
It's also helpful to remember that many of history's significant buying
opportunities resulted from short-term economic crises that, in their time, were
considered unprecedented. We believe current market uncertainty may represent a
buying opportunity for patient, long-term investors. Rest assured that Invesco
Aim's portfolio managers are working diligently on your behalf to attempt to
capitalize on this situation.
MANAGING MONEY IS OUR FOCUS
I believe Invesco Aim is uniquely positioned to navigate current difficult
markets. Our parent company, Invesco Ltd., is one of the world's largest and
most diversified global investment managers. Invesco provides clients with
diversified investment strategies from distinct management teams around the
globe and a range of investment products. Invesco's single focus is asset
management -- which means we focus on doing one thing well: managing your money.
That can be reassuring in uncertain times.
While market conditions change often, our commitment to putting
shareholders first, helping clients achieve their investment goals and providing
excellent customer service remains constant.
If you have questions about this report or your account, please contact one
of our client service representatives at 800 959 4246.
Thank you for your continued confidence, and all of us at Invesco Aim look
forward to serving you.
Sincerely,
/S/ PHILIP TAYLOR
Philip Taylor
Senior Managing Director, Invesco Ltd.
CEO, Invesco Aim
1 U.S. Federal Reserve; 2 Bureau of Labor Statistics; 3 FactSet Research;
4 Wall Street Journal
2 AIM SELECT EQUITY FUND
[PHOTO OF CROCKETT]
Bruce Crockett
Dear Fellow Shareholders:
Since my last letter, continuing troubles in the global economy and financial
markets have negatively affected all investors. The new government promises to
move quickly with a stimulus package, yet considerable anxiety remains about
how, when and what kind of a recovery will occur. While no one likes to see
investment values decline as sharply as they have recently, as mutual fund
investors we can find some consolation in the knowledge that our fund
investments are more transparent, more comprehensively governed and more closely
regulated than most other kinds of investments. In addition, mutual funds
generally are more diversified than other investments; as shareholders we invest
not in a single security but in a portfolio of multiple securities. The benefits
of diversification have been reiterated by the stories of investors who "lost
everything" because they had too many of their assets in one place, whether that
place was a single money manager or their employer's stock. Mutual fund
investors also have the opportunity to diversify further among different types
of funds that each deploy a different strategy and focus on different kinds of
securities. These include conservatively managed money market funds, which,
relative to other securities, continue to offer a more safe, liquid, and
convenient way to invest short-term assets.
In addition to diversification, investing discipline is essential during
challenging times such as these. Strategies such as dollar-cost-averaging, where
individuals invest a consistent amount at regular intervals, can help investors
acquire more fund shares when prices are low. Periodic rebalancing of asset
allocation plans achieves the same effect. "Buy low, sell high" has long been
the mantra of investment success, but the advice is not always easy to follow
because it requires the discipline to resist prevailing trends. Of course,
investment strategies, such as dollar-cost-averaging and portfolio rebalancing
do not guarantee a profit or eliminate the risk of loss. Investors should
consider their ability to continue investing regardless of fluctuating security
prices.
A long-term view is also important, particularly for assets that are not
needed right away. In the past, it has often proven better to keep long-term
assets invested through a downturn than to miss the beginning of the upward
trend. To develop a diversified and disciplined investing plan that is right for
your individual goals, I encourage you to consult an experienced and trustworthy
investment professional who has the knowledge and the tools to help you
establish and implement the plan, monitor its results and adapt it to changing
goals and circumstances.
Even when working with a personal financial advisor, investors should
supplement the relationship with their own knowledge and awareness of the
investments they hold. Visit the Invesco Aim website at invescoaim.com regularly
to find out what is happening in your AIM funds and to read timely market
commentary from Invesco Aim management, strategists and portfolio managers. The
site's "Education and Planning" section can also help you clarify basic
investment concepts, learn how to choose a financial advisor, evaluate different
investment choices and make more informed investment decisions. Invesco Aim's
redesigned public home page recently received a Gold Award for its user-friendly
navigation and graphics from The Mutual Funds Monitor Awards, sponsored by
Corporate Insight.
As always, your Board of Trustees and Invesco Aim are committed to putting
your interests first by controlling costs, monitoring investment performance and
streamlining the investment management process during these difficult times.
Your Board has already begun the annual review and management contract renewal
process with the continuing goal of making AIM funds one of the best and most
cost-effective ways for you to invest your hard-earned money.
While the investing climate may remain uncertain for a while, economies and
markets are dynamic, and no stage is ever permanent. Please feel free to contact
me in writing with your questions or concerns. You can send an email to me at
bruce@brucecrockett.com.
Best regards,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM SELECT EQUITY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY
For the year ended December 31, 2008, AIM Select Equity Fund Class A shares, at
net asset value, delivered a return of -38.63%, lagging the broad market S&P 500
Index, which returned -36.99%, as well as the Fund's style-specific benchmark,
the Russell 3000 Index, which returned -37.31%.+ This was one of the most
challenging years in history for financial markets. All sectors were down for
the period, but the Fund benefited from holdings in the consumer discretionary
sector. Select holdings in energy and information technology were the primary
detractors from results.
Your Fund's long-term performance appears later in this report.
FUND VS. INDEXES
Total returns, 12/31/07 to 12/31/08, 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 -38.63%
Class B Shares -39.08
Class C Shares -39.12
Class Y Shares* -38.63
S&P 500 Index+ (Broad Market Index) -36.99
Russell 3000 Index+ (Style-Specific Index) -37.31
Lipper Multi-Cap Core Funds Index+ (Peer Group Index) -39.45
+ Lipper Inc.
* Share class incepted during the fiscal year. See page 7 for a detailed
explanation of Fund performance.
HOW WE INVEST
We manage your Fund to provide exposure to large-, mid- and small-
capitalization stocks. The portfolio is designed to outperform the Russell 3000
Index while minimizing the amount of additional risk relative to the benchmark.
The Fund can be used as a long-term allocation to large-cap stocks that
complements other style-specific strategies within a diversified asset
allocation strategy.
The investment process integrates the following key steps:
# Universe development
# Stock rankings
# Risk assessment
# Portfolio construction
# Trading
While companies included within the Russell 3000 Index are used as a
general guide for developing the Fund's investable universe, nonbenchmark stocks
may also be considered. Each stock in the universe is evaluated on four factors:
company earnings momentum, price trend, management action and relative
valuation. The sum of the scores from these four factors makes up our alpha
(excess return) forecast, relative to the average stock in the universe. Stocks
are also evaluated on a multitude of other factors to develop a stock-specific
risk forecast and transaction cost forecast.
We then incorporate the alpha forecast, risk forecast and transaction cost
forecast -- using an optimizer (a proprietary software system) -- to build a
portfolio that we believe is an optimal balance of the stocks' potential return
and risk. This portfolio is constructed according to certain constraints to
increase the probability that the Fund's relative performance and volatility
remain within the Fund strategy's guidelines. The portfolio is continually
monitored by the Fund management team. The overall investment process is
repeated on a monthly basis to determine which companies should be bought or
sold within the portfolio.
MARKET CONDITIONS AND YOUR FUND
The year ended December 31, 2008, was a challenging time in the markets. It can
be difficult to maintain perspective during times of crisis, but we should
remember that markets have gone through similarly difficult environments in the
past and historically they have recovered. Today's challenges are serious, but
the government is taking aggressive action. These challenges are not
insurmountable, and we do not believe this is the time to abandon your long-term
investment strategy.
These days we are often asked, "How did our economy get into this mess?" It
is not a simple question to answer, but essentially there was an excessive
amount of leverage in the system -- too much debt and not enough assets to back
it up. For many years, financial institutions took on too much risk in an effort
to keep up with one another, and banks stretched beyond their traditional
revenue sources to keep up with their competitors. Likewise, many consumers took
on more and more risk through home equity loans, credit cards and other forms of
credit. While financial institutions and individual consumers are not
exclusively behind the current crisis, they played a role, and our economy is
now
PORTFOLIO COMPOSITION
By sector
Information Technology 19.5%
Health Care 16.6
Consumer Discretionary 15.2
Financials 14.5
Energy 13.3
Industrials 6.5
Consumer Staples 6.4
Telecommunication Services 4.4
Materials 2.7
U.S. Treasury Bills, Money Market Funds Plus Other Assets
Liabilities 0.9
TOP FIVE INDUSTRIES*
1. Integrated Oil & Gas 11.1%
2. Pharmaceuticals 10.5
3. Apparel Retail 6.4
4. Reinsurance 4.9
5. Systems Software 4.8
Total Net Assets $189.2 million
Total Number of Holdings* 82
TOP 10 EQUITY HOLDINGS*
1. Exxon Mobil Corp. 6.2%
2. Pfizer Inc. 3.2
3. Microsoft Corp. 3.1
4. Wal-Mart Stores, Inc. 3.1
5. Verizon Communications Inc. 3.0
6. Merck & Co. Inc. 2.7
7. International Business Machines Corp. 2.6
8. General Electric Co. 2.6
9. Intel Corp. 2.4
10.ConocoPhillips 2.3
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
* Excluding money market fund holdings.
4 AIM SELECT EQUITY FUND
going through the painful process of "deleveraging."
Regarding the performance of AIM Select Equity Fund in 2008, the Fund at
net asset value slightly underperformed its style-specific benchmark, the
Russell 3000 Index.(1) All sectors finished the year in negative territory, but
consumer staples, traditionally a defensive part of the economy, held up
comparatively well versus the overall portfolio.
The biggest contributor to performance in 2008 was APOLLO GROUP, a
for-profit education company that runs such institutions as the University of
Phoenix and the Institute for Professional Development. As the economy weakened,
the prospect of more people furthering their education for career enhancement
improved, boosting the company's results. On the other hand, the primary
detractor from returns in 2008 was WALTER INDUSTRIES. The conglomerate had
operations that were exposed to the troubled housing industry and coal
production, both of which were under tremendous pressure in 2008. The company is
in the process of divesting its nonstrategic operations and focusing on its coal
division.
It is important to understand our investment process to further evaluate
the drivers of our relative performance versus the benchmark. We generally
evaluate performance based on the effect of our stock selection and risk
management processes. It should also be noted that our team took over the
management of this Fund in May 2008.
After we assumed management of the Fund, our stock selection model,
explained previously, was a positive contributor to Fund performance. However,
while our stock selection model may identify a stock with an attractive alpha
forecast, the optimizer may indicate that its transaction costs are too high
and/or its risk level is unacceptable. Placing more emphasis on transaction
costs and potential risk in making stock selections can benefit or detract from
Fund performance. From inception of Invesco Institutional's U.S. Quantitative
Strategies' management of the Fund in May 2008 to December 2008, it detracted
from our results.
Stock selection within the portfolio was strong from May through December
2008, primarily as the result of the optimization process. The Fund also
benefited from not owning embattled insurance giant American International Group
(not a Fund holding), which needed billions in government aid to stay afloat.
SOUTHWEST AIRLINES and eBAY, companies that rely on a strong economy to prosper,
detracted from performance. Overweight positions in these stocks versus the
Fund's benchmark hurt returns for the year.
In terms of risk management, we seek to minimize style biases in the
portfolio. Active managers may add value in one or more of four areas: beta bias
(relative volatility), style bias, over- or underweight positions in sectors or
industries and stock selection. We attempt to add value through our stock
selection decisions. Consequently, our risk management process seeks to
neutralize the Fund's exposure relative to the benchmark with regard to beta,
style and sector or industry exposure.
We thank you for your continued investment in AIM Select Equity Fund.
1 Lipper Inc.
The views and opinions expressed in management's discussion of Fund performance
are those of Invesco Aim Advisors, Inc. These views and opinions are subject to
change at any time based on factors such as market and economic conditions.
These views and opinions may not be relied upon as investment advice or
recommendations, or as an offer for a particular security. The information is
not a complete analysis of every aspect of any market, country, industry,
security or the Fund. Statements of fact are from sources considered reliable,
but Invesco Aim Advisors, Inc. makes no representation or warranty as to their
completeness or accuracy. Although historical performance is no guarantee of
future results, these insights may help you understand our investment management
philosophy.
See important Fund and index disclosures later in this report.
JEREMY LEFKOWITZ
Portfolio manager, is manager of AIM Select Equity Fund. He began his investment
career in 1968 and has been associated with Invesco Institutional and/or its
affiliates since 1982. Mr. Lefkowitz earned a B.S. in industrial engineering and
an M.B.A. in finance from Columbia University.
DANIEL KOSTYK
Chartered Financial Analyst, portfolio manager, is manager of AIM Select Equity
Fund. He has been associated with Invesco Institutional and/or its affiliates
since 1995. Mr. Kostyk earned a B.S. in mechanical engineering from Northwestern
University in Chicago.
ANTHONY MUNCHAK
Chartered Financial Analyst, portfolio manager, is manager of AIM Select Equity
Fund. He has been associated with Invesco Institutional and/or its affiliates
since 2000. Mr. Munchak earned a B.S. and an M.S. from Boston College. He also
earned an M.B.A. from Bentley College.
GLEN MURPHY
Chartered Financial Analyst, portfolio manager, is manager of AIM Select Equity
Fund. He has been associated with Invesco Institutional and/or its affiliates
since 1995. Mr. Murphy earned a B.B.A. from the University of Massachusetts and
an M.S. in finance from Boston College.
FRANCIS ORLANDO
Chartered Financial Analyst, portfolio manager, is manager of AIM Select Equity
Fund. He has been associated with Invesco Institutional and/or its affiliates
since 1987. Mr. Orlando earned a B.B.A. from Merrimack College and an M.B.A.
from Boston University.
Assisted by Invesco Institutional's U.S. Quantitative Strategies Team
5 AIM SELECT EQUITY FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable
sales charges and Fund expenses including management fees. Index results include
reinvested dividends, but they do not reflect sales charges. Performance of an
index of funds reflects fund expenses and management fees; performance of a
market index does not. Performance shown in the chart and table(s) does not
reflect deduction of taxes a shareholder would pay on Fund distributions or sale
of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the
value of the Fund and its indexes. We believe that a logarithmic chart is more
effective than other types of charts in illustrating changes in value during the
early years shown in the chart. The vertical axis, the one that indicates the
dollar value of an investment, is constructed with each segment representing a
percent change in the value of the investment. In this chart, each segment
represents a doubling, or 100% change, in the value of the investment. In other
words, the space between $5,000 and $10,000 is the same size as the space
between $10,000 and $20,000, and so on.
6 AIM SELECT EQUITY FUND
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT - OLDEST SHARE CLASS SINCE INCEPTION
Index data from 11/30/67, Fund data from 12/4/67
AIM Select
Equity Fund- Lipper Multi-Cap
Date Class A Shares S&P 500 Index(1) Core Funds Index(1)
11/30/67 10000 $10000
12/4/67 $9450 10000 10000
12/67 9535 10291 10481
1/68 9167 9866 10167
2/68 8628 9613 9596
3/68 8788 9701 9651
4/68 9593 10523 10719
5/68 9914 10667 11215
6/68 9895 10792 11340
7/68 9563 10619 11021
8/68 9724 10768 11329
9/68 10142 11210 12019
10/68 10209 11321 12160
11/68 10940 11894 12969
12/68 10627 11429 12658
1/69 10352 11364 12681
2/69 9931 10855 11742
3/69 10196 11256 12121
4/69 10560 11526 12329
5/69 10491 11530 12407
6/69 9528 10918 11324
7/69 8781 10289 10532
8/69 9384 10730 11211
9/69 9205 10491 11057
10/69 9563 10987 11640
11/69 9305 10631 11317
12/69 8949 10464 11096
1/70 8126 9694 10282
2/70 8914 10235 10844
3/70 8803 10280 10716
4/70 7873 9380 9353
5/70 7297 8839 8639
6/70 7095 8427 8337
7/70 7378 9075 8924
8/70 7808 9509 9341
9/70 8197 9853 9912
10/70 8105 9772 9731
11/70 8473 10266 10150
12/70 9078 10880 10813
1/71 9385 11350 11385
2/71 9792 11483 11654
3/71 10474 11935 12269
4/71 10846 12399 12751
5/71 10609 11915 12354
6/71 10774 11954 12410
7/71 10170 11490 11940
8/71 10628 11936 12516
9/71 10618 11883 12452
10/71 10118 11418 11793
11/71 10316 11420 11695
12/71 11472 12435 12840
1/72 11878 12691 13284
2/72 12601 13044 13781
3/72 12705 13151 13869
4/72 13093 13241 13980
5/72 13533 13501 14166
6/72 12892 13239 13789
7/72 12588 13303 13559
8/72 13075 13794 13967
9/72 12823 13759 13787
10/72 12781 13923 13815
11/72 13348 14593 14458
12/72 13663 14799 14473
1/73 12444 14578 13826
2/73 12091 14063 13114
3/73 11709 14076 12934
4/73 10782 13537 12136
5/73 10530 13316 11755
6/73 10258 13264 11654
7/73 11316 13803 12512
8/73 11235 13332 12303
9/73 12026 13902 12998
10/73 11696 13924 13042
11/73 10212 12380 11570
12/73 10256 12626 11790
1/74 9883 12535 11762
2/74 10050 12524 11855
3/74 9827 12270 11478
4/74 9438 11830 11008
5/74 8938 11471 10487
6/74 8783 11341 10225
7/74 8026 10501 9689
8/74 7587 9592 8979
9/74 6831 8488 8135
10/74 7902 9916 9482
11/74 7778 9430 9153
12/74 7632 9283 8908
1/75 8415 10464 9871
2/75 9092 11131 10423
3/75 9493 11414 10795
4/75 10146 11996 11342
5/75 10570 12569 11820
6/75 11132 13168 12293
7/75 10214 12320 11579
8/75 10067 12103 11421
9/75 9719 11727 11055
10/75 10194 12493 11531
11/75 10519 12844 11829
12/75 10392 12741 11722
1/76 11547 14291 13103
2/76 11417 14171 13204
3/76 11769 14649 13506
4/76 11476 14535 13292
- ----------------
1 Lipper Inc.
[MOUNTAIN CHART]
5/76 11487 14373 13193
6/76 12062 15010 13703
7/76 11828 14938 13609
8/76 11921 14910 13554
9/76 12229 15296 13794
10/76 11802 15010 13505
11/76 11920 14948 13593
12/76 12465 15788 14284
1/77 11304 15042 13684
2/77 11325 14768 13513
3/77 11217 14613 13471
4/77 11122 14674 13499
5/77 11002 14386 13311
6/77 11576 15097 13890
7/77 11480 14865 13647
8/77 11281 14654 13535
9/77 11450 14676 13604
10/77 11051 14105 13109
11/77 11498 14552 13707
12/77 11547 14659 13802
1/78 10929 13818 12993
2/78 10811 13538 12886
3/78 11143 13936 13335
4/78 12248 15193 14474
5/78 12580 15332 14876
6/78 12433 15122 14873
7/78 13148 16004 15945
8/78 13572 16486 16628
9/78 13335 16433 16377
10/78 12249 15000 14457
11/78 12562 15322 15038
12/78 12961 15623 15426
1/79 13384 16315 16033
2/79 13028 15789 15496
3/79 13803 16732 16571
4/79 14006 16837 16821
5/79 13878 16472 16603
6/79 14463 17187 17333
7/79 14720 17417 17572
8/79 15574 18422 18843
9/79 15677 18503 18897
10/79 14926 17317 17541
11/79 15741 18140 18872
12/79 16103 18528 19514
1/80 16840 19681 20493
2/80 16431 19679 20112
3/80 14859 17766 18179
4/80 15637 18587 19117
5/80 16442 19544 20222
6/80 17130 20161 20991
7/80 18358 21565 22649
8/80 18923 21782 23195
9/80 19705 22423 23737
10/80 20069 22876 24063
11/80 22090 25312 26363
12/80 21565 24550 25873
1/81 20581 23521 24861
2/81 20915 23928 25249
3/81 22437 24886 26628
4/81 22754 24403 26580
5/81 22467 24464 27005
6/81 21944 24312 26492
7/81 21707 24363 26102
8/81 20113 22955 24570
9/81 18744 21826 23236
10/81 20224 23004 24461
11/81 20837 23952 25608
12/81 20514 23339 25060
1/82 19757 23035 24546
2/82 18690 21748 23540
3/82 18358 21635 23259
4/82 19358 22615 24450
5/82 18866 21843 23739
6/82 18480 21516 23240
7/82 17986 21135 23050
8/82 20278 23701 25611
9/82 20564 23995 26066
10/82 23338 26756 29082
11/82 24607 27837 30705
12/82 24733 28375 31086
1/83 25396 29430 31882
2/83 26406 30104 32956
3/83 27209 31215 33876
4/83 28814 33675 36183
5/83 29177 33382 36754
6/83 30706 34680 38423
7/83 29616 33657 37143
8/83 29752 34162 37080
9/83 30374 34634 37800
10/83 28883 34232 36594
11/83 29619 34954 37670
12/83 29717 34772 37349
1/84 29040 34578 36367
2/84 27800 33360 34676
3/84 28447 33938 35054
4/84 28379 34260 35058
5/84 26588 32362 33059
6/84 27237 33064 33836
7/84 26499 32654 32960
8/84 29485 36259 36786
9/84 29326 36267 36533
10/84 29279 36408 36412
11/84 28708 36000 35815
12/84 29234 36947 36782
1/85 31695 39825 39982
2/85 32450 40315 40162
3/85 32326 40339 39925
4/85 31761 40303 39725
5/85 33285 42632 41978
6/85 33801 43302 42771
7/85 34193 43241 42651
8/85 33844 42822 42370
9/85 32572 41528 40683
10/85 33396 43447 42417
11/85 35667 46428 45415
12/85 37314 48675 47455
1/86 37464 48947 48105
2/86 40146 52604 52069
3/86 42133 55539 54651
4/86 41725 54917 54219
5/86 43736 57838 56692
6/86 44632 58816 57281
7/86 41722 55528 53260
8/86 44255 59643 56488
9/86 41069 54710 52121
10/86 42798 57867 54795
11/86 43320 59273 55294
12/86 42102 57762 54232
1/87 47159 65542 60436
2/87 50092 68131 64322
3/87 50884 70100 65274
4/87 50848 69476 64152
5/87 51082 70074 64697
6/87 53197 73612 67330
[MOUNTAIN CHART]
7/87 55809 77345 70232
8/87 57394 80230 72472
9/87 56900 78473 71240
10/87 43608 61577 55681
11/87 40137 56503 52240
12/87 43621 60803 56106
1/88 44175 63357 57666
2/88 46741 66297 60393
3/88 45278 64255 59415
4/88 45672 64968 59801
5/88 45476 65520 59484
6/88 48082 68528 62030
7/88 46779 68267 61236
8/88 44922 65953 59675
9/88 47015 68763 61883
10/88 47372 70674 62885
11/88 46818 69664 61854
12/88 48040 70876 62967
1/89 50860 76064 66896
2/89 49690 74170 65826
3/89 50252 75898 67505
4/89 53352 79837 70954
5/89 56089 83055 73821
6/89 54440 82590 73223
7/89 59835 90039 79176
8/89 62007 91795 80641
9/89 61846 91418 80439
10/89 59830 89298 78380
11/89 60954 91110 80222
12/89 61899 93297 81192
1/90 57628 87037 75679
2/90 58959 88160 76671
3/90 61406 90496 78472
4/90 60381 88242 76652
5/90 67053 96828 83612
6/90 67274 96180 83721
7/90 65229 95872 82984
8/90 58517 87215 75963
9/90 54157 82976 71861
10/90 52603 82627 70970
11/90 56738 87957 75449
12/90 58775 90402 77546
1/91 62630 94326 81059
2/91 67910 101060 86936
3/91 69193 103506 89396
4/91 69242 103755 89333
5/91 72005 108216 93389
6/91 67677 103260 88822
7/91 71724 108072 93148
8/91 73768 110622 95756
9/91 72433 108775 94693
10/91 72817 110232 96142
11/91 70436 105801 92104
12/91 80551 117883 102549
1/92 80003 115691 102385
2/92 81099 117183 104105
3/92 76614 114910 101689
4/92 75518 118277 102025
5/92 75738 118856 103015
6/92 73390 117085 100511
7/92 75525 121862 103989
8/92 74158 119376 101649
9/92 74981 120785 103347
10/92 77058 121196 105135
11/92 80503 125316 110213
12/92 80712 126858 112108
1/93 79986 127923 113577
2/93 76434 129663 113191
3/93 77879 132399 116077
4/93 74195 129195 113454
5/93 77875 132644 117050
6/93 79519 133029 117331
7/93 79916 132497 116839
8/93 84120 137519 121512
9/93 85567 136460 122326
10/93 84848 139284 124320
11/93 80639 137961 122244
12/93 83639 139631 125948
1/94 88808 144378 130306
2/94 87334 140465 128143
3/94 81718 134355 122466
4/94 81718 136075 123642
5/94 79798 138293 124569
6/94 74180 134905 120994
7/94 75953 139330 124539
8/94 80829 145028 129919
9/94 80094 141489 127178
10/94 82529 144659 128589
11/94 78757 139393 123510
12/94 79458 141456 124770
1/95 78767 145120 126367
2/95 83004 150765 131194
3/95 86466 155213 134828
4/95 88696 159776 137350
5/95 91473 166151 141346
6/95 97940 170006 146082
7/95 105951 175633 152465
8/95 106640 176072 153792
9/95 110340 183502 158252
10/95 107571 182842 155957
11/95 109346 190850 162663
12/95 106732 194534 164973
1/96 108120 201148 169246
2/96 112531 203018 172715
3/96 112610 204967 174978
4/96 117103 207980 179212
5/96 120206 213325 182707
6/96 117910 214136 180770
7/96 109892 204671 171931
8/96 114717 208990 177673
9/96 122563 220735 186681
10/96 122649 226827 189015
11/96 129763 243953 201225
12/96 126558 239123 198770
1/97 133329 254044 208192
2/97 130155 256051 207567
3/97 122450 245553 199887
4/97 126050 260188 206803
5/97 137180 276085 220763
6/97 142146 288371 229085
7/97 156873 311296 246496
8/97 152072 293864 239717
9/97 159858 309938 252902
10/97 151466 299586 243393
11/97 151632 313457 247530
12/97 151269 318848 250971
1/98 150104 322356 252376
2/98 163613 345598 270396
3/98 169503 363292 283078
4/98 172792 366998 286135
5/98 166606 360685 278295
6/98 173453 375329 286115
7/98 170262 371351 280278
8/98 137827 317691 236639
[MOUNTAIN CHART]
9/98 148536 338055 247856
10/98 158087 365505 264759
11/98 170338 387654 278950
12/98 192193 409983 297863
1/99 202321 427120 307752
2/99 188321 413837 295904
3/99 205703 430390 305254
4/99 215638 447047 317709
5/99 207207 436496 314150
6/99 218728 460634 329544
7/99 211969 446309 322294
8/99 207306 444077 316686
9/99 208404 431909 308800
10/99 221325 459249 324487
11/99 238212 468572 334936
12/99 271943 496124 359788
1/00 265090 471219 349606
2/00 317658 462313 363066
3/00 326870 507527 386339
4/00 310396 492250 372005
5/00 287178 482159 359060
6/00 315896 494020 374212
7/00 309767 486314 368374
8/00 347590 516514 394345
9/00 333791 489242 376244
10/00 314297 487187 371993
11/00 259767 448797 340336
12/00 267092 450996 347789
1/01 268721 467006 359788
2/01 225995 424462 327407
3/01 197271 397593 307992
4/01 219444 428447 332939
5/01 219334 431317 335736
6/01 219444 420836 329961
7/01 213014 416712 323329
8/01 199467 390667 304996
9/01 172618 359141 273734
10/01 177987 366000 281180
11/01 192350 394072 303252
12/01 198563 397540 310349
1/02 191197 391736 303490
2/02 184658 384176 297997
3/02 199615 398621 310066
4/02 188995 374464 296888
5/02 185839 371731 294453
6/02 168315 345263 271398
7/02 147763 318367 249984
8/02 145887 320437 251559
9/02 131167 285637 228416
10/02 139929 310745 242874
11/02 148338 329017 257666
12/02 139809 309703 242850
1/03 135727 301620 238746
2/03 132808 297096 234615
3/03 133858 299978 235366
4/03 142157 324666 253678
5/03 153259 341743 270826
6/03 155359 346118 274861
7/03 160377 352209 280166
8/03 165990 359077 288767
9/03 162372 355271 284927
10/03 172877 375344 301908
11/03 176507 378647 306618
12/03 181061 398488 318852
1/04 185027 405820 326345
2/04 187950 411461 331404
3/04 189472 405248 327626
4/04 186782 398886 320713
5/04 188762 404350 324561
6/04 193556 412195 331734
7/04 183743 398551 318133
8/04 181648 400145 317910
9/04 186208 404467 324714
10/04 189485 410655 329617
11/04 199641 427246 346164
12/04 206190 441772 358348
1/05 201159 430993 350178
2/05 203854 440044 357252
3/05 200470 432255 351643
4/05 193694 424042 342078
5/05 201752 437527 356069
6/05 205020 438139 359986
7/05 210986 454438 375249
8/05 208180 450303 373523
9/05 211449 453950 376885
10/05 208763 446369 369083
11/05 217051 463242 383293
12/05 216704 463427 387778
1/06 225459 475708 402164
2/06 224512 476992 400556
3/06 229294 482907 409488
4/06 231037 489378 414566
5/06 220986 475333 400222
6/06 221340 475951 399061
7/06 220765 478902 394272
8/06 225092 490300 403616
9/06 230584 502949 412294
10/06 237017 519345 427632
11/06 241923 529213 437766
12/06 246471 536622 442669
1/07 250440 544725 452320
2/07 244379 534103 446349
3/07 246945 540085 451036
4/07 256872 564011 468581
5/07 266325 583695 486106
6/07 261771 574005 481877
7/07 248342 556211 466457
8/07 249037 564554 469489
9/07 257106 585669 485874
10/07 261888 594981 495688
11/07 246227 570110 473432
12/07 245513 566177 469124
1/08 231028 532206 442759
2/08 223312 514909 431115
3/08 215139 512695 425036
4/08 223314 537664 446415
5/08 227981 544653 457352
6/08 214325 498793 420901
7/08 212096 494603 414756
8/08 212457 501775 418696
9/08 189086 457117 372012
10/08 157679 380367 301739
11/08 146342 353057 275397
12/08 150974 356598 283915
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/08, including maximum applicable sales charges
CLASS A SHARES
Inception (12/4/67) 6.83%
10 Years -2.95
5 Years -4.69
1 Year -42.00
CLASS B SHARES
Inception (9/1/93) 3.41%
10 Years -2.99
5 Years -4.71
1 Year -42.13
CLASS C SHARES
Inception (8/4/97) -1.12%
10 Years -3.16
5 Years -4.35
1 Year -39.73
CLASS Y SHARES
10 Years -2.40%
5 Years -3.61
1 Year -38.63
CLASS Y SHARES' INCEPTION DATE IS OCTOBER 3, 2008; RETURNS SINCE THAT DATE ARE
ACTUAL RETURNS. ALL OTHER RETURNS ARE BLENDED RETURNS OF ACTUAL CLASS Y SHARE
PERFORMANCE AND RESTATED CLASS A SHARE PERFORMANCE (FOR PERIODS PRIOR TO THE
INCEPTION DATE OF CLASS Y SHARES) AT NET ASSET VALUE. THE RESTATED CLASS A SHARE
PERFORMANCE REFLECTS THE RULE 12B-1 FEES APPLICABLE TO CLASS A SHARES AS WELL AS
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RECEIVED BY CLASS A SHARES. CLASS A
SHARES' INCEPTION DATE IS DECEMBER 4, 1967.
THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT GUARANTEE
COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE
VISIT INVESCOAIM.COM FOR THE MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE
FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE AND THE
EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU
SELL SHARES.
THE NET ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT
FUND PROSPECTUS AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C AND
CLASS Y SHARES WAS 1.34%, 2.09%, 2.09% AND 1.09%, RESPECTIVELY.1 THE TOTAL
ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT FUND PROSPECTUS
AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C AND CLASS Y SHARES
WAS 1.35%, 2.10%, 2.10% AND 1.10%, RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
ABOVE MAY VARY FROM THE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS OF THIS
REPORT THAT ARE BASED ON EXPENSES INCURRED DURING THE PERIOD COVERED BY THIS
REPORT.
CLASS A SHARE PERFORMANCE REFLECTS THE MAXIMUM 5.50% SALES CHARGE, AND
CLASS B AND CLASS C SHARE PERFORMANCE REFLECTS THE APPLICABLE CONTINGENT
DEFERRED SALES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CDSC ON CLASS B SHARES
DECLINES FROM 5% BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE
SEVENTH YEAR. THE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST YEAR AFTER
PURCHASE. CLASS Y SHARES DO NOT HAVE A FRONT-END SALES CHARGE OR A CDSC;
THEREFORE, PERFORMANCE IS AT NET ASSET VALUE. CLASS Y SHARES DO NOT HAVE A
FRONT-END SALES CHARGE OR A CDSC; THEREFORE, PERFORMANCE IS AT NET ASSET VALUE.
THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER PRIMARILY DUE TO
DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES.
1 Total annual operating expenses less any contractual fee waivers and/or
expense reimbursements by the advisor in effect through at least June 30,
2009. See current prospectus for more information.
7 AIM SELECT EQUITY FUND
AIM SELECT EQUITY FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
# Unless otherwise stated, information presented in this report is as of
December 31, 2008, and is based on total net assets.
# Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES
# Effective September 30, 2003, only previously established qualified plans
are eligible to purchase Class B shares of any AIM fund.
# Class Y shares are available to only certain investors. Please see the
prospectus for more information.
PRINCIPAL RISKS OF INVESTING IN THE FUND
# Since a large percentage of the Fund's assets may be invested in securities
of a limited number of companies, each investment has a greater effect on
the Fund's overall performance, and any change in the value of those
securities could significantly affect the value of your investment in the
Fund.
# Credit risk is the risk of loss on an investment due to the deterioration
of an issuer's financial health. Such a deterioration of financial health
may result in a reduction of the credit rating of the issuer's securities
and may lead to the issuer's inability to honor its contractual
obligations, including making timely payment of interest and principal.
# Interest rate risk refers to the risk that bond prices generally fall as
interest rates rise and vice versa.
# There is no guarantee that the investment techniques and risk analysis used
by the Fund's portfolio managers will produce the desired results.
# The Fund may use enhanced investment techniques such as leveraging and
derivatives. Leveraging entails risks such as magnifying changes in the
value of the portfolio's securities. Derivatives are subject to
counterparty risk--the risk that the other party will not complete the
transaction with the Fund.
# Prices of equity securities change in response to many factors, including
the historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions
and market liquidity.
# Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, relative lack of information, relatively
low market liquidity, and the potential lack of strict financial and
accounting controls and standards.
# The prices of securities held by the Fund may decline in response to market
risks.
# The Fund may engage in active and frequent trading of portfolio securities
to achieve its investment objective. If a fund does trade in this way, it
may incur increased costs, which can lower the actual return of the fund.
Active trading may also increase short term gains and losses, which may
affect taxes that must be paid.
ABOUT INDEXES USED IN 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, 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 approximately 98% of the investable U.S. equity market.
The Russell 3000 Index is a trademark/service mark of the Frank Russell
Company. Russell--REGISTERED TRADEMARK-- is a trademark of the Frank
Russell Company.
# The LIPPER MULTI-CAP CORE FUNDS INDEX is an equally weighted representation
of the largest funds in the Lipper Multi-Cap Core Funds category. These
funds typically have an average price-to-earnings ratio, price-to-book
ratio, and three-year sales-per-share growth value, compared to the S&P
Composite 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
OTHER INFORMATION
# The Chartered Financial Analyst--REGISTERED TRADEMARK-- (CFA--REGISTERED
TRADEMARK--) designation is a globally recognized standard for measuring
the competence and integrity of investment professionals.
# The returns shown in management's discussion of Fund performance are based
on net asset values calculated for shareholder transactions. Generally
accepted accounting principles require adjustments to be made to the net
assets of the Fund at period end for financial reporting purposes, and as
such, the net asset values for shareholder transactions and the returns
based on those net asset values may differ from the net asset values and
returns reported in the Financial Highlights.
# Industry classifications used in this report are generally according to the
Global Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of MSCI Inc. and Standard & Poor's.
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 NASDAQ SYMBOLS
Class A Shares AGWFX
Class B Shares AGWBX
Class C Shares AGWCX
Class Y Shares AGWYX
8 AIM SELECT EQUITY FUND
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-99.13%
AEROSPACE & DEFENSE-0.08%
L-3 Communications Holdings, Inc. 2,100 $ 154,938
==============================================================================
AIRLINES-1.01%
Southwest Airlines Co. 221,600 1,910,192
==============================================================================
APPAREL RETAIL-6.43%
Aeropostale, Inc.(b) 153,100 2,464,910
- ------------------------------------------------------------------------------
Children's Place Retail Stores, Inc. (The)(b) 68,900 1,493,752
- ------------------------------------------------------------------------------
Foot Locker, Inc. 90,800 666,472
- ------------------------------------------------------------------------------
Gap, Inc. (The) 268,200 3,591,198
- ------------------------------------------------------------------------------
Ross Stores, Inc. 67,600 2,009,748
- ------------------------------------------------------------------------------
TJX Cos., Inc. (The) 94,000 1,933,580
==============================================================================
12,159,660
==============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.22%
Jones Apparel Group, Inc. 71,500 418,990
==============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.54%
Northern Trust Corp. 19,500 1,016,730
==============================================================================
BIOTECHNOLOGY-4.42%
Amgen Inc.(b) 67,400 3,892,350
- ------------------------------------------------------------------------------
Biogen Idec Inc.(b) 79,000 3,762,770
- ------------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc.(b) 29,000 700,640
==============================================================================
8,355,760
==============================================================================
CABLE & SATELLITE-1.27%
DIRECTV Group, Inc. (The)(b) 104,800 2,400,968
==============================================================================
COAL & CONSUMABLE FUELS-0.92%
Walter Industries, Inc. 99,400 1,740,494
==============================================================================
COMMUNICATIONS EQUIPMENT-0.74%
EchoStar Corp.-Class A(b) 18,600 276,582
- ------------------------------------------------------------------------------
F5 Networks, Inc.(b) 10,600 242,316
- ------------------------------------------------------------------------------
InterDigital, Inc.(b) 32,300 888,250
==============================================================================
1,407,148
==============================================================================
COMPUTER & ELECTRONICS RETAIL-0.95%
RadioShack Corp. 150,000 1,791,000
==============================================================================
COMPUTER HARDWARE-3.34%
Hewlett-Packard Co. 37,100 1,346,359
- ------------------------------------------------------------------------------
International Business Machines Corp. 59,200 4,982,272
==============================================================================
6,328,631
==============================================================================
COMPUTER STORAGE & PERIPHERALS-2.67%
Lexmark International, Inc.-Class A(b) 49,900 1,342,310
- ------------------------------------------------------------------------------
QLogic Corp.(b) 276,600 3,717,504
==============================================================================
5,059,814
==============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.05%
Hewitt Associates, Inc.-Class A(b) 32,800 930,864
- ------------------------------------------------------------------------------
MasterCard, Inc.-Class A 20,600 2,944,358
==============================================================================
3,875,222
==============================================================================
DIVERSIFIED METALS & MINING-0.11%
Compass Minerals International, Inc. 3,500 205,310
==============================================================================
EDUCATION SERVICES-2.10%
Apollo Group Inc.-Class A(b) 51,900 3,976,578
==============================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.61%
GrafTech International Ltd.(b) 139,600 1,161,472
==============================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-2.56%
CF Industries Holdings, Inc. 56,900 2,797,204
- ------------------------------------------------------------------------------
Mosaic Co. (The) 23,700 820,020
- ------------------------------------------------------------------------------
Terra Industries Inc. 73,000 1,216,910
==============================================================================
4,834,134
==============================================================================
GENERAL MERCHANDISE STORES-1.24%
Big Lots, Inc.(b) 128,100 1,856,169
- ------------------------------------------------------------------------------
Family Dollar Stores, Inc. 19,000 495,330
==============================================================================
2,351,499
==============================================================================
HEALTH CARE SERVICES-1.61%
Express Scripts, Inc.(b) 55,400 3,045,892
==============================================================================
HOME ENTERTAINMENT SOFTWARE-0.24%
Take-Two Interactive Software, Inc.(b) 61,000 461,160
==============================================================================
HOMEBUILDING-1.89%
D.R. Horton, Inc. 447,700 3,165,239
- ------------------------------------------------------------------------------
Pulte Homes, Inc. 37,000 404,410
==============================================================================
3,569,649
==============================================================================
HOMEFURNISHING RETAIL-0.10%
Rent-A-Center, Inc.(b) 10,800 190,620
==============================================================================
HOUSEHOLD PRODUCTS-2.03%
Procter & Gamble Co. (The) 62,200 3,845,204
==============================================================================
HOUSEWARES & SPECIALTIES-0.37%
American Greetings Corp.-Class A 92,100 697,197
==============================================================================
HYPERMARKETS & SUPER CENTERS-3.07%
Wal-Mart Stores, Inc. 103,700 5,813,422
==============================================================================
INDUSTRIAL CONGLOMERATES-4.72%
3M Co. 69,500 3,999,030
- ------------------------------------------------------------------------------
General Electric Co. 304,400 4,931,280
==============================================================================
8,930,310
==============================================================================
INDUSTRIAL MACHINERY-0.08%
John Bean Technologies Corp. 19,400 158,498
==============================================================================
INSURANCE BROKERS-1.51%
Marsh & McLennan Cos., Inc. 117,700 2,856,579
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM SELECT EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
INTEGRATED OIL & GAS-11.07%
Chevron Corp. 8,900 $ 658,333
- ------------------------------------------------------------------------------
ConocoPhillips 84,100 4,356,380
- ------------------------------------------------------------------------------
Exxon Mobil Corp. 146,800 11,719,044
- ------------------------------------------------------------------------------
Occidental Petroleum Corp. 70,100 4,205,299
==============================================================================
20,939,056
==============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-4.34%
AT&T Inc. 91,000 2,593,500
- ------------------------------------------------------------------------------
Verizon Communications Inc. 165,600 5,613,840
==============================================================================
8,207,340
==============================================================================
INTERNET RETAIL-0.37%
Netflix Inc.(b) 23,700 708,393
==============================================================================
INTERNET SOFTWARE & SERVICES-3.29%
eBay Inc.(b) 231,100 3,226,156
- ------------------------------------------------------------------------------
Sohu.com Inc.(b) 63,500 3,006,090
==============================================================================
6,232,246
==============================================================================
LEISURE PRODUCTS-0.30%
Polaris Industries Inc. 19,500 558,675
==============================================================================
LIFE & HEALTH INSURANCE-1.84%
Aflac, Inc. 75,900 3,479,256
==============================================================================
MULTI-LINE INSURANCE-0.04%
American International Group, Inc.(b) 45,500 71,435
==============================================================================
OIL & GAS STORAGE & TRANSPORTATION-1.36%
Frontline Ltd. (Bermuda) 86,800 2,570,148
==============================================================================
PERSONAL PRODUCTS-0.04%
NBTY, Inc.(b) 4,400 68,860
==============================================================================
PHARMACEUTICALS-10.54%
Forest Laboratories, Inc.(b) 59,800 1,523,106
- ------------------------------------------------------------------------------
Johnson & Johnson 10,500 628,215
- ------------------------------------------------------------------------------
Lilly (Eli) and Co. 100,200 4,035,054
- ------------------------------------------------------------------------------
Merck & Co. Inc. 167,000 5,076,800
- ------------------------------------------------------------------------------
Perrigo Co. 80,700 2,607,417
- ------------------------------------------------------------------------------
Pfizer Inc. 343,100 6,076,301
==============================================================================
19,946,893
==============================================================================
PROPERTY & CASUALTY INSURANCE-4.03%
Allstate Corp. (The) 10,200 334,152
- ------------------------------------------------------------------------------
Aspen Insurance Holdings Ltd. (Bermuda) 176,700 4,284,975
- ------------------------------------------------------------------------------
Axis Capital Holdings Ltd. 34,500 1,004,640
- ------------------------------------------------------------------------------
Chubb Corp. (The) 33,700 1,718,700
- ------------------------------------------------------------------------------
Travelers Cos., Inc. (The) 6,400 289,280
==============================================================================
7,631,747
==============================================================================
REINSURANCE-4.92%
Endurance Specialty Holdings Ltd. 2,700 82,431
- ------------------------------------------------------------------------------
IPC Holdings, Ltd. 126,700 3,788,330
- ------------------------------------------------------------------------------
Platinum Underwriters Holdings, Ltd. (Bermuda) 115,900 4,181,672
- ------------------------------------------------------------------------------
RenaissanceRe Holdings Ltd. 24,500 1,263,220
==============================================================================
9,315,653
==============================================================================
SEMICONDUCTORS-2.37%
Intel Corp. 306,100 4,487,426
==============================================================================
SOFT DRINKS-0.14%
Dr. Pepper Snapple Group, Inc.(b) 16,600 269,750
==============================================================================
SPECIALIZED REIT'S-1.63%
Public Storage 38,800 3,084,600
==============================================================================
SYSTEMS SOFTWARE-4.78%
Microsoft Corp. 303,400 5,898,096
- ------------------------------------------------------------------------------
Symantec Corp.(b) 232,200 3,139,344
==============================================================================
9,037,440
==============================================================================
TOBACCO-1.08%
Altria Group, Inc. 17,400 262,044
- ------------------------------------------------------------------------------
Philip Morris International Inc. 40,900 1,779,559
==============================================================================
2,041,603
==============================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.11%
USA Mobility, Inc.(b) 17,600 203,632
==============================================================================
Total Common Stocks & Other Equity Interests
(Cost $238,800,004) 187,571,224
==============================================================================
<Caption>
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS-0.34%
0.04%, 03/19/09(c)(d) (Cost $649,944) $650,000 649,929
==============================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-0.78%
Liquid Assets Portfolio-Institutional Class(e) 734,853 734,853
- ------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 734,853 734,853
==============================================================================
Total Money Market Funds (Cost $1,469,706) 1,469,706
==============================================================================
TOTAL INVESTMENTS-100.25% (Cost $240,919,654) 189,690,859
==============================================================================
OTHER ASSETS LESS LIABILITIES-(0.25)% (473,118)
==============================================================================
NET ASSETS-100.00% $189,217,741
==============================================================================
</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) Non-income producing security.
(c) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(d) All or a portion of the value was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1J and Note 7.
(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.
10 AIM SELECT EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
<Table>
ASSETS:
Investments, at value (Cost $239,449,948) $188,221,153
- --------------------------------------------------------------------------------
Investments in affiliated money market funds, at value and cost 1,469,706
================================================================================
Total investments (Cost $240,919,654) 189,690,859
================================================================================
Receivables for:
Variation margin 23,205
- --------------------------------------------------------------------------------
Fund shares sold 15,031
- --------------------------------------------------------------------------------
Dividends 289,645
- --------------------------------------------------------------------------------
Investment for trustee deferred compensation and retirement plans 82,043
- --------------------------------------------------------------------------------
Other assets 24,759
================================================================================
Total assets 190,125,542
================================================================================
LIABILITIES:
Payables for:
Fund shares reacquired 493,070
- --------------------------------------------------------------------------------
Accrued fees to affiliates 172,331
- --------------------------------------------------------------------------------
Accrued other operating expenses 88,164
- --------------------------------------------------------------------------------
Trustee deferred compensation and retirement plans 154,236
================================================================================
Total liabilities 907,801
================================================================================
Net assets applicable to shares outstanding $189,217,741
================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $324,954,096
- --------------------------------------------------------------------------------
Undistributed net investment income 598,555
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) (85,157,010)
- --------------------------------------------------------------------------------
Unrealized appreciation (depreciation) (51,177,900)
================================================================================
$189,217,741
================================================================================
NET ASSETS:
Class A $152,478,452
================================================================================
Class B $ 23,158,783
================================================================================
Class C $ 12,482,989
================================================================================
Class Y $ 1,097,517
================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 11,827,415
================================================================================
Class B 2,070,253
================================================================================
Class C 1,118,421
================================================================================
Class Y 85,103
================================================================================
Class A:
Net asset value per share $ 12.89
- --------------------------------------------------------------------------------
Maximum offering price per share
(Net asset value of $12.89 divided by 94.50%) $ 13.64
================================================================================
Class B:
Net asset value and offering price per share $ 11.19
================================================================================
Class C:
Net asset value and offering price per share $ 11.16
================================================================================
Class Y:
Net asset value and offering price per share $ 12.90
================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM SELECT EQUITY FUND
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $1,973) $ 5,389,248
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $94,332) 196,730
- ------------------------------------------------------------------------------------------------
Interest 8,641
================================================================================================
Total investment income 5,594,619
================================================================================================
EXPENSES:
Advisory fees 2,050,238
- ------------------------------------------------------------------------------------------------
Administrative services fees 88,166
- ------------------------------------------------------------------------------------------------
Custodian fees 18,355
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 536,135
- ------------------------------------------------------------------------------------------------
Class B 518,008
- ------------------------------------------------------------------------------------------------
Class C 195,192
- ------------------------------------------------------------------------------------------------
Transfer agent fees 1,094,459
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 24,193
- ------------------------------------------------------------------------------------------------
Other 347,089
================================================================================================
Total expenses 4,871,835
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (30,664)
================================================================================================
Net expenses 4,841,171
================================================================================================
Net investment income 753,448
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (68,968,320)
- ------------------------------------------------------------------------------------------------
Futures contracts (1,254,965)
================================================================================================
(70,223,285)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (65,218,668)
- ------------------------------------------------------------------------------------------------
Futures contracts 50,895
================================================================================================
(65,167,773)
================================================================================================
Net realized and unrealized gain (loss) (135,391,058)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(134,637,610)
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM SELECT EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 753,448 $ (131,194)
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (70,223,285) 67,693,157
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (65,167,773) (73,002,025)
==========================================================================================================
Net increase (decrease) in net assets resulting from operations (134,637,610) (5,440,062)
==========================================================================================================
Share transactions-net:
Class A (17,437,958) 14,471,482
- ----------------------------------------------------------------------------------------------------------
Class B (42,884,430) 5,977,756
- ----------------------------------------------------------------------------------------------------------
Class C (5,709,230) 8,282,959
- ----------------------------------------------------------------------------------------------------------
Class Y 1,291,209 --
==========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (64,740,409) 28,732,197
==========================================================================================================
Net increase (decrease) in net assets (199,378,019) 23,292,135
==========================================================================================================
NET ASSETS:
Beginning of year 388,595,760 365,303,625
==========================================================================================================
End of year (includes undistributed net investment income of $598,555
and $(188,520), respectively) $ 189,217,741 $388,595,760
==========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM SELECT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
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 assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class.
The Fund's investment objective is long-term growth of capital.
The Fund currently consists of four different classes of shares: Class A,
Class B, Class C and Class Y. 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 Y 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.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close
of the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on
that day. Securities traded in the over-the-counter market are valued
based on 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting
purposes.
14 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 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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. 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.
15 AIM SELECT EQUITY FUND
K. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
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, 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 (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$5,170.
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 year
ended December 31, 2008, Invesco reimbursed expenses of the Fund in the amount
of $2,667.
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 year ended December 31, 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 year
ended December 31, 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, Class C and Class Y 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
year ended December 31, 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 year ended December 31, 2008, IADI
advised the Fund that IADI retained $14,626 in front-end sales commissions from
the sale of Class A shares and $242, $47,344 and $989 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 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. 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 significant
unobservable inputs (Level 3) generally when market prices are not readily
available or are unreliable. Based on the valuation inputs the securities or
other investments are tiered into one of three levels. Changes in valuation
methods may result in transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using 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
16 AIM SELECT EQUITY FUND
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 valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN OTHER
INPUT LEVEL SECURITIES INVESTMENTS*
- ---------------------------------------------------------------
Level 1 $189,040,930 $50,895
- ---------------------------------------------------------------
Level 2 649,929 --
- ---------------------------------------------------------------
Level 3 -- --
===============================================================
$189,690,859 $50,895
===============================================================
</Table>
* Other investments include futures contracts, which are included at unrealized
appreciation/(depreciation).
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the year
ended December 31, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $22,827.
NOTE 5--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the year ended December 31, 2008, the Fund paid legal fees of $3,937
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, 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 AT PERIOD-END
<Table>
<Caption>
OPEN FUTURES CONTRACTS
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT VALUE APPRECIATION
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 E-Mini Futures 39 January-2009/Long $1,755,195 $50,895
========================================================================================================================
</Table>
17 AIM SELECT EQUITY FUND
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
There were no ordinary income or long-term capital gain distributions paid
during the years ended December 31, 2008 and 2007.
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 786,181
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (56,035,045)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (187,626)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (65,722,140)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (14,577,725)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 324,954,096
================================================================================================
Total net assets $189,217,741
================================================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
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 to utilizing
$62,885,565 of capital loss carryforward in the fiscal year ending December 31,
2009.
The Fund has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2009 $ 6,596,274
- -----------------------------------------------------------------------------------------------
December 31, 2010 7,313,689
- -----------------------------------------------------------------------------------------------
December 31, 2011 210,540
- -----------------------------------------------------------------------------------------------
December 31,2016 51,601,637
===============================================================================================
Total capital loss carryforward $65,722,140
===============================================================================================
</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 year ended December 31, 2008 was $450,473,192 and
$510,256,821, 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 $ 8,161,056
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (64,196,101)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(56,035,045)
================================================================================================
Cost of investments for tax purposes is $245,725,904.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of proxy costs and
partnership transactions on December 31, 2008, undistributed net investment
income was increased by $33,627, undistributed net realized gain (loss) was
increased by $43,628 and shares of beneficial interest decreased by $77,255.
This reclassification had no effect on the net assets of the Fund.
18 AIM SELECT EQUITY FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 742,688 $ 11,278,181 467,843 $ 10,015,119
- ------------------------------------------------------------------------------------------------------------------------
Class B 238,218 3,322,954 207,196 3,997,298
- ------------------------------------------------------------------------------------------------------------------------
Class C 81,147 1,224,729 124,883 2,407,197
- ------------------------------------------------------------------------------------------------------------------------
Class Y(b) 92,791 1,390,408 -- --
========================================================================================================================
Issued in connection with acquisitions:(c)
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 1,834,908 32,223,120 705,747 15,163,646
- ------------------------------------------------------------------------------------------------------------------------
Class B (2,129,999) (32,223,120) (805,162) (15,163,646)
========================================================================================================================
Reacquired:
Class A(b) (3,684,529) (60,939,259) (3,638,205) (78,648,128)
- ------------------------------------------------------------------------------------------------------------------------
Class B (903,657) (13,984,264) (1,595,873) (30,381,893)
- ------------------------------------------------------------------------------------------------------------------------
Class C (456,913) (6,933,959) (586,495) (11,114,180)
- ------------------------------------------------------------------------------------------------------------------------
Class Y(b) (7,688) (99,199) -- --
========================================================================================================================
Net increase (decrease) in share activity (4,193,034) $(64,740,409) 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) Effective upon the commencement date of Class Y shares, October 3, 2008,
the following shares were converted from Class A and Investor Class shares
into Class Y shares of the Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
---------------------------------------------------------------------------------------------------
Class Y 91,519 $ 1,372,782
---------------------------------------------------------------------------------------------------
Class A (91,519) (1,372,782)
===================================================================================================
</Table>
(c) As of the open of business on April 23, 2007, the Fund acquired all the
net assets of AIM Opportunities II Fund and AIM Opportunities III Fund
pursuant to plans 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.
19 AIM SELECT EQUITY FUND
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET NET ON SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM NET ASSET NET ASSETS,
BEGINNING INCOME REALIZED AND INVESTMENT VALUE, END TOTAL END OF PERIOD
OF PERIOD (LOSS)(a) UNREALIZED) OPERATIONS OF PERIOD RETURN(b) (000S OMITTED)
- -----------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $21.02 $ 0.08 $(8.21) $(8.13) $12.89 (38.68)% $152,478
Year ended 12/31/07 21.10 0.04 (0.12) (0.08) 21.02 (0.38) 271,828
Year ended 12/31/06 18.55 0.03 2.52 2.55 21.10 13.75 259,817
Year ended 12/31/05 17.65 (0.04) 0.94 0.90 18.55 5.10 259,946
Year ended 12/31/04 15.50 (0.06)(e) 2.21 2.15 17.65 13.87 292,681
- -----------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 18.37 (0.05) (7.13) (7.18) 11.19 (39.08) 23,159
Year ended 12/31/07 18.58 (0.11) (0.10) (0.21) 18.37 (1.13) 89,372
Year ended 12/31/06 16.46 (0.11) 2.23 2.12 18.58 12.88 85,521
Year ended 12/31/05 15.78 (0.15) 0.83 0.68 16.46 4.31 106,097
Year ended 12/31/04 13.96 (0.17)(e) 1.99 1.82 15.78 13.04 148,300
- -----------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 18.33 (0.05) (7.12) (7.17) 11.16 (39.12) 12,483
Year ended 12/31/07 18.55 (0.11) (0.11) (0.22) 18.33 (1.19) 27,396
Year ended 12/31/06 16.43 (0.11) 2.23 2.12 18.55 12.90 19,966
Year ended 12/31/05 15.75 (0.15) 0.83 0.68 16.43 4.32 22,860
Year ended 12/31/04 13.94 (0.17)(e) 1.98 1.81 15.75 12.98 29,710
- -----------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(f) 15.00 0.01 (2.11) (2.10) 12.90 (14.00) 1,098
_______________________________________________________________________________________________________________________
=======================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF
NET ASSETS ASSETS WITHOUT NET INVESTMENT
WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
ABSORBED ABSORBED NET ASSETS TURNOVER(c)
- ----------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 1.52%(d) 1.52%(d) 0.44%(d) 158%
Year ended 12/31/07 1.33 1.34 0.19 129
Year ended 12/31/06 1.40 1.41 0.14 72
Year ended 12/31/05 1.39 1.39 (0.21) 91
Year ended 12/31/04 1.38 1.40 (0.40)(e) 38
- ----------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 2.27(d) 2.27(d) (0.31)(d) 158
Year ended 12/31/07 2.08 2.09 (0.56) 129
Year ended 12/31/06 2.15 2.16 (0.61) 72
Year ended 12/31/05 2.14 2.14 (0.96) 91
Year ended 12/31/04 2.13 2.15 (1.15)(e) 38
- ----------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 2.27(d) 2.27(d) (0.31)(d) 158
Year ended 12/31/07 2.08 2.09 (0.56) 129
Year ended 12/31/06 2.15 2.16 (0.61) 72
Year ended 12/31/05 2.14 2.14 (0.96) 91
Year ended 12/31/04 2.13 2.15 (1.15)(e) 38
- ----------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(f) 1.50(d)(g) 1.50(d)(g) 0.46(d)(g) 158
______________________________________________________________________________________________
==============================================================================================
</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, if applicable.
(c) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable. 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.
(d) Ratios are based on average daily net assets (000's omitted) of $214,454,
$51,801, $19,519 and $1,111 for Class A, Class B, Class C and Class Y
shares, respectively.
(e) 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)%; $(0.19) and (1.26)% and $(0.19) and (1.26)% for Class
A, Class B and Class C shares, respectively.
(f) Commencement date was October 3, 2008.
(g) Annualized.
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
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 alleging
that the defendants permitted improper market timing and related activity in the
AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the 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.
All lawsuits based on allegations of market timing, late trading and related
issues were 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
20 AIM SELECT EQUITY FUND
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
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.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
21 AIM SELECT EQUITY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Funds Group
and Shareholders of AIM Select Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Select Equity Fund (one of the
funds constituting AIM Funds Group, hereafter referred to as the "Fund") at
December 31, 2008, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
February 17, 2009
Houston, Texas
22 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. With
the exception of the actual ending account value and expenses of the Class Y
shares, the example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period July 1, 2008, through
December 31, 2008. The actual ending account and expenses of the Class Y shares
in the below example are based on an investment of $1,000 invested as of close
of business October 3, 2008 (the date the share class commenced operations) and
held through December 31, 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 (as of close of business
October 31, 2008 through December 31, 2008 for the Class Y shares). Because the
actual ending account value and expense information may not provide a meaningful
comparison to mutual funds that provide such information for a full six month
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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $703.00 $ 7.06 $1,016.84 $ 8.36 1.65%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 700.20 10.26 1,013.07 12.14 2.40
- ---------------------------------------------------------------------------------------------------
C 1,000.00 699.70 10.25 1,013.07 12.14 2.40
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 860.00 3.43 1,017.60 7.61 1.50
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 2008 (as of close of
business October 3, 2008, through December 31, 2008 for the Class Y shares),
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
184/366 to reflect the most recent fiscal half year. For the Class Y shares
actual expenses are equal to the annualized expense ratio indicated above
multiplied by the average account value over the period, multiplied by 90
(as of close of business October 3, 2008, through December 31, 2008)/366.
Because the Class Y shares have not been in existence for a full six month
period, the actual ending account value and expense information shown may
not provide a meaningful comparison to fund expense information of classes
that show such data for a full six month period and, because the actual
ending account value and expense information in the expense example covers a
short time period, return and expense data may not be indicative of return
and expense data for longer time periods.
(3) Hypothetical expenses are equal to the annualized expense ratio indicated
above multiplied by the average account value over the period, multiplied by
184/366 to reflect a one-half year period. The hypothetical ending account
value and expenses may be used to compare ongoing costs of investing in
Class Y shares of the Fund and other funds because such data is based on a
full six month period.
23 AIM SELECT EQUITY FUND
TAX INFORMATION
ADDITIONAL NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended March 31, 2008, June 30, 2008, September 30, 2008 and
December 31, 2008 were 4.04%, 4.25%, 4.93%, and 5.57%, respectively.
24 AIM SELECT EQUITY FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Funds Group (the "Trust"), is 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 104
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Each officer serves for a one year term or until their successors are
elected and qualified. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); Chairman, Investment
Company Institute; President, Co-Chief Executive Officer,
Co-President, Chief Operating Officer and Chief Financial
Officer, Franklin Resources, Inc. (global investment
management organization)
- --------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim Capital Management, Inc.
(registered investment advisor); Director and President,
INVESCO Funds Group, Inc. (registered investment advisor and
register transfer agent) and AIM GP Canada Inc. (general
partner for a limited partnership); Director, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco Aim Investment Services, Inc. (registered
transfer agent) and INVESCO Distributors, Inc. (registered
broker dealer); Director, President and Chairman, IVZ Callco
Inc. (holding company), INVESCO Inc. (holding company) and
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, AIM
Trimark Corporate Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund company); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
Director and Chairman, Fund Management Company (registered
broker dealer); President and Principal Executive Officer,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments Trust and
Tax-Free Investments Trust only); President, AIM Trimark
Global Fund Inc. and AIM Trimark Canada Fund Inc.; and
Director, Trimark Trust (federally regulated Canadian Trust
Company)
- --------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1987 Chairman, Crockett Technology Associates (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association/Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (property casualty company)
Formerly: Director, CompuDyne Corporation (provider of
product and services to the public security market);
Director, President and Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice President, AB Volvo;
Director of various public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (government affairs company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer, Texana Timber LP
(sustainable forestry company); and Discovery Global
Education Fund (non-profit)
- --------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan is considered an interested person of the Trust because he is
an officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
25 AIM SELECT EQUITY FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
Formerly: Director of Compliance and Assistant General Counsel,
ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General
Counsel and Director of Compliance, ALPS Mutual Funds, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim Capital Management, Inc.;
Chief Operating Officer, Senior Vice President, General Counsel
and Secretary, Liberty Ridge Capital, Inc. (an investment
adviser); Vice President and Secretary, PBHG Funds (an investment
company); Vice President and Secretary, PBHG Insurance Series
Fund (an investment company); Chief Operating Officer, General
Counsel and Secretary, Old Mutual Investment Partners (a broker-
dealer); General Counsel and Secretary, Old Mutual Fund Services
(an administrator); General Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder servicing center); Executive
Vice President, General Counsel and Secretary, Old Mutual
Capital, Inc. (an investment adviser); and Vice President and
Secretary, Old Mutual Advisors Funds (an investment company)
- --------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited,
IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO North American Holdings,
Inc.; and Vice President, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1992 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust only)
- --------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco Aim Private Asset Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering Compliance Officer, Fund
Management Company; and Manager of the Fraud Prevention
Department, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, The AIM Family of Funds--Registered
Trademark--, Invesco Global Asset Management (N.A.), Inc.
(registered investment advisor), Invesco Institutional (N.A.),
Inc., (registered investment advisor), INVESCO Private Capital
Investments, Inc. (holding company), Invesco Private Capital,
Inc. (registered investment advisor) and Invesco Senior Secured
Management, Inc. (registered investment advisor); and Vice
President, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
26 AIM SELECT EQUITY FUND
[GO PAPERLESS GRAPHIC]
GO PAPERLESS WITH EDELIVERY
Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund
reports and prospectuses with a service that's all about eeees:
# ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of trees used to
produce paper.
# ECONOMICAL. Help reduce your fund's printing and delivery expenses and put
more capital back in your fund's returns.
# EFFICIENT. Stop waiting for regular mail. Your documents will be sent via
email as soon as they're available.
# EASY. Download, save and print files using your home computer with a few
clicks of your mouse.
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 website 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 email
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 website, invescoaim.com. On the home page, scroll
down and click on Proxy Policy. The information is also available on the SEC
website, 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
website. 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 website, sec.gov.
If used after April 20, 2009, 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.
Please refer to each fund's prospectus for information on the fund's
subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the
retail mutual funds, exchange-traded funds and institutional money market funds
and the subdistributor for the STIC Global Funds represented by Invesco Aim. All
entities are indirect, wholly owned subsidiaries of Invesco Ltd.
It is anticipated that the businesses of the affiliated investment adviser
firms -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.,
Invesco Private Asset Management, Inc. and Invesco Global Asset Management
(N.A.), Inc. -- will be combined into Invesco Institutional (N.A.), Inc., and
the consolidated adviser firm will be renamed Invesco Advisers, Inc., on or
about Aug. 1, 2009. Additional information will be posted at invescoaim.com on
or about Aug. 1, 2009.
[INVESCO AIM LOGO]
- SERVICE MARK -
invescoaim.com SEQ-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO]
- -- SERVICE MARK --
AIM SMALL CAP EQUITY FUND
Annual Report to Shareholders # December 31, 2008
[MOUNTAIN GRAPHIC]
2 Letters to Shareholders
4 Performance Summary
4 Management Discussion
6 Long-Term Fund Performance
8 Supplemental Information
9 Schedule of Investments
12 Financial Statements
15 Notes to Financial Statements
21 Financial Highlights
23 Auditor's Report
24 Fund Expenses
25 Tax Information
26 Trustees and Officers
[PHOTO OF TAYLOR]
Philip Taylor
Dear Shareholder:
In previous reports, I've talked with you about short-term market volatility.
I'd like to take this opportunity to update you on market developments during
calendar year 2008 and provide you with some perspective and encouragement.
MARKET OVERVIEW
At the start of 2008, we saw warning signs of increasing economic ills -- a
weakening housing market, rising inflation and slowing job growth, among others.
In response, the U.S. Federal Reserve Board (the Fed) cut short-term interest
rate targets throughout 2008 in an effort to stimulate economic growth. The Fed
reduced its short-term interest rate target from 4.25% to a range of zero to
0.25% during the year.(1)
In the spring of 2008, more serious factors came to the forefront --
driving unemployment sharply higher( 2) and causing major stock market indexes
to hit multi-year lows in the U.S. and overseas.(3) For example, the S&P 500
Index, considered representative of the U.S. stock market, had its worst
one-year performance since 1937.(4) During the second half of 2008, the Fed, the
U.S. Department of the Treasury and other federal agencies took unprecedented
action to rescue the troubled financials sector and domestic automobile
industry, stabilize the stock market and inject liquidity into the credit
markets.
HOW WE GOT HERE
The cause of this correction was years of lax lending associated with the recent
housing boom. Mortgage loans of questionable quality were bundled into
hard-to-value securities that were bought by, and traded among, financial
institutions. As the value of those securities declined, financial institutions
sought to unload them -- but there were few buyers. With the value of their
assets falling and access to credit tightening, a number of well-established
financial firms faced severe difficulties, and investor uncertainty and market
volatility spiked.
In October 2008, the administration and Congress enacted a plan, the Troubled
Assets Relief Program, authorizing the U.S. Department of the Treasury to
purchase up to $700 billion in troubled mortgage-related assets -- the largest
and most direct effort to resolve a credit crisis in the last half century. The
Fed, in concert with other central banks, cut short-term interest rate targets
and undertook other initiatives intended to restore investor confidence, expand
lending and mitigate the effects of the global credit crisis. Following his
election, President Barack Obama again pledged to act boldly to stimulate the
U.S. economy.
As we enter 2009, the volatility in the stock, fixed-income and credit
markets we saw last year emphasized the importance of three timeless investing
principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
# INVEST FOR THE LONG TERM. Short-term fluctuations have always been a
reality of the markets. We urge you to stick to your investment plan and
stay focused on your long-term goals.
# DIVERSIFY. Although diversification doesn't eliminate the risk of loss or
guarantee a profit, a careful selection of complementary asset classes may
cushion your portfolio against excessive volatility.
# STAY FULLY INVESTED. Trying to time the market is a gamble, not an
investment strategy. A sound investment strategy includes viewing market
volatility as a matter of course, not a reason to panic.
A trusted financial advisor can explain more fully the potential value of
following these principles. An experienced advisor who knows your individual
investment goals, financial situation and risk tolerance can be your most
valuable asset during times of market volatility. Your advisor can provide
guidance and can monitor your investments to ensure they're on course.
It's also helpful to remember that many of history's significant buying
opportunities resulted from short-term economic crises that, in their time, were
considered unprecedented. We believe current market uncertainty may represent a
buying opportunity for patient, long-term investors. Rest assured that Invesco
Aim's portfolio managers are working diligently on your behalf to attempt to
capitalize on this situation.
MANAGING MONEY IS OUR FOCUS
I believe Invesco Aim is uniquely positioned to navigate current difficult
markets. Our parent company, Invesco Ltd., is one of the world's largest and
most diversified global investment managers. Invesco provides clients with
diversified investment strategies from distinct management teams around the
globe and a range of investment products. Invesco's single focus is asset
management -- which means we focus on doing one thing well: managing your money.
That can be reassuring in uncertain times.
While market conditions change often, our commitment to putting
shareholders first, helping clients achieve their investment goals and providing
excellent customer service remains constant.
If you have questions about this report or your account, please contact one
of our client service representatives at 800 959 4246.
Thank you for your continued confidence, and all of us at Invesco Aim look
forward to serving you.
Sincerely,
/S/ PHILIP TAYLOR
Philip Taylor
Senior Managing Director, Invesco Ltd.
CEO, Invesco Aim
- ---------------
1 U.S. Federal Reserve;
2 Bureau of Labor Statistics;
3 FactSet Research;
4 Wall Street Journal
2 AIM SMALL CAP EQUITY FUND
[PHOTO OF CROCKETT]
BRUCE CROCKETT
Dear Fellow Shareholders:
Since my last letter, continuing troubles in the global economy and financial
markets have negatively affected all investors. The new government promises to
move quickly with a stimulus package, yet considerable anxiety remains about
how, when and what kind of a recovery will occur. While no one likes to see
investment values decline as sharply as they have recently, as mutual fund
investors we can find some consolation in the knowledge that our fund
investments are more transparent, more comprehensively governed and more closely
regulated than most other kinds of investments. In addition, mutual funds
generally are more diversified than other investments; as shareholders we invest
not in a single security but in a portfolio of multiple securities. The benefits
of diversification have been reiterated by the stories of investors who "lost
everything" because they had too many of their assets in one place, whether that
place was a single money manager or their employer's stock. Mutual fund
investors also have the opportunity to diversify further among different types
of funds that each deploy a different strategy and focus on different kinds of
securities. These include conservatively managed money market funds, which,
relative to other securities, continue to offer a more safe, liquid, and
convenient way to invest short-term assets.
In addition to diversification, investing discipline is essential during
challenging times such as these. Strategies such as dollar-cost-averaging, where
individuals invest a consistent amount at regular intervals, can help investors
acquire more fund shares when prices are low. Periodic rebalancing of asset
allocation plans achieves the same effect. "Buy low, sell high" has long been
the mantra of investment success, but the advice is not always easy to follow
because it requires the discipline to resist prevailing trends. Of course,
investment strategies, such as dollar-cost-averaging and portfolio rebalancing
do not guarantee a profit or eliminate the risk of loss. Investors should
consider their ability to continue investing regardless of fluctuating security
prices.
A long-term view is also important, particularly for assets that are not
needed right away. In the past, it has often proven better to keep long-term
assets invested through a downturn than to miss the beginning of the upward
trend. To develop a diversified and disciplined investing plan that is right for
your individual goals, I encourage you to consult an experienced and trustworthy
investment professional who has the knowledge and the tools to help you
establish and implement the plan, monitor its results and adapt it to changing
goals and circumstances.
Even when working with a personal financial advisor, investors should
supplement the relationship with their own knowledge and awareness of the
investments they hold. Visit the Invesco Aim website at invescoaim.com regularly
to find out what is happening in your AIM funds and to read timely market
commentary from Invesco Aim management, strategists and portfolio managers. The
site's "Education and Planning" section can also help you clarify basic
investment concepts, learn how to choose a financial advisor, evaluate different
investment choices and make more informed investment decisions. Invesco Aim's
redesigned public home page recently received a Gold Award for its user-friendly
navigation and graphics from The Mutual Funds Monitor Awards, sponsored by
Corporate Insight.
As always, your Board of Trustees and Invesco Aim are committed to putting
your interests first by controlling costs, monitoring investment performance and
streamlining the investment management process during these difficult times.
Your Board has already begun the annual review and management contract renewal
process with the continuing goal of making AIM funds one of the best and most
cost-effective ways for you to invest your hard-earned money.
While the investing climate may remain uncertain for a while, economies and
markets are dynamic, and no stage is ever permanent. Please feel free to contact
me in writing with your questions or concerns. You can send an email to me at
bruce@brucecrockett.com.
Best regards,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM SMALL CAP EQUITY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PERFORMANCE SUMMARY
For the year ended December 31, 2008, Class A shares of AIM Small Cap Equity
Fund had negative returns but, at net asset value (NAV), fared better than the
Fund's style-specific index, the Russell 2000 Index.+Performance versus the
Russell 2000 Index was driven by better stock selection across sectors.
At NAV, the Fund's Class A shares also fared better than the broad market,
as measured by the S&P 500 Index.+Small-cap stocks generally outperformed
large-cap stocks in 2008+; the S&P 500 Index is heavily oriented to large-cap
stocks.
Your Fund's long-term performance appears later in this report.
FUND VS. INDEXES
Total returns, 12/31/07 to 12/31/08, 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 -31.45%
Class B Shares -32.01
Class C Shares -32.01
Class R Shares -31.59
Class Y Shares* -31.45
S&P 500 Index +(Broad Market Index) -36.99
Russell 2000 Index+(Style-Specific Index) -33.79
Lipper Small-Cap Core Funds Index+(Peer Group Index) -35.59
- ----------
+ Lipper Inc.
* Share class incepted during the fiscal year. See page 7 for a detailed
explanation of Fund performance.
HOW WE INVEST
Our investment process seeks to identify attractively valued small-cap companies
with high growth potential, demonstrated by consistent and accelerating revenue
and earnings growth.
We begin with a quantitative model that ranks companies based on a set of
fundamental, valuation and timeliness factors. This proprietary model provides
an objective approach to identifying new investment opportunities, as the
highest ranked stocks become the primary focus of our research efforts.
Our stock selection process is based on a rigorous three-step process that
includes fundamental, valuation and timeliness analysis.
1. Fundamental analysis. Building financial models and conducting in-depth
interviews with company management.
2. Valuation analysis. Identifying attractively valued stocks given their
growth potential over a one- to two-year horizon.
3. Timeliness analysis. Identifying the "timeliness" of a stock purchase. We
review trading volume characteristics and trend analysis to make sure
there are no signs of stock deterioration. This also serves as a risk
management measure that helps us confirm our high conviction candidates.
Portfolio construction plays an important role in risk management. We align
the Fund with the S&P SmallCap 600 Index, the benchmark we believe represents
the small-cap-growth asset class. We seek to manage risk by keeping the Fund's
sector weightings in line with the benchmark by staying fully diversified in all
those sectors. We also seek to limit stock-specific risk by investing in
typically 100-120 holdings.
We consider selling a stock when it no longer meets our investment
criteria, based on:
# Our original investment thesis is not valid because the fundamentals are
no longer intact.
# The price target set at purchase is exceeded.
# The company's timeliness profile deteriorates.
MARKET CONDITIONS AND YOUR FUND
Many factors contributed to sharp negative performance of most major market
indexes for the year ended December 31, 2008.(1) The chief catalyst was the
ongoing subprime loan crisis and its far-reaching effects on overall credit
availability. Additionally, record high crude oil prices,(2) falling home values
and the weak U.S. dollar placed significant pressure on the purchasing power of
consumers. Later in the year, consumer confidence fell and market volatility
increased dramatically due to growing concerns of a global recession.
To facilitate the orderly functioning of the credit markets and possibly
prevent a more severe economic downturn, in early October Congress enacted a
$700 billion rescue plan -- the Troubled Assets Relief Program. In addition, the
U.S. Federal Reserve (the Fed), in concert with other central banks,
dramatically lowered short-term interest rates.
In this environment, the Fund had double-digit negative performance but
fared better at NAV than the Russell 2000 Index.(1) Performance was driven
primarily by stock selection in several sectors, including industrials, health
care, consumer discretionary and materials.
PORTFOLIO COMPOSITION
By sector
Industrials 18.2%
Financials 17.2
Information Technology 15.9
Health Care 14.3
Consumer Discretionary 11.5
Consumer Staples 5.6
Energy 4.9
Materials 4.0
Telecommunication Services 2.6
Utilities 2.6
Money Market Funds
Plus Other Assets Less Liabilities 3.2
TOP FIVE INDUSTRIES
1.Regional Banks 8.1%
2.Environment & Facilities Services 3.9
3.Trucking 3.8
4.Health Care Equipment 3.2
5.Industrial Machinery 3.2
--------------
Total Net Assets $365.9 million
Total Number of Holdings* 103
TOP 10 EQUITY HOLDINGS*
1. Alberto-Culver Co. 1.6%
2. Community Trust Bancorp., Inc. 1.6
3. KBW Inc. 1.5
4. CACI International Inc.-Class A 1.5
5. Marten Transport, Ltd. 1.5
6. Capella Education Co. 1.5
7. ViroPharma Inc. 1.4
8. Team, Inc. 1.4
9. Arris Group Inc. 1.4
10.ComTech Telecommunications Corp. 1.4
The Fund's holdings are subject to change, and there is no assurance that the
Fund will continue to hold any particular security.
- -----------
* Excluding money market fund holdings.
4 AIM SMALL CAP EQUITY FUND
The Fund outperformed its benchmark index by the widest margin in the
industrials sector, largely due to stock selection in the transportation
industry. The top contributor to Fund performance was ALLEGIANT TRAVEL, a
company that provides airline transportation from smaller cities to tourist
destinations. Other transportation holdings that made positive contributions
included truckload carriers MARTEN TRANSPORT and OLD DOMINION FREIGHT.
Outperformance in the health care sector was also due to stock selection.
Key contributors to Fund performance included home health care services provider
GENTIVA HEALTH SERVICES and pharmaceutical manufacturer VIROPHARMA.
The Fund also outperformed the Russell 2000 Index in the consumer
discretionary sector, driven by stock selection and an underweight position. The
Fund's underweight position was a benefit during the year as many consumer
discretionary stocks were weak due to significant reductions in consumer
spending. Specifically, the Fund avoided all companies in the automobiles and
components industry, many of which performed poorly.
Another area of relative strength for the Fund was the materials sector,
where the Fund benefited from solid stock selection. One holding that made a key
contribution to Fund performance was salt producer COMPASS MINERALS
INTERNATIONAL.
Underperformance versus the Russell 2000 Index was concentrated in three
sectors: energy, financials and utilities. After reaching highs(2) earlier in
the year, the price of oil fell sharply due to weakening demand caused by the
global economic slowdown, negatively affecting many companies in the energy
sector. Three of the Fund's top five detractors from performance were energy
holdings: NATCO GROUP, VENOCO AND PARALLEL PETROLEUM.
The financials sector experienced significant volatility during the year,
as the credit crisis intensified and a liquidity crunch emerged.
Underperformance in this sector was driven largely by an underweight position in
the bank industry, as many small-cap bank stocks rallied late in the year. In
addition, stock selection in the diversified financials and insurance industries
detracted from performance.
The Fund also underperformed in the utilities sector, due to both stock
selection and an underweight position. Key detractors included ENERGEN and
CASCAL N.V.
The most significant changes to overall positioning of the Fund included
reductions in the information technology and materials sectors and additions in
the financials, health care and utilities sectors. All changes to the Fund were
based on our bottom-up stock selection process of identifying high quality
growth companies trading at what we believe are attractive valuations.
We thank you for your commitment to AIM Small Cap Equity Fund.
- -------------
1 Lipper Inc.
2 Bloomberg L.P.
The views and opinions expressed in management's discussion of Fund performance
are those of Invesco Aim Advisors, Inc. These views and opinions are subject to
change at any time based on factors such as market and economic conditions.
These views and opinions may not be relied upon as investment advice or
recommendations, or as an offer for a particular security. The information is
not a complete analysis of every aspect of any market, country, industry,
security or the Fund. Statements of fact are from sources considered reliable,
but Invesco Aim Advisors, Inc. makes no representation or warranty as to their
completeness or accuracy. Although historical performance is no guarantee of
future results, these insights may help you understand our investment management
philosophy.
See important Fund and index disclosures later in this report.
[PHOTO OF ELLIS]
JULIET ELLIS
Chartered Financial Analyst, senior portfolio manager, is lead manager of AIM
Small Cap Equity Fund. Ms. Ellis joined Invesco Aim in 2004. She previously
served as senior portfolio manager of two small-cap funds for another company
and was responsible for the management of more than $2 billion in assets. Ms.
Ellis began her investment career in 1981 as a financial consultant. She is a
cum laude and Phi Beta Kappa graduate of Indiana University with a B.A. in
economics and political science.
[PHOTO OF HARTSFIELD]
JUAN HARTSFIELD
Chartered Financial Analyst, portfolio manager, is manager of AIM Small Cap
Equity Fund. Prior to joining Invesco Aim in 2004, he began his investment
career in 2000 as an equity analyst and most recently served as a portfolio
manager. Mr. Hartsfield earned a B.S. in petroleum engineering from The
University of Texas at Austin and his M.B.A. from the University of Michigan.
Assisted by the Small Cap Core/Growth Team
5 AIM SMALL CAP EQUITY FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee comparable future results.
The data shown in the chart include reinvested distributions, applicable
sales charges and Fund expenses including management fees. Results for Class B
shares are calculated as if a hypothetical shareholder had liquidated his entire
investment in the Fund at the close of the reporting period and paid the
applicable contingent deferred sales charges. Index results include reinvested
dividends, but they do not reflect sales charges.
Performance of an index of funds reflects fund expenses and management
fees; performance of a market index does not. Performance shown in the chart and
table(s) does not reflect deduction of taxes a shareholder would pay on Fund
distributions or sale of Fund shares.
This chart, which is a logarithmic chart, presents the fluctuations in the
value of the Fund and its indexes. We believe that a logarithmic chart is more
effective than other types of charts in illustrating changes in value during the
early years shown in the chart. The vertical axis, the one that indicates the
dollar value of an investment, is constructed with each segment representing a
percent change in the value of the investment. In this chart, each segment
represents a doubling, or 100% change, in the value of the investment. In other
words, the space between $5,000 and $10,000 is the same size as the space
between $10,000 and $20,000.
6 AIM SMALL CAP EQUITY FUND
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- OLDEST SHARE CLASS SINCE INCEPTION
Fund and index data from 08/31/00
AIM Small Cap AIM Small Cap AIM Small Cap
Equity Fund- Class Equity Fund- Class Equity Fund- Class Russell 2000 Lipper Small-Cap
Date A Shares B Shares C Shares S&P 500 Index(1) Index(1) Core Funds Index(1)
8/31/00 $ 9450 $ 10000 $ 10000 $ 10000 $ 10000 $ 10000
9/00 9308 9850 9850 9472 9706 9743
10/00 9233 9760 9760 9432 9273 9450
11/00 8193 8660 8660 8689 8321 8509
12/00 8845 9340 9340 8732 9036 9335
1/01 9280 9790 9790 9041 9506 9668
2/01 8410 8870 8870 8217 8882 9054
3/01 7985 8420 8420 7697 8448 8625
4/01 8722 9191 9191 8295 9109 9313
5/01 9251 9740 9740 8350 9333 9652
6/01 9648 10160 10160 8147 9655 9951
7/01 9384 9871 9871 8067 9132 9720
8/01 9072 9541 9541 7562 8837 9448
9/01 7985 8391 8391 6952 7648 8210
10/01 8288 8702 8702 7084 8095 8698
11/01 8883 9322 9322 7628 8722 9344
12/01 9634 10113 10103 7695 9260 10000
1/02 9530 9992 9992 7582 9164 9882
2/02 9426 9883 9883 7436 8913 9618
3/02 10325 10812 10812 7716 9629 10357
4/02 10429 10913 10913 7248 9717 10408
5/02 10211 10683 10683 7195 9286 10020
6/02 9634 10073 10073 6683 8825 9459
7/02 8046 8413 8403 6162 7492 8173
8/02 8140 8503 8503 6202 7473 8217
9/02 7374 7692 7692 5529 6936 7635
10/02 7573 7902 7902 6015 7159 7906
11/02 8036 8383 8383 6369 7798 8490
12/02 7781 8113 8113 5995 7363 8077
1/03 7573 7883 7883 5838 7160 7841
2/03 7299 7593 7592 5750 6943 7596
3/03 7497 7803 7803 5806 7033 7660
4/03 8093 8413 8413 6284 7699 8298
5/03 8783 9133 9133 6615 8526 9027
6/03 9019 9373 9363 6699 8680 9235
7/03 9596 9964 9963 6817 9223 9709
8/03 9964 10345 10334 6950 9646 10129
9/03 9785 10154 10154 6876 9468 9909
10/03 10588 10985 10975 7265 10263 10688
11/03 10928 11335 11325 7329 10627 11073
12/03 11373 11775 11776 7713 10843 11381
1/04 11694 12105 12096 7855 11314 11742
2/04 11979 12395 12386 7964 11415 11946
3/04 12083 12496 12486 7844 11522 12075
4/04 11563 11946 11946 7721 10934 11660
5/04 11724 12106 12096 7827 11108 11762
6/04 12036 12427 12417 7979 11576 12264
7/04 11156 11506 11507 7715 10797 11618
8/04 10702 11026 11027 7746 10741 11516
9/04 11128 11456 11457 7829 11245 12089
10/04 11402 11737 11738 7949 11467 12287
- -------------
1 Lipper Inc.
[MOUNTAIN CHART]
AIM Small Cap AIM Small Cap AIM Small Cap
Equity Fund- Class Equity Fund- Class Equity Fund- Class Russell 2000 Lipper Small-Cap
Date A Shares B Shares C Shares S&P 500 Index(1) Index(1) Core Funds Index (1)
11/04 12205 12557 12547 8271 12461 13257
12/04 12448 12795 12795 8552 12830 13471
1/05 12030 12362 12362 8343 12295 13081
2/05 12390 12733 12723 8519 12503 13386
3/05 12127 12455 12445 8368 12145 13049
4/05 11378 11672 11672 8210 11450 12345
5/05 12088 12393 12383 8471 12199 13006
6/05 12369 12682 12671 8483 12670 13450
7/05 12933 13249 13237 8798 13472 14249
8/05 12748 13053 13052 8718 13223 14117
9/05 12923 13228 13217 8788 13264 14252
10/05 12680 12970 12959 8642 12852 13814
11/05 13351 13649 13639 8968 13476 14446
12/05 13265 13548 13538 8972 13415 14490
1/06 14260 14562 14551 9209 14617 15594
2/06 14326 14608 14609 9234 14577 15490
3/06 14716 15000 14989 9349 15284 16173
4/06 14986 15265 15254 9474 15282 16294
5/06 14651 14908 14910 9202 14424 15508
6/06 14500 14747 14749 9214 14516 15402
7/06 14110 14345 14346 9271 14044 14879
8/06 14446 14679 14680 9491 14460 15174
9/06 14597 14829 14830 9736 14580 15245
10/06 15215 15439 15441 10053 15420 15982
11/06 15691 15923 15913 10244 15825 16448
12/06 15499 15706 15708 10387 15878 16475
1/07 15715 15923 15912 10544 16144 16769
2/07 15803 15991 15993 10339 16016 16807
3/07 15904 16087 16089 10454 16188 16992
4/07 16284 16467 16469 10917 16478 17477
5/07 17019 17201 17189 11298 17154 18231
6/07 16867 17024 17026 11110 16902 18047
7/07 15955 16100 16087 10766 15746 17101
8/07 16347 16480 16482 10927 16103 17167
9/07 16803 16941 16930 11335 16380 17534
10/07 17247 17377 17365 11516 16849 17958
11/07 16272 16371 16373 11034 15640 16755
12/07 16263 16359 16362 10958 15630 16791
1/08 14944 15026 15028 10301 14564 15680
2/08 14597 14667 14669 9966 14024 15380
3/08 14874 14937 14939 9923 14083 15248
4/08 15567 15625 15613 10406 14672 15986
5/08 16206 16255 16258 10541 15346 16775
6/08 15457 15491 15494 9653 14165 15610
7/08 15624 15655 15644 9572 14689 15652
8/08 15985 15999 16004 9711 15220 16012
9/08 14612 14622 14626 8846 14007 14517
10/08 11865 11866 11854 7361 11093 11422
11/08 10727 10712 10715 6832 9781 10231
12/08 11150 11150 11115 6904 10349 10816
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/08, including maximum applicable sales charges
CLASS A SHARES
Inception (8/31/00) 1.32%
5 Years -1.52
1 Year -35.21
CLASS B SHARES
Inception (8/31/00) 1.31%
5 Years -1.40
1 Year -35.36
CLASS C SHARES
Inception (8/31/00) 1.28%
5 Years -1.14
1 Year -32.68
CLASS R SHARES
Inception 1.78%
5 Years -0.64
1 Year -31.59
CLASS Y SHARES
Inception 2.00%
5 Years -0.40
1 Year -31.45
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
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 AUGUST 31, 2000.
CLASS Y SHARES' INCEPTION DATE IS OCTOBER 3, 2008; RETURNS SINCE THAT DATE
ARE ACTUAL RETURNS. ALL OTHER RETURNS ARE BLENDED RETURNS OF ACTUAL CLASS Y
SHARE PERFORMANCE AND RESTATED CLASS A SHARE PERFORMANCE (FOR PERIODS PRIOR TO
THE INCEPTION DATE OF CLASS Y SHARES) AT NET ASSET VALUE. THE RESTATED CLASS A
SHARE PERFORMANCE REFLECTS THE RULE 12B-1 FEES APPLICABLE TO CLASS A SHARES AS
WELL AS ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RECEIVED BY CLASS A SHARES.
CLASS A SHARES' INCEPTION DATE IS AUGUST 31, 2000.
THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT
GUARANTEE COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER.
PLEASE VISIT INVESCOAIM.COM FOR THE MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE
AND THE EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS
WHEN YOU SELL SHARES.
THE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT
FUND PROSPECTUS AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C,
CLASS R AND CLASS Y SHARES WAS 1.37%, 2.12%, 2.12%, 1.62% AND 1.12%,
RESPECTIVELY. THE EXPENSE RATIOS PRESENTED ABOVE MAY VARY FROM THE EXPENSE
RATIOS PRESENTED IN OTHER SECTIONS OF THIS REPORT THAT ARE BASED ON EXPENSES
INCURRED DURING THE PERIOD COVERED BY THIS REPORT.
CLASS A SHARE PERFORMANCE REFLECTS THE MAXIMUM 5.50% SALES CHARGE, AND
CLASS B AND CLASS C SHARE PERFORMANCE REFLECTS THE APPLICABLE CONTINGENT
DEFERRED SALES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CDSC ON CLASS B SHARES
DECLINES FROM 5% BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE
SEVENTH YEAR. THE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST YEAR AFTER
PURCHASE. CLASS R SHARES DO NOT HAVE A FRONT-END SALES CHARGE; RETURNS SHOWN ARE
AT NET ASSET VALUE AND DO NOT REFLECT A 0.75% CDSC THAT MAY BE IMPOSED ON A
TOTAL REDEMPTION OF RETIREMENT PLAN ASSETS WITHIN THE FIRST YEAR. CLASS Y SHARES
DO NOT HAVE A FRONT-END SALES CHARGE OR A CDSC; THEREFORE, PERFORMANCE IS AT NET
ASSET VALUE.
THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER PRIMARILY DUE TO
DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES.
7 AIM SMALL CAP EQUITY FUND
AIM SMALL CAP EQUITY FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
# Unless otherwise stated, information presented in this report is as of
December 31, 2008, and is based on total net assets.
# Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES
# Effective September 30, 2003, only previously established qualified plans
are eligible to purchase Class B shares of any AIM fund.
# Class R shares are available only to certain retirement plans. Please see
the prospectus for more information.
# Class Y shares are available to only certain investors. Please see the
prospectus for more information.
PRINCIPAL RISKS OF INVESTING IN THE FUND
# Since a large percentage of the Fund's assets may be invested in
securities of a limited number of companies, each investment has a greater
effect on the Fund's overall performance, and any change in the value of
those securities could significantly affect the value of your investment
in the Fund.
# The values of convertible securities in which the Fund invests may be
affected by market interest rates, the risk that the issuer may default on
interest or principal payments, and the value of the underlying common
stock into which these securities may be converted.
# Prices of equity securities change in response to many factors, including
the historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions
and market liquidity.
# Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, relative lack of information, relatively
low market liquidity, and the potential lack of strict financial and
accounting controls and standards.
# The prices of securities held by the Fund may decline in response to
market risks.
# Investing in a fund that invests in smaller companies involves risks not
associated with investing in more established companies, such as business
risk, stock price fluctuations and illiquidity.
# Although the Fund's return during certain periods was positively impacted
by its investments in initial public offerings (IPOs), there can be no
assurance that the Fund will have favorable IPO investment opportunities
in the future.
ABOUT INDEXES USED IN 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, but rather the most widely
held 500 companies chosen with respect to market size, liquidity, and
their industry.
# The RUSSELL 2000--REGISTERED TRADEMARK--INDEX measures the performance of
the 2,000 smallest companies in the Russell 3000--REGISTERED TRADEMARK--
Index, which represents approximately 8% of the total market
capitalization of the Russell 3000 Index. The Russell 2000 Index and the
Russell 3000 Index are trademarks/service marks of the Frank Russell
Company. Russell--REGISTERED TRADEMARK-- is a trademark of the Frank
Russell Company.
# The LIPPER SMALL-CAP CORE FUNDS INDEX is an equally weighted
representation of the largest funds in the Lipper Small-Cap Core Funds
category. These funds typically have an average price-to-earnings ratio,
price-to-book ratio, and three-year sales-per-share growth value, compared
to the S&P SmallCap 600 Index.
# The S&P SMALLCAP 600 INDEX is a market-value weighted index that consists
of 600 small cap domestic stocks chosen for market size, liquidity and
industry group representation.
# 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 or fund expenses.
OTHER INFORMATION
# The Chartered Financial Analyst--REGISTERED TRADEMARK--(CFA--REGISTERED
TRADEMARK--) designation is a globally recognized standard for measuring
the competence and integrity of investment professionals.
# The returns shown in management's discussion of Fund performance are based
on net asset values calculated for shareholder transactions. Generally
accepted accounting principles require adjustments to be made to the net
assets of the Fund at period end for financial reporting purposes, and as
such, the net asset values for shareholder transactions and the returns
based on those net asset values may differ from the net asset values and
returns reported in the Financial Highlights.
# Industry classifications used in this report are generally according to
the Global Industry Classification Standard, which was developed by and is
the exclusive property and a service mark of MSCI Inc. and Standard &
Poor's.
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 NASDAQ SYMBOLS
Class A Shares SMEAX
Class B Shares SMEBX
Class C Shares SMECX
Class R Shares SMERX
Class Y Shares SMEYX
8 AIM SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS(a)
December 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.75%
AEROSPACE & DEFENSE-3.07%
AAR Corp.(b)(c) 214,797 $ 3,954,413
- -------------------------------------------------------------------------------
Aerovironment Inc.(b)(c) 102,865 3,786,460
- -------------------------------------------------------------------------------
Curtiss-Wright Corp. 104,405 3,486,083
===============================================================================
11,226,956
===============================================================================
AIRLINES-1.14%
Allegiant Travel Co.(b)(c) 86,089 4,181,343
===============================================================================
APPAREL RETAIL-2.12%
Citi Trends Inc.(b)(c) 293,003 4,313,004
- -------------------------------------------------------------------------------
J. Crew Group, Inc.(b)(c) 281,160 3,430,152
===============================================================================
7,743,156
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.53%
Carter's, Inc.(c) 172,768 3,327,511
- -------------------------------------------------------------------------------
Volcom, Inc.(b)(c) 208,673 2,274,536
===============================================================================
5,602,047
===============================================================================
APPLICATION SOFTWARE-1.81%
Blackbaud, Inc. 236,554 3,193,479
- -------------------------------------------------------------------------------
Parametric Technology Corp.(b)(c) 271,355 3,432,641
===============================================================================
6,626,120
===============================================================================
ASSET MANAGEMENT & CUSTODY BANKS-1.30%
Affiliated Managers Group, Inc.(b)(c) 53,011 2,222,221
- -------------------------------------------------------------------------------
GAMCO Investors, Inc.-Class A 92,897 2,537,946
===============================================================================
4,760,167
===============================================================================
BIOTECHNOLOGY-0.36%
InterMune, Inc.(b)(c) 125,375 1,326,468
===============================================================================
COMMUNICATIONS EQUIPMENT-2.83%
Arris Group Inc.(c) 651,612 5,180,315
- -------------------------------------------------------------------------------
Comtech Telecommunications Corp.(c) 112,785 5,167,809
- -------------------------------------------------------------------------------
Lantronix Inc.-Wts. expiring 02/09/11(d) 2,606 0
===============================================================================
10,348,124
===============================================================================
CONSTRUCTION & ENGINEERING-1.20%
Northwest Pipe Co.(b)(c) 103,344 4,403,488
===============================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.45%
Titan International, Inc. 200,597 1,654,925
===============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.27%
CyberSource Corp.(c) 324,252 3,887,782
- -------------------------------------------------------------------------------
Euronet Worldwide, Inc.(b)(c) 195,466 2,269,360
- -------------------------------------------------------------------------------
Wright Express Corp.(c) 169,730 2,138,598
===============================================================================
8,295,740
===============================================================================
DIVERSIFIED CHEMICALS-0.90%
FMC Corp. 73,324 3,279,783
===============================================================================
DIVERSIFIED METALS & MINING-1.10%
Compass Minerals International, Inc. 68,788 4,035,104
===============================================================================
DIVERSIFIED SUPPORT SERVICES-0.17%
EnerNOC, Inc.(b)(c) 83,519 621,381
===============================================================================
EDUCATION SERVICES-1.46%
Capella Education Co.(b)(c) 91,177 5,357,561
===============================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.34%
Belden Inc.(b) 154,813 3,232,495
- -------------------------------------------------------------------------------
General Cable Corp.(b)(c) 93,968 1,662,294
===============================================================================
4,894,789
===============================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-1.23%
OSI Systems, Inc.(c) 169,227 2,343,794
- -------------------------------------------------------------------------------
Rofin-Sinar Technologies, Inc.(b)(c) 104,976 2,160,406
===============================================================================
4,504,200
===============================================================================
ENVIRONMENTAL & FACILITIES SERVICES-3.87%
ABM Industries Inc. 263,374 5,017,275
- -------------------------------------------------------------------------------
Team, Inc.(b)(c) 188,495 5,221,311
- -------------------------------------------------------------------------------
Waste Connections, Inc.(c) 124,890 3,942,777
===============================================================================
14,181,363
===============================================================================
FOOD RETAIL-1.36%
Ruddick Corp.(b) 180,208 4,982,751
===============================================================================
GAS UTILITIES-1.55%
Energen Corp. 73,399 2,152,793
- -------------------------------------------------------------------------------
UGI Corp. 144,051 3,517,725
===============================================================================
5,670,518
===============================================================================
GENERAL MERCHANDISE STORES-1.31%
Pantry, Inc. (The)(b)(c) 222,889 4,780,969
===============================================================================
HEALTH CARE DISTRIBUTORS-0.95%
Owens & Minor, Inc. 92,090 3,467,189
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM SMALL CAP EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-3.23%
Cardiac Science Corp.(c) 384,039 $ 2,880,293
- -------------------------------------------------------------------------------
Invacare Corp.(b) 308,516 4,788,168
- -------------------------------------------------------------------------------
Quidel Corp.(c) 318,013 4,156,430
===============================================================================
11,824,891
===============================================================================
HEALTH CARE FACILITIES-1.00%
Skilled Healthcare Group Inc.-Class A(c) 432,068 3,646,654
===============================================================================
HEALTH CARE SERVICES-1.31%
Gentiva Health Services, Inc.(c) 163,281 4,777,602
===============================================================================
HEALTH CARE SUPPLIES-1.10%
Haemonetics Corp.(b)(c) 71,366 4,032,179
===============================================================================
HEALTH CARE TECHNOLOGY-1.13%
Omnicell, Inc.(c) 339,617 4,146,724
===============================================================================
HOTELS, RESORTS & CRUISE LINES-0.28%
Red Lion Hotels Corp.(c) 432,400 1,029,112
===============================================================================
HOUSEHOLD APPLIANCES-1.12%
Snap-on Inc. 104,295 4,107,137
===============================================================================
INDUSTRIAL MACHINERY-3.16%
Chart Industries, Inc.(c) 137,578 1,462,454
- -------------------------------------------------------------------------------
Kadant Inc.(c) 229,907 3,099,147
- -------------------------------------------------------------------------------
RBC Bearings Inc.(c) 146,971 2,980,572
- -------------------------------------------------------------------------------
Valmont Industries, Inc.(b) 65,856 4,040,924
===============================================================================
11,583,097
===============================================================================
INSURANCE BROKERS-1.18%
Arthur J. Gallagher & Co. 166,487 4,313,678
===============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.65%
Alaska Communications Systems Group Inc.(b) 468,938 4,398,639
- -------------------------------------------------------------------------------
Cincinnati Bell Inc.(c) 1,397,770 2,697,696
- -------------------------------------------------------------------------------
NTELOS Holdings Corp. 105,393 2,598,991
===============================================================================
9,695,326
===============================================================================
INTERNET SOFTWARE & SERVICES-2.43%
Ariba Inc.(c) 619,102 4,463,725
- -------------------------------------------------------------------------------
Open Text Corp. (Canada)(b)(c) 147,322 4,438,812
===============================================================================
8,902,537
===============================================================================
INVESTMENT BANKING & BROKERAGE-1.48%
KBW Inc.(b)(c) 234,729 5,398,767
===============================================================================
IT CONSULTING & OTHER SERVICES-1.46%
CACI International Inc.-Class A(b)(c) 118,887 5,360,615
===============================================================================
LIFE SCIENCES TOOLS & SERVICES-2.53%
Bio-Rad Laboratories, Inc.-Class A(c) 57,921 4,362,030
- -------------------------------------------------------------------------------
Dionex Corp.(b)(c) 62,441 2,800,479
- -------------------------------------------------------------------------------
eResearch Technology, Inc.(c) 317,338 2,103,951
===============================================================================
9,266,460
===============================================================================
METAL & GLASS CONTAINERS-1.08%
AptarGroup, Inc.(b) 111,827 3,940,783
===============================================================================
MOVIES & ENTERTAINMENT-1.10%
World Wrestling Entertainment, Inc.-Class A(b) 363,089 4,023,026
===============================================================================
MULTI-UTILITIES-0.76%
Avista Corp. 143,505 2,781,127
===============================================================================
OFFICE REIT'S-0.86%
Alexandria Real Estate Equities, Inc. 51,968 3,135,749
===============================================================================
OIL & GAS EQUIPMENT & SERVICES-2.49%
Complete Production Services, Inc.(c) 203,250 1,656,488
- -------------------------------------------------------------------------------
Lufkin Industries, Inc. 69,843 2,409,583
- -------------------------------------------------------------------------------
NATCO Group Inc.-Class A(c) 133,161 2,021,384
- -------------------------------------------------------------------------------
Oceaneering International, Inc.(c) 103,583 3,018,409
===============================================================================
9,105,864
===============================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.36%
Comstock Resources, Inc.(c) 83,478 3,944,336
- -------------------------------------------------------------------------------
Parallel Petroleum Corp.(c) 366,961 737,592
- -------------------------------------------------------------------------------
Penn Virginia Corp.(b) 126,780 3,293,744
- -------------------------------------------------------------------------------
Venoco Inc.(c) 249,833 677,047
===============================================================================
8,652,719
===============================================================================
PACKAGED FOODS & MEATS-2.58%
Flowers Foods, Inc. 175,695 4,279,930
- -------------------------------------------------------------------------------
TreeHouse Foods, Inc.(b)(c) 189,378 5,158,657
===============================================================================
9,438,587
===============================================================================
PERSONAL PRODUCTS-1.64%
Alberto-Culver Co. 245,154 6,008,725
===============================================================================
PHARMACEUTICALS-2.64%
ViroPharma Inc.(c) 403,665 5,255,718
- -------------------------------------------------------------------------------
VIVUS, Inc.(b)(c) 828,323 4,406,679
===============================================================================
9,662,397
===============================================================================
PROPERTY & CASUALTY INSURANCE-2.23%
Assured Guaranty Ltd. 282,191 3,216,977
- -------------------------------------------------------------------------------
FPIC Insurance Group, Inc.(c) 113,068 4,950,117
===============================================================================
8,167,094
===============================================================================
REGIONAL BANKS-8.12%
BancFirst Corp. 73,250 3,876,390
- -------------------------------------------------------------------------------
Commerce Bancshares, Inc.(b) 105,315 4,628,594
- -------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM SMALL CAP EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
REGIONAL BANKS-(CONTINUED)
Community Trust Bancorp, Inc. 159,247 $ 5,852,327
- -------------------------------------------------------------------------------
First Financial Bankshares, Inc.(b) 89,651 4,949,632
- -------------------------------------------------------------------------------
MB Financial, Inc. 144,472 4,037,993
- -------------------------------------------------------------------------------
Texas Capital Bancshares, Inc.(c) 228,920 3,058,371
- -------------------------------------------------------------------------------
Whitney Holding Corp.(b) 206,891 3,308,187
===============================================================================
29,711,494
===============================================================================
RESTAURANTS-2.46%
DineEquity, Inc. 123,979 1,433,197
- -------------------------------------------------------------------------------
Papa John's International, Inc.(c) 184,810 3,406,048
- -------------------------------------------------------------------------------
Sonic Corp.(c) 341,808 4,159,804
===============================================================================
8,999,049
===============================================================================
SEMICONDUCTOR EQUIPMENT-1.83%
ATMI, Inc.(c) 207,047 3,194,735
- -------------------------------------------------------------------------------
MKS Instruments, Inc.(c) 236,500 3,497,835
===============================================================================
6,692,570
===============================================================================
SEMICONDUCTORS-2.08%
Power Integrations, Inc. 166,202 3,304,096
- -------------------------------------------------------------------------------
Semtech Corp.(b)(c) 381,578 4,300,384
===============================================================================
7,604,480
===============================================================================
SPECIALIZED REIT'S-2.05%
LaSalle Hotel Properties(b) 152,896 1,689,501
- -------------------------------------------------------------------------------
Senior Housing Properties Trust 136,540 2,446,797
- -------------------------------------------------------------------------------
Universal Health Realty Income Trust 101,875 3,352,706
===============================================================================
7,489,004
===============================================================================
SPECIALTY CHEMICALS-0.97%
Zep, Inc. 184,656 3,565,707
===============================================================================
TECHNOLOGY DISTRIBUTORS-0.10%
PC Mall, Inc.(c) 89,105 357,311
===============================================================================
TRUCKING-3.77%
Landstar System, Inc. 111,940 4,301,854
- -------------------------------------------------------------------------------
Marten Transport, Ltd.(c) 282,630 5,358,665
- -------------------------------------------------------------------------------
Old Dominion Freight Line, Inc.(c) 144,977 4,126,045
===============================================================================
13,786,564
===============================================================================
WATER UTILITIES-0.25%
Cascal N.V. (United Kingdom) 224,845 903,877
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $428,561,754) 354,055,048
===============================================================================
MONEY MARKET FUNDS-2.38%
Liquid Assets Portfolio-Institutional Class(e) 4,354,077 4,354,077
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 4,354,077 4,354,077
===============================================================================
Total Money Market Funds (Cost $8,708,154) 8,708,154
===============================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-99.13% (Cost $437,269,908) 362,763,202
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-17.76%
Liquid Assets Portfolio-Institutional Class (Cost
$64,976,756)(e)(f) 64,976,756 64,976,756
===============================================================================
TOTAL INVESTMENTS-116.89% (Cost $502,246,664) 427,739,958
===============================================================================
OTHER ASSETS LESS LIABILITIES-(16.89)% (61,795,458)
===============================================================================
NET ASSETS-100.00% $365,944,500
===============================================================================
</Table>
Investment Abbreviations:
<Table>
REIT - Real Estate Investment Trust
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) All or a portion of this security was out on loan at December 31, 2008.
(c) Non-income producing security.
(d) Non-income producing security acquired through a corporate action.
(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 11.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM SMALL CAP EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$428,561,754)* $354,055,048
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 73,684,910
======================================================
Total investments (Cost
$502,246,664) 427,739,958
======================================================
Receivables for:
Investments sold 2,061,309
- ------------------------------------------------------
Fund shares sold 2,446,070
- ------------------------------------------------------
Dividends 476,199
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 43,135
- ------------------------------------------------------
Other assets 29,979
======================================================
Total assets 432,796,650
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 1,437,536
- ------------------------------------------------------
Collateral upon return of securities
loaned 64,976,756
- ------------------------------------------------------
Accrued fees to affiliates 272,724
- ------------------------------------------------------
Accrued other operating expenses 58,045
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 107,089
======================================================
Total liabilities 66,852,150
======================================================
Net assets applicable to shares
outstanding $365,944,500
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $467,837,058
- ------------------------------------------------------
Undistributed net investment income
(loss) (126,724)
- ------------------------------------------------------
Undistributed net realized gain (loss) (27,259,128)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (74,506,706)
======================================================
$365,944,500
======================================================
NET ASSETS:
Class A $227,884,654
======================================================
Class B $ 50,220,079
======================================================
Class C $ 36,470,220
======================================================
Class R $ 23,878,594
======================================================
Class Y $ 3,533,526
======================================================
Institutional Class $ 23,957,427
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 28,820,208
======================================================
Class B 6,875,511
======================================================
Class C 4,994,960
======================================================
Class R 3,082,007
======================================================
Class Y 446,622
======================================================
Institutional Class 2,950,632
======================================================
Class A:
Net asset value per share $ 7.91
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $7.91 divided
by 94.50%) $ 8.37
======================================================
Class B:
Net asset value and offering price
per share $ 7.30
======================================================
Class C:
Net asset value and offering price
per share $ 7.30
======================================================
Class R:
Net asset value and offering price
per share $ 7.75
======================================================
Class Y:
Net asset value and offering price
per share $ 7.91
======================================================
Institutional Class:
Net asset value and offering price
per share $ 8.12
======================================================
</Table>
* At December 31, 2008, securities with an aggregate value of $64,405,525 were
on loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM SMALL CAP EQUITY FUND
STATEMENT OF OPERATIONS
For the year ended December 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $5,848) $ 4,560,126
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $835,955) 1,150,041
================================================================================================
Total investment income 5,710,167
================================================================================================
EXPENSES:
Advisory fees 3,454,625
- ------------------------------------------------------------------------------------------------
Administrative services fees 150,040
- ------------------------------------------------------------------------------------------------
Custodian fees 11,111
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 717,329
- ------------------------------------------------------------------------------------------------
Class B 794,596
- ------------------------------------------------------------------------------------------------
Class C 443,708
- ------------------------------------------------------------------------------------------------
Class R 125,962
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C, R and Y 1,359,174
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 729
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 29,382
- ------------------------------------------------------------------------------------------------
Other 310,492
================================================================================================
Total expenses 7,397,148
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (42,880)
================================================================================================
Net expenses 7,354,268
================================================================================================
Net investment income (loss) (1,644,101)
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from investment securities (includes net gains from
securities sold to affiliates of $3,875,153) (26,858,226)
================================================================================================
Change in net unrealized appreciation (depreciation) (147,408,543)
================================================================================================
Net realized and unrealized gain (loss) (174,266,769)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(175,910,870)
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM SMALL CAP EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,644,101) $ (3,595,022)
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) (26,858,226) 54,821,346
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (147,408,543) (32,039,448)
=========================================================================================================
Net increase (decrease) in net assets resulting from operations (175,910,870) 19,186,876
=========================================================================================================
Distributions to shareholders from net realized gains:
Class A (3,289,862) (29,992,662)
- ---------------------------------------------------------------------------------------------------------
Class B (815,086) (10,156,017)
- ---------------------------------------------------------------------------------------------------------
Class C (577,212) (5,014,599)
- ---------------------------------------------------------------------------------------------------------
Class R (350,122) (2,305,068)
- ---------------------------------------------------------------------------------------------------------
Class Y (41,951) --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (334,108) (3,264,873)
=========================================================================================================
Total distributions from net realized gains (5,408,341) (50,733,219)
=========================================================================================================
Share transactions-net:
Class A (4,535,055) 119,069,962
- ---------------------------------------------------------------------------------------------------------
Class B (27,582,114) (13,915,556)
- ---------------------------------------------------------------------------------------------------------
Class C 1,083,289 (747,735)
- ---------------------------------------------------------------------------------------------------------
Class R 7,578,764 (682,405)
- ---------------------------------------------------------------------------------------------------------
Class Y 4,010,813 --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (3,099,714) 23,360,252
=========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (22,544,017) 127,084,518
=========================================================================================================
Net increase (decrease) in net assets (203,863,228) 95,538,175
=========================================================================================================
NET ASSETS:
Beginning of year 569,807,728 474,269,553
=========================================================================================================
End of year (includes undistributed net investment income (loss) of
$(126,724) and $(121,424), respectively) $ 365,944,500 $569,807,728
=========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
14 AIM SMALL CAP EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
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 assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. Matters affecting each portfolio or class will be voted on exclusively
by the shareholders of such portfolio or class.
The Fund's primary investment objective is long-term growth of capital.
The Fund currently consists of six different classes of shares: Class A, Class
B, Class C, Class R, Class Y 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.
Class R, Class Y 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.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price or official closing price as of the close
of the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on
that day. Securities traded in the over-the-counter market are valued
based on 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. Because of the inherent uncertainties of valuation, the
values reflected in the financial statements may materially differ from
the value received upon actual sale of those investments.
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.
15 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 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. Upon the failure of the borrower to return the securities,
collateral may be liquidated and the securities may be purchased on the
open market to replace the loaned securities. The Fund could 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.
16 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, 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 (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2008, the Advisor waived advisory fees of
$14,158.
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 year
ended December 31, 2008, Invesco reimbursed expenses of the Fund in the amount
of $2,964.
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 year ended December 31, 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 year
ended December 31, 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, Class Y 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 year ended December 31, 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 year ended December 31, 2008, IADI
advised the Fund that IADI retained $56,313 in front-end sales commissions from
the sale of Class A shares and $1,120, $67,261, $4,232 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 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. 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 significant
unobservable inputs
17 AIM SMALL CAP EQUITY FUND
(Level 3) generally when market prices are not readily available or are
unreliable. Based on the valuation inputs the securities or other investments
are tiered into one of three levels. Changes in valuation methods may result in
transfers in or out of an investment's assigned level,
Level 1 -- Prices are determined using 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 valuation input levels, as of the end of the
reporting period, December 31, 2008. The level assigned to the securities
valuations may not be an indication of the risk or liquidity associated with
investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially
differ from the value received upon actual sale of those investments.
<Table>
<Caption>
INVESTMENTS IN
INPUT LEVEL SECURITIES
- --------------------------------------
Level 1 $427,739,958
- --------------------------------------
Level 2 --
- --------------------------------------
Level 3 --
======================================
$427,739,958
======================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended December 31, 2008, the Fund
engaged in securities purchases of $6,238,369 and securities sales of
$10,335,796, which resulted in net realized gains of $3,875,153.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the year
ended December 31, 2008, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $25,758.
NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS
"Trustees' and Officers' 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
Officers' 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 Officers'
Fees and Benefits" include amounts accrued by the Fund to fund such retirement
benefits. Obligations under the deferred compensation and retirement plans
represent unsecured claims against the general assets of the Fund.
During the year ended December 31, 2008, the Fund paid legal fees of $4,388
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, 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.
18 AIM SMALL CAP EQUITY FUND
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
DECEMBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Ordinary income $1,530,214 $ 9,752,973
- -------------------------------------------------------------------------------------------------------
Long-term capital gain 3,878,127 40,980,246
=======================================================================================================
Total distributions $5,408,341 $50,733,219
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments $(74,926,038)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (126,724)
- ------------------------------------------------------------------------------------------------
Post-October deferrals (15,319,112)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (11,520,684)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 467,837,058
================================================================================================
Total net assets $365,944,500
================================================================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's net unrealized
appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The
ability to utilize capital loss carryforward in the future may be limited under
the Internal Revenue Code and related regulations based on the results of future
transactions.
The Fund has a capital loss carryforward as of December 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
December 31, 2016 $11,520,684
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended December 31, 2008 was $236,850,234 and
$273,556,129, 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 $ 34,461,228
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (109,387,266)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $ (74,926,038)
================================================================================================
Cost of investments for tax purposes is $502,665,996.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of proxy costs, excise tax
expenses and distributions reclasses, on December 31, 2008, undistributed net
investment income (loss) was increased by $1,638,801, undistributed net realized
gain (loss) was increased by $12,787 and shares of beneficial interest decreased
by $1,651,588. This reclassification had no effect on the net assets of the
Fund.
19 AIM SMALL CAP EQUITY FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
2008(a) 2007
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 9,257,999 $ 92,284,143 5,343,108 $ 70,760,228
- --------------------------------------------------------------------------------------------------------------------------
Class B 937,641 8,964,701 517,633 6,341,819
- --------------------------------------------------------------------------------------------------------------------------
Class C 1,948,156 18,789,173 532,166 6,440,580
- --------------------------------------------------------------------------------------------------------------------------
Class R 1,762,619 17,263,551 585,378 7,362,480
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) 446,957 4,015,372 -- --
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 704,479 6,822,531 1,610,396 20,741,905
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 416,783 3,117,475 2,467,977 28,653,263
- --------------------------------------------------------------------------------------------------------------------------
Class B 113,178 782,068 895,442 9,688,676
- --------------------------------------------------------------------------------------------------------------------------
Class C 79,785 550,888 435,538 4,712,523
- --------------------------------------------------------------------------------------------------------------------------
Class R 47,742 349,948 201,841 2,303,018
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) 5,588 41,800 -- --
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 41,893 321,735 275,517 3,264,873
==========================================================================================================================
Issued in connection with acquisitions:(c)
Class A -- -- 9,152,387 118,894,223
- --------------------------------------------------------------------------------------------------------------------------
Class B -- -- 1,921,059 23,515,193
- --------------------------------------------------------------------------------------------------------------------------
Class C -- -- 818,718 10,022,526
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,216,240 12,042,367 1,161,604 14,986,698
- --------------------------------------------------------------------------------------------------------------------------
Class B (1,311,007) (12,042,367) (1,235,588) (14,986,698)
==========================================================================================================================
Reacquired:
Class A(b) (11,422,318) (111,979,040) (8,863,106) (114,224,450)
- --------------------------------------------------------------------------------------------------------------------------
Class B (2,701,315) (25,286,516) (3,168,868) (38,474,546)
- --------------------------------------------------------------------------------------------------------------------------
Class C (1,950,803) (18,256,772) (1,819,422) (21,923,364)
- --------------------------------------------------------------------------------------------------------------------------
Class R (1,008,461) (10,034,735) (822,111) (10,347,903)
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) (5,923) (46,359) -- --
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,011,393) (10,243,980) (50,548) (646,526)
==========================================================================================================================
Net increase (decrease) in share activity (2,432,160) $ (22,544,017) 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 18% of the
outstanding shares of the Fund. ADI 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) Effective upon the commencement date of Class Y shares, October 3, 2008,
the following shares were converted from Class A shares into Class Y shares
of the Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
-----------------------------------------------------------------------------------------------------
Class Y 309,176 $ 2,974,271
-----------------------------------------------------------------------------------------------------
Class A (309,176) ($2,974,271)
=====================================================================================================
</Table>
(c) 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, April 20, 2007. AIM
Opportunities I Fund's net assets at that date of $152,431,942 including
$24,404,550 of unrealized appreciation, was 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.
20 AIM SMALL CAP EQUITY FUND
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES)
NET ASSET NET ON SECURITIES DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT REALIZED TOTAL VALUE, END
OF PERIOD (LOSS) UNREALIZED) OPERATIONS GAINS DISTRIBUTIONS OF PERIOD
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 $11.72 $(0.02)(c) $(3.67) $(3.69) $(0.12) $(0.12) $ 7.91
Year ended 12/31/07 12.24 (0.05)(c) 0.64 0.59 (1.11) (1.11) 11.72
Year ended 12/31/06 12.26 (0.07)(c) 2.16 2.09 (2.11) (2.11) 12.24
Year ended 12/31/05 12.80 (0.10) 0.96 0.86 (1.40) (1.40) 12.26
Year ended 12/31/04 12.03 (0.09)(c) 1.22 1.13 (0.36) (0.36) 12.80
- --------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 10.92 (0.09)(c) (3.41) (3.50) (0.12) (0.12) 7.30
Year ended 12/31/07 11.56 (0.14)(c) 0.61 0.47 (1.11) (1.11) 10.92
Year ended 12/31/06 11.77 (0.17)(c) 2.07 1.90 (2.11) (2.11) 11.56
Year ended 12/31/05 12.42 (0.19) 0.94 0.75 (1.40) (1.40) 11.77
Year ended 12/31/04 11.77 (0.18)(c) 1.19 1.01 (0.36) (0.36) 12.42
- --------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 10.92 (0.09)(c) (3.41) (3.50) (0.12) (0.12) 7.30
Year ended 12/31/07 11.56 (0.14)(c) 0.61 0.47 (1.11) (1.11) 10.92
Year ended 12/31/06 11.76 (0.17)(c) 2.08 1.91 (2.11) (2.11) 11.56
Year ended 12/31/05 12.42 (0.19) 0.93 0.74 (1.40) (1.40) 11.76
Year ended 12/31/04 11.77 (0.18)(c) 1.19 1.01 (0.36) (0.36) 12.42
- --------------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 12/31/08 11.51 (0.04)(c) (3.60) (3.64) (0.12) (0.12) 7.75
Year ended 12/31/07 12.07 (0.09)(c) 0.64 0.55 (1.11) (1.11) 11.51
Year ended 12/31/06 12.15 (0.11)(c) 2.14 2.03 (2.11) (2.11) 12.07
Year ended 12/31/05 12.71 (0.13) 0.97 0.84 (1.40) (1.40) 12.15
Year ended 12/31/04 11.99 (0.12)(c) 1.20 1.08 (0.36) (0.36) 12.71
- --------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(e) 9.62 (0.00) (1.59) (1.59) (0.12) (0.12) 7.91
- --------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 11.96 0.04(c) (3.76) (3.72) (0.12) (0.12) 8.12
Year ended 12/31/07 12.40 0.01(c) 0.66 0.67 (1.11) (1.11) 11.96
Year ended 12/31/06 12.33 0.01(c) 2.17 2.18 (2.11) (2.11) 12.40
Year ended 12/31/05(e) 11.69 (0.01) 2.05 2.04 (1.40) (1.40) 12.33
==========================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT INVESTMENT
NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS)
TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
RETURN(A) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(B)
- ------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 12/31/08 (31.45)% $227,885 1.41%(d) 1.41%(d) (0.19)%(d) 51%
Year ended 12/31/07 4.92 343,993 1.37 1.43 (0.42) 49
Year ended 12/31/06 16.83 245,868 1.49 1.60 (0.55) 56
Year ended 12/31/05 6.58 218,915 1.51 1.62 (0.84) 52
Year ended 12/31/04 9.45 247,581 1.53 1.64 (0.77) 124
- ------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 12/31/08 (32.01) 50,220 2.16(d) 2.16(d) (0.94)(d) 51
Year ended 12/31/07 4.16 107,417 2.12 2.18 (1.17) 49
Year ended 12/31/06 15.90 126,111 2.24 2.35 (1.30) 56
Year ended 12/31/05 5.89 131,547 2.21 2.32 (1.54) 52
Year ended 12/31/04 8.64 156,450 2.27 2.29 (1.51) 124
- ------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 12/31/08 (32.01) 36,470 2.16(d) 2.16(d) (0.94)(d) 51
Year ended 12/31/07 4.16 53,684 2.12 2.18 (1.17) 49
Year ended 12/31/06 16.00 57,221 2.24 2.35 (1.30) 56
Year ended 12/31/05 5.81 55,009 2.21 2.32 (1.54) 52
Year ended 12/31/04 8.64 65,792 2.27 2.29 (1.51) 124
- ------------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 12/31/08 (31.59) 23,879 1.66(d) 1.66(d) (0.44)(d) 51
Year ended 12/31/07 4.65 26,251 1.62 1.68 (0.67) 49
Year ended 12/31/06 16.47 27,946 1.74 1.85 (0.80) 56
Year ended 12/31/05 6.48 17,862 1.71 1.82 (1.04) 52
Year ended 12/31/04 9.06 11,817 1.77 1.79 (1.01) 124
- ------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 12/31/08(e) (16.48) 3,534 1.29(d)(f) 1.30(d)(f) (0.07)(d)(f) 51
- ------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 12/31/08 (31.07) 23,957 0.84(d) 0.84(d) 0.37(d) 51
Year ended 12/31/07 5.50 38,463 0.84 0.89 0.11 49
Year ended 12/31/06 17.45 17,122 0.90 1.01 0.04 56
Year ended 12/31/05(e) 17.31 4,712 0.87(f) 0.98(f) (0.20)(f) 52
========================================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Total returns do not include sales charges and are not
annualized for periods less than one year, if applicable.
(b) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable. For the period ending
December 31, 2007, the portfolio 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.
(c) Calculated using average shares outstanding.
(d) Ratios are based on average daily net assets (000's omitted) of $286,932,
$79,460, $44,371, $25,192, $2,602, and $31,526 for Class A, Class B, Class
C, Class R, Class Y, and Institutional Class shares, respectively.
(e) Commencement date of Class Y and Institutional Class was October 3, 2008
and April 29, 2005, respectively.
(f) Annualized.
21 AIM SMALL CAP EQUITY FUND
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On 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
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 alleging that the defendants permitted
improper market timing and related activity in the AIM Funds.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
the 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.
All lawsuits based on allegations of market timing, late trading and related
issues were 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 January 5, 2008, the parties reached an agreement in principle to settle both
the Consolidated Amended Class Action Complaint and Consolidated Amended Fund
Derivative Complaint, subject to the MDL Court approval. Individual class
members have the right to object. On December 15, 2008, the parties reached an
agreement in principle to settle the Amended Class Action Complaint for
Violations of ERISA, subject to the MDL Court approval. Individual class members
have the right to object. No payments are required under the settlement;
however, the parties agreed that certain limited changes to benefit plans and
participants' accounts would be made.
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.
Management of Invesco Aim and the Fund believe that the outcome of the Pending
Litigation and Regulatory Inquiries described above will have no material
adverse affect on the Fund or on the ability of Invesco Aim and IADI to provide
ongoing services to the Fund.
22 AIM SMALL CAP EQUITY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Funds Group
and Shareholders of AIM Small Cap Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Small Cap Equity Fund (one of
the funds constituting AIM Funds Group, hereafter referred to as the "Fund") at
December 31, 2008, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
February 17, 2009
Houston, Texas
23 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. With
the exception of the actual ending account value and expenses of the Class Y
Shares, the example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period July 1, 2008, through
December 31, 2008. The actual ending account and expenses of the Class Y shares
in the below example are based on an investment of $1,000 invested as of close
of business October 3, 2008 (commencement date) and held through December 31,
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 (as of close of business
October 3, 2008 through December 31, 2008 for the Class Y shares). Because the
actual ending account value and expense information in the example is not based
upon a six month period for the Class Y shares, the ending account value and
expense information may not provide a meaningful comparison to mutual funds that
provide such information for a full six month 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $721.20 $6.40 $1,017.70 $ 7.51 1.48%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 718.00 9.63 1,013.93 11.29 2.23
- ---------------------------------------------------------------------------------------------------
C 1,000.00 718.00 9.63 1,013.93 11.29 2.23
- ---------------------------------------------------------------------------------------------------
R 1,000.00 720.40 7.48 1,016.44 8.77 1.73
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 835.20 2.91 1,018.65 6.55 1.29
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 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
184/366 to reflect the most recent fiscal half year. For the Class Y shares
actual expenses are equal to the annualized expense ratio indicated above
multiplied by the average account value over the period, multiplied by 90
(as of close of business October 3, 2008, through December 31, 2008)/366.
Because the Class Y shares have not been in existence for a full six month
period, the actual ending account value and expense information shown may
not provide a meaningful comparison to fund expense information of classes
that show such data for a full six month period and, because the actual
ending account value and expense information in the expense example covers a
short time period, return and expense data may not be indicative of return
and expense data for longer time periods.
(3) Hypothetical expenses are equal to the annualized expense ratio indicated
above multiplied by the average account value over the period, multiplied by
184/366 to reflect a one-half year period. The hypothetical ending account
value and expenses may be used to compare ongoing costs of investing in
Class Y shares of the Fund and other funds because such data is based on a
full six month period.
24 AIM SMALL CAP EQUITY FUND
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 July 1, 2008, through December 31, 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 (07/01/08) (12/31/08)(1) PERIOD(2) (12/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $723.20 $3.90 $1,020.61 $4.57 0.90%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period July 1, 2008, through December 31, 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
184/366 to reflect the most recent fiscal half year.
AIM SMALL CAP EQUITY FUND
Supplement to Annual Report dated 12/31/08
AIM SMALL CAP EQUITY FUND
INSTITUTIONAL CLASS SHARES
The following information has been prepared to provide Institutional Class
shareholders with a performance overview specific to their holdings.
Institutional Class shares are offered exclusively to institutional investors,
including defined contribution plans that meet certain criteria.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 12/31/08
Inception 2.28%
5 Years 0.05
1 Year -31.07
Institutional Class shares' inception date is April 29, 2005. Returns since that
date are historical returns. All other returns are blended returns of historical
Institutional Class share performance and restated Class A share performance
(for periods prior to the inception date of Institutional Class shares) at net
asset value (NAV) and reflect the 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.
Please note that past performance is not indicative of future results.
More recent returns may be more or less than those shown. All returns assume
reinvestment of distributions at NAV. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. See full report for information on comparative benchmarks. Please
consult your Fund prospectus for more information. For the most current
month-end performance, please call 800 451 4246 or visit invescoaim.com.
NASDAQ SYMBOL SMEIX
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-1 Invesco Aim Distributors, Inc.
TAX INFORMATION
Form 1099-DIV, Form 1042-S and other year-end tax information provide
shareholders with actual calendar year amounts that should be included in their
tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the
Internal Revenue Code or to meet a specific state's requirement.
The Fund designates the following amounts or, if subsequently determined to be
different, the maximum amount allowable for its fiscal year ended December 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $3,878,127
Qualified Dividend Income* 51.67%
Corporate Dividends Received Deduction* 50.40%
</Table>
* The above percentages are based on ordinary income dividends paid to
shareholders during the Fund's fiscal year.
ADDITIONAL NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended March 31, 2008, June 30, 2008, September 30, 2008 and
December 31, 2008 were 3.69%, 3.30%, 4.25%, and 3.84%, respectively.
25 AIM SMALL CAP EQUITY FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Funds Group (the "Trust"), is 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 104
portfolios in the AIM Funds complex. The trustees serve for the life of the
Trust, subject to their earlier death, incapacitation, resignation, retirement
or removal as more specifically provided in the Trust's organizational
documents. Each officer serves for a one year term or until their successors are
elected and qualified. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- --------------------------------------------------------------------------------------------------------------------------------
Martin L. 2007 Executive Director, Chief Executive Officer and President, None
Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global
Trustee investment management firm); Chairman, Invesco Aim Advisors,
Inc. (registered investment advisor); Director, Chairman,
Chief Executive Officer and President, IVZ Inc. (holding
company); INVESCO North American Holdings, Inc. (holding
company); and, INVESCO Group Services, Inc. (service
provider); Trustee, The AIM Family of Funds--Registered
Trademark--; Vice Chairman, Investment Company Institute;
and Member of Executive Board, SMU Cox School of Business
Formerly: Director, Chief Executive Officer and President,
Invesco Holding Company Limited (parent of Invesco Aim and a
global investment management firm); Chairman, Investment
Company Institute; President, Co-Chief Executive Officer,
Co-President, Chief Operating Officer and Chief Financial
Officer, Franklin Resources, Inc. (global investment
management organization)
- --------------------------------------------------------------------------------------------------------------------------------
Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None
Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and
Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual
Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim
Advisors, Inc., and 1371 Preferred Inc. (holding company);
Director, Chairman, Chief Executive Officer and President,
Invesco Aim Management Group, Inc. (financial services
holding company) and Invesco Aim Capital Management, Inc.
(registered investment advisor); Director and President,
INVESCO Funds Group, Inc. (registered investment advisor and
register transfer agent) and AIM GP Canada Inc. (general
partner for a limited partnership); Director, Invesco Aim
Distributors, Inc. (registered broker dealer); Director and
Chairman, Invesco Aim Investment Services, Inc. (registered
transfer agent) and INVESCO Distributors, Inc. (registered
broker dealer); Director, President and Chairman, IVZ Callco
Inc. (holding company), INVESCO Inc. (holding company) and
Invesco Canada Holdings Inc. (formerly AIM Canada Holdings
Inc.) (holding company); Chief Executive Officer, AIM
Trimark Corporate Class Inc. (formerly AIM Trimark Global
Fund Inc.) (corporate mutual fund company) and AIM Trimark
Canada Fund Inc. (corporate mutual fund company); Director
and Chief Executive Officer, Invesco Trimark Ltd./Invesco
Trimark Ltee (formerly AIM Funds Management Inc. d/b/a
INVESCO Enterprise Services) (registered investment advisor
and registered transfer agent) and Invesco Trimark Dealer
Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered
broker dealer); Trustee, President and Principal Executive
Officer of The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust and Short-Term
Investments Trust); Trustee and Executive Vice President,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust and Short-Term Investments Trust
only); and Manager, Invesco PowerShares Capital Management
LLC
Formerly: President, Invesco Trimark Dealer Inc.; Director
and President, AIM Trimark Corporate Class Inc. and AIM
Trimark Canada Fund Inc.; Director and President, Invesco
Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds
Management Inc. d/b/a INVESCO Enterprise Services); Senior
Managing Director, Invesco Holding Company Limited; Trustee
and Executive Vice President, Tax-Free Investments Trust;
Director and Chairman, Fund Management Company (registered
broker dealer); President and Principal Executive Officer,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments Trust and
Tax-Free Investments Trust only); President, AIM Trimark
Global Fund Inc. and AIM Trimark Canada Fund Inc.; and
Director, Trimark Trust (federally regulated Canadian Trust
Company)
- --------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1987 Chairman, Crockett Technology Associates (technology ACE Limited
Trustee and Chair consulting company) (insurance company);
Captaris, Inc.
(unified messaging
provider); and
Investment Company
Institute
- --------------------------------------------------------------------------------------------------------------------------------
Bob R. Baker -- 1936 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Retired
Trustee
Formerly: Partner, law firm of Baker & McKenzie; and None
Director, Badgley Funds, Inc. (registered investment
company) (2 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Van Gilder
Trustee firm) Insurance Company;
Board of Governors,
Western Golf
Association/Evans
Scholars Foundation
and Executive
Committee, United
States Golf
Association
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group Ltd. (private
investment and management); Continental Energy Services, LLC
(oil and gas pipeline service); Reich & Tang Funds
(registered investment company); Annuity and Life Re
(Holdings), Ltd. (reinsurance company), and Homeowners of
America Holding Corporation/Homeowners of America Insurance
Company (property casualty company)
Formerly: Director, CompuDyne Corporation (provider of
product and services to the public security market);
Director, President and Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice President, AB Volvo;
Director of various public and private corporations
- --------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff
Trustee (government affairs company); and Owner and Chief Executive
Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate
entertainment)
Formerly: Chief Executive Officer, Texana Timber LP
(sustainable forestry company); and Discovery Global
Education Fund (non-profit)
- --------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Larry Soll -- 1942 2003 Retired None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Raymond Stickel, Jr. -- 1944 2005 Retired
Trustee
Formerly: Partner, Deloitte & Touche; and Director, Mainstay None
VP Series Funds, Inc. (25 portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Mr. Flanagan is considered an interested person of the Trust because he is
an officer of the advisor to the Trust, and an officer and a director of
Invesco Ltd., ultimate parent of the advisor to the Trust.
(2) Mr. Taylor is considered an interested person of the Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
26 AIM SMALL CAP EQUITY FUND
TRUSTEES AND OFFICERS--(CONTINUED)
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER
POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S)
TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- --------------------------------------------------------------------------------------------------------------------------------
Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A
Senior Vice President and Funds--Registered Trademark--
Senior Officer
Formerly: Director of Compliance and Assistant General Counsel,
ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General
Counsel and Director of Compliance, ALPS Mutual Funds, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A
Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc.
Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice
President and Secretary, Invesco Aim Distributors, Inc.;
Director, Vice President and Secretary, Invesco Aim Investment
Services, Inc. and INVESCO Distributors, Inc.; Director and Vice
President, INVESCO Funds Group Inc.; Senior Vice President, Chief
Legal Officer and Secretary, The AIM Family of Funds--Registered
Trademark--; and Manager, Invesco PowerShares Capital Management
LLC
Formerly: Director, Vice President and Secretary, Fund Management
Company; Vice President, Invesco Aim Capital Management, Inc.;
Chief Operating Officer, Senior Vice President, General Counsel
and Secretary, Liberty Ridge Capital, Inc. (an investment
adviser); Vice President and Secretary, PBHG Funds (an investment
company); Vice President and Secretary, PBHG Insurance Series
Fund (an investment company); Chief Operating Officer, General
Counsel and Secretary, Old Mutual Investment Partners (a broker-
dealer); General Counsel and Secretary, Old Mutual Fund Services
(an administrator); General Counsel and Secretary, Old Mutual
Shareholder Services (a shareholder servicing center); Executive
Vice President, General Counsel and Secretary, Old Mutual
Capital, Inc. (an investment adviser); and Vice President and
Secretary, Old Mutual Advisors Funds (an investment company)
- --------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A
Vice President AIM Family of Funds--Registered Trademark--
Formerly: Senior Vice President, Invesco Aim Management Group,
Inc.; Senior Vice President and Chief Compliance Officer, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark--; Vice President and Chief Compliance Officer, Invesco
Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.;
Vice President, Invesco Aim Investment Services, Inc. and Fund
Management Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
- --------------------------------------------------------------------------------------------------------------------------------
Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A
Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited,
IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO
Funds Group, Inc.; Secretary, INVESCO North American Holdings,
Inc.; and Vice President, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary and General
Counsel, Invesco Aim Management Group, Inc. and Invesco Aim
Advisors, Inc.; Senior Vice President, Invesco Aim Distributors,
Inc.; Director, General Counsel and Vice President, Fund
Management Company; Vice President, Invesco Aim Capital
Management, Inc. and Invesco Aim Investment Services, Inc.;
Senior Vice President, Chief Legal Officer and Secretary, The AIM
Family of Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc. and Chief Executive Officer
and President, INVESCO Funds Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A
Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President,
and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc.
Officer and Invesco Aim Private Asset Management Inc.
Formerly: Assistant Vice President and Assistant Treasurer, The
AIM Family of Funds--Registered Trademark-- and Assistant Vice
President, Invesco Aim Advisors, Inc., Invesco Aim Capital
Management, Inc. and Invesco Aim Private Asset Management, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1992 Head of Invesco's World Wide Fixed Income and Cash Management N/A
Vice President Group; Director of Cash Management and Senior Vice President,
Invesco Aim Advisors, Inc. and Invesco Aim Capital Management,
Inc; Executive Vice President, Invesco Aim Distributors, Inc.;
Senior Vice President, Invesco Aim Management Group, Inc.; Vice
President, The AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust and Short-Term Investments
Trust); and President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM Treasurer's Series
Trust and Short-Term Investments Trust only)
Formerly President and Principal Executive Officer, Tax-Free
Investments Trust; Director and President, Fund Management
Company; Chief Cash Management Officer and Managing Director,
Invesco Aim Capital Management, Inc.; and Vice President, Invesco
Aim Advisors, Inc. and The AIM Family of Funds--Registered
Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust only)
- --------------------------------------------------------------------------------------------------------------------------------
Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A
Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim
Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc.,
Invesco Aim Private Asset Management, Inc. and The AIM Family of
Funds--Registered Trademark--
Formerly: Anti-Money Laundering Compliance Officer, Fund
Management Company; and Manager of the Fraud Prevention
Department, Invesco Aim Investment Services, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A
Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim
Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief
Compliance Officer, The AIM Family of Funds--Registered
Trademark--, Invesco Global Asset Management (N.A.), Inc.
(registered investment advisor), Invesco Institutional (N.A.),
Inc., (registered investment advisor), INVESCO Private Capital
Investments, Inc. (holding company), Invesco Private Capital,
Inc. (registered investment advisor) and Invesco Senior Secured
Management, Inc. (registered investment advisor); and Vice
President, Invesco Aim Distributors, Inc. and Invesco Aim
Investment Services, Inc.
Formerly: Vice President, Invesco Aim Capital Management, Inc.
and Fund Management Company; and Global Head of Product
Development, AIG-Global Investment Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
The Statement of Additional Information of the Trust includes additional
information about the Fund's Trustees and is available upon request, without
charge, by calling 1.800.959.4246.
Please refer to the Fund's prospectus for information on the Fund's sub-
advisors.
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers
Suite 100 Inc. Inc. LLP
Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Suite 100 Suite 100 Suite 2900
Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678
COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN
Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and
& Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company
2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801
Americas
New York, NY 10036-2714
27 AIM SMALL CAP EQUITY FUND
[GO PAPERLESS GRAPHIC]
GO PAPERLESS WITH EDELIVERY
Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund
reports and prospectuses with a service that's all about eeees:
# ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of trees used to
produce paper.
# ECONOMICAL. Help reduce your fund's printing and delivery expenses and put
more capital back in your fund's returns.
# EFFICIENT. Stop waiting for regular mail. Your documents will be sent via
email as soon as they're available.
# EASY. Download, save and print files using your home computer with a few
clicks of your mouse.
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 website 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 email
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 website, invescoaim.com. On the home page, scroll
down and click on Proxy Policy. The information is also available on the SEC
website, 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
website. 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 website, sec.gov.
If used after April 20, 2009, 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.
Please refer to each fund's prospectus for information on the fund's
subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the
retail mutual funds, exchange-traded funds and institutional money market funds
and the subdistributor for the STIC Global Funds represented by Invesco Aim. All
entities are indirect, wholly owned subsidiaries of Invesco Ltd.
It is anticipated that the businesses of the affiliated investment adviser firms
- -- Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco
Private Asset Management, Inc. and Invesco Global Asset Management (N.A.), Inc.
- -- will be combined into Invesco Institutional (N.A.), Inc., and the
consolidated adviser firm will be renamed Invesco Advisers, Inc., on or about
Aug. 1, 2009. Additional information will be posted at invescoaim.com on or
about Aug. 1, 2009.
[INVESCO AIM LOGO]
- -- SERVICE MARK --
invescoaim.com SCE-AR-1 Invesco Aim Distributors, Inc.
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the Registrant had
adopted a code of ethics (the "Code") that applies to the Registrant's
principal executive officer ("PEO") and principal financial officer
("PFO"). There were no amendments to the Code during the period
covered by the report. The Registrant did not grant any waivers,
including implicit waivers, from any provisions of the Code to the PEO
or PFO during the period covered by this report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that the Registrant has at least
one audit committee financial expert serving on its Audit Committee.
The Audit Committee financial expert is Raymond Stickel, Jr. Mr.
Stickel is "independent" within the meaning of that term as used in
Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
FEES BILLED BY PRINCIPAL ACCOUNTANT RELATED TO THE REGISTRANT
PWC billed the Registrant aggregate fees for services rendered to the
Registrant for the last two fiscal years as follows:
Percentage of Fees Percentage of Fees
Billed Applicable to Billed Applicable to
Non-Audit Services Non-Audit Services
Fees Billed by PWC Provided for fiscal Provided for fiscal
for Services year end 2008 Fees Billed by PWC year end 2007
Rendered to the Pursuant to Waiver of for Services Rendered Pursuant to Waiver of
Registrant for fiscal Pre-Approval to the Registrant for Pre-Approval
year end 2008 Requirement(1) fiscal year end 2007 Requirement(1)
--------------------- --------------------- ---------------------- ---------------------
Audit Fees $267,375 N/A $284,419 N/A
Audit-Related Fees(2) $ 0 0% $ 13,950 0%
Tax Fees(3) $ 66,279 0% $ 72,320 0%
All Other Fees $ 0 0% $ 0 0%
-------- --------
Total Fees $333,654 0% $370,689 0%
PWC billed the Registrant aggregate non-audit fees of $66,279 for the fiscal
year ended 2008, and $86,270 for the fiscal year ended 2007, for non-audit
services rendered to the Registrant.
- ----------
(1) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by the Registrant at the
time of engagement, (ii) the aggregate amount of all such services provided
is no more than 5% of the aggregate audit and non-audit fees paid by the
Registrant during a fiscal year; and (iii) such services are promptly
brought to the attention of the Registrant's Audit Committee and approved
by the Registrant's Audit Committee prior to the completion of the audit.
(2) Audit-Related Fees for the fiscal year ended December 31, 2007 includes
fees billed for completing agreed-upon procedures related to reorganization
transactions.
(3) Tax fees for the fiscal year end December 31, 2008 includes fees billed for
reviewing tax returns and consultation services. Tax fees for fiscal year
end December 31, 2007 includes fees billed for reviewing tax returns and
consultation services.
FEES BILLED BY PRINCIPAL ACCOUNTANT RELATED TO INVESCO AIM AND INVESCO AIM
AFFILIATES
PWC billed Invesco Aim Advisors, Inc. ("Invesco Aim"), the Registrant's
adviser, and any entity controlling, controlled by or under common control with
Invesco Aim that provides ongoing services to the Registrant ("Invesco Aim
Affiliates") aggregate fees for pre-approved non-audit services rendered to
Invesco Aim and Invesco Aim Affiliates as follows:
Fees Billed for Non- Fees Billed for Non-
Audit Services Audit Services
Rendered to Invesco Percentage of Fees Rendered to Invesco Percentage of Fees
Aim and Invesco Aim Billed Applicable to Aim and Invesco Aim Billed Applicable to
Affiliates for fiscal Non-Audit Services Affiliates for fiscal Non-Audit Services
year end 2008 That Provided for fiscal year year end 2007 That Provided for fiscal year
Were Required end 2008 Pursuant to Were Required end 2007 Pursuant to
to be Pre-Approved Waiver of Pre- to be Pre-Approved Waiver of Pre-
by the Registrant's Approval by the Registrant's Approval
Audit Committee Requirement(1) Audit Committee Requirement(1)
--------------------- ------------------------ --------------------- ------------------------
Audit-Related Fees $0 0% $0 0%
Tax Fees $0 0% $0 0%
All Other Fees $0 0% $0 0%
--- ---
Total Fees(2) $0 0% $0 0%
- ----------
(1) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by the Registrant at the
time of engagement, (ii) the aggregate amount of all such services provided
is no more than 5% of the aggregate audit and non-audit fees paid by the
Registrant, Invesco Aim and Invesco Aim Affiliates during a fiscal year;
and (iii) such services are promptly brought to the attention of the
Registrant's Audit Committee and approved by the Registrant's Audit
Committee prior to the completion of the audit.
(2) Including the fees for services not required to be pre-approved by the
registrant's audit committee, PWC billed Invesco Aim and Invesco Aim
Affiliates aggregate non-audit fees of $0 for the fiscal year ended 2008,
and $0 for the fiscal year ended 2007, for non-audit services rendered to
Invesco Aim and Invesco Aim Affiliates.
The Audit Committee also has considered whether the provision of non-audit
services that were rendered to Invesco Aim and Invesco Aim Affiliates that
were not required to be pre-approved pursuant to SEC regulations, if any,
is compatible with maintaining the principal accountant's independence.
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
POLICIES AND PROCEDURES
As adopted by the Audit Committees of
the AIM Funds (the "Funds")
Last Amended September 18, 2006
STATEMENT OF PRINCIPLES
Under the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and
Exchange Commission ("SEC") ("Rules"), the Audit Committees of the Funds' (the
"Audit Committee") Board of Trustees (the "Board") are responsible for the
appointment, compensation and oversight of the work of independent accountants
(an "Auditor"). As part of this responsibility and to assure that the Auditor's
independence is not impaired, the Audit Committees pre-approve the audit and
non-audit services provided to the Funds by each Auditor, as well as all
non-audit services provided by the Auditor to the Funds' investment adviser and
to affiliates of the adviser that provide ongoing services to the Funds
("Service Affiliates") if the services directly impact the Funds' operations or
financial reporting. The SEC Rules also specify the types of services that an
Auditor may not provide to its audit client. The following policies and
procedures comply with the requirements for pre-approval and provide a mechanism
by which management of the Funds may request and secure pre-approval of audit
and non-audit services in an orderly manner with minimal disruption to normal
business operations.
Proposed services either may be pre-approved without consideration of specific
case-by-case services by the Audit Committees ("general pre-approval") or
require the specific pre-approval of the Audit Committees ("specific
pre-approval"). As set forth in these policies and procedures, unless a type of
service has received general pre-approval, it will require specific pre-approval
by the Audit Committees. Additionally, any fees exceeding 110% of estimated
pre-approved fee levels provided at the time the service was pre-approved will
also require specific approval by the Audit Committees before payment is made.
The Audit Committees will also consider the impact of additional fees on the
Auditor's independence when determining whether to approve any additional fees
for previously pre-approved services.
The Audit Committees will annually review and generally pre-approve the services
that may be provided by each Auditor without obtaining specific pre-approval
from the Audit Committee. The term of any general pre-approval runs from the
date of such pre-approval through September 30th of the following year, unless
the Audit Committees consider a different period and state otherwise. The Audit
Committees will add to or subtract from the list of general pre-approved
services from time to time, based on subsequent determinations.
The purpose of these policies and procedures is to set forth the guidelines to
assist the Audit Committees in fulfilling their responsibilities.
DELEGATION
The Audit Committees may from time to time delegate pre-approval authority to
one or more of its members who are Independent Trustees. All decisions to
pre-approve a service by a delegated member shall be reported to the Audit
Committee at its next quarterly meeting.
AUDIT SERVICES
The annual audit services engagement terms will be subject to specific
pre-approval of the Audit Committees. Audit services include the annual
financial statement audit and other procedures such as tax provision work that
is required to be performed by the independent auditor to be able to form an
opinion on the Funds' financial statements. The Audit Committee will obtain,
review and consider sufficient information concerning the proposed Auditor to
make a reasonable evaluation of the Auditor's qualifications and independence.
In addition to the annual Audit services engagement, the Audit Committees may
grant either general or specific pre-approval of other audit services, which are
those services that only the independent auditor reasonably can provide. Other
Audit services may include services such as issuing consents for the inclusion
of audited financial statements with SEC registration statements, periodic
reports and other documents filed with the SEC or other documents issued in
connection with securities offerings.
NON-AUDIT SERVICES
The Audit Committees may provide either general or specific pre-approval of any
non-audit services to the Funds and its Service Affiliates if the Audit
Committees believe that the provision of the service will not impair the
independence of the Auditor, is consistent with the SEC's Rules on auditor
independence, and otherwise conforms to the Audit Committee's general principles
and policies as set forth herein.
AUDIT-RELATED SERVICES
"Audit-related services" are assurance and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements or that are traditionally performed by the independent auditor.
Audit-related services include, among others, accounting consultations related
to accounting, financial reporting or disclosure matters not classified as
"Audit services"; assistance with understanding and implementing new accounting
and financial reporting guidance from rulemaking authorities; and agreed-upon
procedures related to mergers, compliance with ratings agency requirements and
interfund lending activities.
TAX SERVICES
"Tax services" include, but are not limited to, the review and signing of the
Funds' federal tax returns, the review of required distributions by the Funds
and consultations regarding tax matters such as the tax treatment of new
investments or the impact of new regulations. The Audit Committee will
scrutinize carefully the retention of the Auditor in connection with a
transaction initially recommended by the Auditor, the major business purpose of
which may be tax avoidance or the tax treatment of which may not be supported in
the Internal Revenue Code and related regulations. The Audit Committee will
consult with the Funds' Treasurer (or his or her designee) and may consult with
outside counsel or advisors as necessary to ensure the consistency of Tax
services rendered by the Auditor with the foregoing policy.
No Auditor shall represent any Fund or any Service Affiliate before a tax court,
district court or federal court of claims.
Under rules adopted by the Public Company Accounting Oversight Board and
approved by the SEC, in connection with seeking Audit Committee pre-approval of
permissible Tax services, the Auditor shall:
1. Describe in writing to the Audit Committees, which writing may be in
the form of the proposed engagement letter:
a. The scope of the service, the fee structure for the
engagement, and any side letter or amendment to the
engagement letter, or any other agreement between the
Auditor and the Fund, relating to the service; and
b. Any compensation arrangement or other agreement, such as a
referral agreement, a referral fee or fee-sharing
arrangement, between the Auditor and any person (other than
the Fund) with respect to the promoting, marketing, or
recommending of a transaction covered by the service;
2. Discuss with the Audit Committees the potential effects of the
services on the independence of the Auditor; and
3. Document the substance of its discussion with the Audit Committees.
ALL OTHER AUDITOR SERVICES
The Audit Committees may pre-approve non-audit services classified as "All other
services" that are not categorically prohibited by the SEC, as listed in Exhibit
1 to this policy.
PRE-APPROVAL FEE LEVELS OR ESTABLISHED AMOUNTS
Pre-approval of estimated fees or established amounts for services to be
provided by the Auditor under general or specific pre-approval policies will be
set periodically by the Audit Committees. Any proposed fees exceeding 110% of
the maximum estimated pre-approved fees or established amounts for pre-approved
audit and non-audit services will be reported to the Audit Committees at the
quarterly Audit Committees meeting and will require specific approval by the
Audit Committees before payment is made. The Audit Committee will always factor
in the overall relationship of fees for audit and non-audit services in
determining whether to pre-approve any such services and in determining whether
to approve any additional fees exceeding 110% of the maximum pre-approved fees
or established amounts for previously pre-approved services.
PROCEDURES
On an annual basis, A I M Advisors, Inc. ("AIM") will submit to the Audit
Committees for general pre-approval, a list of non-audit services that the Funds
or Service Affiliates of the Funds may request from the Auditor. The list will
describe the non-audit services in reasonable detail and will include an
estimated range of fees and such other information as the Audit Committee may
request.
Each request for services to be provided by the Auditor under the general
pre-approval of the Audit Committees will be submitted to the Funds' Treasurer
(or his or her designee) and must include a detailed description of the services
to be rendered. The Treasurer or his or her designee will ensure that such
services are included within the list of services that have received the general
pre-approval of the Audit Committees. The Audit Committees will be informed at
the next quarterly scheduled Audit Committees meeting of any such services for
which the Auditor rendered an invoice and whether such services and fees had
been pre-approved and if so, by what means.
Each request to provide services that require specific approval by the Audit
Committees shall be submitted to the Audit Committees jointly by the Fund's
Treasurer or his or her designee and the Auditor, and must include a joint
statement that, in their view, such request is consistent with the policies and
procedures and the SEC Rules.
Each request to provide tax services under either the general or specific
pre-approval of the Audit Committees will describe in writing: (i) the scope of
the service, the fee structure for the engagement, and any side letter or
amendment to the engagement letter, or any other agreement between the Auditor
and the audit client, relating to the service; and (ii) any compensation
arrangement or other agreement between the Auditor and any person (other than
the audit client) with respect to the promoting, marketing, or recommending of a
transaction covered by the service. The Auditor will discuss with the Audit
Committees the potential effects of the services on the Auditor's independence
and will document the substance of the discussion.
Non-audit services pursuant to the de minimis exception provided by the SEC
Rules will be promptly brought to the attention of the Audit Committees for
approval, including documentation that each of the conditions for this
exception, as set forth in the SEC Rules, has been satisfied.
On at least an annual basis, the Auditor will prepare a summary of all the
services provided to any entity in the investment company complex as defined in
section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of
the engagement and the fees associated with those services.
The Audit Committees have designated the Funds' Treasurer to monitor the
performance of all services provided by the Auditor and to ensure such services
are in compliance with these policies and procedures. The Funds' Treasurer will
report to the Audit Committee on a periodic basis as to the results of such
monitoring. Both the Funds' Treasurer and management of AIM will immediately
report to the chairman of the Audit Committee any breach of these policies and
procedures that comes to the attention of the Funds' Treasurer or senior
management of AIM.
EXHIBIT 1 TO PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICIES AND
PROCEDURES
CONDITIONALLY PROHIBITED NON-AUDIT SERVICES (NOT PROHIBITED IF THE FUND CAN
REASONABLY CONCLUDE THAT THE RESULTS OF THE SERVICE WOULD NOT BE SUBJECT TO
AUDIT PROCEDURES IN CONNECTION WITH THE AUDIT OF THE FUND'S FINANCIAL
STATEMENTS)
- Bookkeeping or other services related to the accounting records or
financial statements of the audit client
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions, or
contribution-in-kind reports
- Actuarial services
- Internal audit outsourcing services
CATEGORICALLY PROHIBITED NON-AUDIT SERVICES
- Management functions
- Human resources
- Broker-dealer, investment adviser, or investment banking services
- Legal services
- Expert services unrelated to the audit
- Any service or product provided for a contingent fee or a commission
- Services related to marketing, planning, or opining in favor of the
tax treatment of confidential transactions or aggressive tax position
transactions, a significant purpose of which is tax avoidance
- Tax services for persons in financial reporting oversight roles at the
Fund
- Any other service that the Public Company Oversight Board determines
by regulation is impermissible.
PwC advised the Funds' Audit Committee that PwC had identified three matters for
consideration under the SEC's auditor independence rules.
First, PwC was engaged to perform services to an affiliate of Invesco Ltd.
("Invesco"), including (a) consulting with respect to the acquisition by the
affiliate of certain assets from a third party; and (b) providing expert
testimony in connection with any arbitration proceeding or litigation arising
from or relating to the transaction. Rules of the Securities and Exchange
Commission ("SEC") provide that an accountant is not independent if, at any
point during the audit and professional engagement period, the accountant
provides expert services unrelated to the audit to an audit client.
Specifically, PwC would not be permitted to provide expert testimony nor perform
other services in support of the client or its counsel in connection with a
proceeding. Within days of being engaged to provide the services it was
determined that some of the services contemplated in the engagement terms would
be inconsistent with the SEC's auditor independence rules. A review of the
services performed pursuant to the original agreement was conducted. After a
review, PwC concluded that the actual services provided were not inconsistent
with the SEC's independence rules. Following the review, the initial engagement
terms were modified to limit PwC's services to those permitted under the rules.
Second, an employee of PwC served as a nominee shareholder (effectively
equivalent to a Trustee) of various companies or trusts since 2001. Some of
these companies held shares of Invesco Nippon Warrants Fund (the "Investment."),
an affiliate of Invesco, formerly known as AMVESCAP PLC (the "Company"). The
investment, which consisted of 2,070 shares, was initially entered into during
July 1, 2001 - December 31, 2005. PwC informed the Audit Committee that this
matter could have constituted an investment in an affiliate of an audit client
in violation of Rule 2-01(c)(1) of Regulation S-X.
Third, PwC became aware that certain aspects of investment advisory services
provided by a PwC network member Firm's Wealth Advisory Practice to its clients
(generally high net worth individuals not associated with Invesco) were
inconsistent with the SEC's auditor independence requirements of the SEC. The
technical violations occurred as a result of professionals of the Wealth
Advisory Practice making a single recommendation of an audit client's product to
its clients rather than also identifying one or more suitable alternatives for
the Wealth Advisory Practice's client to consider. The Wealth Advisory Practice
also received commissions from the fund manager. With respect to Invesco and its
affiliates, there were 33 cases of single product recommendation and 20 cases of
commissions received totaling approximately Pound Sterling 7,000. These
violations occurred over a two year period and ended in November 2007.
It should be noted that at no time did The Wealth Advisory Practice recommend
products on behalf Invesco and its affiliates. Additionally, members of the
audit engagement team were not aware of these violations or services; the advice
provided was based on an understanding of the investment objectives of the
clients of the Wealth Advisory Practice and not to promote the Company and its
affiliates, and the volume and nature of the violations were insignificant.
Although PwC received commissions, PwC derived no economic benefit from the
commission as any commissions received were deducted from the time based fees
charged to the investor client and created no incentive for PwC to recommend the
investment.
PwC advised the Audit Committee that it believes its independence had not been
adversely affected as it related to the audits of the Funds by any of these
matters. In reaching this conclusion, PwC noted that during the time of its
audits, the engagement team was not aware of the services provided or the
investments and noted the insignificance of the services provided. Based on the
foregoing, PwC did not believe any of these matters affected PwC's ability to
act objectively and impartially and to issue a report on financial statements as
the Funds' independent auditor, and, believes that a reasonable investor with
knowledge of all the facts would agree with this conclusion.
Based upon PwC's review, discussion and representations above, the audit
committee, in its business judgment, concurred with PwC's conclusions in
relation to its independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Investments in securities of unaffiliated issuers is included as part
of the reports to stockholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 11. CONTROLS AND PROCEDURES.
(a) As of December 16, 2008, an evaluation was performed under the supervision
and with the participation of the officers of the Registrant, including the
PEO and PFO, to assess the effectiveness of the Registrant's disclosure
controls and procedures, as that term is defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act"), as amended. Based on that
evaluation, the Registrant's officers, including the PEO and PFO, concluded
that, as of December 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 this
report that have materially affected, or are reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
12(a) (1) Code of Ethics.
12(a) (2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act
of 1940.
12(a) (3) Not applicable.
12(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act
of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AIM Funds Group
By: /s/ Philip A. Taylor
---------------------------------
Philip A. Taylor
Principal Executive Officer
Date: March 6, 2009
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: March 6, 2009
By: /s/ Sheri Morris
---------------------------------
Sheri Morris
Principal Financial Officer
Date: March 6, 2009
EXHIBIT INDEX
12(a)(1) Code of Ethics.
12(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act
of 1940.
12(a)(3) Not applicable.
12(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act
of 1940.