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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-05426
AIM Investment Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
11 Greenway Plaza, Suite 100 Houston, Texas 77046
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Philip A. Taylor 11 Greenway Plaza, Suite 100 Houston, Texas 77046
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (713) 626-1919
Date of fiscal year end: 10/31
Date of reporting period: 10/31/08
================================================================================
Item 1. Reports to Stockholders.
[INVESCO AIM LOGO] AIM CHINA FUND
- -- SERVICE MARK -- Annual Report to Shareholders o October 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 Approval of Investment Advisory Agreement
27 Tax Information
28 Trustees and Officers
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 recent market developments and
[TAYLOR provide some perspective and encouragement to my fellow long-term investors.
PHOTO]
MARKET OVERVIEW
At the start of the fiscal year in November 2007, we saw warning signs of
increasing economic ills -- a weakening housing market, rising inflation and
Philip Taylor slowing job growth, among others. In response, the U.S. Federal Reserve Board
(the Fed) repeatedly cut short-term interest rate targets to stimulate economic
growth and expand market liquidity.(1) Also, Congress and the president worked
together to enact an economic stimulus plan that included billions of dollars in
rebates to taxpayers.
These actions helped the economy and the U.S. stock market until the spring of
2008, when other factors came to the forefront -- triggering a severe correction that eventually
drove major stock-market indexes to multi-year lows.(2)
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.
The recent volatility in the stock, fixed-income and credit markets has driven home the
importance of three timeless investing principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
o 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.
o 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.
o 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 capitalize on
this situation.
MANAGING MONEY IS OUR FOCUS
As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain
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, 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 we 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) Lipper Inc.
2 AIM CHINA FUND
Dear Fellow Shareholders:
As I write this letter, turbulent financial markets are causing considerable
investor anxiety, reminding us again that markets are cyclical and the correction
of excess is often painful, at least in the short term. Your Board of Trustees
[CROCKETT believes in the wisdom of a long-term perspective and consistent investment
PHOTO] discipline. We continue to put your interests first in the effort to improve
investment performance, contain shareholder costs and uphold the highest ethical
standards.
We remain enthusiastic about the global reach and investment expertise that
Invesco, a leading independent global investment management company, brings to
Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse
investment strategies deployed throughout the worldwide network of Invesco
investment centers has helped strengthen the management of many AIM Funds. The
rebranding of the Funds' management company as Invesco Aim was followed by the
launch of an upgraded, investor-friendly website (invescoaim.com); a new
mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and
a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in
financial publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between
the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual
process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory
Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your
behalf to double the number of votes in favor of separating the roles of chairman and CEO at the
companies whose shares your Funds hold. We also continued to support the movement for shareholders
to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a
matter of policy, and I would be interested to hear your thoughts on this policy.
As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com.
The dialogue that has been established in this way has been instructive for your Board, and we want
it to continue. Although the production schedule for Fund annual reports and prospectuses allows me
to write these letters of general report and response just twice a year, please be assured that your
comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM CHINA FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
======================================================================================= o Valuation -- in absolute and relative
PERFORMANCE SUMMARY terms.
For the fiscal year ended October 31, 2008, Class A shares of AIM China Fund, at net o Management/ franchise value --
asset value (NAV), underperformed the Fund's broad market index and peer group indexes management and ownership, earnings
but performed in line with its style-specific index. quality, balance sheet quality, product
quality.
We attribute this performance mainly to positive stock selection in the financials
sector and an overweight position in information technology. Our cash position also o Earnings growth -- earnings per share
helped relative performance in a falling market. The largest detractors from relative growth, growth in market share, origin
performance came from the consumer discretionary, telecommunication services and of growth.
industrials sectors.
o Liquidity -- days to get in and out,
Your Fund's long-term performance appears later in this report. total turnover.
FUND VS. INDEXES We consider selling a Fund holding if:
Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does o We believe the stock is trading
not include applicable contingent deferred sales charges (CDSC) or front-end sales significantly above its fair value.
charges, which would have reduced performance.
o We believe a stock has negative
Class A Shares -64.58% earnings momentum or sequential
Class B Shares -64.84 earnings downgrades, unless its
Class C Shares -64.83 valuation is already very low or
Class Y Shares* -64.58 distressed.
MSCI EAFE Index(triangle) (Broad Market Index) -46.62
MSCI China Index(triangle) (Style-Specific Index) -64.83 o We see a permanent, fundamental
Lipper China Region Funds Index(triangle)** (Peer Group Index) -62.22 deterioration in a company's business
Lipper China Region Funds Category Average (triangle)** (Former Peer Group) -62.45 prospects.
(triangle)Lipper Inc. o We identify a more attractive
opportunity elsewhere.
* Share class incepted during the fiscal year. See page 7 for a detailed explanation
of Fund performance. MARKET CONDITIONS AND YOUR FUND
** The Fund has elected to use the Lipper China Region Funds Index as its International markets declined sharply
peer-group index instead of the Lipper China Region Funds Category Average during the fiscal year as a number of
when the index became available. financial institutions world wide fell
======================================================================================= victim to the broadening credit crisis.(1)
All countries within the developed markets
HOW WE INVEST mainland China that are listed on the Hong based MSCI EAFE Index finished the period
Kong Stock Exchange; firms incorporated in in negative territory, while emerging
We adhere to a disciplined investment Hong Kong whose main businesses are in markets like China posted the largest
process focusing our investment process on China and other China-related corporations declines.
inefficiencies in the Chinese equity listed in or outside Hong Kong. Within
market. this framework, we seek to identify stocks Economic growth momentum in China
with the following characteristics: slowed during the fiscal year as the
Our investment process is country felt the effects of the global
multifactored. However, we primarily focus o Growth stocks selling at reasonable financial crisis. China's economy expanded
on bottom-up stock selection, where we prices. by 9% in the third quarter of 2008, down
believe we can add the most value. Indexes from 10.4% year-over-year in the first
are listed for reference only and the Fund o Quality stocks we believe to be half of 2008.(2) Fixed asset investment
is not managed, and the portfolio is not undervalued that will potentially and retail sales growth continued to
constructed, to mimic any index. benefit from a pick up in the earnings demonstrate resilience, and exports
cycle. continued to hold up reasonably well at
To capitalize on secular growth in 21.5% year-over-year in September.(2)
China, we consider all listed companies in In particular, we evaluate four main
China; companies incorporated in criteria when we perform stock research:
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Financials 36.7% 1. Diversified Banks 19.1% 1. China Mobile Ltd. 9.8%
Energy 18.8 2. Integrated Oil & Gas 9.9 2. Industrial and Commercial Bank
Telecommunication Services 16.0 3. Wireless Telecommunication of China 7.0
Information Technology 6.7 Services 9.8 3. China Life Insurance Co., Ltd.
Utilities 3.9 4. Life & Health Insurance 8.8 -Class H 6.5
Consumer Staples 3.3 5. Integrated Telecommunications 4. CNOOC Ltd. 5.1
Consumer Discretionary 2.1 Services 6.1 5. PetroChina Co. Ltd.-Class H 5.0
Materials 1.4 ========================================== 6. China Petroleum and Chemical
Industrials 1.1 Corp. (Sinopec)-Class H 4.9
Money Market Funds Plus 7. China Construction Bank Corp.
Other Assets Less Liabilities 10.0 ========================================== -Class H 4.9
========================================== Total Net Assets $103.5 million 8. China Unicom Ltd. 3.4
Total Number of Holdings* 39 9. Tencent Holdings Ltd. 3.2
========================================== 10. China Overseas Land & Investment
Ltd. 2.7
==========================================
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 CHINA FUND
However, indicators of productivity, such those stocks that have rallied and reached The views and opinions expressed in
as industrial production and electricity our price targets. We believe maintaining management's discussion of Fund
power usage, showed deterioration over the a focus on value is crucial in this performance are those of Invesco Aim
past few months, reflecting the weakening environment, and we have seen Advisors, Inc. These views and opinions
of domestic demand and the anticipation of opportunities to buy undervalued stocks. are subject to change at any time based on
an exports-led slowdown. In particular, factors such as market and economic
industrial production registered a In the first half of 2008, the Fund conditions. These views and opinions may
19-month low of 11.4% year-over-year in benefited from exposure to the financials not be relied upon as investment advice or
September.(2) Meanwhile, consumer price sector by overweighting banks and recommendations, or as an offer for a
index inflation continued to decline to underweighting property and insurance particular security. The information is
4.6% year-over-year in September.(3) The companies, mainly due to the good forward not a complete analysis of every aspect of
decline was attributed to the fall in food earnings visibility that Chinese banks any market, country, industry, security or
prices as well as weakening demand for offered. While earnings growth in banks the Fund. Statements of fact are from
other products. for the first half of 2008 was positive, sources considered reliable, but Invesco
the growth in the second half of 2008 was Aim Advisors, Inc. makes no representation
All sectors of the Fund were in not attractive due to the weaker economy or warranty as to their completeness or
negative territory for the period. On an as well as the narrowing of net interest accuracy. Although historical performance
absolute basis, our holdings in the margins. The exposure of Chinese banks to is no guarantee of future results, these
financials and energy sectors detracted the subprime-related crisis is generally insights may help you understand our
the most from overall performance, while small relative to their asset sizes and to investment management philosophy.
our investments in utilities, as a other overseas banks. We have started to
defensive measure amid the market gradually increase our exposure to See important Fund and index disclosures
volatility, detracted the least. property and insurance companies, whose later in this report.
valuations have fallen to attractive
Positive stock selection in the levels. SAMANTHA HO
financials sector and an overweight Chartered Financial Analyst,
position in information technology helped We also continued to like [HO investment director for
us to perform in line versus the MSCI infrastructure-related industries as the PHOTO] INVESCO Hong Kong Limited,
China Index. Our cash position also Chinese government has a sense of urgency portfolio manager of AIM China
enhanced relative performance in a falling in accelerating the country's Fund. Ms. Ho began her investment career
market environment. On the other hand, infrastructure development in areas in 1989. She joined Invesco in 2004. She
stock selection and an overweight position including transportation and power, to aid earned a B.A. from Bryn Mawr College and
in the consumer discretionary sector the recovery from recent natural disasters an M.B.A. from the UCLA Graduate School of
detracted from the Fund's performance and to support economic growth. After the Management.
versus the benchmark as did our close of the fiscal year, the Chinese
underweight exposure to the government announced a $580 billion MAY LO
telecommunication services sector. Stock stimulus package to be spent before the Assistant portfolio manager
selection in industrials also hurt end of 2010, with a focus on [LO for INVESCO Hong Kong Limited,
relative performance for the period. infrastructure-related industries.(3) PHOTO] is a portfolio manager of AIM
China Fund. Ms. Lo joined
Utility company CLP HOLDINGS was the Invesco in 2005. She earned an M.B.A. from
largest contributor to the Fund's We remain committed to our discipline Massachusetts Institute of Technology
performance for the fiscal year. We and maintain our positive stance on the Sloan Business School and a B.S. from
maintained a defensive strategy in view of Chinese economy and stock market over the Cornell University.
the extreme market volatility. As a long term. We thank you for your
defensive sector, utilities added value participation in AIM China Fund.
due to the generally steady cash flow and
higher earnings visibility of companies in (1) Lipper Inc.
this sector.
(2) National Bureau of Statistics (China)
Telecommunications giant CHINA MOBILE
was among the largest detractors from Fund (3) Xinhua
performance. The company's stock fell due
to concerns about the restructuring of
China's telecommunications industry. While
the company may eventually lose some of
its market share in the near term because
of increased competition, we believe China
Mobile -- the only company that has
invested in rural networks -- has reliable
products, services and fees.
We continued to adhere to our
discipline and bottom-up research
capabilities to identify attractive
opportunities within our stock universe.
Our strategy is to hold on to what we
consider to be our attractively valued
holdings, defensive stocks and, at the
same time, take profits in
5 AIM CHINA FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee compare the Fund's performance to both the results include reinvested dividends, but
comparable future results. old and the new indexes. they do not reflect sales charges.
Performance of an index of funds reflects
Since the last reporting period, the The data shown in the chart include fund expenses and management fees;
Fund has elected to use the Lipper China reinvested distributions, applicable sales performance of a market index does not.
Region Funds Index as its peer group index charges and Fund expenses including Performance shown in the chart and
instead of the Lipper China Region Funds management fees. Results for Class B table(s) does not reflect deduction of
Category Average since the index became shares are calculated as if a hypothetical taxes a shareholder would pay on Fund
available during the reporting period. shareholder had liquidated his entire distributions or sale of Fund shares.
Because this is the first reporting period investment in the Fund at the close of the
since we have adopted the new index, SEC reporting period and paid the applicable
guidelines require that we contingent deferred sales charges. Index
continued from page 8
ment professionals. assets of the Fund at period end for o Industry classifications used in this
financial reporting purposes, and as such, report are generally according to the
o The returns shown in management's the net asset values for shareholder Global Industry Classification
discussion of Fund performance are transactions and the returns based on Standard, which was developed by and is
based on net asset values calculated those net asset values may differ from the the exclusive property and a service
for shareholder transactions. Generally net asset values and returns reported in mark of MSCI Inc. and Standard &
accepted accounting principles require the Financial Highlights. Poor's.
adjustments to be made to the net
6 AIM CHINA FUND
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- CLASS A, B AND C (OLDEST SHARE CLASSES WITH SALES CHARGES)
Fund and index data from 3/31/06
Lipper China
Lipper China Region Funds
AIM China Fund- AIM China Fund- AIM China Fund- Region Funds Category
Date Class A Shares Class B Shares Class C Shares MSCI EAFE Index(1) MSCI China Index(1) Index(1) Average (1)
3/31/06 $ 9450 $10000 $10000 $10000 $10000 $10000 $10000
4/06 9545 10100 10090 10478 10524 10522 10504
5/06 9308 9840 9840 10071 9981 10034 10068
6/06 9317 9850 9840 10070 10188 10000 10061
7/06 9242 9761 9760 10170 10458 10068 10088
8/06 9251 9761 9750 10449 10686 10250 10264
9/06 9704 10241 10230 10465 11084 10467 10550
10/06 10375 10931 10921 10873 11849 10980 11098
11/06 11471 12081 12070 11197 13144 11994 12193
12/06 12758 13437 13426 11549 15060 13072 13361
1/07 12577 13235 13225 11627 14422 13192 13380
2/07 12873 13537 13526 11721 14169 13186 13441
3/07 13492 14170 14170 12020 14715 13568 13779
4/07 14245 14944 14944 12554 15268 14002 14240
5/07 15912 16694 16683 12774 16419 15152 15379
6/07 17207 18041 18031 12789 18313 16418 16734
7/07 19483 20413 20395 12601 20208 17630 17970
8/07 20179 21128 21109 12404 21664 18250 18627
9/07 23653 24758 24739 13068 25983 21235 21561
10/07 27225 28479 28450 13581 30295 24222 24534
11/07 23748 24828 24809 13135 26201 21399 21697
12/07 22321 23313 23305 12839 25036 20628 20852
1/08 18109 18907 18898 11653 19638 17060 17206
2/08 18786 19592 19582 11820 21755 17791 17897
3/08 16517 17217 17209 11695 19106 16136 16196
4/08 18697 19478 19469 12330 22088 18043 18106
5/08 18196 18950 18939 12450 20993 17710 17681
6/08 15732 16369 16358 11432 18445 15496 15428
7/08 15772 16400 16389 11065 18870 15415 15275
8/08 14840 15426 15414 10617 17326 14430 14269
9/08 12305 12782 12781 9082 13793 11829 11656
10/08 9645 9725 10004 7249 10656 9150 8955
====================================================================================================================================
(1) Lipper Inc.
========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/08, including maximum As of 9/30/08, the most recent calendar
applicable sales charges quarter-end, including maximum applicable
sales charges
CLASS A SHARES
Inception (3/31/06) -1.39% CLASS A SHARES
1 Year -66.52 Inception (3/31/06) 8.65%
1 Year -50.85
CLASS B SHARES
Inception (3/31/06) -1.07% CLASS B SHARES
1 Year -66.54 Inception (3/31/06) 9.27%
1 Year -50.88
CLASS C SHARES
Inception (3/31/06) 0.02% CLASS C SHARES
1 Year -65.18 Inception (3/31/06) 10.31%
1 Year -48.83
CLASS Y SHARES ==========================================
Inception 0.79%
1 Year -64.58
==========================================
CLASS Y SHARES' INCEPTION DATE IS OCTOBER THE NET ANNUAL FUND OPERATING EXPENSE FIRST YEAR AFTER PURCHASE. CLASS Y SHARES
3, 2008; RETURNS SINCE THAT DATE ARE RATIO SET FORTH IN THE MOST RECENT FUND DO NOT HAVE A FRONT-END SALES CHARGE OR A
ACTUAL RETURNS. ALL OTHER RETURNS ARE PROSPECTUS AS OF THE DATE OF THIS REPORT CDSC; THEREFORE, PERFORMANCE IS AT NET
BLENDED RETURNS OF ACTUAL CLASS Y SHARE FOR CLASS A, CLASS B, CLASS C AND CLASS Y ASSET VALUE.
PERFORMANCE AND RESTATED CLASS A SHARE SHARES WAS 1.87%, 2.62%, 2.62% AND 1.62%,
PERFORMANCE (FOR PERIODS PRIOR TO THE RESPECTIVELY.(1) THE TOTAL ANNUAL FUND THE PERFORMANCE OF THE FUND'S SHARE
INCEPTION DATE OF CLASS Y SHARES) AT NET OPERATING EXPENSE RATIO SET FORTH IN THE CLASSES WILL DIFFER PRIMARILY DUE TO
ASSET VALUE. THE RESTATED CLASS A SHARE MOST RECENT FUND PROSPECTUS AS OF THE DATE DIFFERENT SALES CHARGE STRUCTURES AND
PERFORMANCE REFLECTS THE RULE 12B-1 FEES OF THIS REPORT FOR CLASS A, CLASS B, CLASS CLASS EXPENSES.
APPLICABLE TO CLASS A SHARES AS WELL AS C AND CLASS Y SHARES WAS 1.88%, 2.63%,
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS 2.63% AND 1.63%, RESPECTIVELY. THE EXPENSE A REDEMPTION FEE OF 2% WILL BE IMPOSED
RECEIVED BY CLASS A SHARES. CLASS A RATIOS PRESENTED ABOVE MAY VARY FROM THE ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
SHARES, INCEPTION DATE IS MARCH 31, 2006. EXPENSE RATIOS PRESENTED IN OTHER SECTIONS THE FUND WITHIN 31 DAYS OF PURCHASE.
OF THIS REPORT THAT ARE BASED ON EXPENSES EXCEPTIONS TO THE REDEMPTION FEE ARE
THE PERFORMANCE DATA QUOTED REPRESENT INCURRED DURING THE PERIOD COVERED BY THIS LISTED IN THE FUND'S PROSPECTUS.
PAST PERFORMANCE AND CANNOT GUARANTEE REPORT.
COMPARABLE FUTURE RESULTS; CURRENT (1) Total annual operating expenses less
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CLASS A SHARE PERFORMANCE REFLECTS THE any contractual fee waivers and/or
VISIT INVESCOAIM.COM FOR THE MOST RECENT MAXIMUM 5.50% SALES CHARGE, AND CLASS B expense reimbursements by the advisor
MONTH-END PERFORMANCE. PERFORMANCE FIGURES AND CLASS C SHARE PERFORMANCE REFLECTS THE in effect through at least June 30,
REFLECT REINVESTED DISTRIBUTIONS, CHANGES APPLICABLE CONTINGENT DEFERRED SALES 2009. See current prospectus for more
IN NET ASSET VALUE AND THE EFFECT OF THE CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE information.
MAXIMUM SALES CHARGE UNLESS OTHERWISE CDSC ON CLASS B SHARES DECLINES FROM 5%
STATED. INVESTMENT RETURN AND PRINCIPAL BEGINNING AT THE TIME OF PURCHASE TO 0% AT
VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE THE BEGINNING OF THE SEVENTH YEAR. THE
A GAIN OR LOSS WHEN YOU SELL SHARES. CDSC ON CLASS C SHARES IS 1% FOR THE
7 AIM CHINA FUND
AIM CHINA FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES o Foreign securities have additional ment or limited operating histories.
risks, including exchange rate changes, For additional information regarding
o Effective September 30, 2003, only political and economic upheaval, the Fund's performance, please see the
previously established qualified plans relative lack of information, Fund's prospectus.
are eligible to purchase Class B shares relatively low market liquidity, and
of any AIM fund. the potential lack of strict financial ABOUT INDEXES USED IN THIS REPORT
and accounting controls and standards.
o Class Y shares are available to only o The MSCI EAFE--REGISTERED TRADEMARK--
certain investors. Please see the o Investing in a single-country mutual INDEX is a free float-adjusted market
prospectus for more information. fund involves greater risk than capitalization index that is designed
investing in a more diversified fund to measure developed market equity
PRINCIPAL RISKS OF INVESTING IN THE FUND due to lack of exposure to other performance, excluding the U.S. and
countries. Canada.
o Since a large percentage of the Fund's
assets may be invested in securities of o Interest rate risk refers to the risk
a limited number of companies, each that bond prices generally fall as o The MSCI CHINA INDEX is a free
investment has a greater effect on the interest rates rise and vice versa. float-adjusted market capitalization
Fund's overall performance, and any index that is designed to measure
change in the value of those securities o The Fund may use enhanced investment equity market performance in China.
could significantly affect the value of techniques such as leveraging and
your investment in the Fund. derivatives. Leveraging entails risks
such as magnifying changes in the value o The LIPPER CHINA REGION FUNDS INDEX is
o The values of convertible securities in of the portfolio's securities. an equally weighted representation of
which the Fund invests may be affected Derivatives are subject to counterparty the largest funds in the Lipper China
by market interest rates, the risk that risk-the risk that the other party Regions Funds category. These funds
the issuer may default on interest or will not complete the transaction with concentrate their investments in equity
principal payments, and the value of the fund. securities whose primary trading
the underlying common stock into which markets or operations are concentrated
these securities may be converted. o Certain securities issued by companies in the China region or in a single
in China may be less liquid, harder to country within this region.
o Credit risk is the risk of loss on an sell and more volatile than many U.S
investment due to the deterioration of securities.
an issuer's financial health. Such a o The LIPPER CHINA REGION FUNDS CATEGORY
deterioration of financial health may o There is no guarantee that the AVERAGE represents an average of all of
result in a reduction of the credit investment techniques and risk analysis the funds in the Lipper China Region
rating of the issuer's securities and used by the Fund's portfolio managers Funds category. These funds concentrate
may lead to the issuer's inability to will produce the desired results. their investments in equity securities
honor its contractual obligations, whose primary trading markets or
including making timely payment of o The prices of securities held by the operations are concentrated in the
interest and principal. Fund may decline in response to market China region or in a single country
risks. within this region.
o The Fund is subject to
currency/exchange rate risk because it o The Fund may invest in A shares, which o The Fund is not managed to track the
may buy or sell currencies other than have limitations to repatriate Fund performance of any particular index,
the U.S. dollar. assets back to the U.S. including the indexes defined here, and
consequently, the performance of the
o Investing in developing countries can o Political and economic conditions and Fund may deviate significantly from the
add additional risk, such as high rates changes in regulatory, tax or economic performance of the indexes.
of inflation or sharply devalued policy in China could significantly
currencies against the U.S. dollar. affect the market in that country and
Transaction costs are often higher, and surrounding or related countries. o A direct investment cannot be made in
there may be delays in settlement an index. Unless otherwise indicated,
procedures. o The Fund's return during certain index results include reinvested
periods was positively impacted by its dividends, and they do not reflect
o Prices of equity securities change in investments in initial public offerings sales charges. Performance of an index
response to many factors, including the (IPOs). There can be no assurance that of funds reflects fund expenses;
historical and prospective earnings of the Fund will have favorable IPO performance of a market index does not.
the issuer, the value of its assets, investment opportunities in the future.
general economic conditions, interest Moreover, the prices of IPO securities OTHER INFORMATION
rates, investor perceptions and market may go up and down more than prices of
liquidity. equity securities of companies with o The Chartered Financial ANALYST--REGIS-
longer trading histories. In addition, TERED TRADEMARK-- (CFA--REGISTERED
companies offering securities in IPOs TRADEMARK--) designation is a globally
may have less experienced manage- recognized standard for measuring the
competence and integrity of invest-
======================================================================================= continued on page 6
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, ==========================================
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. FUND NASDAQ SYMBOLS
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING.
======================================================================================= Class A Shares AACFX
Class B Shares ABCFX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class C Shares CACFX
Class Y Shares AMCYX
==========================================
8 AIM CHINA FUND
SCHEDULE OF INVESTMENTS(a)
October 31, 2008
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-90.03%(b)
APPAREL RETAIL-0.39%
Pou Sheng International (Holdings) Ltd. (Hong
Kong)(c) 3,935,000 $ 399,691
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.87%
China Dongxiang Group Co. 3,088,000 897,556
===============================================================================
COAL & CONSUMABLE FUELS-2.97%
China Coal Energy Co.-Class H 1,459,000 859,418
- -------------------------------------------------------------------------------
China Shenhua Energy Co. Ltd.-Class H (Hong Kong) 1,195,000 2,213,773
===============================================================================
3,073,191
===============================================================================
COMMUNICATIONS EQUIPMENT-0.69%
ZTE Corp.-Class H 320,640 711,619
===============================================================================
COMPUTER HARDWARE-0.67%
Lenovo Group Ltd. (Hong Kong) 2,252,000 689,491
===============================================================================
CONSTRUCTION & ENGINEERING-1.14%
China Communications Construction Co. Ltd.-Class H 1,694,000 1,183,385
===============================================================================
CONSTRUCTION MATERIALS-0.36%
Anhui Conch Cement Co. Ltd.-Class H (Hong Kong)(c) 116,000 373,433
===============================================================================
DISTRIBUTORS-0.81%
Integrated Distribution Services Group Ltd. (Hong
Kong) 1,000,000 838,721
===============================================================================
DIVERSIFIED BANKS-19.12%
Bank of China Ltd.-Class H 6,536,000 1,941,849
- -------------------------------------------------------------------------------
Bank of Communications Co. Ltd.-Class H 4,628,000 2,685,058
- -------------------------------------------------------------------------------
BOC Hong Kong (Holdings) Ltd. (Hong Kong) 1,152,000 1,290,472
- -------------------------------------------------------------------------------
China Construction Bank Corp.-Class H 10,422,000 5,065,551
- -------------------------------------------------------------------------------
China Merchants Bank Co., Ltd.-Class H 1,013,000 1,528,911
- -------------------------------------------------------------------------------
Industrial and Commercial Bank of China Ltd.-Class
H 15,629,000 7,271,523
===============================================================================
19,783,364
===============================================================================
DIVERSIFIED REAL ESTATE ACTIVITIES-0.52%
Franshion Properties China Ltd. (Hong Kong) 2,822,000 544,378
===============================================================================
ELECTRONIC COMPONENTS-2.21%
Meadville Holdings Ltd. 19,000,000 2,289,058
===============================================================================
ELECTRIC UTILITIES-1.52%
CLP Holdings Ltd. (Hong Kong) 232,000 1,575,439
===============================================================================
GOLD-0.50%
Zijin Mining Group Co., Ltd.-Class H 1,664,000 516,047
===============================================================================
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS-2.40%
China Resources Power Holdings Co. Ltd. (Hong
Kong) 900,000 1,761,332
- -------------------------------------------------------------------------------
Datang International Power Generation Co.
Ltd.-Class H 1,924,000 718,374
===============================================================================
2,479,706
===============================================================================
INTEGRATED OIL & GAS-9.89%
China Petroleum and Chemical Corp. (Sinopec)-Class
H 7,670,000 5,066,907
- -------------------------------------------------------------------------------
PetroChina Co. Ltd.-Class H 6,628,000 5,165,484
===============================================================================
10,232,391
===============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-6.11%
China Telecom Corp. Ltd.-Class H 7,884,000 2,780,225
- -------------------------------------------------------------------------------
China Unicom Ltd. (Hong Kong) 2,456,322 3,538,030
===============================================================================
6,318,255
===============================================================================
INTERNET SOFTWARE & SERVICES-3.17%
Tencent Holdings Ltd. 454,200 3,280,154
===============================================================================
INVESTMENT COMPANIES-EXCHANGE TRADED FUNDS-1.30%
iShares Asia Trust (Hong Kong)(c) 1,265,600 1,343,453
===============================================================================
LIFE & HEALTH INSURANCE-8.84%
China Life Insurance Co., Ltd.-Class H 2,510,000 6,708,124
- -------------------------------------------------------------------------------
Ping An Insurance (Group) Co. of China Ltd.-Class
H 564,500 2,442,561
===============================================================================
9,150,685
===============================================================================
OFFICE REIT'S-0.82%
Champion Real Estate Investment Trust (Hong Kong) 3,568,000 847,707
===============================================================================
OIL & GAS EXPLORATION & PRODUCTION-5.95%
CNOOC Ltd. 6,435,000 5,270,427
- -------------------------------------------------------------------------------
CNPC Hong Kong Ltd. (Hong Kong) 2,920,000 883,118
===============================================================================
6,153,545
===============================================================================
PACKAGED FOODS & MEATS-1.26%
Want Want China Holdings Ltd. 3,468,000 1,305,982
===============================================================================
PAPER PRODUCTS-0.57%
Shandong Chenming Paper Holdings Ltd.-Class H(c) 2,190,000 587,629
===============================================================================
PERSONAL PRODUCTS-2.07%
Hengan International Group Co. Ltd. 761,000 2,146,260
===============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM CHINA FUND
<Table>
<Caption>
SHARES VALUE
- -------------------------------------------------------------------------------
REAL ESTATE DEVELOPMENT-3.99%
China Overseas Land & Investment Ltd. (Hong Kong) 2,508,000 $ 2,793,634
- -------------------------------------------------------------------------------
China Resources Land Ltd. (Hong Kong) 1,298,000 1,336,091
===============================================================================
4,129,725
===============================================================================
RETAIL REIT'S-2.05%
Link REIT (The) (Hong Kong) 1,218,500 2,122,865
===============================================================================
WIRELESS TELECOMMUNICATION SERVICES-9.84%
China Mobile Ltd. 1,160,000 10,178,238
===============================================================================
Total Common Stocks & Other Equity Interests
(Cost $146,062,623) 93,151,968
===============================================================================
MONEY MARKET FUNDS-10.64%
Liquid Assets Portfolio-Institutional Class(d) 5,503,508 5,503,508
- -------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 5,503,508 5,503,508
- -------------------------------------------------------------------------------
Total Money Market Funds (Cost $11,007,016) 11,007,016
===============================================================================
TOTAL INVESTMENTS(e)-100.67% (Cost $157,069,639) 104,158,984
===============================================================================
OTHER ASSETS LESS LIABILITIES-(0.67)% (698,104)
===============================================================================
NET ASSETS-100.00% $103,460,880
_______________________________________________________________________________
===============================================================================
</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) Country of issuer and/or credit risk exposure listed in Common Stocks &
Other Equity Interests has been determined to be China unless otherwise
noted.
(c) Non-income producing security.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(e) The majority of foreign securities were fair valued using adjusted closing
market prices.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM CHINA FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<Table>
ASSETS:
Investments, at value (Cost $146,062,623) $ 93,151,968
- --------------------------------------------------------------------------------
Investments in affiliated money market funds, at value and cost 11,007,016
================================================================================
Total investments (Cost $157,069,639) 104,158,984
================================================================================
Foreign currencies, at value (Cost $2,850) 2,882
- --------------------------------------------------------------------------------
Receivables for:
Investments sold 1,173,318
- --------------------------------------------------------------------------------
Fund shares sold 159,129
- --------------------------------------------------------------------------------
Dividends 39,113
- --------------------------------------------------------------------------------
Investment for trustee deferred compensation and retirement plans 4,571
- --------------------------------------------------------------------------------
Other assets 38,458
================================================================================
Total assets 105,576,455
________________________________________________________________________________
================================================================================
LIABILITIES:
Payables for:
Investments purchased 1,452,647
- --------------------------------------------------------------------------------
Fund shares reacquired 317,842
- --------------------------------------------------------------------------------
Accrued fees to affiliates 154,035
- --------------------------------------------------------------------------------
Accrued other operating expenses 180,555
- --------------------------------------------------------------------------------
Trustee deferred compensation and retirement plans 10,496
================================================================================
Total liabilities 2,115,575
================================================================================
Net assets applicable to shares outstanding $103,460,880
________________________________________________________________________________
================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $249,817,586
- --------------------------------------------------------------------------------
Undistributed net investment income 358,242
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) (93,804,896)
- --------------------------------------------------------------------------------
Unrealized appreciation (depreciation) (52,910,052)
================================================================================
$103,460,880
________________________________________________________________________________
================================================================================
NET ASSETS:
Class A $ 69,459,857
________________________________________________________________________________
================================================================================
Class B $ 11,624,652
________________________________________________________________________________
================================================================================
Class C $ 21,547,999
________________________________________________________________________________
================================================================================
Class Y $ 569,244
________________________________________________________________________________
================================================================================
Institutional Class $ 259,128
________________________________________________________________________________
================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 7,074,753
________________________________________________________________________________
================================================================================
Class B 1,203,524
________________________________________________________________________________
================================================================================
Class C 2,233,473
________________________________________________________________________________
================================================================================
Class Y 57,971
________________________________________________________________________________
================================================================================
Institutional Class 26,154
________________________________________________________________________________
================================================================================
Class A:
Net asset value per share $ 9.82
- --------------------------------------------------------------------------------
Maximum offering price per share
(Net asset value of $9.82 divided by 94.50%) $ 10.39
________________________________________________________________________________
================================================================================
Class B:
Net asset value and offering price per share $ 9.66
________________________________________________________________________________
================================================================================
Class C:
Net asset value and offering price per share $ 9.65
________________________________________________________________________________
================================================================================
Class Y:
Net asset value and offering price per share $ 9.82
________________________________________________________________________________
================================================================================
Institutional Class:
Net asset value and offering price per share $ 9.91
________________________________________________________________________________
================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM CHINA FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $25,500) $ 5,661,119
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds 340,087
================================================================================================
Total investment income 6,001,206
================================================================================================
EXPENSES:
Advisory fees 2,607,205
- ------------------------------------------------------------------------------------------------
Administrative services fees 95,027
- ------------------------------------------------------------------------------------------------
Custodian fees 333,762
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 468,692
- ------------------------------------------------------------------------------------------------
Class B 282,078
- ------------------------------------------------------------------------------------------------
Class C 625,996
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C and Y 806,643
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 699
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 23,793
- ------------------------------------------------------------------------------------------------
Other 336,689
================================================================================================
Total expenses 5,580,584
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (38,457)
================================================================================================
Net expenses 5,542,127
================================================================================================
Net investment income 459,079
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (93,044,274)
- ------------------------------------------------------------------------------------------------
Foreign currencies (100,153)
================================================================================================
(93,144,427)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (204,449,330)
- ------------------------------------------------------------------------------------------------
Foreign currencies 123
================================================================================================
(204,449,207)
================================================================================================
Net realized and unrealized gain (loss) (297,593,634)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(297,134,555)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM CHINA FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 459,079 $ (227,476)
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (93,144,427) 13,750,604
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (204,449,207) 149,643,832
==========================================================================================================
Net increase (decrease) in net assets resulting from operations (297,134,555) 163,166,960
==========================================================================================================
Distributions to shareholders from net investment income:
Class A (221,048) (169,696)
- ----------------------------------------------------------------------------------------------------------
Class B -- (28,185)
- ----------------------------------------------------------------------------------------------------------
Class C -- (26,445)
- ----------------------------------------------------------------------------------------------------------
Institutional Class (5,457) (7,987)
==========================================================================================================
Total distributions from net investment income (226,505) (232,313)
==========================================================================================================
Distributions to shareholders from net realized gains:
Class A (9,017,711) --
- ----------------------------------------------------------------------------------------------------------
Class B (1,209,567) --
- ----------------------------------------------------------------------------------------------------------
Class C (3,141,859) --
- ----------------------------------------------------------------------------------------------------------
Institutional Class (74,510) --
==========================================================================================================
Total distributions from net realized gains (13,443,647) --
==========================================================================================================
Share transactions-net:
Class A (106,755,882) 259,091,269
- ----------------------------------------------------------------------------------------------------------
Class B (9,157,656) 31,038,425
- ----------------------------------------------------------------------------------------------------------
Class C (36,102,039) 92,044,841
- ----------------------------------------------------------------------------------------------------------
Class Y 704,668 --
- ----------------------------------------------------------------------------------------------------------
Institutional Class (1,826,719) 1,415,639
==========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (153,137,628) 383,590,174
==========================================================================================================
Net increase (decrease) in net assets (463,942,335) 546,524,821
==========================================================================================================
NET ASSETS:
Beginning of year 567,403,215 20,878,394
==========================================================================================================
End of year (includes undistributed net investment income of $358,242
and $194,922, respectively) $ 103,460,880 $567,403,215
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM CHINA FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM China Fund (the "Fund") is a series portfolio of AIM Investment Funds (the
"Trust"). The Trust is organized as a Delaware statutory trust and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of nine separate series
portfolios, each authorized to issue an unlimited number of shares of beneficial
interest. The 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 CHINA 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. OTHER RISKS -- Investing in a single-country mutual fund involves greater
risk than investing in a more diversified fund due to lack of exposure to
other countries. The political and economic conditions and changes in
regulatory, tax or economic policy in a single country could significantly
affect the market in that country and in surrounding or related countries.
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.
Certain securities issued by companies in China may be less liquid,
harder to sell and more volatile than many U.S. securities.
J. 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.
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
15 AIM CHINA FUND
of the amounts actually received or paid. Net unrealized foreign currency
gains and losses arise from changes in the fair values of assets and
liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
The Fund may invest in foreign securities which may be subject to
foreign taxes on income, gains on investments or currency repatriation, a
portion of which may be recoverable.
L. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to
attempt to minimize the risk to the Fund from adverse changes in the
relationship between currencies. The Fund may also enter into a foreign
currency contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. dollar price of that
security. Fluctuations in the value of these contracts are recorded as
unrealized appreciation (depreciation) until the contracts are closed.
When these contracts are closed, realized gains (losses) are recorded.
Realized and unrealized gains and losses on these contracts are included
in the Statement of Operations. The Fund could be exposed to risk, which
may be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with Invesco
Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the
investment advisory agreement, the Fund pays an advisory fee to the Advisor
based on the annual rate of the Fund's average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.935%
- -------------------------------------------------------------------
Next $250 million 0.91%
- -------------------------------------------------------------------
Next $500 million 0.885%
- -------------------------------------------------------------------
Next $1.5 billion 0.86%
- -------------------------------------------------------------------
Next $2.5 billion 0.835%
- -------------------------------------------------------------------
Next $2.5 billion 0.81%
- -------------------------------------------------------------------
Next $2.5 billion 0.785%
- -------------------------------------------------------------------
Over $10 billion 0.76%
___________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement approved by shareholders of
the Fund, 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).
Previously, under the terms of a master sub-advisory agreement between the
Advisor and Invesco Hong Kong Limited, the Advisor paid Invesco Hong Kong
Limited 40% of the amount of the Advisor's compensation on sub-advised assets.
This agreement terminated on May 1, 2008.
The Advisor has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C, Class Y
and Institutional Class shares to 2.05%, 2.80%, 2.80%, 1.80% and 1.80% of
average daily net assets, respectively, through at least June 30, 2009. In
determining the Advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with Invesco Ltd. ("Invesco")
described more fully below, the expense offset arrangements from which the Fund
may benefit are in the form of credits that the Fund receives from banks where
the Fund or its transfer agent has deposit accounts in which it holds uninvested
cash. These credits are used to pay certain expenses incurred by the Fund.
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash in such affiliated money market
funds.
For the year ended October 31, 2008, the Advisor waived advisory fees of
$15,470.
At the request of the Trustees of the Trust, 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
October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of
$2,470.
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 October 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
16 AIM CHINA FUND
limitations approved by the Trust's Board of Trustees. For the year ended
October 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 October 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 October 31, 2008, IADI
advised the Fund that IADI retained $337,056 in front-end sales commissions from
the sale of Class A shares and $65,445, $278,966 and $497,398 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--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 October 31, 2008, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $20,517.
NOTE 4--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 October 31, 2008, the Fund paid legal fees of $3,458 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--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.
17 AIM CHINA FUND
NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
OCTOBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- ------------------------------------------------------------------------------------------------------
Ordinary income $13,079,687 $232,313
- ------------------------------------------------------------------------------------------------------
Long-term capital gain 590,465 --
======================================================================================================
Total distributions $13,670,152 $232,313
______________________________________________________________________________________________________
======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 376,019
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (55,790,001)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation -- other investments 603
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (12,283)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (90,931,044)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 249,817,586
================================================================================================
Total net assets $103,460,880
________________________________________________________________________________________________
================================================================================================
</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 October 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
October 31, 2016 $90,931,044
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2008 was $258,844,067 and
$394,082,116, 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 $ 142,636
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (55,932,637)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(55,790,001)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $159,948,985.
</Table>
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and proxy costs, on October 31, 2008, undistributed net investment
income (loss) was decreased by $69,254, undistributed net realized gain was
increased by $92,338 and shares of beneficial interest decreased by $23,084.
This reclassification had no effect on the net assets of the Fund.
18 AIM CHINA FUND
NOTE 9--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2008(a) 2007
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,523,696 $ 132,997,795 15,068,860 $309,379,576
- -------------------------------------------------------------------------------------------------------------------------
Class B 725,706 14,659,700 2,117,762 41,435,305
- -------------------------------------------------------------------------------------------------------------------------
Class C 2,045,319 44,586,448 5,219,270 111,652,901
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) 63,802 766,030 -- --
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 57,563 1,282,405 142,968 3,143,338
=========================================================================================================================
Issued as reinvestment of dividends:
Class A 368,758 8,164,317 13,161 165,308
- -------------------------------------------------------------------------------------------------------------------------
Class B 52,744 1,156,163 2,167 27,133
- -------------------------------------------------------------------------------------------------------------------------
Class C 129,748 2,841,472 2,024 25,339
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 3,372 74,932 619 7,783
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 108,243 1,946,451 34,531 688,092
- -------------------------------------------------------------------------------------------------------------------------
Class B (109,651) (1,946,451) (34,786) (688,092)
=========================================================================================================================
Reacquired:(c)
Class A(b) (13,404,560) (249,864,445) (2,932,819) (51,141,707)
- -------------------------------------------------------------------------------------------------------------------------
Class B (1,273,996) (23,027,068) (539,990) (9,735,921)
- -------------------------------------------------------------------------------------------------------------------------
Class C (4,434,414) (83,529,959) (988,568) (19,633,399)
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) (5,831) (61,362) -- --
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class (162,148) (3,184,056) (92,185) (1,735,482)
=========================================================================================================================
Net increase (decrease) in share activity (9,311,649) $(153,137,628) 18,013,014 $383,590,174
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There is an entity that is a record owner of more than 5% of the
outstanding shares of the Fund that owns 11% 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 into Class Y shares of the
Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
- -------------------------------------------------------------------------------------------------
Class Y 62,515 $ 751,430
- -------------------------------------------------------------------------------------------------
Class A (62,515) (751,430)
_________________________________________________________________________________________________
=================================================================================================
</Table>
(c) Net of redemption fees of $305,496 and $200,553 which were allocated among
the classes based on relative net assets of each class for the years ended
October 31, 2008 and 2007, respectively.
19 AIM CHINA FUND
NOTE 10--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 NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END
OF PERIOD (LOSS)(a) UNREALIZED)(b) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 $28.59 $ 0.07 $(18.15) $(18.08) $(0.01) $(0.68) $(0.69) $ 9.82
Year ended 10/31/07 10.98 0.01 17.70 17.71 (0.10) -- (0.10) 28.59
Year ended 10/31/06(f) 10.00 0.09 0.89 0.98 -- -- -- 10.98
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 28.32 (0.06) (17.92) (17.98) -- (0.68) (0.68) 9.66
Year ended 10/31/07 10.93 (0.14) 17.60 17.46 (0.07) -- (0.07) 28.32
Year ended 10/31/06(f) 10.00 0.05 0.88 0.93 -- -- -- 10.93
- -------------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 28.29 (0.06) (17.90) (17.96) -- (0.68) (0.68) 9.65
Year ended 10/31/07 10.92 (0.14) 17.58 17.44 (0.07) -- (0.07) 28.29
Year ended 10/31/06(f) 10.00 0.05 0.87 0.92 -- -- -- 10.92
- -------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 10/31/08(h) 12.02 0.00 (2.20) (2.20) -- -- -- 9.82
- -------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 28.72 0.17 (18.25) (18.08) (0.05) (0.68) (0.73) 9.91
Year ended 10/31/07 10.99 0.09 17.74 17.83 (0.10) -- (0.10) 28.72
Year ended 10/31/06(f) 10.00 0.11 0.88 0.99 -- -- -- 10.99
_______________________________________________________________________________________________________________________________
===============================================================================================================================
<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(c) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(d)
- -----------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 (64.58)% $ 69,460 1.75%(e) 1.76%(e) 0.39%(e) 94%
Year ended 10/31/07 162.36 385,401 1.85 1.86 0.04 102
Year ended 10/31/06(f) 9.80 14,212 2.09(g) 4.14(g) 1.60(g) 80
- -----------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 (64.84) 11,625 2.50(e) 2.51(e) (0.36)(e) 94
Year ended 10/31/07 160.56 51,222 2.60 2.61 (0.71) 102
Year ended 10/31/06(f) 9.30 2,881 2.84(g) 4.89(g) 0.85(g) 80
- -----------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 (64.83) 21,548 2.50(e) 2.51(e) (0.36)(e) 94
Year ended 10/31/07 160.52 127,122 2.60 2.61 (0.71) 102
Year ended 10/31/06(f) 9.20 2,950 2.84(g) 4.89(g) 0.85(g) 80
- -----------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 10/31/08(h) (18.30) 569 1.80(e)(g) 1.81(e)(g) 0.34(e)(g) 94
- -----------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 (64.37) 259 1.26(e) 1.27(e) 0.88(e) 94
Year ended 10/31/07 163.45 3,658 1.35 1.36 0.53 102
Year ended 10/31/06(f) 9.90 835 1.84(g) 3.48(g) 1.85(g) 80
_________________________________________________________________________________________________________________
=================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes redemption fees added to shares of beneficial interest for Class
A, Class B, Class C and Institutional Class shares of $0.02, $0.03 and
$0.02 per share for the years ended October 31, 2008, October 31, 2007 and
October 31, 2006, respectively. Redemption fees added to shares of
beneficial interest for Class Y shares were less than $0.005 per share for
the period ended October 31, 2008.
(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 $187,477,
$28,208, $62,600, $582 and $1,312 for Class A, Class B, Class C, Class Y
and Institutional Class shares, respectively.
(f) Commencement date of March 31, 2006.
(g) Annualized.
(h) Commencement date of October 3, 2008.
20 AIM CHINA FUND
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into
certain arrangements permitting market timing of the AIM Funds and failed to
disclose these arrangements in the prospectuses for such Funds, and conclusions
of law to the effect that Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, Invesco Aim's time to respond to that Order has been indefinitely
suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals,
depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws 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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various Invesco Aim- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund
Derivative Complaint purportedly brought on behalf of the AIM Funds and fund
registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA
purportedly brought on behalf of participants in the Invesco 401(k) plan. Based
on orders issued by the MDL Court, all claims asserted against the AIM Funds
that have been transferred to the MDL Court have been dismissed, although
certain Funds remain nominal defendants in the Consolidated Amended Fund
Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco
defendants' motion to dismiss the Amended Class Action Complaint for Violations
of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and
remanded this lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing
full cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco Aim and the Fund are unable to
estimate the impact, if any, that the outcome of the Pending Litigation and
Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund.
21 AIM CHINA FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM China Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM China Fund (one of the funds
constituting AIM Investment Funds, hereafter referred to as the "Fund") at
October 31, 2008, and the results of its operations for the year then ended, and
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the periods indicated, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2008
Houston, Texas
22 AIM CHINA 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
fees (12b-1); 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 May 1, 2008, through
October 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 October 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 October 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 transactional 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 transactional 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $515.80 $ 7.24 $1,015.58 $ 9.63 1.90%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 514.10 10.09 1,011.81 13.40 2.65
- ---------------------------------------------------------------------------------------------------
C 1,000.00 513.80 10.08 1,011.81 13.40 2.65
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 817.00 1.30 1,016.09 9.12 1.80
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 31, 2008 (as of close of
business October 3, 2008 through October 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 29
(as of close of business October 3, 2008, through October 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 CHINA FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM comparative performance and fee data Trustees recognized that the advisory
Investment Funds is required under the regarding the AIM Funds prepared by an arrangements and resulting advisory fees
Investment Company Act of 1940 to approve independent company, Lipper, Inc. for the Fund and the other AIM Funds are
annually the renewal of the AIM China (Lipper), under the direction and the result of years of review and
Fund's (the Fund) investment advisory supervision of the independent Senior negotiation between the Trustees and
agreement with Invesco Aim Advisors, Inc. Officer who also prepares a separate Invesco Aim, that the Trustees may focus
(Invesco Aim). During contract renewal analysis of this information for the to a greater extent on certain aspects of
meetings held on June 18-19, 2008, the Trustees. Each Sub-Committee then makes these arrangements in some years than in
Board as a whole and the disinterested or recommendations to the Investments others, and that the Trustees'
"independent" Trustees, voting separately, Committee regarding the performance, fees deliberations and conclusions in a
approved the continuance of the Fund's and expenses of their assigned funds. The particular year may be based in part on
investment advisory agreement for another Investments Committee considers each their deliberations and conclusions of
year, effective July 1, 2008. In doing so, Sub-Committee's recommendations and makes these same arrangements throughout the
the Board determined that the Fund's its own recommendations regarding the year and in prior years.
investment advisory agreement is in the performance, fees and expenses of the AIM
best interests of the Fund and its Funds to the full Board. The Investments FACTORS AND CONCLUSIONS AND SUMMARY OF
shareholders and that the compensation to Committee also considers each INDEPENDENT WRITTEN FEE EVALUATION
Invesco Aim under the Fund's investment Sub-Committee's recommendations in making
advisory agreement is fair and reasonable. its annual recommendation to the Board The discussion below serves as a summary
whether to approve the continuance of each of the Senior Officer's independent
The independent Trustees met separately AIM Fund's investment advisory agreement written evaluation with respect to the
during their evaluation of the Fund's and sub-advisory agreements for another Fund's investment advisory agreement as
investment advisory agreement with year. well as a discussion of the material
independent legal counsel from whom they factors and related conclusions that
received independent legal advice, and the The independent Trustees are assisted formed the basis for the Board's approval
independent Trustees also received in their annual evaluation of the Fund's of the Fund's investment advisory
assistance during their deliberations from investment advisory agreement by the agreement and sub-advisory agreements.
the independent Senior Officer, a independent Senior Officer. One Unless otherwise stated, information set
full-time officer of the AIM Funds who responsibility of the Senior Officer is to forth below is as of June 19, 2008 and
reports directly to the independent manage the process by which the AIM Funds' does not reflect any changes that may have
Trustees. proposed management fees are negotiated occurred since that date, including but
during the annual contract renewal process not limited to changes to the Fund's
THE BOARD'S FUND EVALUATION PROCESS to ensure that they are negotiated in a performance, advisory fees, expense
manner that is at arms' length and limitations and/or fee waivers.
The Board's Investments Committee has reasonable. Accordingly, the Senior
established three Sub-Committees that are Officer must either supervise a I. Investment Advisory Agreement
responsible for overseeing the management competitive bidding process or prepare an
of a number of the series portfolios of independent written evaluation. The Senior A. Nature, Extent and Quality of
the AIM Funds. This Sub-Committee Officer has recommended that an Services Provided by Invesco Aim
structure permits the Trustees to focus on independent written evaluation be provided
the performance of the AIM Funds that have and, at the direction of the Board, has The Board reviewed the advisory services
been assigned to them. The Sub-Committees prepared an independent written provided to the Fund by Invesco Aim under
meet throughout the year to review the evaluation. the Fund's investment advisory agreement,
performance of their assigned funds, and the performance of Invesco Aim in
the Sub-Committees review monthly and During the annual contract renewal providing these services, and the
quarterly comparative performance process, the Board considered the factors credentials and experience of the officers
information and periodic asset flow data discussed below under the heading "Factors and employees of Invesco Aim who provide
for their assigned funds. These materials and Conclusions and Summary of Independent these services. The Board's review of the
are prepared under the direction and Written Fee Evaluation" in evaluating the qualifications of Invesco Aim to provide
supervision of the independent Senior fairness and reasonableness of the Fund's these services included the Board's
Officer. Over the course of each year, the investment advisory agreement and consideration of Invesco Aim's portfolio
Sub-Committees meet with portfolio sub-advisory agreements at the contract and product review process, various back
managers for their assigned funds and renewal meetings and at their meetings office support functions provided by
other members of management and review throughout the year as part of their Invesco Aim, and Invesco Aim's equity and
with these individuals the performance, ongoing oversight of the Fund. The Fund's fixed income trading operations. The Board
investment objective(s), policies, investment advisory agreement and concluded that the nature, extent and
strategies and limitations of these funds. sub-advisory agreements were considered quality of the advisory services provided
separately, although the Board also to the Fund by Invesco Aim were
In addition to their meetings considered the common interests of all of appropriate and that Invesco Aim currently
throughout the year, the Sub-Committees the AIM Funds in their deliberations. The is providing satisfactory advisory
meet at designated contract renewal Board considered all of the information services in accordance with the terms of
meetings each year to conduct an in-depth provided to them and did not identify any the Fund's investment advisory agreement.
review of the performance, fees and particular factor that was controlling. In addition, based on their ongoing
expenses of their assigned funds. During Each Trustee may have evaluated the meetings throughout the year with the
the contract renewal process, the Trustees information provided differently from one Fund's portfolio manager or managers, the
receive another and attributed different weight to Board concluded that these individuals are
the various factors. The competent and able to continue to carry
out their responsibilities under the
continued
24 AIM CHINA FUND
Fund's investment advisory agreement. contractual advisory fee rate was below economies of scale through contractual
the median contractual advisory fee rate breakpoints in the Fund's advisory fee
In determining whether to continue the of funds in its expense group. The Board schedule or through advisory fee waivers
Fund's investment advisory agreement, the also reviewed the methodology used by or expense limitations. The Board noted
Board considered the prior relationship Lipper in determining contractual fee that the Fund's contractual advisory fee
between Invesco Aim and the Fund, as well rates. schedule includes seven breakpoints and
as the Board's knowledge of Invesco Aim's that the level of the Fund's advisory
operations, and concluded that it was The Board also compared the Fund's fees, as a percentage of the Fund's net
beneficial to maintain the current effective fee rate (the advisory fee after assets, has decreased as net assets
relationship, in part, because of such any advisory fee waivers and before any increased because of the breakpoints.
knowledge. The Board also considered the expense limitations/waivers) to the Based on this information, the Board
steps that Invesco Aim and its affiliates advisory fee rates of other clients of concluded that the Fund's advisory fees
have taken over the last several years to Invesco Aim and its affiliates with would reflect economies of scale at higher
improve the quality and efficiency of the investment strategies comparable to those asset levels. The Board also noted that
services they provide to the AIM Funds in of the Fund, including nine offshore funds the Fund shares directly in economies of
the areas of investment performance, advised by the Invesco Aim affiliate that scale through lower fees charged by third
product line diversification, sub-advises the Fund. The Board noted that party service providers based on the
distribution, fund operations, shareholder the Fund's rate was below the rates for combined size of all of the AIM Funds and
services and compliance. The Board the offshore funds advised by the Invesco affiliates.
concluded that the quality and efficiency Aim affiliate.
of the services Invesco Aim and its E. Profitability and Financial
affiliates provide to the AIM Funds in Additionally, the Board compared the Resources of Invesco Aim
each of these areas have generally Fund's effective fee rate to the total
improved, and support the Board's approval advisory fees paid by numerous separately The Board reviewed information from
of the continuance of the Fund's managed accounts/wrap accounts advised by Invesco Aim concerning the costs of the
investment advisory agreement. Invesco Aim affiliates. The Board noted advisory and other services that Invesco
that the Fund's rate was generally above Aim and its affiliates provide to the Fund
B. Fund Performance the rates for the separately managed and the profitability of Invesco Aim and
accounts/ wrap accounts. The Board its affiliates in providing these
The Board noted that the Fund recently considered that management of the services. The Board also reviewed
began operations and that only one separately managed accounts/wrap accounts information concerning the financial
calendar year of comparative performance by the Invesco Aim affiliates involves condition of Invesco Aim and its
data was available. The Board compared the different levels of services and different affiliates. The Board also reviewed with
Fund's performance during the past operational and regulatory requirements Invesco Aim the methodology used to
calendar year to the performance of funds than Invesco Aim's management of the Fund. prepare the profitability information. The
in the Fund's performance group that are The Board concluded that these differences Board considered the overall profitability
not managed by Invesco Aim, and against are appropriately reflected in the fee of Invesco Aim, as well as the
the performance of all funds in the Lipper structure for the Fund. profitability of Invesco Aim in connection
China Region Funds Index. The Board also with managing the Fund. The Board noted
reviewed the criteria used by Invesco Aim The Board noted that Invesco Aim has that Invesco Aim continues to operate at a
to identify the funds in the Fund's contractually agreed to waive fees and/or net profit, although increased expenses in
performance group for inclusion in the limit expenses of the Fund through at recent years have reduced the
Lipper reports. The Board noted that the least June 30, 2009 in an amount necessary profitability of Invesco Aim and its
Fund's performance was in the first to limit total annual operating expenses affiliates. The Board concluded that the
quintile of its performance group for the to a specified percentage of average daily Fund's fees were fair and reasonable, and
one year period (the first quintile being net assets for each class of the Fund. The that the level of profits realized by
the best performing funds and the fifth Board considered the contractual nature of Invesco Aim and its affiliates from
quintile being the worst performing this fee waiver and noted that it remains providing services to the Fund was not
funds). The Board noted that the Fund's in effect until at least June 30, 2009. excessive in light of the nature, quality
performance was above the performance of The Board also considered the effect this and extent of the services provided. The
the Index for the one year period. The expense limitation would have on the Board considered whether Invesco Aim is
Board also considered the steps Invesco Fund's estimated total expenses. financially sound and has the resources
Aim has taken over the last several years necessary to perform its obligations under
to improve the quality and efficiency of After taking account of the Fund's the Fund's investment advisory agreement,
the services that Invesco Aim provides to contractual advisory fee rate, as well as and concluded that Invesco Aim has the
the AIM Funds. The Board concluded that the comparative advisory fee information financial resources necessary to fulfill
Invesco Aim continues to be responsive to and the expense limitation discussed these obligations.
the Board's focus on fund performance. above, the Board concluded that the Fund's
advisory fees were fair and reasonable. F. Independent Written Evaluation of
C. Advisory Fees and Fee Waivers the Fund's Senior Officer
D. Economies of Scale and Breakpoints
The Board compared the Fund's contractual The Board noted that, at their direction,
advisory fee rate to the contractual The Board considered the extent to which the Senior Officer of the Fund, who is
advisory fee rates of funds in the Fund's there are economies of scale in Invesco independent of Invesco Aim and Invesco
Lipper expense group that are not managed Aim's provision of advisory services to Aim's affiliates, had prepared an
by Invesco Aim, at a common asset level the Fund. The Board also considered independent written evaluation to assist
and as of the end of the past calendar whether the Fund benefits from such the Board in determining the
year. The Board noted that the Fund's reasonableness of the proposed management
fees of the AIM Funds, including the Fund.
The
continued
25 AIM CHINA FUND
Board noted that they had relied upon the The Board noted that Invesco Aim will B. Fund Performance
Senior Officer's written evaluation receive advisory fees from these
instead of a competitive bidding process. affiliated money market funds attributable The Board did view Fund performance as a
In determining whether to continue the to such investments, although Invesco Aim relevant factor in considering whether to
Fund's investment advisory agreement, the has contractually agreed to waive through approve the sub-advisory agreements for
Board considered the Senior Officer's at least June 30, 2009, the advisory fees the Fund, as one of the Affiliated
written evaluation. payable by the Fund in an amount equal to Subadvisers currently serves as the
100% of the net advisory fees Invesco Aim sub-adviser to the Fund. The Board
G. Collateral Benefits to Invesco Aim receives from the affiliated money market compared the Fund's performance during the
and its Affiliates funds with respect to the Fund's past calendar year to the performance of
investment of uninvested cash, but not funds in the Fund's performance group that
The Board considered various other cash collateral. The Board considered the are not managed by Invesco Aim, and
benefits received by Invesco Aim and its contractual nature of this fee waiver and against the performance of all funds in
affiliates resulting from Invesco Aim's noted that it remains in effect until at the Lipper China Region Funds Index. The
relationship with the Fund, including the least June 30, 2009. The Board concluded Board also reviewed the criteria used by
fees received by Invesco Aim and its that the Fund's investment of uninvested Invesco Aim to identify the funds in the
affiliates for their provision of cash and cash collateral from any Fund's performance group for inclusion in
administrative, transfer agency and securities lending arrangements in the the Lipper reports. The Board noted that
distribution services to the Fund. The affiliated money market funds is in the the Fund's performance was in the first
Board considered the performance of best interests of the Fund and its quintile of its performance group for the
Invesco Aim and its affiliates in shareholders. one year period (the first quintile being
providing these services and the the best performing funds and the fifth
organizational structure employed by II. Sub-Advisory Agreements quintile being the worst performing
Invesco Aim and its affiliates to provide funds). The Board noted that the Fund's
these services. The Board also considered A. Nature, Extent and Quality of performance was above the performance of
that these services are provided to the Services Provided by Affiliated the Index for the one year period. The
Fund pursuant to written contracts which Sub-Advisers Board also considered the steps Invesco
are reviewed and approved on an annual Aim has taken over the last several years
basis by the Board. The Board concluded The Board reviewed the services to be to improve the quality and efficiency of
that Invesco Aim and its affiliates were provided by Invesco Trimark Ltd., Invesco the services that Invesco Aim provides to
providing these services in a satisfactory Asset Management Deutschland, GmbH, the AIM Funds. The Board concluded that
manner and in accordance with the terms of Invesco Asset Management Limited, Invesco Invesco Aim continues to be responsive to
their contracts, and were qualified to Asset Management (Japan) Limited, Invesco the Board's focus on fund performance.
continue to provide these services to the Australia Limited, Invesco Global Asset
Fund. Management (N.A.), Inc., Invesco Hong Kong C. Sub-Advisory Fees
Limited, Invesco Institutional (N.A.),
The Board considered the benefits Inc. and Invesco Senior Secured The Board considered the services to be
realized by Invesco Aim as a result of Management, Inc. (collectively, the provided by the Affiliated Sub-Advisers
portfolio brokerage transactions executed "Affiliated Sub-Advisers") under the pursuant to the sub-advisory agreements
through "soft dollar" arrangements. Under sub-advisory agreements and the and the services to be provided by Invesco
these arrangements, portfolio brokerage credentials and experience of the officers Aim pursuant to the Fund's investment
commissions paid by the Fund and/or other and employees of the Affiliated advisory agreement, as well as the
funds advised by Invesco Aim are used to Sub-Advisers who will provide these allocation of fees between Invesco Aim and
pay for research and execution services. services. The Board concluded that the the Affiliated Sub-Advisers pursuant to
The Board noted that soft dollar nature, extent and quality of the services the sub-advisory agreements. The Board
arrangements shift the payment obligation to be provided by the Affiliated noted that the sub-advisory fees have no
for the research and execution services Sub-Advisers were appropriate. The Board direct effect on the Fund or its
from Invesco Aim to the funds and noted that the Affiliated Sub-Advisers, shareholders, as they are paid by Invesco
therefore may reduce Invesco Aim's which have offices and personnel that are Aim to the Affiliated Sub-Advisers, and
expenses. The Board also noted that geographically dispersed in financial that Invesco Aim and the Affiliated
research obtained through soft dollar centers around the world, have been formed Sub-Advisers are affiliates. After taking
arrangements may be used by Invesco Aim in in part for the purpose of researching and account of the Fund's contractual
making investment decisions for the Fund compiling information and making sub-advisory fee rate, as well as other
and may therefore benefit Fund recommendations on the markets and relevant factors, the Board concluded that
shareholders. The Board concluded that economies of various countries and the Fund's sub-advisory fees were fair and
Invesco Aim's soft dollar arrangements securities of companies located in such reasonable.
were appropriate. The Board also concluded countries or on various types of
that, based on their review and investments and investment techniques, and D. Financial Resources of the
representations made by Invesco Aim, these providing investment advisory services. Affiliated Sub-Advisers
arrangements were consistent with The Board concluded that the sub-advisory
regulatory requirements. agreements will benefit the Fund and its The Board considered whether each
shareholders by permitting Invesco Aim to Affiliated Sub-Adviser is financially
The Board considered the fact that the utilize the additional resources and sound and has the resources necessary to
Fund's uninvested cash and cash collateral talent of the Affiliated Sub-Advisers in perform its obligations under its
from any securities lending arrangements managing the Fund. respective sub-advisory agreement, and
may be invested in money market funds concluded that each Affiliated Sub-Adviser
advised by Invesco Aim pursuant to has the financial resources necessary to
procedures approved by the Board. fulfill these obligations.
26 AIM CHINA 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 October 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $590,465
Qualified Dividend Income* 2.30%
Corporate Dividends Received Deduction* 0%
</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 January 31, 2008, April 30, 2008, July 31, 2008 and
October 31, 2008 were 99.61%, 99.60%, 99.88%, and 99.94%, respectively.
27 AIM CHINA FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee
oversees 103 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 2003 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 1997 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, Policy
Trustee firm) Studies, Inc. and
Van Gilder Insurance
Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 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 2001 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 2001 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 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.
28 AIM CHINA 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 2004 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
29 AIM CHINA FUND
Supplement to Annual Report dated 10/31/08
AIM CHINA FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS A redemption fee of 2% will be imposed
For periods ended 10/31/08 on certain redemptions or exchanges out of
The following information has been the Fund within 31 days of purchase.
prepared to provide Institutional Class Inception (3/31/06) 1.21% Exceptions to the redemption fee are
shareholders with a performance overview 1 Year -64.37 listed in the Fund's prospectus.
specific to their holdings. Institutional ==========================================
Class shares are offered exclusively to Please note that past performance is
institutional investors, including defined ========================================== not indicative of future results. More
contribution plans that meet certain AVERAGE ANNUAL TOTAL RETURNS recent returns may be more or less than
criteria. For periods ended 9/30/08, most recent those shown. All returns assume
calendar quarter-end reinvestment of distributions at NAV.
Investment return and principal value will
Inception (3/31/06) 11.56% fluctuate so your shares, when redeemed,
1 Year -47.70 may be worth more or less than their
========================================== original cost. See full report for
information on comparative benchmarks.
Institutional Class shares have no sales Please consult your Fund prospectus for
charge; therefore, performance is at net more information. For the most current
asset value (NAV). Performance of month-end performance, please call 800 451
Institutional Class shares will differ 4246 or visit invescoaim.com.
from performance of other share classes
primarily due to differing sales charges (1) Total annual operating expenses less
and class expenses. any contractual fee waivers and/or
expense reimbursements by the advisor
The net annual Fund operating expense in effect through at least June 30,
ratio set forth in the most recent Fund 2009. See current prospectus for more
prospectus as of the date of this information
supplement for Institutional Class shares
was 1.37%.(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 1.38%. 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.
==========================================
NASDAQ SYMBOL IACFX
==========================================
Information on your Fund's expenses is shown later in this supplement.
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]
invescoaim.com CHI-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
Supplement to Annual Report dated 10/31/08
AIM CHINA FUND
Past performance cannot guarantee The performance data shown in the chart
comparable future results. above is that of the Fund's institutional
share class. The performance data shown in
The data shown in the chart above the chart in the annual report is that of
includes reinvested distributions and Fund the Fund's Class A, B and C shares. The
expenses including management fees. Index performance of the Fund's other share
results include reinvested dividends. classes will differ primarily due to
Performance of an index of funds reflects different sales charge structures and
fund expenses and management fees; class expenses, and may be greater than or
performance of a market index does not. less than the performance of the Fund's
Performance shown in the chart and Institutional Class shares shown in the
table(s) does not reflect deduction of chart above.
taxes a shareholder would pay on Fund
distributions or sale of Fund shares.
Performance of the indexes does not
reflect the effects of taxes.
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]
invescoaim.com CHI-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- INSTITUTIONAL CLASS SHARES
Fund and index data from 3/31/06
AIM China Fund- Lipper China
Institutional Lipper China Region Funds
Class MSCI EAFE MSCI China Region Funds Category
Date Shares Index(1) Index(1) Index(1) Average (1)
3/31/06 $10000 $10000 $10000 $10000 $10000
4/06 10110 10478 10524 10522 10504
5/06 9850 10071 9981 10034 10068
6/06 9870 10070 10188 10000 10061
7/06 9790 10170 10458 10068 10088
8/06 9800 10449 10686 10250 10264
9/06 10280 10465 11084 10467 10550
10/06 10990 10873 11849 10980 11098
11/06 12151 11197 13144 11994 12193
12/06 13530 11549 15060 13072 13361
1/07 13338 11627 14422 13192 13380
2/07 13661 11721 14169 13186 13441
3/07 14316 12020 14715 13568 13779
4/07 15112 12554 15268 14002 14240
5/07 16897 12774 16419 15152 15379
6/07 18267 12789 18313 16418 16734
7/07 20688 12601 20208 17630 17970
8/07 21435 12404 21664 18250 18627
9/07 25145 13068 25983 21235 21561
10/07 28957 13581 30295 24222 24534
11/07 25268 13135 26201 21399 21697
12/07 23752 12839 25036 20628 20852
1/08 19284 11653 19638 17060 17206
2/08 20013 11820 21755 17791 17897
3/08 17597 11695 19106 16136 16196
4/08 19940 12330 22088 18043 18106
5/08 19409 12450 20993 17710 17681
6/08 16785 11432 18445 15496 15428
7/08 16837 11065 18870 15415 15275
8/08 15859 10617 17326 14430 14269
9/08 13152 9082 13793 11829 11656
10/08 10317 7249 10656 9150 8955
====================================================================================================================================
(1) Lipper Inc.
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management fees
and other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with ongoing costs of investing in other mutual funds. The example is based on
an investment of $1,000 invested at the beginning of the period and held for the
entire period May 1, 2008, through October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $517.50 $4.84 $1,018.75 $6.44 1.27%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 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 CHINA 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:
o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will
trees used to produce paper. be sent via email as soon as they're available.
o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer
expenses and put more capital back in your fund's returns. 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 811-05426 and 033-19338.
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 January 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 [INVESCO AIM LOGO]
investment advisory services to individual and institutional clients and do not sell securities. Please -- SERVICE MARK --
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.
invescoaim.com CHI-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM DEVELOPING MARKETS FUND
- -- SERVICE MARK -- Annual Report to Shareholders o October 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 Approval of Investment Advisory Agreement
27 Tax Information
28 Trustees and Officers
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 recent market developments and
[TAYLOR provide some perspective and encouragement to my fellow long-term investors.
PHOTO]
MARKET OVERVIEW
At the start of the fiscal year in November 2007, we saw warning signs of
increasing economic ills -- a weakening housing market, rising inflation and
Philip Taylor slowing job growth, among others. In response, the U.S. Federal Reserve Board
(the Fed) repeatedly cut short-term interest rate targets to stimulate economic
growth and expand market liquidity.(1) Also, Congress and the president worked
together to enact an economic stimulus plan that included billions of dollars in
rebates to taxpayers.
These actions helped the economy and the U.S. stock market until the spring of
2008, when other factors came to the forefront -- triggering a severe correction that eventually
drove major stock-market indexes to multi-year lows.(2)
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.
The recent volatility in the stock, fixed-income and credit markets has driven home the
importance of three timeless investing principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
o 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.
o 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.
o 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 capitalize on
this situation.
MANAGING MONEY IS OUR FOCUS
As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain
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, 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 we 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) Lipper Inc.
2 AIM DEVELOPING MARKETS FUND
Dear Fellow Shareholders:
As I write this letter, turbulent financial markets are causing considerable
investor anxiety, reminding us again that markets are cyclical and the correction
of excess is often painful, at least in the short term. Your Board of Trustees
[CROCKETT believes in the wisdom of a long-term perspective and consistent investment
PHOTO] discipline. We continue to put your interests first in the effort to improve
investment performance, contain shareholder costs and uphold the highest ethical
standards.
We remain enthusiastic about the global reach and investment expertise that
Invesco, a leading independent global investment management company, brings to
Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse
investment strategies deployed throughout the worldwide network of Invesco
investment centers has helped strengthen the management of many AIM Funds. The
rebranding of the Funds' management company as Invesco Aim was followed by the
launch of an upgraded, investor-friendly website (invescoaim.com); a new
mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and
a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in
financial publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between
the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual
process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory
Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your
behalf to double the number of votes in favor of separating the roles of chairman and CEO at the
companies whose shares your Funds hold. We also continued to support the movement for shareholders
to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a
matter of policy, and I would be interested to hear your thoughts on this policy.
As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com.
The dialogue that has been established in this way has been instructive for your Board, and we want
it to continue. Although the production schedule for Fund annual reports and prospectuses allows me
to write these letters of general report and response just twice a year, please be assured that your
comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM DEVELOPING MARKETS FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
======================================================================================= has not been the case. Emerging equity
PERFORMANCE SUMMARY markets, particularly in China, India,
Russia and Brazil, have seen significant
Having peaked in October 2007, emerging markets followed world stock markets down on setbacks.(1) The crisis in global credit
increased concerns that the U.S. economy may enter a recession.(triangle) Within this markets and the failures of prominent
environment, AIM Developing Markets Fund's Class A shares, at net asset value, returned financial institutions in the U.S. and
- -55.04% over the fiscal year ended October 31, 2008, performing in line with the Europe were catalysts for a further slide
- -56.35% return for the MSCI Emerging Markets Index and -56.42% return for the Lipper in share prices.
Emerging Market Funds Index.(triangle)
Developing markets, as measured by the
Your Fund's long-term performance appears later in this report. MSCI Emerging Markets Index, returned
-56.35% for the fiscal year ended October
FUND VS. INDEXES 31, 2008, lagging the -46.62% return of
the MSCI EAFE Index, which measures the
Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does performance of developed markets.(1)
not include applicable contingent deferred sales charges (CDSC) or front-end sales
charges, which would have reduced performance. Ongoing misgivings about the health of
global financial markets, combined with
Class A Shares -55.04% increased concerns about a slowdown in
Class B Shares -55.36 economic growth next year, trumped fears
Class C Shares -55.38 about the inflation outlook in emerging
Class Y Shares* -55.02 markets. While several emerging countries
MSCI EAFE Index(triangle) (Broad Market Index) -46.62 raised interest rates earlier in the
MSCI Emerging Markets Index(triangle) (Style-Specific Index) -56.35 fiscal year to combat accelerating
Lipper Emerging Market Funds Index(triangle) (Peer Group Index) -56.42 inflationary pressures, there appeared to
be a change in emphasis by central banks
(triangle)Lipper Inc. toward promoting economic growth. This was
* Share class incepted during the fiscal year. See page 7 for a detailed most notable in China, where interest
explanation of Fund performance. rates were lowered in September 2008 the
======================================================================================= first cut in six years.(2)
HOW WE INVEST primarily on a stock-by-stock basis. We With global events overriding
focus on the strengths of individual country-specific issues, all of the
When selecting stocks for your Fund, we companies rather than sectors, countries regions and sectors within emerging
employ a disciplined investment strategy or market-cap trends. markets suffered severe losses. The Fund
that emphasizes fundamental research, was not immune to this sharp decline, with
supported by both quantitative analysis We believe disciplined sell decisions positive stock performers few and far
and portfolio construction techniques. Our are key to successful investing. We between. However, on a relative basis, the
"EQV" (Earnings, Quality, Valuation) consider selling a stock for one of the Fund's focus on not just earnings but also
strategy focuses primarily on identifying following reasons: on the quality and valuation of a stock,
quality companies that have experienced, helped mitigate losses.
or exhibit the potential for, accelerating o A company's fundamentals deteriorate,
or above average earnings growth but whose or it posts disappointing earnings. At a country level, an underweight
stock prices do not fully reflect these exposure to China versus the Fund's
attributes. o A stock's price seems overvalued. style-specific index, the MSCI Emerging
Markets Index, helped relative Fund
While research responsibilities within o A more attractive opportunity becomes
the portfolio management team are focused available.
by geographic region, we select
investments for the Fund by using a MARKET CONDITIONS AND YOUR FUND
bottom-up investment approach, which means
that we construct the Fund In the early stages of the global credit
and banking crisis, emerging markets
seemed relatively immune. More recently,
especially from mid-2008 onwards, that
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE COUNTRIES TOP 10 EQUITY HOLDINGS*
By sector
Consumer Discretionary 16.2% 1. Brazil 14.4% 1. America Movil SAB de C.V.-
Financials 13.3 2. United States 11.1 Series L-ADR 3.3%
Telecommunication Services 13.1 3. Philippines 8.6 2. Grupo Televisa S.A.-ADR 3.0
Industrials 9.7 4. Mexico 8.0 3. SM Investments Corp. 3.0
Energy 9.2 5. Russia 6.7 4. Siam Commercial Bank PCL 2.9
Health Care 8.7 ========================================== 5. Philippine Long Distance
Utilities 6.6 Telephone Co. 2.7
Consumer Staples 4.2 6. Equatorial Energia S.A. 2.6
Information Technology 2.5 ========================================== 7. Petroleo Brasileiro S.A.-ADR 2.6
Materials 2.4 Total Net Assets $523.9 million 8. PT Telekomunikasi Indonesia 2.2
Money Market Funds Plus 9. Intralot S.A. 2.1
Other Assets Less Liabilities 14.1 Total Number of Holdings* 69 10. Teva Pharmaceutical Industries
========================================== ========================================== Ltd.-ADR 2.0
==========================================
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
* Excluding money market fund holdings.
4 AIM DEVELOPING MARKETS FUND
performance. Valuations in this market we were overweight on a relative basis, SHUXIN CAO
were well beyond what we considered to be increased markedly as stocks with robust Chartered Financial Analyst,
reasonable, leading us to significantly growth and reasonable valuations were [CAO senior portfolio manager, is
trim back our exposure earlier in the added to the portfolio. In contrast, our PHOTO] co-manager of AIM Developing
period. Similarly, underweight exposure to exposure to the financials and materials Markets Fund. Mr. Cao joined
weak financials and energy stocks in India sectors witnessed a significant reduction. Invesco Aim in 1997. He graduated from
and information technology stocks in We remained underweight in both sectors Tianjin Foreign Language Institute with a
Taiwan and Korea helped as well. While the versus the MSCI Emerging Markets Index. B.A. in English. Mr. Cao also earned an
successful staging of the Olympic Games in M.B.A. from Texas A&M University and is a
Beijing caused some local gains in One of our larger exposures was to the certified public accountant.
industrial production, it had a limited consumer via consumer discretionary and
affect on the Chinese stock market, which telecommunication services sectors,
sustained deep losses for the period. segments of the market focused on domestic
consumption. We were keenly aware of the
From a sector perspective, our challenges consumers faced, but strong BORGE ENDRESEN
significant underweight position in local franchises trading at decade-low Chartered Financial Analyst,
materials hurt relative returns earlier in valuations became increasingly more [ENDRESEN portfolio manager, is
the fiscal year as materials stocks saw a attractive in these more consumer focused PHOTO] co-manager of AIM Developing
boost. The latter part of the fiscal year, sectors. Markets Fund. Mr. Endresen
however, brought a dramatic reversal of joined Invesco Aim in 1999. He graduated
this upward trend, as the materials sector From a country perspective, stock summa cum laude from the University of
declined sharply as a result of falling selection led to a modest increase in the Oregon with a B.S. in finance. Mr.
commodity prices. Our limited exposure to Fund's exposure to Mexico, Indonesia and Endresen also earned an M.B.A. from The
this volatile sector, particularly to the Russia and a decline in Brazil and South University of Texas at Austin.
base metals and mining industry, helped Africa. We also gradually added to our
relative results overall for the fiscal weighting in China on a very limited basis Assisted by the Asia Pacific/Latin
year. In our view, underlying assumptions to take advantage of some valuation America Team and the Europe/Canada Team
used to rationalize the sector's dramatic opportunities that arose from the recent
price appreciation over the last several sell-off.
years were overly optimistic and did not
support the high valuations. Volatile markets can test an investor's
resolve, and 2008 has so far been one of
A higher-than-average cash position of the most turbulent periods in many years.
13.26%, in a declining market, was also a However, it's always worth remembering
plus. The level of cash at the close of that market turbulence can create
the fiscal year should not be construed as investment opportunities. We welcome any
a new long-term defensive strategy. new investors who have invested in the
Fund during the fiscal year, and to all of
In contrast, stock holdings in Brazil our shareholders we would like to express
and the Philippines detracted from Fund our appreciation for your continued
performance. In Brazil, exposure to the investment in AIM Developing Markets Fund.
weak industrials and consumer
discretionary sectors detracted (1) Lipper Inc.
significantly from both relative and
absolute results. The small-cap dominated (2) Bloomberg L.P.
industrials sector dropped dramatically as
investors sold small-cap stocks. Within (3) Banco Central do Brazil
the consumer staples sector, home builders
were negatively affected earlier in the The views and opinions expressed in
period by the Brazilian Central Bank's management's discussion of Fund
decision to raise interest rates after two performance are those of Invesco Aim
years of rate reductions.(3) Advisors, Inc. These views and opinions
are subject to change at any time based on
The Fund's results were also hurt by factors such as market and economic
the Fund's all-cap flexibility. An conditions. These views and opinions may
overweight exposure to small-cap stocks not be relied upon as investment advice or
versus the large-cap biased MSCI Emerging recommendations, or as an offer for a
Markets Index, detracted from relative particular security. The information is
results. Broadly speaking, a flight to not a complete analysis of every aspect of
liquidity and safety continued, regardless any market, country, industry, security or
of fundamentals and negatively affected the Fund. Statements of fact are from
small-cap returns. sources considered reliable, but Invesco
Aim Advisors, Inc. makes no representation
Our overall "EQV" focused strategy or warranty as to their completeness or
remained the same, despite the volatile accuracy. Although historical performance
nature of markets. Over the fiscal year, is no guarantee of future results, these
our exposure to the telecommunication insights may help you understand our
services and health care sectors, where investment management philosophy.
See important Fund and index disclosures
later in this report.
5 AIM DEVELOPING MARKETS FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee shown in the chart and table(s) does not one that indicates the dollar value of an
comparable future results. reflect deduction of taxes a shareholder investment, is constructed with each
would pay on Fund distributions or sale of segment representing a percent change in
The data shown in the chart include Fund shares. the value of the investment. In this
reinvested distributions, applicable sales chart, each segment represents a doubling,
charges and Fund expenses including This chart, which is a logarithmic or 100% change, in the value of the
management fees. Index results include chart, presents the fluctuations in the investment. In other words, the space
reinvested dividends, but they do not value of the Fund and its indexes. We between $5,000 and $10,000 is the same
reflect sales charges. Performance of an believe that a logarithmic chart is more size as the space between $10,000 and
index of funds reflects fund expenses and effective than other types of charts in $20,000, and so on.
management fees; performance of a market illustrating changes in value during the
index does not. Performance early years shown in the chart. The
vertical axis, the
6 AIM DEVELOPING MARKETS FUND
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- CLASS A SHARES (OLDEST SHARE CLASS)
Index data from 12/31/93, Fund data from 1/11/94
AIM Developing
Markets Fund - Lipper Emerging
Date Class A Shares MSCI EAFE Index(1) Market Funds Index(1)
12/31/93 $10000 $10000
1/94 $ 9538 10845 10253
2/94 9166 10815 9980
3/94 8291 10350 9125
4/94 7881 10789 8874
5/94 8221 10727 9037
6/94 7881 10878 8648
7/94 8209 10983 9164
8/94 9091 11243 10093
9/94 9241 10889 10231
10/94 9121 11251 10016
11/94 8844 10711 9566
12/94 8120 10778 8840
1/95 7323 10364 7936
2/95 6729 10334 7804
3/95 6579 10979 7838
4/95 7193 11391 8090
5/95 7605 11256 8468
6/95 7592 11058 8502
7/95 7800 11747 8798
8/95 7814 11299 8573
9/95 7892 11519 8531
10/95 7604 11210 8176
11/95 7624 11522 7965
12/95 8044 11986 8241
1/96 8730 12035 8990
2/96 8612 12076 8885
3/96 8660 12332 8959
4/96 8965 12691 9275
5/96 9138 12457 9367
6/96 9173 12527 9385
7/96 8930 12161 8841
8/96 9235 12188 9083
9/96 9547 12511 9176
10/96 9505 12383 8965
11/96 9747 12876 9168
12/96 9939 12711 9247
1/97 10283 12266 9954
2/97 10635 12466 10309
3/97 10291 12511 10047
4/97 10427 12578 10046
5/97 10751 13396 10394
6/97 11053 14135 10903
7/97 11404 14364 11222
8/97 10141 13291 9986
9/97 10464 14036 10347
10/97 9020 12957 8619
11/97 8877 12825 8225
12/97 9096 12937 8300
1/98 8297 13528 7722
2/98 8810 14396 8412
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
3/98 9156 14839 8725
4/98 9352 14957 8767
5/98 8177 14884 7610
6/98 7453 14997 6889
7/98 7581 15149 7099
8/98 5275 13272 5065
9/98 5381 12865 5255
10/98 5674 14206 5760
11/98 6096 14934 6147
12/98 5883 15523 6070
1/99 5715 15478 5947
2/99 5677 15109 5896
3/99 6542 15739 6552
4/99 7293 16377 7463
5/99 7140 15534 7373
6/99 7960 16139 8201
7/99 7638 16619 7996
8/99 7531 16680 7908
9/99 7278 16848 7627
10/99 7554 17479 7857
11/99 8144 18086 8723
12/99 9502 19709 10256
1/00 9264 18457 10137
2/00 9187 18954 10439
3/00 9326 19688 10470
4/00 8188 18652 9331
5/00 7819 18197 8834
6/00 8250 18908 9272
7/00 7735 18116 8894
8/00 8096 18273 8986
9/00 7311 17383 8127
10/00 6835 16973 7520
11/00 6158 16336 6840
12/00 6324 16917 7087
1/01 7136 16908 7908
2/01 6517 15641 7295
3/01 5767 14598 6599
4/01 6115 15612 6936
5/01 6316 15061 7127
6/01 6169 14445 7003
7/01 5728 14183 6569
8/01 5644 13823 6483
9/01 4607 12423 5558
10/01 4886 12741 5850
11/01 5744 13211 6429
12/01 6207 13289 6839
1/02 6403 12583 7109
2/02 6606 12672 7268
3/02 6911 13418 7666
4/02 6934 13445 7760
5/02 6934 13616 7688
6/02 6340 13074 7126
7/02 5746 11783 6594
8/02 5801 11756 6648
9/02 5151 10494 5981
10/02 5449 11058 6267
11/02 5855 11560 6688
12/02 5644 11171 6523
1/03 5644 10705 6485
2/03 5518 10459 6332
3/03 5268 10254 6128
4/03 5784 11258 6718
5/03 6214 11941 7201
6/03 6527 12229 7564
7/03 6847 12525 7910
8/03 7426 12828 8439
9/03 7550 13223 8626
====================================================================================================================================
====================================================================================================================================
[MOUNTAIN CHART]
10/03 8222 14047 9298
11/03 8277 14360 9436
12/03 8732 15481 10237
1/04 9115 15700 10530
2/04 9507 16063 11003
3/04 9656 16153 11150
4/04 8849 15788 10272
5/04 8951 15841 10071
6/04 8873 16188 10123
7/04 8654 15663 9974
8/04 8998 15732 10362
9/04 9523 16143 10969
10/04 9953 16693 11304
11/04 10792 17834 12234
12/04 11144 18616 12868
1/05 11144 18275 12913
2/05 12076 19064 13990
3/05 11231 18585 13039
4/05 11035 18148 12720
5/05 11404 18157 13113
6/05 11843 18398 13549
7/05 12658 18962 14484
8/05 13002 19441 14709
9/05 14067 20307 15996
10/05 13174 19714 15031
11/05 14224 20196 16158
12/05 15098 21136 17069
1/06 17242 22434 19034
2/06 17234 22384 18923
3/06 17604 23122 19179
4/06 18652 24226 20538
5/06 16665 23285 18280
6/06 16500 23284 18189
7/06 16784 23514 18580
8/06 17398 24161 19086
9/06 17445 24198 19228
10/06 18754 25139 20233
11/06 19903 25890 21562
12/06 20960 26703 22543
1/07 21183 26884 22435
2/07 21356 27101 22225
3/07 22257 27792 23072
4/07 23221 29026 24165
5/07 24984 29535 25466
6/07 25323 29571 26353
7/07 26192 29136 27308
8/07 25275 28680 26716
9/07 27431 30215 29308
10/07 29991 31402 32435
11/07 27630 30369 30442
12/07 27838 29686 30716
1/08 25062 26943 27324
2/08 25849 27329 28516
3/08 24169 27042 27188
4/08 25278 28510 29244
5/08 26140 28787 29783
6/08 24044 26433 26719
7/08 23349 25585 25785
8/08 21957 24548 23826
9/08 18563 20998 19919
10/08 13488 16761 14134
====================================================================================================================================
========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/08, including maximum As of 9/30/08, the most recent calendar
applicable sales charges quarter-end, including maximum applicable
sales charges
CLASS A SHARES
Inception (1/11/94) 2.04% CLASS A SHARES
10 Years 8.42 Inception (1/11/94) 4.29%
5 Years 9.16 10 Years 12.54
1 Year -57.52 5 Years 18.36
1 Year -36.06
CLASS B SHARES
Inception (11/3/97) 2.92% CLASS B SHARES
10 Years 8.51 Inception (11/3/97) 6.01%
5 Years 9.38 10 Years 12.63
1 Year -57.50 5 Years 18.70
1 Year -36.05
CLASS C SHARES
Inception (3/1/99) 8.54% CLASS C SHARES
5 Years 9.67 Inception (3/1/99) 12.31%
1 Year -55.81 5 Years 18.93
1 Year -33.47
CLASS Y SHARES ==========================================
10 Years 9.05%
5 Years 10.41
1 Year -55.02
==========================================
CLASS Y SHARES' INCEPTION DATE IS OCTOBER YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL AT THE TIME OF PURCHASE TO 0% AT THE
3, 2008; RETURNS SINCE THAT DATE ARE SHARES. BEGINNING OF THE SEVENTH YEAR. THE CDSC ON
ACTUAL RETURNS. ALL OTHER RETURNS ARE CLASS C SHARES IS 1% FOR THE FIRST YEAR
BLENDED RETURNS OF ACTUAL CLASS Y SHARE THE NET ANNUAL FUND OPERATING EXPENSE AFTER PURCHASE. CLASS Y SHARES DO NOT HAVE
PERFORMANCE AND RESTATED CLASS A SHARE RATIO SET FORTH IN THE MOST RECENT FUND A FRONT-END SALES CHARGE OR A CDSC;
PERFORMANCE (FOR PERIODS PRIOR TO THE PROSPECTUS AS OF THE DATE OF THIS REPORT THEREFORE, PERFORMANCE IS AT NET ASSET
INCEPTION DATE OF CLASS Y SHARES) AT NET FOR CLASS A, CLASS B, CLASS C AND CLASS Y VALUE.
ASSET VALUE. THE RESTATED CLASS A SHARE SHARES WAS 1.58%, 2.33%, 2.33% AND 1.33%,
PERFORMANCE REFLECTS THE RULE 12B-1 FEES RESPECTIVELY.(1) THE TOTAL ANNUAL FUND THE PERFORMANCE OF THE FUND'S SHARE
APPLICABLE TO CLASS A SHARES AS WELL AS OPERATING EXPENSE RATIO SET FORTH IN THE CLASSES WILL DIFFER PRIMARILY DUE TO
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS MOST RECENT FUND PROSPECTUS AS OF THE DATE DIFFERENT SALES CHARGE STRUCTURES AND
RECEIVED BY CLASS A SHARES. CLASS A SHARES OF THIS REPORT FOR CLASS A, CLASS B, CLASS CLASS EXPENSES.
INCEPTION DATE IS JANUARY 11, 1994. C AND CLASS Y SHARES WAS 1.59%, 2.34%,
2.34% AND 1.34%, RESPECTIVELY. THE EXPENSE HAD THE ADVISOR NOT WAIVED FEES AND/OR
THE PERFORMANCE DATA QUOTED REPRESENT RATIOS PRESENTED ABOVE MAY VARY FROM THE REIMBURSED EXPENSES IN THE PAST,
PAST PERFORMANCE AND CANNOT GUARANTEE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS PERFORMANCE WOULD HAVE BEEN LOWER.
COMPARABLE FUTURE RESULTS; CURRENT OF THIS REPORT THAT ARE BASED ON EXPENSES
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE INCURRED DURING THE PERIOD COVERED BY THIS A REDEMPTION FEE OF 2% WILL BE IMPOSED
VISIT INVESCOAIM.COM FOR THE MOST RECENT REPORT. ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
MONTH-END PERFORMANCE. PERFORMANCE FIGURES THE FUND WITHIN 31 DAYS OF PURCHASE.
REFLECT REINVESTED DISTRIBUTIONS, CHANGES CLASS A SHARE PERFORMANCE REFLECTS THE EXCEPTIONS TO THE REDEMPTION FEE ARE
IN NET ASSET VALUE AND THE EFFECT OF THE MAXIMUM 5.50% SALES CHARGE, AND CLASS B LISTED IN THE FUND'S PROSPECTUS.
MAXIMUM SALES CHARGE UNLESS OTHERWISE AND CLASS C SHARE PERFORMANCE REFLECTS THE
STATED. INVESTMENT RETURN AND PRINCIPAL APPLICABLE CONTINGENT DEFERRED SALES (1) Total annual operating expenses less
VALUE WILL FLUCTUATE SO THAT CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE any contractual fee waivers and/or
CDSC ON CLASS B SHARES DECLINES FROM 5% expense reimbursements by the advisor
BEGINNING in effect through at least June 30,
2009. See current prospectus for more
information.
7 AIM DEVELOPING MARKETS FUND
AIM DEVELOPING MARKETS FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL WITH A SECONDARY INVESTMENT OBJECTIVE OF INCOME.
o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES junk bonds do not necessarily reflect Emerging Markets Funds category. The
their actual market risk. funds seek long-term capital
o Effective September 30, 2003, only appreciation by investing at least 65%
previously established qualified plans o Nondiversification increases the risk of total assets in emerging market
are eligible to purchase Class B shares that the value of the Fund's shares may equity securities, where "emerging
of any AIM fund. vary more widely, and the Fund may be market" is defined by a country's GNP
subject to greater investment and per capita or other economic measures.
o Class Y shares are available only to credit risk than if it invested more
certain investors. Please see the broadly. o The Fund is not managed to track the
prospectus for more information. performance of any particular index,
o Sovereign debt securities are subject including the indexes defined here, and
PRINCIPAL RISKS OF INVESTING IN THE FUND to the additional risk that -- under consequently, the performance of the
some political, diplomatic, social or Fund may deviate significantly from the
o Investing in developing countries can economic circumstances -- some performance of the indexes.
add additional risk, such as high rates developing countries that issue lower
of inflation or sharply devalued quality debt securities may be unable o A direct investment cannot be made in
currencies against the U.S. dollar. or unwilling to make principal or an index. Unless otherwise indicated,
Transaction costs are often higher, and interest payments as they come due. index results include reinvested
there may be delays in settlement dividends, and they do not reflect
procedures. o The Fund's returns during certain sales charges. Performance of an index
periods were positively affected by its of funds reflects fund expenses;
o Prices of equity securities change in investments in initial public offerings performance of a market index does not.
response to many factors, including the (IPOs). There can be no assurance that
historical and prospective earnings of the Fund will have favorable IPO OTHER INFORMATION
the issuer, the value of its assets, investment opportunities in the future.
general economic conditions, interest Moreover, the prices of IPO securities o The Chartered Financial Analyst--REGIS-
rates, investor perceptions and market may go up and down more than prices of TERED TRADEMARK-- (CFA--REGISTERED
liquidity. equity securities of companies with TRADEMARK--) designation is a globally
longer trading histories. In addition, recognized standard for measuring the
o Foreign securities have additional companies offering securities in IPOs competence and integrity of investment
risks, including exchange rate changes, may have less experienced management or professionals.
political and economic upheaval, limited operating histories. For
relative lack of information, additional information regarding the o The returns shown in management's
relatively low market liquidity, and Fund's performance, please see the discussion of Fund performance are
the potential lack of strict financial Fund's prospectus. based on net asset values calculated
and accounting controls and standards. for shareholder transactions. Generally
o The prices of securities held by the accepted accounting principles require
o Investing in a Fund that invests in Fund may decline in response to market adjustments to be made to the net
smaller companies involves risks not risks. assets of the Fund at period end for
associated with investing in more financial reporting purposes, and as
established companies, such as business ABOUT INDEXES USED IN THIS REPORT such, the net asset values for
risk, stock price fluctuations and shareholder transactions and the
illiquidity. o The MSCI EAFE--REGISTERED TRADEMARK-- returns based on those net asset values
INDEX is a free float-adjusted market may differ from the net asset values
o The Fund may invest in debt securities, capitalization index that is designed and returns reported in the Financial
such as notes and bonds, which carry to measure developed market equity Highlights.
interest rate and credit risk. performance, excluding the U.S. and
Canada. o Industry classifications used in this
o The Fund may invest in lower quality report are generally according to the
debt securities, commonly known as o The MSCI EMERGING MARKETS Global Industry Classification
"junk bonds." Compared to higher INDEX--SERVICE MARK-- is a free Standard, which was developed by and is
quality debt securities, junk bonds float-adjusted market capitalization the exclusive property and a service
involve greater risk of default or index that is designed to measure mark of MSCI Inc. and Standard &
price changes due to changes in credit equity market performance in the global Poor's.
quality of the issuer because they are emerging markets.
generally unsecured and may be
subordinated to other creditors' o The LIPPER EMERGING MARKET FUNDS INDEX
claims. Credit ratings on is an equally weighted representation
of the largest funds in the Lipper
======================================================================================= ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares GTDDX
======================================================================================= Class B Shares GTDBX
Class C Shares GTDCX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class Y Shares GTDYX
==========================================
8 AIM DEVELOPING MARKETS FUND
SCHEDULE OF INVESTMENTS(a)
October 31, 2008
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS & OTHER EQUITY INTERESTS-82.55%
BRAZIL-11.05%
American Banknote S.A.(b) 224,100 $ 1,118,943
- --------------------------------------------------------------------------------
American Banknote S.A. 1,550,300 7,740,729
- --------------------------------------------------------------------------------
Companhia Vale do Rio Doce-ADR 267,820 3,513,799
- --------------------------------------------------------------------------------
Dufry South America Ltd.-BDR(b) 255,600 1,586,401
- --------------------------------------------------------------------------------
Dufry South America Ltd.-BDR 141,900 880,713
- --------------------------------------------------------------------------------
Equatorial Energia S.A. 2,465,300 13,862,317
- --------------------------------------------------------------------------------
OdontoPrev S.A.(b) 26,900 347,619
- --------------------------------------------------------------------------------
OdontoPrev S.A. 486,100 6,281,700
- --------------------------------------------------------------------------------
Terna Participacoes S.A.(b)(c) 150,000 1,160,259
- --------------------------------------------------------------------------------
Terna Participacoes S.A.(c) 1,082,100 8,370,111
- --------------------------------------------------------------------------------
Totvs S.A.(b) 200,000 3,446,040
- --------------------------------------------------------------------------------
Totvs S.A. 202,300 3,485,669
- --------------------------------------------------------------------------------
Wilson Sons Ltd.-BDR(b) 550,000 2,471,052
- --------------------------------------------------------------------------------
Wilson Sons Ltd.-BDR 810,500 3,641,431
================================================================================
57,906,783
================================================================================
CANADA-0.35%
Sherritt International Corp. 584,486 1,812,847
================================================================================
CHINA-6.25%
CNOOC Ltd. 11,655,000 9,545,739
- --------------------------------------------------------------------------------
Haitian International Holdings Ltd. 17,339,000 2,267,693
- --------------------------------------------------------------------------------
Stella International Holdings Ltd. 9,196,500 7,768,512
- --------------------------------------------------------------------------------
Xinyi Glass Holdings Co. Ltd. 22,142,000 6,281,703
- --------------------------------------------------------------------------------
Xiwang Sugar Holdings Co. Ltd. 23,740,000 2,880,641
- --------------------------------------------------------------------------------
Yantai North Andre Juice Co. Ltd.-Class H(d) 109,455,000 3,989,694
================================================================================
32,733,982
================================================================================
CZECH REPUBLIC-0.91%
CEZ A.S. 110,258 4,779,600
================================================================================
GREECE-2.11%
Intralot S.A. 2,132,432 11,035,927
================================================================================
HONG KONG-0.06%
eSun Holdings Ltd.(e) 9,500,000 332,229
================================================================================
HUNGARY-0.79%
Richter Gedeon Nyrt 30,174 4,144,585
================================================================================
INDONESIA-4.67%
PT Astra International Tbk 3,236,500 2,774,573
- --------------------------------------------------------------------------------
PT Bank Central Asia Tbk 26,684,000 6,627,197
- --------------------------------------------------------------------------------
PT Indocement Tunggal Prakarsa Tbk 11,597,500 3,798,235
- --------------------------------------------------------------------------------
PT Telekomunikasi Indonesia 22,675,500 11,257,687
================================================================================
24,457,692
================================================================================
ISRAEL-4.03%
Israel Discount Bank-Class A 10,557,497 10,496,348
- --------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR 247,558 10,615,287
================================================================================
21,111,635
================================================================================
LUXEMBOURG-0.54%
Millicom International Cellular S.A. 70,100 2,804,000
================================================================================
MALAYSIA-5.52%
Parkson Holdings Berhad 9,440,200 8,891,181
- --------------------------------------------------------------------------------
Public Bank Berhad 2,758,000 6,533,072
- --------------------------------------------------------------------------------
SP Setia Berhad 4,894,000 3,856,910
- --------------------------------------------------------------------------------
Top Glove Corp. Berhad 9,002,400 9,633,866
================================================================================
28,915,029
================================================================================
MEXICO-7.98%
America Movil S.A.B. de C.V.-Series L-ADR 563,100 17,422,314
- --------------------------------------------------------------------------------
Grupo Financiero BanCrecer S.A. de C.V.-Series
B(e) 1 0
- --------------------------------------------------------------------------------
Grupo Financiero Banorte S.A.B. de C.V.-Class O 2,334,800 4,276,171
- --------------------------------------------------------------------------------
Grupo Televisa S.A.-ADR 890,691 15,729,603
- --------------------------------------------------------------------------------
Urbi, Desarrollos Urbanos, S.A. de C.V.(e) 2,939,400 4,404,467
================================================================================
41,832,555
================================================================================
PHILIPPINES-8.62%
Energy Development Corp.(b) 3,623,000 220,465
- --------------------------------------------------------------------------------
Energy Development Corp. 79,228,000 4,821,136
- --------------------------------------------------------------------------------
First Gen Corp.(b)(e) 3,037,400 859,663
- --------------------------------------------------------------------------------
First Gen Corp.(e) 2,600,300 735,952
- --------------------------------------------------------------------------------
GMA Holdings, Inc.-PDR(b)(d) 2,532,000 217,328
- --------------------------------------------------------------------------------
GMA Holdings, Inc.-PDR(d) 99,821,000 8,567,888
- --------------------------------------------------------------------------------
Philippine Long Distance Telephone Co. 345,600 14,123,027
- --------------------------------------------------------------------------------
SM Investments Corp. 3,848,628 15,624,723
================================================================================
45,170,182
================================================================================
RUSSIA-6.71%
Gazprom-ADR 424,250 8,561,361
- --------------------------------------------------------------------------------
LUKOIL-ADR 180,932 7,020,162
- --------------------------------------------------------------------------------
Mobile TeleSystems-ADR 173,400 6,788,610
- --------------------------------------------------------------------------------
Pharmstandard(b)(e) 125,000 3,125,000
- --------------------------------------------------------------------------------
Pharmstandard(e) 93,100 2,327,500
- --------------------------------------------------------------------------------
Vimpel-Communications-ADR 505,100 7,323,950
================================================================================
35,146,583
================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM DEVELOPING MARKETS FUND
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------------
SOUTH AFRICA-3.29%
Naspers Ltd.-Class N 546,632 $ 9,156,935
- --------------------------------------------------------------------------------
Sasol Ltd. 160,738 4,813,539
- --------------------------------------------------------------------------------
Standard Bank Group Ltd. 405,683 3,241,614
================================================================================
17,212,088
================================================================================
SOUTH KOREA-6.28%
CJ CheilJedang Corp.(e) 22,302 2,523,174
- --------------------------------------------------------------------------------
CJ Corp.(e) 180,399 4,802,580
- --------------------------------------------------------------------------------
Daegu Bank 682,320 3,447,356
- --------------------------------------------------------------------------------
Hyundai Department Store Co., Ltd. 106,840 5,037,615
- --------------------------------------------------------------------------------
Hyundai Development Co. 144,420 3,886,812
- --------------------------------------------------------------------------------
Hyundai H&S Co., Ltd. 73,434 2,434,753
- --------------------------------------------------------------------------------
KCC Engineering & Construction Co., Ltd. 161,050 2,494,991
- --------------------------------------------------------------------------------
Lotte Confectionery Co., Ltd. 5,648 4,727,439
- --------------------------------------------------------------------------------
TechnoSemiChem Co., Ltd. 339,255 3,564,704
================================================================================
32,919,424
================================================================================
SWEDEN-1.45%
Oriflame Cosmetics S.A.-SDR 243,745 7,612,699
================================================================================
TAIWAN-3.26%
Hung Poo Real Estate Development Corp. 4,081,000 2,177,241
- --------------------------------------------------------------------------------
Taiwan Mobile Co., Ltd. 6,419,242 8,934,926
- --------------------------------------------------------------------------------
Wistron Corp. 7,316,769 5,944,073
================================================================================
17,056,240
================================================================================
THAILAND-4.55%
Kasikornbank PCL 6,080,600 8,865,468
- --------------------------------------------------------------------------------
Siam Commercial Bank PCL(f) 9,720,300 14,952,208
================================================================================
23,817,676
================================================================================
TURKEY-4.13%
Eczacibasi Ilac Sanayi ve Ticaret A.S. 11,723,400 9,263,075
- --------------------------------------------------------------------------------
Haci Omer Sabanci Holding A.S. 2,081,768 5,045,272
- --------------------------------------------------------------------------------
Tupras-Turkiye Petrol Rafinerileri A.S. 377,314 4,830,112
- --------------------------------------------------------------------------------
Turk Traktor ve Ziraat Makineleri A.S. 836,494 2,521,717
================================================================================
21,660,176
================================================================================
Total Foreign Common Stocks & Other Equity
Interests (Cost $684,853,947) 432,461,932
================================================================================
FOREIGN PREFERRED STOCKS-3.37%
BRAZIL-3.37%
Duratex S.A.-Pfd.(b) 220,000 1,929,968
- --------------------------------------------------------------------------------
Duratex S.A.-Pfd. 253,800 2,226,480
- --------------------------------------------------------------------------------
Petroleo Brasileiro S.A.-ADR-Pfd. 611,600 13,498,012
================================================================================
Total Foreign Preferred Stocks (Cost
$9,849,449) 17,654,460
================================================================================
MONEY MARKET FUNDS-11.03%
Liquid Assets Portfolio-Institutional Class(g) 28,900,103 28,900,103
- --------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(g) 28,900,103 28,900,103
================================================================================
Total Money Market Funds (Cost $57,800,206) 57,800,206
================================================================================
TOTAL INVESTMENTS-96.95% (Cost $752,503,602)(h) 507,916,598
================================================================================
OTHER ASSETS LESS LIABILITIES-3.05% 15,963,120
================================================================================
NET ASSETS-100.00% $523,879,718
________________________________________________________________________________
================================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
BDR - Brazilian Depositary Receipt
PDR - Philippine Deposit Receipt
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) 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 October 31, 2008 was $16,482,737, which represented 3.15% of the Fund's
Net Assets.
(c) Each unit represents one ordinary share and two preferred shares.
(d) Affiliated company during the period. The Investment Company Act of 1940
defines affiliates as those companies in which a fund holds 5% or more of
the outstanding voting securities. The Fund has not owned enough of the
outstanding voting securities of the issuer to have control (as defined in
the Investment Company Act of 1940) of that issuer. The aggregate value of
these securities as of October 31, 2008 was $12,774,910, which represented
2.44% of the Fund's Net Assets. See Note 3.
(e) Non-income producing security.
(f) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at
October 31, 2008 represented 2.85% of the Fund's Net Assets. See Note 1A.
(g) The money market fund and the Fund are affiliated by having the same
investment advisor.
(h) The majority of foreign securities were fair valued using adjusted closing
market prices.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM DEVELOPING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$666,999,439) $ 437,341,482
- -------------------------------------------------------
Investments in affiliates, at value
(Cost $85,504,163) 70,575,116
=======================================================
Total investments (Cost
$752,503,602) 507,916,598
=======================================================
Foreign currencies, at value (Cost
$11,110,252) 10,701,042
- -------------------------------------------------------
Receivables for:
Investments sold 9,065,441
- -------------------------------------------------------
Fund shares sold 1,410,218
- -------------------------------------------------------
Dividends 1,163,193
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 17,218
- -------------------------------------------------------
Other assets 72,589
=======================================================
Total assets 530,346,299
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Investments purchased 3,910,632
- -------------------------------------------------------
Fund shares reacquired 1,241,910
- -------------------------------------------------------
Accrued fees to affiliates 571,661
- -------------------------------------------------------
Accrued other operating expenses 677,296
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 65,082
=======================================================
Total liabilities 6,466,581
=======================================================
Net assets applicable to shares
outstanding $ 523,879,718
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 752,745,628
- -------------------------------------------------------
Undistributed net investment income 8,687,786
- -------------------------------------------------------
Undistributed net realized gain 7,489,875
- -------------------------------------------------------
Unrealized appreciation (depreciation) (245,043,571)
=======================================================
$ 523,879,718
_______________________________________________________
=======================================================
NET ASSETS:
Class A $ 401,274,932
_______________________________________________________
=======================================================
Class B $ 32,308,898
_______________________________________________________
=======================================================
Class C $ 76,852,754
_______________________________________________________
=======================================================
Class Y $ 1,854,011
_______________________________________________________
=======================================================
Institutional Class $ 11,589,123
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 24,643,914
_______________________________________________________
=======================================================
Class B 2,059,391
_______________________________________________________
=======================================================
Class C 4,903,614
_______________________________________________________
=======================================================
Class Y 113,823
_______________________________________________________
=======================================================
Institutional Class 706,733
_______________________________________________________
=======================================================
Class A:
Net asset value per share $ 16.28
- -------------------------------------------------------
Maximum offering price per share
(Net asset value of $16.28 divided
by 94.50%) $ 17.23
_______________________________________________________
=======================================================
Class B:
Net asset value and offering price
per share $ 15.69
_______________________________________________________
=======================================================
Class C:
Net asset value and offering price
per share $ 15.67
_______________________________________________________
=======================================================
Class Y:
Net asset value and offering price
per share $ 16.29
_______________________________________________________
=======================================================
Institutional Class:
Net asset value and offering price
per share $ 16.40
_______________________________________________________
=======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM DEVELOPING MARKETS FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $3,672,887) $ 29,166,203
- ------------------------------------------------------------------------------------------------
Dividends from affiliates (includes securities lending income of $123,385) 3,033,556
================================================================================================
Total investment income 32,199,759
================================================================================================
EXPENSES:
Advisory fees 10,144,837
- ------------------------------------------------------------------------------------------------
Administrative services fees 290,325
- ------------------------------------------------------------------------------------------------
Custodian fees 1,503,665
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 2,151,984
- ------------------------------------------------------------------------------------------------
Class B 748,784
- ------------------------------------------------------------------------------------------------
Class C 1,691,728
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C and Y 2,533,464
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 2,307
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 47,850
- ------------------------------------------------------------------------------------------------
Other 682,833
================================================================================================
Total expenses 19,797,777
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (169,584)
================================================================================================
Net expenses 19,628,193
================================================================================================
Net investment income 12,571,566
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (net of tax on the sale of foreign investments of
$383,375 -- Note 1J) 18,463,947
- ------------------------------------------------------------------------------------------------
Foreign currencies (3,132,964)
================================================================================================
15,330,983
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (net of change in estimated tax on foreign investments
held of $2,388,520 -- Note 1J) (770,439,933)
- ------------------------------------------------------------------------------------------------
Foreign currencies (901,818)
================================================================================================
(771,341,751)
================================================================================================
Net realized and unrealized gain (loss) (756,010,768)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(743,439,202)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM DEVELOPING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 12,571,566 $ 7,613,627
- ------------------------------------------------------------------------------------------------------------
Net realized gain 15,330,983 134,511,116
- ------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (771,341,751) 337,861,179
============================================================================================================
Net increase (decrease) in net assets resulting from operations (743,439,202) 479,985,922
============================================================================================================
Distributions to shareholders from net investment income:
Class A (7,173,873) (1,310,164)
- ------------------------------------------------------------------------------------------------------------
Class B (172,961) --
- ------------------------------------------------------------------------------------------------------------
Class C (377,099) --
- ------------------------------------------------------------------------------------------------------------
Institutional Class (286,795) (58,727)
============================================================================================================
Total distributions from net investment income (8,010,728) (1,368,891)
============================================================================================================
Distributions to shareholders from net realized gains:
Class A (42,089,669) --
- ------------------------------------------------------------------------------------------------------------
Class B (3,896,418) --
- ------------------------------------------------------------------------------------------------------------
Class C (8,494,911) --
- ------------------------------------------------------------------------------------------------------------
Institutional Class (1,135,957) --
============================================================================================================
Total distributions from net realized gains (55,616,955) --
============================================================================================================
Share transactions-net:
Class A (135,692,086) 277,938,240
- ------------------------------------------------------------------------------------------------------------
Class B (18,290,777) 5,631,250
- ------------------------------------------------------------------------------------------------------------
Class C (21,508,495) 93,040,817
- ------------------------------------------------------------------------------------------------------------
Class Y 2,348,360 --
- ------------------------------------------------------------------------------------------------------------
Institutional Class (2,054,509) 13,915,454
============================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (175,197,507) 390,525,761
============================================================================================================
Net increase (decrease) in net assets (982,264,392) 869,142,792
============================================================================================================
NET ASSETS:
Beginning of year 1,506,144,110 637,001,318
============================================================================================================
End of year (includes undistributed net investment income of
$8,687,786 and $7,567,189, respectively) $ 523,879,718 $1,506,144,110
____________________________________________________________________________________________________________
============================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM DEVELOPING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Developing Markets Fund (the "Fund") is a series portfolio of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of nine
separate series portfolios, each authorized to issue an unlimited number of
shares of beneficial interest. The 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 to provide long-term growth of
capital with a secondary investment objective of income.
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.
14 AIM DEVELOPING MARKETS 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. Dividend income is recorded on the ex-dividend date.
The Fund may periodically participate in litigation related to Fund
investments. As such, the Fund may receive proceeds from litigation
settlements. Any proceeds 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. 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.
15 AIM DEVELOPING MARKETS FUND
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 0.935%
- -------------------------------------------------------------------
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 to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C, Class Y
and Institutional Class shares to 1.75%, 2.50%, 2.50%, 1.50% and 1.50% of
average daily net assets, respectively, through at least June 30, 2009. In
determining the Advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with Invesco Ltd. ("Invesco")
described more fully below, the expense offset arrangements from which the Fund
may benefit are in the form of credits that the Fund receives from banks where
the Fund or its transfer agent has deposit accounts in which it holds uninvested
cash. These credits are used to pay certain expenses incurred by the Fund. The
Advisor did not waive fees and/or reimburse expenses, during the period under
this expense limitation.
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash in such affiliated money market
funds.
For the year ended October 31, 2008, the Advisor waived advisory fees of
$104,211.
At the request of the Trustees of the Trust, 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
October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of
$14,980.
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 October 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 October 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 DEVELOPING MARKETS 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 October 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 October 31, 2008, IADI
advised the Fund that IADI retained $168,702 in front-end sales commissions from
the sale of Class A shares and $58,837, $154,980 and $106,894 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--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
October 31, 2008.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
10/31/07 AT COST FROM SALES (DEPRECIATION) 10/31/08 INCOME GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------
Yantai North Andre Juice Co.
Ltd. $10,327,930 $37,409,933 $-- $(43,748,169) $ 3,989,694 $109,471 $--
- ------------------------------------------------------------------------------------------------------------------------
GMA Holdings, Inc.-PDR 16,765,020 3,023,351 -- (11,003,155) 8,785,216 378,460 --
========================================================================================================================
Total Investments in
Affiliates $27,092,950 $40,433,284 $-- $(54,751,324) $12,774,910 $487,931 $--
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended October 31, 2008, the Fund
engaged in securities purchases of $1,177,280.
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 October 31, 2008, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $50,393.
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 October 31, 2008, the Fund paid legal fees of $5,487 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.
17 AIM DEVELOPING MARKETS FUND
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
OCTOBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Ordinary income $ 8,010,728 $1,368,891
- -------------------------------------------------------------------------------------------------------
Long-term capital gain 55,616,955 --
=======================================================================================================
Total distributions $63,627,683 $1,368,891
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 8,759,596
- ------------------------------------------------------------------------------------------------
Undistributed long-term gain 13,120,399
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (245,232,701)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (456,567)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (71,810)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (4,984,827)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 752,745,628
================================================================================================
Total net assets $ 523,879,718
________________________________________________________________________________________________
================================================================================================
</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
$2,498,065 of capital loss carryforward in the fiscal year ended October 31,
2009.
The Fund utilized $6,108,281 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The
Fund has a capital loss carryforward as of October 31, 2008 which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
October 31, 2009 $2,280,845
- -----------------------------------------------------------------------------------------------
October 31, 2010 2,694,002
- -----------------------------------------------------------------------------------------------
October 31, 2012 9,980
===============================================================================================
Total capital loss carryforward $4,984,827
_______________________________________________________________________________________________
===============================================================================================
</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 October 31, 2008 was $281,208,257 and
$493,051,613, 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 $ 37,925,120
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (283,157,821)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(245,232,701)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $753,149,299.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, capital loss carryforward expirations and limitations, capital
gain taxes and proxy costs, on October 31, 2008, undistributed net investment
income was decreased by $3,440,241, undistributed net realized gain was
increased by $3,516,339 and shares of beneficial interest decreased by $76,098.
This reclassification had no effect on the net assets of the Fund.
18 AIM DEVELOPING MARKETS FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2008(a) OCTOBER 31, 2007
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 8,855,693 $ 261,805,064 17,646,901 $ 537,129,106
- --------------------------------------------------------------------------------------------------------------------------
Class B 491,183 14,670,268 1,088,544 31,756,963
- --------------------------------------------------------------------------------------------------------------------------
Class C 1,639,516 48,632,748 4,377,966 129,117,550
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) 114,108 2,353,525 -- --
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 179,088 5,269,485 587,155 17,610,907
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,311,745 43,536,902 43,747 1,142,227
- --------------------------------------------------------------------------------------------------------------------------
Class B 116,078 3,736,544 -- --
- --------------------------------------------------------------------------------------------------------------------------
Class C 260,487 8,377,250 -- --
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class 42,728 1,421,982 2,242 58,641
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 390,392 11,332,810 295,956 8,787,864
- --------------------------------------------------------------------------------------------------------------------------
Class B (403,774) (11,332,810) (304,966) (8,787,864)
==========================================================================================================================
Reacquired:(c)
Class A(b) (16,278,389) (452,366,862) (8,734,916) (269,120,957)
- --------------------------------------------------------------------------------------------------------------------------
Class B (962,238) (25,364,779) (604,284) (17,337,849)
- --------------------------------------------------------------------------------------------------------------------------
Class C (2,969,538) (78,518,493) (1,234,537) (36,076,733)
- --------------------------------------------------------------------------------------------------------------------------
Class Y(b) (285) (5,165) -- --
- --------------------------------------------------------------------------------------------------------------------------
Institutional Class (320,301) (8,745,976) (118,157) (3,754,094)
==========================================================================================================================
Net increase (decrease) in share activity (7,533,507) $(175,197,507) 13,045,651 $ 390,525,761
__________________________________________________________________________________________________________________________
==========================================================================================================================
</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 30% 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 113,046 $ 2,334,400
-----------------------------------------------------------------------------------------------------
Class A (113,046) (2,334,400)
_____________________________________________________________________________________________________
=====================================================================================================
</Table>
(c) Net of redemption fees of $191,062 and $132,283 which were allocated among
the classes based on relative net assets of each class for the years ended
October 31, 2008 and 2007, respectively.
19 AIM DEVELOPING MARKETS 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) ON
NET ASSET NET SECURITIES DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END
OF PERIOD (LOSS)(A) UNREALIZED)(B) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 $37.97 $ 0.37 $(20.45) $(20.08) $(0.23) $(1.38) $(1.61) $16.28
Year ended 10/31/07 23.80 0.27 13.96 14.23 (0.06) -- (0.06) 37.97
Year ended 10/31/06 16.81 0.12 6.98 7.10 (0.11) -- (0.11) 23.80
Year ended 10/31/05 12.71 0.09 4.01 4.10 -- -- -- 16.81
Year ended 10/31/04 10.52 0.02 2.19 2.21 (0.02) -- (0.02) 12.71
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 36.72 0.15 (19.74) (19.59) (0.06) (1.38) (1.44) 15.69
Year ended 10/31/07 23.14 0.04 13.54 13.58 -- -- -- 36.72
Year ended 10/31/06 16.40 (0.04) 6.82 6.78 (0.04) -- (0.04) 23.14
Year ended 10/31/05 12.48 (0.01) 3.93 3.92 -- -- -- 16.40
Year ended 10/31/04 10.36 (0.04) 2.16 2.12 -- -- -- 12.48
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 36.68 0.15 (19.72) (19.57) (0.06) (1.38) (1.44) 15.67
Year ended 10/31/07 23.12 0.04 13.52 13.56 -- -- -- 36.68
Year ended 10/31/06 16.38 (0.04) 6.82 6.78 (0.04) -- (0.04) 23.12
Year ended 10/31/05 12.46 (0.01) 3.93 3.92 -- -- -- 16.38
Year ended 10/31/04 10.34 (0.04) 2.16 2.12 -- -- -- 12.46
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 10/31/08(f) 20.65 0.02 (4.38) (4.36) -- -- -- 16.29
- ----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 38.17 0.51 (20.56) (20.05) (0.34) (1.38) (1.72) 16.40
Year ended 10/31/07 23.91 0.41 14.00 14.41 (0.15) -- (0.15) 38.17
Year ended 10/31/06 16.81 0.24 6.99 7.23 (0.13) -- (0.13) 23.91
Year ended 10/31/05(f) 16.64 0.00 0.17 0.17 -- -- -- 16.81
__________________________________________________________________________________________________________________________________
==================================================================================================================================
<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(c) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(d)
- --------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 (55.04)% $ 401,275 1.59%(e) 1.60%(e) 1.26%(e) 27%
Year ended 10/31/07 59.90 1,152,814 1.57 1.61 0.89 41
Year ended 10/31/06 42.45 502,546 1.74 1.80 0.57 51
Year ended 10/31/05 32.26 265,583 1.83 1.98 0.62 40
Year ended 10/31/04 21.05 197,848 2.00 2.22 0.16 49
- --------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 (55.36) 32,309 2.34(e) 2.35(e) 0.51(e) 27
Year ended 10/31/07 58.69 103,476 2.32 2.36 0.14 41
Year ended 10/31/06 41.38 61,055 2.49 2.55 (0.18) 51
Year ended 10/31/05 31.41 34,456 2.50 2.65 (0.05) 40
Year ended 10/31/04 20.46 26,447 2.52 2.74 (0.36) 49
- --------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 (55.37) 76,853 2.34(e) 2.35(e) 0.51(e) 27
Year ended 10/31/07 58.65 219,121 2.32 2.36 0.14 41
Year ended 10/31/06 41.43 65,416 2.49 2.55 (0.18) 51
Year ended 10/31/05 31.46 12,327 2.50 2.65 (0.05) 40
Year ended 10/31/04 20.50 6,222 2.52 2.74 (0.36) 49
- --------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 10/31/08(f) (21.11) 1,854 1.36(e)(g) 1.37(e)(g) 1.49(e)(g) 27
- --------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 (54.81) 11,589 1.12(e) 1.13(e) 1.73(e) 27
Year ended 10/31/07 60.59 30,734 1.12 1.16 1.34 41
Year ended 10/31/06 43.20 7,984 1.23 1.28 1.07 51
Year ended 10/31/05(f) 1.02 24 1.34(g) 1.45(g) 1.11(g) 40
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes redemption fees added to the shares of beneficial interest for all
classes, which were less than $0.005 for the years ended October 31, 2008,
2007, 2005 and 2004, and were $0.01 for Class A, Class B, Class C and
Institutional Class shares for the year ended October 31, 2006.
(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 $860,794,
$74,878, $169,173, $1,889 and $23,781 for Class A, Class B, Class C, Class
Y and Institutional Class shares, respectively.
(f) Class Y and Institutional Class shares commenced on October 3, 2008 and
October 25, 2005, respectively.
(g) Annualized.
20 AIM DEVELOPING MARKETS 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
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to Invesco Aim and IADI (Order No. 05-1318). The WVASC makes
findings of fact that Invesco Aim and IADI entered into certain arrangements
permitting market timing of the AIM Funds and failed to disclose these
arrangements in the prospectuses for such Funds, and conclusions of law to the
effect that Invesco Aim and IADI violated the West Virginia securities laws. The
WVASC orders Invesco Aim and IADI to cease any further violations and seeks to
impose monetary sanctions, including restitution to affected investors,
disgorgement of fees, reimbursement of investigatory, administrative and legal
costs and an "administrative assessment," to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. By agreement with the Commissioner of Securities, Invesco Aim's time to
respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various Invesco Aim- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund
Derivative Complaint purportedly brought on behalf of the AIM Funds and fund
registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA
purportedly brought on behalf of participants in the Invesco 401(k) plan. Based
on orders issued by the MDL Court, all claims asserted against the AIM Funds
that have been transferred to the MDL Court have been dismissed, although
certain Funds remain nominal defendants in the Consolidated Amended Fund
Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco
defendants' motion to dismiss the Amended Class Action Complaint for Violations
of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and
remanded this lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing
full cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco Aim and the Fund are unable to
estimate the impact, if any, that the outcome of the Pending Litigation and
Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund.
21 AIM DEVELOPING MARKETS FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Developing Markets Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Developing Markets Fund (one of
the funds constituting AIM Investment Funds, hereafter referred to as the
"Fund") at October 31, 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 October 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2008
Houston, Texas
22 AIM DEVELOPING MARKETS 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 May 1, 2008, through
October 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 October 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 October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $533.40 $6.28 $1,016.94 $ 8.26 1.63%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 531.70 9.16 1,013.17 12.04 2.38
- ---------------------------------------------------------------------------------------------------
C 1,000.00 531.40 9.16 1,013.17 12.04 2.38
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 788.90 0.96 1,018.30 6.90 1.36
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 31, 2008 (as of close of
business October 3, 2008, through October 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 29
(as of close of business October 3, 2008, through October 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 DEVELOPING MARKETS FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM their assigned funds. During the contract ated the information provided differently
Investment Funds is required under the renewal process, the Trustees receive from one another and attributed different
Investment Company Act of 1940 to approve comparative performance and fee data weight to the various factors. The
annually the renewal of the AIM Developing regarding the AIM Funds prepared by an Trustees recognized that the advisory
Markets Fund's (the Fund) investment independent company, Lipper, Inc. arrangements and resulting advisory fees
advisory agreement with Invesco Aim (Lipper), under the direction and for the Fund and the other AIM Funds are
Advisors, Inc. (Invesco Aim). During supervision of the independent Senior the result of years of review and
contract renewal meetings held on June Officer who also prepares a separate negotiation between the Trustees and
18-19, 2008, the Board as a whole and the analysis of this information for the Invesco Aim, that the Trustees may focus
disinterested or "independent" Trustees, Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of
voting separately, approved the recommendations to the Investments these arrangements in some years than in
continuance of the Fund's investment Committee regarding the performance, fees others, and that the Trustees'
advisory agreement for another year, and expenses of their assigned funds. The deliberations and conclusions in a
effective July 1, 2008. In doing so, the Investments Committee considers each particular year may be based in part on
Board determined that the Fund's Sub-Committee's recommendations and makes their deliberations and conclusions of
investment advisory agreement is in the its own recommendations regarding the these same arrangements throughout the
best interests of the Fund and its performance, fees and expenses of the AIM year and in prior years.
shareholders and that the compensation to Funds to the full Board. The Investments
Invesco Aim under the Fund's investment Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF
advisory agreement is fair and reasonable. Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION
its annual recommendation to the Board
The independent Trustees met separately whether to approve the continuance of each The discussion below serves as a summary
during their evaluation of the Fund's AIM Fund's investment advisory agreement of the Senior Officer's independent
investment advisory agreement with and sub-advisory agreements for another written evaluation with respect to the
independent legal counsel from whom they year. Fund's investment advisory agreement as
received independent legal advice, and the well as a discussion of the material
independent Trustees also received The independent Trustees are assisted factors and related conclusions that
assistance during their deliberations from in their annual evaluation of the Fund's formed the basis for the Board's approval
the independent Senior Officer, a investment advisory agreement by the of the Fund's investment advisory
full-time officer of the AIM Funds who independent Senior Officer. One agreement and sub-advisory agreements.
reports directly to the independent responsibility of the Senior Officer is to Unless otherwise stated, information set
Trustees. manage the process by which the AIM Funds' forth below is as of June 19, 2008 and
proposed management fees are negotiated does not reflect any changes that may have
THE BOARD'S FUND EVALUATION PROCESS during the annual contract renewal process occurred since that date, including but
to ensure that they are negotiated in a not limited to changes to the Fund's
The Board's Investments Committee has manner that is at arms' length and performance, advisory fees, expense
established three Sub-Committees that are reasonable. Accordingly, the Senior limitations and/or fee waivers.
responsible for overseeing the management Officer must either supervise a
of a number of the series portfolios of competitive bidding process or prepare an I. Investment Advisory Agreement
the AIM Funds. This Sub-Committee independent written evaluation. The Senior
structure permits the Trustees to focus on Officer has recommended that an A. Nature, Extent and Quality of
the performance of the AIM Funds that have independent written evaluation be provided Services Provided by Invesco Aim
been assigned to them. The Sub-Committees and, at the direction of the Board, has
meet throughout the year to review the prepared an independent written The Board reviewed the advisory services
performance of their assigned funds, and evaluation. provided to the Fund by Invesco Aim under
the Sub-Committees review monthly and the Fund's investment advisory agreement,
quarterly comparative performance During the annual contract renewal the performance of Invesco Aim in
information and periodic asset flow data process, the Board considered the factors providing these services, and the
for their assigned funds. These materials discussed below under the heading "Factors credentials and experience of the officers
are prepared under the direction and and Conclusions and Summary of Independent and employees of Invesco Aim who provide
supervision of the independent Senior Written Fee Evaluation" in evaluating the these services. The Board's review of the
Officer. Over the course of each year, the fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide
Sub-Committees meet with portfolio investment advisory agreement and these services included the Board's
managers for their assigned funds and sub-advisory agreements at the contract consideration of Invesco Aim's portfolio
other members of management and review renewal meetings and at their meetings and product review process, various back
with these individuals the performance, throughout the year as part of their office support functions provided by
investment objective(s), policies, ongoing oversight of the Fund. The Fund's Invesco Aim, and Invesco Aim's equity and
strategies and limitations of these funds. investment advisory agreement and fixed income trading operations. The Board
sub-advisory agreements were considered concluded that the nature, extent and
In addition to their meetings separately, although the Board also quality of the advisory services provided
throughout the year, the Sub-Committees considered the common interests of all of to the Fund by Invesco Aim were
meet at designated contract renewal the AIM Funds in their deliberations. The appropriate and that Invesco Aim currently
meetings each year to conduct an in-depth Board considered all of the information is providing satisfactory advisory
review of the performance, fees and provided to them and did not identify any services in accordance with the terms of
expenses of particular factor that was controlling. the Fund's investment advisory agreement.
Each Trustee may have evalu- In addition, based on their ongoing
meetings throughout the year with the
continued
24 AIM DEVELOPING MARKETS FUND
Fund's portfolio manager or managers, the continues to be responsive to the Board's because of the breakpoints. Based on this
Board concluded that these individuals are focus on fund performance. Although the information, the Board concluded that the
competent and able to continue to carry independent written evaluation of the Fund's advisory fees appropriately reflect
out their responsibilities under the Fund's Senior Officer only considered Fund economies of scale at current asset
Fund's investment advisory agreement. performance through the most recent levels. The Board also noted that the Fund
calendar year, the Board also reviewed shares directly in economies of scale
In determining whether to continue the more recent Fund performance and this through lower fees charged by third party
Fund's investment advisory agreement, the review did not change their conclusions. service providers based on the combined
Board considered the prior relationship size of all of the AIM Funds and
between Invesco Aim and the Fund, as well C. Advisory Fees and Fee Waivers affiliates.
as the Board's knowledge of Invesco Aim's
operations, and concluded that it was The Board compared the Fund's contractual E. Profitability and Financial
beneficial to maintain the current advisory fee rate to the contractual Resources of Invesco Aim
relationship, continued in part, because advisory fee rates of funds in the Fund's
of such knowledge. The Board also expense group that are not managed by The Board reviewed information from
considered the steps that Invesco Aim and Invesco Aim, at a common asset level and Invesco Aim concerning the costs of the
its affiliates have taken over the last as of the end of the past calendar year. advisory and other services that Invesco
several years to improve the quality and The Board noted that the Fund's Aim and its affiliates provide to the Fund
efficiency of the services they provide to contractual advisory fee rate was below and the profitability of Invesco Aim and
the AIM Funds in the areas of investment the median contractual advisory fee rate its affiliates in providing these
performance, product line diversification, of funds in its expense group. The Board services. The Board also reviewed
distribution, fund operations, shareholder also reviewed the methodology used by information concerning the financial
services and compliance. The Board Lipper in determining contractual fee condition of Invesco Aim and its
concluded that the quality and efficiency rates. The Board noted that Invesco Aim affiliates. The Board also reviewed with
of the services Invesco Aim and its does not serve as an advisor to other Invesco Aim the methodology used to
affiliates provide to the AIM Funds in mutual funds or other clients with prepare the profitability information. The
each of these areas have generally investment strategies comparable to those Board considered the overall profitability
improved, and support the Board's approval of the Fund. of Invesco Aim, as well as the
of the continuance of the Fund's profitability of Invesco Aim in connection
investment advisory agreement. The Board noted that Invesco Aim has with managing the Fund. The Board noted
contractually agreed to waive fees and/or that Invesco Aim continues to operate at a
B. Fund Performance limit expenses of the Fund through at net profit, although increased expenses in
least June 30, 2009 in an amount necessary recent years have reduced the
The Board compared the Fund's performance to limit total annual operating expenses profitability of Invesco Aim and its
during the past one, three and five to a specified percentage of average daily affiliates. The Board concluded that the
calendar years to the performance of funds net assets for each class of the Fund. The Fund's fees were fair and reasonable, and
in the Fund's performance group that are Board considered the contractual nature of that the level of profits realized by
not managed by Invesco Aim, and against this fee waiver and noted that it remains Invesco Aim and its affiliates from
the performance of all funds in the Lipper in effect until at least June 30, 2009. providing services to the Fund was not
Emerging Markets Funds Index. The Board The Board also considered the effect this excessive in light of the nature, quality
also reviewed the criteria used by Invesco expense limitation would have on the and extent of the services provided. The
Aim to identify the funds in the Fund's Fund's estimated total expenses. Board considered whether Invesco Aim is
performance group for inclusion in the financially sound and has the resources
Lipper reports. The Board noted that the After taking account of the Fund's necessary to perform its obligations under
Fund's performance was in the fourth contractual advisory fee rate, as well as the Fund's investment advisory agreement,
quintile of its performance group for the the comparative advisory fee information and concluded that Invesco Aim has the
one year period, the second quintile for and the expense limitation discussed financial resources necessary to fulfill
the three year period and the third above, the Board concluded that the Fund's these obligations.
quintile for the five year period (the advisory fees were fair and reasonable.
first quintile being the best performing F. Independent Written Evaluation of
funds and the fifth quintile being the D. Economies of Scale and Breakpoints the Fund's Senior Officer
worst performing funds). The Board noted
that the Fund's performance was below the The Board considered the extent to The Board noted that, at their direction,
performance of the Index for the one year which there are economies of scale in the Senior Officer of the Fund, who is
period and above the performance for the Invesco Aim's provision of advisory independent of Invesco Aim and Invesco
three and five year periods. The Board services to the Fund. The Board also Aim's affiliates, had prepared an
noted that Invesco Aim acknowledges the considered whether the Fund benefits from independent written evaluation to assist
Fund's underperformance because of shorter such economies of scale through the Board in determining the
term performance results and continues to contractual breakpoints in the Fund's reasonableness of the proposed management
monitor the Fund. The Board also advisory fee schedule or through advisory fees of the AIM Funds, including the Fund.
considered the steps Invesco Aim has taken fee waivers or expense limitations. The The Board noted that they had relied upon
over the last several years to improve the Board noted that the Fund's contractual the Senior Officer's written evaluation
quality and efficiency of the services advisory fee schedule includes seven instead of a competitive bidding process.
that Invesco Aim provides to the AIM breakpoints and that the level of the In determining whether to continue the
Funds. The Board concluded that Invesco Fund's advisory fees, as a percentage of Fund's investment advisory agreement, the
Aim the Fund's net assets, has decreased as Board considered the Senior Officer's
net assets increased written evaluation.
continued
25 AIM DEVELOPING MARKETS FUND
G. Collateral Benefits to Invesco Aim to 100% of the net advisory fees Invesco C. Sub-Advisory Fees
and its Affiliates Aim receives from the affiliated money
market funds with respect to the Fund's The Board considered the services to be
The Board considered various other investment of uninvested cash, but not provided by the Affiliated Sub-Advisers
benefits received by Invesco Aim and its cash collateral. The Board considered the pursuant to the sub-advisory agreements
affiliates resulting from Invesco Aim's contractual nature of this fee waiver and and the services to be provided by Invesco
relationship with the Fund, including the noted that it remains in effect until at Aim pursuant to the Fund's investment
fees received by Invesco Aim and its least June 30, 2009. The Board concluded advisory agreement, as well as the
affiliates for their provision of that the Fund's investment of uninvested allocation of fees between Invesco Aim and
administrative, transfer agency and cash and cash collateral from any the Affiliated Sub-Advisers pursuant to
distribution services to the Fund. The securities lending arrangements in the the sub-advisory agreements. The Board
Board considered the performance of affiliated money market funds is in the noted that the sub-advisory fees have no
Invesco Aim and its affiliates in best interests of the Fund and its direct effect on the Fund or its
providing these services and the shareholders. shareholders, as they are paid by Invesco
organizational structure employed by Aim to the Affiliated Sub-Advisers, and
Invesco Aim and its affiliates to provide II. Sub-Advisory Agreements that Invesco Aim and the Affiliated
these services. The Board also considered Sub-Advisers are affiliates. After taking
that these services are provided to the A. Nature, Extent and Quality of account of the Fund's contractual
Fund pursuant to written contracts which Services Provided by Affiliated sub-advisory fee rate, as well as other
are reviewed and approved on an annual Sub-Advisers relevant factors, the Board concluded that
basis by the Board. The Board concluded the Fund's sub-advisory fees were fair and
that Invesco Aim and its affiliates were The Board reviewed the services to be reasonable.
providing these services in a satisfactory provided by Invesco Trimark Ltd., Invesco
manner and in accordance with the terms of Asset Management Deutschland, GmbH, D. Financial Resources of the
their contracts, and were qualified to Invesco Asset Management Limited, In-vesco Affiliated Sub-Advisers
continue to provide these services to the Asset Management (Japan) Limited, Invesco
Fund. Australia Limited, Invesco Global Asset The Board considered whether each
Management (N.A.), Inc., Invesco Hong Kong Affiliated Sub-Adviser is financially
The Board considered the benefits Limited, Invesco Institutional (N.A.), sound and has the resources necessary to
realized by Invesco Aim as a result of Inc. and Invesco Senior Secured perform its obligations under its
portfolio brokerage transactions executed Management, Inc. (collectively, the respective sub-advisory agreement, and
through "soft dollar" arrangements. Under "Affiliated Sub-Advisers") under the concluded that each Affiliated Sub-Adviser
these arrangements, portfolio brokerage sub-advisory agreements and the has the financial resources necessary to
commissions paid by the Fund and/or other credentials and experience of the officers fulfill these obligations.
funds advised by Invesco Aim are used to and employees of the Affiliated
pay for research and execution services. Sub-Advisers who will provide these
The Board noted that soft dollar services. The Board concluded that the
arrangements shift the payment obligation nature, extent and quality of the services
for the research and execution services to be provided by the Affiliated
from Invesco Aim to the funds and Sub-Advisers were appropriate. The Board
therefore may reduce Invesco Aim's noted that the Affiliated Sub-Advisers,
expenses. The Board also noted that which have offices and personnel that are
research obtained through soft dollar geographically dispersed in financial
arrangements may be used by Invesco Aim in centers around the world, have been formed
making investment decisions for the Fund in part for the purpose of researching and
and may therefore benefit Fund compiling information and making
shareholders. The Board concluded that recommendations on the markets and
Invesco Aim's soft dollar arrangements economies of various countries and
were appropriate. The Board also concluded securities of companies located in such
that, based on their review and countries or on various types of
representations made by Invesco Aim, these investments and investment techniques, and
arrangements were consistent with providing investment advisory services.
regulatory requirements. The Board concluded that the sub-advisory
agreements will benefit the Fund and its
The Board considered the fact that the shareholders by permitting Invesco Aim to
Fund's uninvested cash and cash collateral utilize the additional resources and
from any securities lending arrangements talent of the Affiliated Sub-Advisers in
may be invested in money market funds managing the Fund.
advised by Invesco Aim pursuant to
procedures approved by the Board. The B. Fund Performance
Board noted that Invesco Aim will receive
advisory fees from these affiliated money The Board did not view Fund performance as
market funds attributable to such a relevant factor in considering whether
investments, although Invesco Aim has to approve the sub-advisory agreements for
contractually agreed to waive through at the Fund, as no Affiliated Sub-Adviser
least June 30, 2009, the advisory fees currently manages any portion of the
payable by the Fund in an amount equal Fund's assets.
26 AIM DEVELOPING MARKETS 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 October 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $55,616,955
Qualified Dividend Income* 100%
Corporate Dividends Received Deduction* 0%
Foreign Taxes 0.0899 Per Share
Foreign Source Income 1.1279 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 January 31, 2008, April 30, 2008, July 31, 2008 and
October 31, 2008 were 99.76%, 99.88%, 99.44%, and 99.85%, respectively.
27 AIM DEVELOPING MARKETS FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee
oversees 103 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 2003 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 1997 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, Policy
Trustee firm) Studies, Inc. and
Van Gilder Insurance
Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 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 2001 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 2001 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 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.
28 AIM DEVELOPING MARKETS 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 2004 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
29 AIM DEVELOPING MARKETS FUND
Supplement to Annual Report dated 10/31/08
AIM DEVELOPING MARKETS FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS in the most recent Fund prospectus as of
For periods ended 10/31/08 the date of this supplement for
The following information has been Institutional Class shares was 1.14%. The
prepared to provide Institutional Class 10 Years 9.20% expense ratios presented above may vary
shareholders with a performance overview 5 Years 10.72 from the expense ratios presented in other
specific to their holdings. Institutional 1 Year -54.81 sections of the actual report that are
Class shares are offered exclusively to ========================================== based on expenses incurred during the
institutional investors, including defined period covered by the report.
contribution plans that meet certain ==========================================
criteria. AVERAGE ANNUAL TOTAL RETURNS A redemption fee of 2% will be imposed
For periods ended 9/30/08, most recent on certain redemptions or exchanges out of
calendar quarter-end the Fund within 31 days of purchase.
Exceptions to the redemption fee are
10 Years 13.34% listed in the Fund's prospectus.
5 Years 20.04
1 Year -32.01 Had the advisor not waived fees and/or
========================================== reimbursed expenses in the past,
performance would have been lower.
Institutional Class shares' inception date
is October 25, 2005. Returns since that Please note that past performance is
date are historical returns. All other not indicative of future results. More
returns are blended returns of historical recent returns may be more or less than
Institutional Class share performance and those shown. All returns assume
restated Class A share performance (for reinvestment of distributions at NAV.
periods prior to the inception date of Investment return and principal value will
Institutional Class shares) at net asset fluctuate so your shares, when redeemed,
value (NAV) and reflect the Rule 12b-1 may be worth more or less than their
fees applicable to Class A shares. Class A original cost. See full report for
shares' inception date is January 11, information on comparative benchmarks.
1994. Please consult your Fund prospectus for
more information. For the most current
Institutional Class shares have no month-end performance, please call 800 451
sales charge; therefore, performance is at 4246 or visit invescoaim.com.
NAV. Performance of Institutional Class
shares will differ from performance of (1) Total annual operating expenses less
other share classes primarily due to any contractual fee waivers and/or
differing sales charges and class expense reimbursements by the advisor
expenses. in effect through at least June 30,
2009. See current prospectus for more
The net annual Fund operating expense information
ratio set forth in the most recent Fund
prospectus as of the date of this
supplement for Institutional Class shares
was 1.13%.(1) The total annual Fund
operating expense ratio set forth
==========================================
NASDAQ SYMBOL GTDIX
==========================================
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]
invescoaim.com DVM-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
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 May 1, 2008, through October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $535.10 $4.40 $1,019.41 $5.79 1.14%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 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 DEVELOPING MARKETS 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:
o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will
trees used to produce paper. be sent via email as soon as they're available.
o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer
expenses and put more capital back in your fund's returns. 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 811-05426 and 033-19338.
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 January 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 [INVESCO AIM LOGO]
investment advisory services to individual and institutional clients and do not sell securities. Please -- SERVICE MARK --
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.
invescoaim.com DVM-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM GLOBAL HEALTH CARE FUND
- -- SERVICE MARK -- Annual Report to Shareholders o October 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
21 Financial Highlights
23 Auditor's Report
24 Fund Expenses
25 Approval of Investment Advisory Agreement
28 Tax Information
29 Trustees and Officers
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 recent market developments and
provide some perspective and encouragement to my fellow long-term investors.
[TAYLOR
PHOTO] MARKET OVERVIEW
At the start of the fiscal year in November 2007, 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
Philip Taylor (the Fed) repeatedly cut short-term interest rate targets to stimulate economic
growth and expand market liquidity.(1) Also, Congress and the president worked
together to enact an economic stimulus plan that included billions of dollars in
rebates to taxpayers.
These actions helped the economy and the U.S. stock market until the spring of
2008, when other factors came to the forefront -- triggering a severe correction that eventually
drove major stock-market indexes to multi-year lows.(2)
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.
The recent volatility in the stock, fixed-income and credit markets has driven home the
importance of three timeless investing principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
o 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.
o 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.
o 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 capitalize on
this situation.
MANAGING MONEY IS OUR FOCUS
As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain
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, 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 we 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) Lipper Inc.
2 AIM GLOBAL HEALTH CARE FUND
Dear Fellow Shareholders:
As I write this letter, turbulent financial markets are causing considerable
investor anxiety, reminding us again that markets are cyclical and the correction
of excess is often painful, at least in the short term. Your Board of Trustees
[CROCKETT believes in the wisdom of a long-term perspective and consistent investment
PHOTO] discipline. We continue to put your interests first in the effort to improve
investment performance, contain shareholder costs and uphold the highest ethical
standards.
We remain enthusiastic about the global reach and investment expertise that
Invesco, a leading independent global investment management company, brings to
Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse
investment strategies deployed throughout the worldwide network of Invesco
investment centers has helped strengthen the management of many AIM Funds. The
rebranding of the Funds' management company as Invesco Aim was followed by the
launch of an upgraded, investor-friendly website (invescoaim.com); a new
mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and
a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in
financial publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between
the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual
process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory
Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your
behalf to double the number of votes in favor of separating the roles of chairman and CEO at the
companies whose shares your Funds hold. We also continued to support the movement for shareholders
to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a
matter of policy, and I would be interested to hear your thoughts on this policy.
As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com.
The dialogue that has been established in this way has been instructive for your Board, and we want
it to continue. Although the production schedule for Fund annual reports and prospectuses allows me
to write these letters of general report and response just twice a year, please be assured that your
comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM GLOBAL HEALTH CARE FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY o A company fails to capitalize on a
market opportunity.
While the health care sector was not immune to the widespread stock market losses for
the fiscal year, the sector displayed some resilience due to its generally more o A change in management occurs.
defensive growth characteristics. The Fund outperformed the broader market, as measured
by the MSCI World Index, for the fiscal year ended October 31, 2008. However, the Fund o A stock's price target has been met.
underperformed its style-specific index, the MSCI World Health Care Index, due
primarily to security selection in pharmaceuticals and life science tools and services, MARKET CONDITIONS AND YOUR FUND
as well as an underweight position in pharmaceuticals and overweight positions in life
sciences tools and services and foreign currency forwards. Several factors contributed to the
negative performance of most major market
Your Fund's long-term performance appears later in this report. indexes for the fiscal year ended October
31, 2008.(1) The chief catalyst was the
FUND VS. INDEXES ongoing subprime loan crisis and its far
reaching effects on overall credit
Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does availability. Although inflation weighed
not include applicable contingent deferred sales charges (CDSC) or front-end sales heavily on the minds of consumers and
charges, which would have reduced performance. investors in the first half of 2008,
falling home values and commodity prices
Class A Shares -26.26% alleviated short-term inflationary
Class B Shares -26.84 pressures beginning mid-year. However,
Class C Shares -26.82 this concern was replaced as unemployment
Class Y Shares* -26.26 and global economic instability took
Investor Class Shares -26.28 center stage from September to the
MSCI World Index(triangle) (Broad Market Index) -41.85 present.
MSCI World Health Care Index(triangle) (Style-Specific Index) -22.81
Lipper Global Health/Biotechnology Funds Index(triangle)** (Peer Group Index) -26.32 The U.S. Federal Reserve Board (the
Lipper Health/Biotechnology Funds Index(triangle) (Former Peer Group Index) -24.94 Fed) continued the monetary easing policy
it began prior to the start of the fiscal
(triangle) Lipper Inc. year. The federal funds target rate was
lowered from 4.5% to 1% in an effort to
* Share class incepted during the fiscal year. See page 7 for a detailed explanation inject liquidity into the weakening credit
of Fund performance. markets.(2) The collapse of Bear Sterns
and Lehman Brothers, forced sales of
** The Fund has elected to use the Lipper Global Health/Biotechnology Funds Index Merrill Lynch and Wachovia, and
instead of the Lipper Health/Biotechnology Funds Index as it represents portfolios difficulties encountered by AIG as well as
with similar investment styles to the Fund. government-sponsored mortgage suppliers
======================================================================================= Freddie Mac and Fannie Mae showed that the
housing market and the financial services
HOW WE INVEST sector continued to struggle. In response,
the Fed deployed a variety of monetary
We seek health care stocks of all market otherwise unfilled market segments. policy tools to help alleviate the strain
capitalizations from around the world that on financial markets.
we believe are attractively priced and We seek to manage risk by generally:
have the potential to benefit from The advance estimate indicated that the
long-term earnings and cash flow growth. o Maintaining exposure to all health care real gross domestic product (GDP)
industries. decreased to an annual rate of 0.3% in the
We typically invest in four broad third quarter of 2008.(3) Predominately,
segments of the health care sector: o Diversifying the portfolio with 70 to the decrease in production was the result
pharmaceuticals, biotechnology, medical 110 holdings. of a decrease in personal consumption and
technology and health services. Suitable residential investment. Inflation, as
investments in this universe are o Limiting the size of investment in a measured by a seasonally-adjusted Consumer
identified as having strong fundamentals single position. Price Index, virtually ground to a halt
and earnings prospects combined with following sharp decreases in
healthy growth prospects. We assess the o Investing in international companies,
long-term commercial potential of each which have lower correlation to the
company's current and prospective U.S. stock market.
products, especially products that fill
We may sell a holding when:
o We identify a more attractive
investment opportunity.
o We see a deterioration of a company's
fundamentals.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Health Care 92.9% 1. United States 85.4% 1. Genzyme Corp. 4.4%
Consumer Staples 3.0 2. Switzerland 5.0 2. Johnson & Johnson 3.9
Financials 0.7 3. Germany 3.2 3. Celgene Corp. 3.9
Money Market Funds Plus 4. United Kingdom 2.1 4. Gilead Sciences, Inc. 3.9
Other Assets Less Liabilities 3.4 5. France 1.3 5. Wyeth 3.8
========================================== ========================================== 6. Amgen Inc. 3.5
The Fund's holdings are subject to change, 7. Bristol Myers Squibb Co. 3.4
and there is no assurance that the Fund ========================================== 8. Medtronic, Inc. 3.0
will continue to hold any particular Total Net Assets $979.0 million 9. Roche Holding AG 3.0
security. Total Number of Holdings* 92 10. Genentech, Inc. 2.6
========================================== ==========================================
* Excluding money market fund holdings.
4 AIM GLOBAL HEALTH CARE FUND
energy prices after June. However, drugs, the company is diversified across DEREK TANER
unemployment trended higher during the animal and consumer health care products, Chartered Financial Analyst,
fiscal year and ultimately reached a rate such as Centrum and Advil. [TANER portfolio manager, is manager
of 6.5% by the end of October.(4) PHOTO] of AIM Global Health Care
Respiratory device maker RESPIRONICS Fund. Mr. Taner began his
Against this backdrop, consumer was among our top contributors to investment career in 1993 as a fixed
staples, health care and utilities were performance for the fiscal year. income analyst, assistant portfolio
among the best performing sectors of the Respironics entered into a definitive manager and manager of a health care fund.
MSCI World Index. Conversely, financial merger agreement with Royal Philips (not a Mr. Tanner joined Invesco Aim in 2005. He
services, materials and industrials were Fund holding) at a share price that earned a B.S. in accounting and an M.B.A.
the worst performing sectors.(1) represented a 31% premium to Respironics from the Haas School of Business at the
30 day average price ended December 21, University of California at Berkeley.
Relative to the MSCI World Health Care 2007.
Index, security selection in Assisted by the Global Health Care Team
pharmaceuticals and life science tools and Large-cap biotechnology companies also
services, as well as an underweight performed relatively well during the
position in pharmaceuticals and an period, as the sector's defensive growth
overweight position in life sciences tools characteristics in a deteriorating
and services drove the Fund's economic environment drew interest from
underperformance relative to the investors. GILEAD SCIENCES, CELGENE and
style-specific benchmark. On the other BIOGEN IDEC were positive contributors and
hand, security selection in health care the takeout of IMCLONE also aided
services, as well as an overweight in performance.
biotechnology, contributed positively to
the Fund's performance. The Fund also During the market turbulence of this
benefited from holding higher levels of fiscal year, we took the opportunity to
cash into the rapid market deterioration trade up to what we believed were higher
in September. It is important to note that quality health care stocks that had been
the style-specific benchmark is more than oversold. We continued to focus on
60% weighted in large-cap pharmaceuticals companies with new product cycles, less
while the Fund is more diversified. In reimbursement risk, and little
general though, we emphasized companies competition. Our opinion was that
with defensive growth that should be less diversified high quality companies with
susceptible to the uncertain economic unique product offerings and services
environment. should continue to deliver above average
earnings growth, despite the potential for
As part of our policy to manage risk, more economic uncertainty and increased
the Fund also held currency forward focus on managing health care costs in an
contracts to hedge our European currency election year. Health care was among the
exposure. The strengthening of the U.S. best performing sectors in the market for
dollar relative to European currencies the fiscal year. This was consistent with
caused the Fund's currency forward our expectations given the fundamental
contracts to detract from our performance demand for health care against the
relative to our style-specific benchmark. decelerating earnings growth in the
broader market.
Managed care organizations struggled
during the period as concerns regarding As always, we thank you for your
the pricing cycle within the insurance continued investment in AIM Global Health
business mounted. UNITEDHEALTH GROUP, one Care Fund.
of the largest detractors from Fund
performance, suffered alongside other (1) Lipper Inc.
managed health care companies during the
fiscal year. Additionally, the company (2) U.S. Federal Reserve
lowered earnings guidance, and there were
ongoing concerns regarding overall service (3) Bureau of Economic Analysis
quality levels. We maintained a position
in the company given the attractive (4) Bureau of Labor Statistics
valuation and its free cash flow
generating capabilities. The views and opinions expressed in
management's discussion of Fund
WYETH, a biopharmaceutical firm focused performance are those of Invesco Aim
on small molecules, biotechnology and Advisors, Inc. These views and opinions
vaccines for a wide array of medical are subject to change at any time based on
conditions, was also a detractor from Fund factors such as market and economic
performance. Although Wyeth suffered from conditions. These views and opinions may
looming patent expirations and pending not be relied upon as investment advice or
lawsuits, we believed its latest drugs and recommendations, or as an offer for a
development pipeline were promising. particular security. The information is
Beyond prescription 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.
5 AIM GLOBAL HEALTH CARE FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee shown in the chart and table(s) does not one that indicates the dollar value of an
comparable future results. reflect deduction of taxes a shareholder investment, is constructed with each
would pay on Fund distributions or sale of segment representing a percent change in
The data shown in the chart include Fund shares. the value of the investment. In this
reinvested distributions, applicable sales chart, each segment represents a doubling,
charges and Fund expenses including This chart, which is a logarithmic or 100% change, in the value of the
management fees. Index results include chart, presents the fluctuations in the investment. In other words, the space
reinvested dividends, but they do not value of the Fund and its indexes. We between $5,000 and $10,000 is the same
reflect sales charges. Performance of an believe that a logarithmic chart is more size as the space between $10,000 and
index of funds reflects fund expenses and effective than other types of charts in $20,000, and so on.
management fees; performance of a market illustrating changes in value during the
index does not. Performance early years shown in the chart. The
vertical axis, the
6 AIM GLOBAL HEALTH CARE FUND
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- CLASS A SHARES (OLDEST SHARE CLASS WITH SALES CHARGES)
Index data from 7/31/89, Fund data from 8/7/89
AIM Global Health
Care Fund-Class A
Date Shares MSCI World Index(1)
7/31/89 $10000 10/93 15288 11979
8/89 $9532 9756 11/93 15442 11298
9/89 9573 10028 12/93 16301 11848
10/89 9780 9692 1/94 17409 12627
11/89 10119 10076 2/94 16713 12461
12/89 10285 10397 3/94 15622 11921
1/90 9821 9909 4/94 15587 12287
2/90 9829 9481 5/94 15526 12315
3/90 10103 8906 6/94 14694 12278
4/90 10103 8775 7/94 15313 12509
5/90 11197 9696 8/94 16893 12883
6/90 11494 9624 9/94 16885 12542
7/90 11520 9709 10/94 16834 12895
8/90 10757 8797 11/94 16422 12333
9/90 10326 7867 12/94 16349 12450
10/90 10632 8598 1/95 16876 12260
11/90 11353 8454 2/95 17200 12436
12/90 11635 8628 3/95 17754 13032
1/91 12409 8940 4/95 17310 13483
2/91 13437 9765 5/95 17246 13596
3/91 14211 9474 6/95 17523 13588
4/91 13923 9545 7/95 18624 14265
5/91 14620 9759 8/95 18976 13944
6/91 13941 9153 9/95 19890 14347
7/91 14926 9582 10/95 20167 14118
8/91 15301 9549 11/95 21240 14606
9/91 15454 9797 12/95 22393 15029
10/91 16398 9952 1/96 23540 15298
11/91 15778 9516 2/96 24234 15388
12/91 18374 10205 3/96 24707 15641
1/92 18133 10013 4/96 24897 16006
2/92 17379 9838 5/96 25318 16016
3/92 16214 9371 6/96 24128 16094
4/92 15196 9499 7/96 21930 15522
5/92 15556 9874 8/96 23730 15697
6/92 14948 9540 9/96 25489 16309
7/92 15556 9561 10/96 24836 16419
8/92 15170 9790 11/96 24995 17336
9/92 14828 9697 12/96 27734 17055
10/92 14939 9432 1/97 28669 17258
11/92 15880 9597 2/97 28864 17453
12/92 15888 9672 3/97 25447 17104
1/93 15322 9701 4/97 24067 17660
2/93 13337 9928 5/97 28318 18747
3/93 13525 10501 6/97 28638 19679
4/93 13610 10985 7/97 29116 20582
5/93 14422 11235 8/97 29491 19202
6/93 14466 11138 9/97 32626 20242
7/93 14081 11364 10/97 31886 19173
8/93 14184 11883 11/97 31066 19509
9/93 14748 11660 12/97 29948 19744
1/98 29526 20291
2/98 32015 21660
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
3/98 32060 22571 10/03 51525 21895
4/98 32572 22788 11/03 53127 22226
5/98 32061 22499 12/03 55975 23618
6/98 32891 23030 1/04 57816 23997
7/98 32727 22990 2/04 58308 24399
8/98 27402 19920 3/04 57643 24237
9/98 29167 20269 4/04 56894 23741
10/98 30389 22098 5/04 56274 23939
11/98 32410 23409 6/04 57067 24449
12/98 35473 24549 7/04 55589 23651
1/99 36650 25083 8/04 56317 23755
2/99 35474 24412 9/04 56036 24204
3/99 38610 25425 10/04 56422 24796
4/99 37780 26424 11/04 56998 26099
5/99 36873 25455 12/04 61102 27095
6/99 38274 26638 1/05 58816 26485
7/99 38320 26555 2/05 58816 27324
8/99 37477 26504 3/05 57299 26796
9/99 35109 26243 4/05 58199 26210
10/99 36193 27604 5/05 59677 26676
11/99 38155 28377 6/05 60124 26907
12/99 37426 30670 7/05 63269 27846
1/00 38126 28910 8/05 64427 28056
2/00 39724 28985 9/05 65135 28785
3/00 39608 30985 10/05 63683 28087
4/00 39177 29671 11/05 65269 29022
5/00 40607 28916 12/05 66424 29665
6/00 44217 29886 1/06 69028 30990
7/00 45132 29041 2/06 70194 30944
8/00 47294 29983 3/06 69794 31624
9/00 50557 28385 4/06 67323 32585
10/00 50122 27906 5/06 64900 31472
11/00 53120 26208 6/06 64569 31462
12/00 56918 26628 7/06 65537 31659
1/01 54578 27141 8/06 67851 32480
2/01 57422 24844 9/06 68095 32868
3/01 52018 23208 10/06 68973 34074
4/01 54323 24919 11/06 69035 34908
5/01 54844 24594 12/06 69305 35618
6/01 59989 23820 1/07 71252 36039
7/01 59413 23502 2/07 70205 35851
8/01 58765 22371 3/07 70766 36507
9/01 56485 20396 4/07 74368 38117
10/01 55576 20786 5/07 75685 39185
11/01 58399 22012 6/07 73467 38883
12/01 59608 22148 7/07 71520 38022
1/02 58004 21475 8/07 73222 37993
2/02 55116 21286 9/07 75485 39800
3/02 58279 22267 10/07 77772 41021
4/02 57638 21469 11/07 78356 39344
5/02 57235 21504 12/07 77274 38836
6/02 53257 20196 1/08 73256 35869
7/02 51356 18492 2/08 72025 35661
8/02 51058 18523 3/08 69800 35319
9/02 48832 16484 4/08 71035 37175
10/02 47933 17699 5/08 72939 37742
11/02 47933 18650 6/08 69963 34732
12/02 46093 17744 7/08 72859 33883
1/03 45346 17203 8/08 74149 33407
2/03 43142 16902 9/08 67883 29434
3/03 43548 16846 10/08 57301 23853
4/03 45089 18339
5/03 48403 19383
6/03 49943 19716
7/03 49813 20115
8/03 48871 20547
9/03 50924 20670
====================================================================================================================================
========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/08, including maximum As of 9/30/08, the most recent calendar
applicable sales charges quarter-end, including maximum applicable
sales charges
CLASS A SHARES
Inception (8/7/89) 9.50% CLASS A SHARES
10 Years 5.96 Inception (8/7/89) 10.51%
5 Years 1.02 10 Years 8.20
1 Year -30.32 5 Years 4.72
1 Year -15.01
CLASS B SHARES
Inception (4/1/93) 9.52% CLASS B SHARES
10 Years 6.09 Inception (4/1/93) 10.77%
5 Years 1.16 10 Years 8.33
1 Year -30.12 5 Years 4.88
1 Year -14.73
CLASS C SHARES
Inception (3/1/99) 4.51% CLASS C SHARES
5 Years 1.48 Inception (3/1/99) 6.41%
1 Year -27.47 5 Years 5.21
1 Year -11.56
CLASS Y SHARES
10 Years 6.56% INVESTOR CLASS SHARES
5 Years 2.17 10 Years 8.82%
1 Year -26.26 5 Years 5.92
1 Year -10.07
INVESTOR CLASS SHARES ==========================================
10 Years 6.55%
5 Years 2.17
1 Year -26.28
==========================================
CLASS Y SHARES' INCEPTION DATE IS OCTOBER THE MOST RECENT MONTH-END PERFORMANCE. FIRST YEAR AFTER PURCHASE. CLASS Y SHARES
3, 2008; RETURNS SINCE THAT DATE ARE PERFORMANCE FIGURES REFLECT REINVESTED AND INVESTOR CLASS SHARES DO NOT HAVE A
ACTUAL RETURNS. ALL OTHER RETURNS ARE DISTRIBUTIONS, CHANGES IN NET ASSET VALUE FRONT-END SALES CHARGE OR A CDSC;
BLENDED RETURNS OF ACTUAL CLASS Y SHARE AND THE EFFECT OF THE MAXIMUM SALES CHARGE THEREFORE, PERFORMANCE IS AT NET ASSET
PERFORMANCE AND RESTATED CLASS A SHARE UNLESS OTHERWISE STATED. INVESTMENT RETURN VALUE.
PERFORMANCE (FOR PERIODS PRIOR TO THE AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
INCEPTION DATE OF CLASS Y SHARES) AT NET YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL THE PERFORMANCE OF THE FUND'S SHARE
ASSET VALUE. THE RESTATED CLASS A SHARE SHARES. CLASSES WILL DIFFER PRIMARILY DUE TO
PERFORMANCE REFLECTS THE RULE 12B-1 FEES DIFFERENT SALES CHARGE STRUCTURES AND
APPLICABLE TO CLASS A SHARES AS WELL AS THE TOTAL ANNUAL FUND OPERATING EXPENSE CLASS EXPENSES.
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RATIO SET FORTH IN THE MOST RECENT FUND
RECEIVED BY CLASS A SHARES. CLASS A SHARES PROSPECTUS AS OF THE DATE OF THIS REPORT A REDEMPTION FEE OF 2% WILL BE IMPOSED
INCEPTION DATE IS AUGUST 7, 1989. FOR CLASS A, CLASS B, CLASS C, CLASS Y AND ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
INVESTOR CLASS SHARES WAS 1.19%, 1.94%, THE FUND WITHIN 31 DAYS OF PURCHASE.
INVESTOR CLASS SHARES' INCEPTION DATE 1.94%, 0.94% AND 1.19%, RESPECTIVELY. THE EXCEPTIONS TO THE REDEMPTION FEE ARE
IS JULY 15, 2005. RETURNS SINCE THAT DATE EXPENSE RATIOS PRESENTED ABOVE MAY VARY LISTED IN THE FUND'S PROSPECTUS.
ARE HISTORICAL RETURNS. ALL OTHER RETURNS FROM THE EXPENSE RATIOS PRESENTED IN OTHER
ARE BLENDED RETURNS OF HISTORICAL INVESTOR SECTIONS OF THIS REPORT THAT ARE BASED ON
CLASS SHARE PERFORMANCE AND RESTATED CLASS EXPENSES INCURRED DURING THE PERIOD
A SHARE PERFORMANCE (FOR PERIODS PRIOR TO COVERED BY THIS REPORT.
THE INCEPTION DATE OF INVESTOR CLASS
SHARES) AT NET ASSET VALUE AND REFLECT THE CLASS A SHARE PERFORMANCE REFLECTS THE
RULE 12B-1 FEES APPLICABLE TO CLASS A MAXIMUM 5.50% SALES CHARGE, AND CLASS B
SHARES. CLASS A SHARES' INCEPTION DATE IS AND CLASS C SHARE PERFORMANCE REFLECTS THE
AUGUST 7, 1989. APPLICABLE CONTINGENT DEFERRED SALES
CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
THE PERFORMANCE DATA QUOTED REPRESENT CDSC ON CLASS B SHARES DECLINES FROM 5%
PAST PERFORMANCE AND CANNOT GUARANTEE BEGINNING AT THE TIME OF PURCHASE TO 0% AT
COMPARABLE FUTURE RESULTS; CURRENT THE BEGINNING OF THE SEVENTH YEAR. THE
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CDSC ON CLASS C SHARES IS 1% FOR THE
VISIT INVESCOAIM.COM FOR
7 AIM GLOBAL HEALTH CARE FUND
AIM GLOBAL HEALTH CARE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES nies may be subject to rapid o The LIPPER HEALTH/BIOTECHNOLOGY FUNDS
obsolescence caused by scientific INDEX is an equally weighted
o Effective September 30, 2003, only advances and technological innovations, representation of the largest funds in
previously established qualified plans which can cause fund shares to rise and the Lipper Health/Biotechnology Funds
are eligible to purchase Class B shares fall more than the value of shares of a category. These funds invest at least
of any AIM fund. fund that invests more broadly. 65% of their portfolios in equity
securities of companies engaged in
o Class Y shares are available to only o The Fund invests in synthetic healthcare, medicine, and
certain investors. Please see the instruments, the value of which may not biotechnology.
prospectus for more information. correlate perfectly with the overall
securities markets. Rising interest o The Fund is not managed to track the
o All Investor Class shares are closed to rates and market price fluctuations performance of any particular index,
new investors. Contact your financial will affect the performance of the including the indexes defined here, and
advisor about purchasing our other fund's investments in synthetic consequently, the performance of the
share classes. instruments. Fund may deviate significantly from the
performance of the indexes.
PRINCIPAL RISKS OF INVESTING IN THE o The prices of securities held by the
FUND Fund may decline in response to market o A direct investment cannot be made in
risks. an index. Unless otherwise indicated,
o The values of convertible securities in index results include reinvested
which the Fund invests may be affected o The prices of IPO securities may go up dividends, and they do not reflect
by market interest rates, the risk that and down more than prices of equity sales charges. Performance of an index
the issuer may default on interest or securities of companies with longer of funds reflects fund expenses;
principal payments, and the value of trading histories. In addition, performance of a market index does not.
the underlying common stock into which companies offering securities in IPOs
these securities may be converted. may have less experienced management or OTHER INFORMATION
limited operating histories. There can
o Investing in developing countries can be no assurance that the fund will have o The Chartered Financial Analyst--REGIS-
add additional risk, such as high rates favorable IPO investment opportunities. TERED TRADEMARK-- (CFA--REGISTERED
of inflation or sharply devalued TRADEMARK--) designation is a globally
currencies against the U.S. dollar. ABOUT INDEXES USED IN THIS REPORT recognized standard for measuring the
Transaction costs are often higher, and competence and integrity of investment
there may be delays in settlement o The MSCI WORLD INDEX--SERVICE MARK-- is professionals.
procedures. a free float-adjusted market
capitalization index that is designed o The returns shown in management's
o Prices of equity securities change in to measure global developed market discussion of Fund performance are
response to many factors, including the equity performance. based on net asset values calculated
historical and prospective earnings of for shareholder transactions. Generally
the issuer, the value of its assets, o The MSCI WORLD HEALTH CARE INDEX is a accepted accounting principles require
general economic conditions, interest free float-adjusted market adjustments to be made to the net
rates, investor perceptions and market capitalization index that represents assets of the Fund at period end for
liquidity. the health care segment in global financial reporting purposes, and as
developed market equity performance. such, the net asset values for
o Foreign securities have additional shareholder transactions and the
risks, including exchange rate changes, o The LIPPER GLOBAL HEALTH/BIOTECHNOLOGY returns based on those net asset values
political and economic upheaval, FUNDS INDEX is an equally weighted may differ from the net asset values
relative lack of information, representation of the largest funds in and returns reported in the Financial
relatively low market liquidity, and the Lipper Health/Biotechnology Funds Highlights.
the potential lack of strict financial category. These funds invest primarily
and accounting controls and standards. in the equity securities of domestic o Industry classifications used in this
and foreign companies engaged in report are generally according to the
o The value of the Fund's shares is healthcare, medicine, and Global Industry Classification
particularly vulnerable to factors biotechnology. Standard, which was developed by and is
affecting the health care industry, the exclusive property and a service
such as substantial government mark of MSCI Inc. and Standard &
regulation that may affect the demand Poor's.
for products and services offered by
health care companies. Also, the products
and services offered by health care
compa-
======================================================================================= ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. Class A Shares GGHCX
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class B Shares GTHBX
======================================================================================= Class C Shares GTHCX
Class Y Shares GGHYX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Investor Class Shares GTHIX
==========================================
8 AIM GLOBAL HEALTH CARE FUND
SCHEDULE OF INVESTMENTS(a)
October 31, 2008
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.30%
BIOTECHNOLOGY-24.18%
Amgen Inc.(b) 570,901 $ 34,191,261
- ---------------------------------------------------------------------------------
Array BioPharma Inc.(b) 541,465 2,664,008
- ---------------------------------------------------------------------------------
Athersys Inc.
(Acquired 04/17/00; Cost $10,000,000)(b)(c)(d) 277,594 208,195
- ---------------------------------------------------------------------------------
Biogen Idec Inc.(b) 246,000 10,467,300
- ---------------------------------------------------------------------------------
BioMarin Pharmaceutical Inc.(b)(e) 604,413 11,072,846
- ---------------------------------------------------------------------------------
Celgene Corp.(b) 592,614 38,081,376
- ---------------------------------------------------------------------------------
Evolutionary Genomics/GenoPlex, Inc.
(Acquired 09/15/97-06/25/98; Cost
$408,490)(b)(c)(d)(f)(g) 109,377 1
- ---------------------------------------------------------------------------------
Genentech, Inc.(b) 304,425 25,249,009
- ---------------------------------------------------------------------------------
Genzyme Corp.(b) 583,629 42,534,882
- ---------------------------------------------------------------------------------
Gilead Sciences, Inc.(b) 828,698 37,995,803
- ---------------------------------------------------------------------------------
Incyte Corp.(b)(e) 488,713 2,028,159
- ---------------------------------------------------------------------------------
Onyx Pharmaceuticals, Inc.(b)(e) 157,781 4,256,931
- ---------------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(b)(e) 268,838 10,202,402
- ---------------------------------------------------------------------------------
Pharmasset, Inc.(b) 127,400 2,277,912
- ---------------------------------------------------------------------------------
Rigel Pharmaceuticals, Inc.(b)(e) 322,584 2,809,707
- ---------------------------------------------------------------------------------
United Therapeutics Corp.(b)(e) 145,937 12,730,085
=================================================================================
236,769,877
=================================================================================
DRUG RETAIL-2.68%
CVS Caremark Corp. 725,696 22,242,583
- ---------------------------------------------------------------------------------
Drogasil S.A. (Brazil) 861,426 3,946,041
=================================================================================
26,188,624
=================================================================================
HEALTH CARE DISTRIBUTORS-1.42%
Animal Health International, Inc.(b) 725,921 4,682,190
- ---------------------------------------------------------------------------------
Cardinal Health, Inc. 242,000 9,244,400
=================================================================================
13,926,590
=================================================================================
HEALTH CARE EQUIPMENT-15.47%
American Medical Systems Holdings, Inc.(b)(e) 696,215 7,533,046
- ---------------------------------------------------------------------------------
Baxter International Inc. 254,900 15,418,901
- ---------------------------------------------------------------------------------
Becton, Dickinson and Co. 281,200 19,515,280
- ---------------------------------------------------------------------------------
Covidien Ltd. 326,988 14,482,299
- ---------------------------------------------------------------------------------
Dexcom Inc.(b)(e) 779,898 3,525,139
- ---------------------------------------------------------------------------------
Hologic, Inc.(b)(e) 581,928 7,122,799
- ---------------------------------------------------------------------------------
Insulet Corp.(b)(e) 431,854 2,418,382
- ---------------------------------------------------------------------------------
Medtronic, Inc. 735,024 29,643,518
- ---------------------------------------------------------------------------------
Nobel Biocare Holding AG (Switzerland)(e) 153,472 2,640,234
- ---------------------------------------------------------------------------------
ResMed Inc.(b) 236,481 8,101,839
- ---------------------------------------------------------------------------------
Sensys Medical, Inc.
(Acquired 04/23/04-08/09/06; Cost
$1,302)(b)(c)(d)(f) 8,750 875
- ---------------------------------------------------------------------------------
Smith & Nephew PLC (United Kingdom) 1,120,245 10,254,478
- ---------------------------------------------------------------------------------
Stryker Corp. 194,900 10,419,354
- ---------------------------------------------------------------------------------
Wright Medical Group, Inc.(b)(e) 463,537 10,744,788
- ---------------------------------------------------------------------------------
Zimmer Holdings, Inc.(b) 207,398 9,629,489
=================================================================================
151,450,421
=================================================================================
HEALTH CARE FACILITIES-1.97%
Assisted Living Concepts Inc.-Class A(b)(e) 984,704 4,893,979
- ---------------------------------------------------------------------------------
Rhoen-Klinikum AG (Germany) 676,346 14,419,820
=================================================================================
19,313,799
=================================================================================
HEALTH CARE SERVICES-7.09%
DaVita, Inc.(b) 306,414 17,388,994
- ---------------------------------------------------------------------------------
Express Scripts, Inc.(b) 121,464 7,361,933
- ---------------------------------------------------------------------------------
HMS Holdings Corp.(b)(e) 215,927 5,348,512
- ---------------------------------------------------------------------------------
Medco Health Solutions, Inc.(b) 426,303 16,178,199
- ---------------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(b) 114,947 4,442,702
- ---------------------------------------------------------------------------------
Quest Diagnostics Inc. 399,469 18,695,149
=================================================================================
69,415,489
=================================================================================
HEALTH CARE SUPPLIES-1.77%
Alcon, Inc. 58,173 5,126,205
- ---------------------------------------------------------------------------------
Align Technology, Inc.(b)(e) 393,252 2,725,236
- ---------------------------------------------------------------------------------
DENTSPLY International Inc. 312,849 9,504,353
=================================================================================
17,355,794
=================================================================================
HEALTH CARE TECHNOLOGY-0.38%
Allscripts-Misys Healthcare Solutions, Inc.(e) 569,709 3,703,108
=================================================================================
LIFE & HEALTH INSURANCE-0.66%
Amil Participacoes S.A. (Brazil)(d) 1,382,700 6,468,397
=================================================================================
LIFE SCIENCES TOOLS & SERVICES-8.02%
AMAG Pharmaceuticals, Inc.(b)(e) 67,481 2,063,569
- ---------------------------------------------------------------------------------
Charles River Laboratories International, Inc.(b) 214,620 7,689,835
- ---------------------------------------------------------------------------------
Invitrogen Corp.(b)(e) 278,159 8,008,198
- ---------------------------------------------------------------------------------
MDS Inc. (Canada)(b) 489,111 5,206,450
- ---------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 507,448 15,720,739
- ---------------------------------------------------------------------------------
Pharmanet Development Group, Inc.(b)(e)(g) 1,161,280 1,858,048
- ---------------------------------------------------------------------------------
Sequenom Inc.(b)(e) 255,868 4,605,624
- ---------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc.(b) 520,165 21,118,699
- ---------------------------------------------------------------------------------
Varian Inc.(b) 222,240 8,189,544
- ---------------------------------------------------------------------------------
Waters Corp.(b) 93,199 4,082,116
=================================================================================
78,542,822
=================================================================================
MANAGED HEALTH CARE-5.28%
Aetna Inc. 338,386 8,415,660
- ---------------------------------------------------------------------------------
AMERIGROUP Corp.(b)(e) 403,200 10,080,000
- ---------------------------------------------------------------------------------
Aveta, Inc.
(Acquired 12/21/05; Cost $10,877,598)(b)(d)(f) 805,748 4,834,488
- ---------------------------------------------------------------------------------
CIGNA Corp. 236,626 3,857,004
- ---------------------------------------------------------------------------------
Health Net Inc.(b) 602,308 7,757,727
- ---------------------------------------------------------------------------------
UnitedHealth Group Inc. 704,185 16,710,310
=================================================================================
51,655,189
=================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM GLOBAL HEALTH CARE FUND
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------------
PERSONAL PRODUCTS-0.34%
Herbalife Ltd.(e) 136,779 $ 3,341,511
=================================================================================
PHARMACEUTICALS-27.04%
Allergan, Inc. 380,598 15,098,323
- ---------------------------------------------------------------------------------
ARYx Therapeutics, Inc.(b) 498,000 1,210,140
- ---------------------------------------------------------------------------------
Auxilium Pharmaceuticals Inc.(b)(e) 182,611 3,588,306
- ---------------------------------------------------------------------------------
Bayer AG (Germany) 148,217 8,152,395
- ---------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 1,618,900 33,268,395
- ---------------------------------------------------------------------------------
Cadence Pharmaceuticals, Inc.(b)(e) 605,985 3,957,082
- ---------------------------------------------------------------------------------
EastPharma Ltd.-GDR (Turkey)(b)(d)(f) 674,841 2,206,730
- ---------------------------------------------------------------------------------
Hikma Pharmaceuticals PLC (United Kingdom)(e) 745,313 3,885,254
- ---------------------------------------------------------------------------------
Ipsen S.A. (France)(e) 212,595 8,043,943
- ---------------------------------------------------------------------------------
Johnson & Johnson 629,334 38,603,348
- ---------------------------------------------------------------------------------
Locus Pharmaceuticals, Inc.
(Acquired 11/21/00-05/09/07; Cost
$6,852,940)(b)(c)(d)(f) 258,824 473,648
- ---------------------------------------------------------------------------------
MAP Pharmaceuticals Inc.(b)(e) 252,083 1,048,665
- ---------------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A(e) 202,386 2,888,048
- ---------------------------------------------------------------------------------
Merck KGaA (Germany) 93,731 8,311,386
- ---------------------------------------------------------------------------------
Novartis AG-ADR (Switzerland) 337,838 17,226,360
- ---------------------------------------------------------------------------------
Pfizer Inc. 1,026,371 18,177,030
- ---------------------------------------------------------------------------------
Pharmstandard-GDR (Russia)(b)(d)(f) 138,700 2,245,320
- ---------------------------------------------------------------------------------
Roche Holding AG (Switzerland) 193,394 29,592,460
- ---------------------------------------------------------------------------------
Sanofi-Aventis-ADR (France) 150,449 4,757,197
- ---------------------------------------------------------------------------------
Shire PLC-ADR (United Kingdom)(e) 160,384 6,327,149
- ---------------------------------------------------------------------------------
Takeda Pharmaceutical Co. Ltd. (Japan) 191,700 9,660,489
- ---------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel)(e) 207,400 8,893,312
- ---------------------------------------------------------------------------------
Wyeth 1,151,859 37,066,823
=================================================================================
264,681,803
=================================================================================
Total Common Stocks & Other Equity Interests
(Cost $1,020,638,439) 942,813,424
=================================================================================
PREFERRED STOCKS-0.26%
HEALTH CARE EQUIPMENT-0.24%
Intact Medical Corp.-Series C, Pfd.
(Acquired 03/26/01; Cost $2,000,001)(c)(d)(f) 2,439,026 237,805
- ---------------------------------------------------------------------------------
Sensys Medical, Inc.,
Series A-2, Pfd., (Acquired 02/25/98-09/30/05;
Cost $7,627,993)(c)(d)(f) 2,173,209 1,890,692
- ---------------------------------------------------------------------------------
Series B, Conv. Pfd., (Acquired 03/16/05-
01/12/07; Cost $245,305)(c)(d)(f) 282,004 245,343
=================================================================================
2,373,840
=================================================================================
PHARMACEUTICALS-0.02%
BioImagene, Inc.-Series B-2, Pfd.
(Acquired 05/24/01; Cost $2,700,000)(c)(d)(f) 187,734 126,007
=================================================================================
Total Preferred Stocks (Cost $12,573,299) 2,499,847
=================================================================================
MONEY MARKET FUNDS-4.42%
Liquid Assets Portfolio-Institutional Class(h) 21,630,118 21,630,118
- ---------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(h) 21,630,118 21,630,118
=================================================================================
Total Money Market Funds (Cost $43,260,236) 43,260,236
=================================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-100.98% (Cost $1,076,471,974) 988,573,507
=================================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON
LOAN
MONEY MARKET FUNDS-8.89%
Liquid Assets Portfolio-Institutional Class (Cost
$87,075,598)(h)(i) 87,075,598 87,075,598
=================================================================================
TOTAL INVESTMENTS-109.87% (Cost $1,163,547,572) 1,075,649,105
=================================================================================
OTHER ASSETS LESS LIABILITIES-(9.87)% (96,646,645)
=================================================================================
NET ASSETS-100.00% $ 979,002,460
_________________________________________________________________________________
=================================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Conv. - Convertible
GDR - Global Depositary Receipt
Pfd. - Preferred
</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 is considered venture capital. See Note 1I.
(d) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at October 31, 2008 was $18,937,501, which represented 1.93% of the Fund's
Net Assets.
(e) All or a portion of this security was out on loan at October 31, 2008.
(f) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at October 31, 2008 was $12,260,909, which represented 1.25% of
the Fund's Net Assets. See Note 1A.
(g) Affiliated company during the period. The Investment Company Act of 1940
defines affiliates as those companies in which a fund holds 5% or more of
the outstanding voting securities. The Fund has not owned enough of the
outstanding voting securities of the issuer to have control (as defined in
the Investment Company Act of 1940) of that issuer. The aggregate value of
these securities as of October 31, 2008 was $1,858,049, which represented
0.19% of the Fund's Net Assets. See Note 3.
(h) The money market fund and the Fund are affiliated by having the same
investment advisor.
(i) 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 1K.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM GLOBAL HEALTH CARE FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$1,018,897,052)* $ 943,455,222
- -------------------------------------------------------
Investments in affiliates (Cost
$144,650,520) 132,193,883
=======================================================
Total investments (Cost
$1,163,547,572) 1,075,649,105
=======================================================
Cash 165,585
- -------------------------------------------------------
Foreign currencies, at value (Cost
$915,548) 880,507
- -------------------------------------------------------
Receivables for:
Investments sold 14,044,787
- -------------------------------------------------------
Fund shares sold 460,919
- -------------------------------------------------------
Dividends 690,734
- -------------------------------------------------------
Foreign currency contracts 11,143,656
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 153,305
- -------------------------------------------------------
Other assets 65,265
=======================================================
Total assets 1,103,253,863
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Investments purchased 34,999,770
- -------------------------------------------------------
Fund shares reacquired 1,107,232
- -------------------------------------------------------
Collateral upon return of securities
loaned 87,075,598
- -------------------------------------------------------
Accrued fees to affiliates 626,657
- -------------------------------------------------------
Accrued other operating expenses 156,766
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 285,380
=======================================================
Total liabilities 124,251,403
=======================================================
Net assets applicable to shares
outstanding $ 979,002,460
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,054,894,216
- -------------------------------------------------------
Undistributed net investment income
(loss) (241,137)
- -------------------------------------------------------
Undistributed net realized gain 2,921,373
- -------------------------------------------------------
Unrealized appreciation (depreciation) (78,571,992)
=======================================================
$ 979,002,460
_______________________________________________________
=======================================================
NET ASSETS:
Class A $ 425,928,117
_______________________________________________________
=======================================================
Class B $ 66,560,691
_______________________________________________________
=======================================================
Class C $ 29,587,976
_______________________________________________________
=======================================================
Class Y $ 617,082
_______________________________________________________
=======================================================
Investor Class $ 456,308,594
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 19,897,479
_______________________________________________________
=======================================================
Class B 3,611,221
_______________________________________________________
=======================================================
Class C 1,603,974
_______________________________________________________
=======================================================
Class Y 28,822
_______________________________________________________
=======================================================
Investor Class 21,311,284
_______________________________________________________
=======================================================
Class A:
Net asset value per share $ 21.41
- -------------------------------------------------------
Maximum offering price per share
(Net asset value of $21.41
divided by 94.50%) $ 22.66
_______________________________________________________
=======================================================
Class B:
Net asset value and offering price
per share $ 18.43
_______________________________________________________
=======================================================
Class C:
Net asset value and offering price
per share $ 18.45
_______________________________________________________
=======================================================
Class Y:
Net asset value and offering price
per share $ 21.41
_______________________________________________________
=======================================================
Investor Class:
Net asset value and offering price
per share $ 21.41
_______________________________________________________
=======================================================
</Table>
* At October 31, 2008, securities with an aggregate value of $85,759,549 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM GLOBAL HEALTH CARE FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $633,378) $ 13,314,875
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $943,711) 2,752,507
================================================================================================
Total investment income 16,067,382
================================================================================================
EXPENSES:
Advisory fees 8,200,411
- ------------------------------------------------------------------------------------------------
Administrative services fees 329,728
- ------------------------------------------------------------------------------------------------
Custodian fees 116,235
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 1,411,477
- ------------------------------------------------------------------------------------------------
Class B 972,307
- ------------------------------------------------------------------------------------------------
Class C 362,866
- ------------------------------------------------------------------------------------------------
Investor Class 1,504,809
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C, Y and Investor 3,122,877
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 52,558
- ------------------------------------------------------------------------------------------------
Other 712,940
================================================================================================
Total expenses 16,786,208
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (164,868)
================================================================================================
Net expenses 16,621,340
================================================================================================
Net investment income (loss) (553,958)
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains from securities sold to affiliates
of $204,637) 19,881,469
- ------------------------------------------------------------------------------------------------
Foreign currencies (822,381)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts (9,246,320)
================================================================================================
9,812,768
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (390,770,143)
- ------------------------------------------------------------------------------------------------
Foreign currencies (10,096)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts 13,324,157
================================================================================================
(377,456,082)
================================================================================================
Net realized and unrealized gain (loss) (367,643,314)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(368,197,272)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM GLOBAL HEALTH CARE FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- -----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (553,958) $ (7,570,453)
- -----------------------------------------------------------------------------------------------------------
Net realized gain 9,812,768 150,340,847
- -----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (377,456,082) 27,865,585
===========================================================================================================
Net increase (decrease) in net assets resulting from operations (368,197,272) 170,635,979
===========================================================================================================
Distributions to shareholders from net realized gains:
Class A (57,327,518) (50,369,554)
- -----------------------------------------------------------------------------------------------------------
Class B (11,980,730) (14,418,133)
- -----------------------------------------------------------------------------------------------------------
Class C (4,059,616) (4,422,169)
- -----------------------------------------------------------------------------------------------------------
Investor Class (61,418,071) (69,356,328)
===========================================================================================================
Total distributions from net realized gains (134,785,935) (138,566,184)
===========================================================================================================
Share transactions-net:
Class A 1,498,537 85,565,558
- -----------------------------------------------------------------------------------------------------------
Class B (13,913,378) (18,741,343)
- -----------------------------------------------------------------------------------------------------------
Class C 4,437,970 (2,246,747)
- -----------------------------------------------------------------------------------------------------------
Class Y 704,218 --
- -----------------------------------------------------------------------------------------------------------
Investor Class (2,191,177) (65,297,812)
===========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (9,463,830) (720,344)
===========================================================================================================
Net increase (decrease) in net assets (512,447,037) 31,349,451
___________________________________________________________________________________________________________
===========================================================================================================
NET ASSETS:
Beginning of year 1,491,449,497 1,460,100,046
===========================================================================================================
End of year (includes undistributed net investment income (loss) of
$(241,137) and $(234,827), respectively) $ 979,002,460 $1,491,449,497
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Health Care Fund (the "Fund") is a series portfolio of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of nine
separate series portfolios, each authorized to issue an unlimited number of
shares of beneficial interest. The 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, Class Y and Investor Class. Investor Class shares of the Fund
are offered only to certain grandfathered investors. Class A shares are sold
with a front-end sales charge unless certain waiver criteria are met 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 Investor 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 GLOBAL HEALTH CARE 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. OTHER RISKS -- The Fund may invest a large percentage of assets in
securities of a limited number of companies, such that each investment may
have 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 Fund has invested in non-publicly traded companies, some of which
are in the startup or development stages. These investments are inherently
risky, as the market for the technologies or products these companies are
developing are typically in the early stages and may never materialize.
The Fund could lose its entire investment in these companies. These
investments are valued at fair value as determined in good faith in
accordance with procedures approved by the Board of Trustees. Investments
in privately held venture capital securities are illiquid.
J. 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.
K. 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
15 AIM GLOBAL HEALTH CARE FUND
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.
L. 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.
M. 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 $350 million 0.75%
- -------------------------------------------------------------------
Next $350 million 0.65%
- -------------------------------------------------------------------
Next $1.3 billion 0.55%
- -------------------------------------------------------------------
Next $2 billion 0.45%
- -------------------------------------------------------------------
Next $2 billion 0.40%
- -------------------------------------------------------------------
Next $2 billion 0.375%
- -------------------------------------------------------------------
Over $8 billion 0.35%
___________________________________________________________________
===================================================================
</Table>
Through December 31, 2009, the Advisor has contractually agreed to waive
advisory fees to the extent necessary so that the advisory fees payable by the
Fund (based on the Fund's average daily net assets) do not exceed the annual
rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- -------------------------------------------------------------------
First $250 million 0.75%
- -------------------------------------------------------------------
Next $250 million 0.74%
- -------------------------------------------------------------------
Next $500 million 0.73%
- -------------------------------------------------------------------
Next $1.5 billion 0.72%
- -------------------------------------------------------------------
Next $2.5 billion 0.71%
- -------------------------------------------------------------------
Next $2.5 billion 0.70%
- -------------------------------------------------------------------
Next $2.5 billion 0.69%
- -------------------------------------------------------------------
Over $10 billion 0.68%
___________________________________________________________________
===================================================================
</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).
16 AIM GLOBAL HEALTH CARE FUND
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 October 31, 2008, the Advisor waived advisory fees of
$67,257.
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 October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of
$21,687.
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 October 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 October 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, Class Y and Investor Class shares of the Fund. The Trust has adopted
plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class
A, Class B, Class C and Investor Class shares (collectively the "Plans"). The
Fund, pursuant to the Plans, pays 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 0.25% 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 October 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 October 31, 2008, IADI
advised the Fund that IADI retained $56,516 in front-end sales commissions from
the sale of Class A shares and $233, $90,433 and $2,049 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--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
October 31, 2008.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
10/31/07 AT COST FROM SALES (DEPRECIATION) 10/31/08 INCOME GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------------------
Evolutionary
Genomics/Genoplex, Inc. $37 $ 408,490 $-- $ (408,526) $ 1 $-- $--
- --------------------------------------------------------------------------------------------------------------------
Pharmanet Development Group,
Inc. -- 13,906,196 -- (12,048,148) 1,858,048 -- --
====================================================================================================================
Total Investments in
Affiliates $37 $14,314,686 $-- $(12,456,674) $1,858,049 $-- $--
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended October 31, 2008, the Fund
engaged in securities purchases of $8,910,907 and securities sales of $705,715,
which resulted in net realized gains of $204,637.
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 October 31, 2008, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $75,924.
17 AIM GLOBAL HEALTH CARE FUND
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 October 31, 2008, the Fund paid legal fees of $5,724 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--FOREIGN CURRENCY CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS
- -------------------------------------------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT ------------------------------------------ UNREALIZED
DATE DELIVER RECEIVE VALUE APPRECIATION
- -------------------------------------------------------------------------------------------------------------------
11/10/08 CHF 31,365,000 USD 29,652,564 $ 27,040,914 $ 2,611,650
- -------------------------------------------------------------------------------------------------------------------
11/10/08 EUR 19,270,000 USD 29,560,180 24,548,053 5,012,127
- -------------------------------------------------------------------------------------------------------------------
11/10/08 GBP 5,885,000 USD 11,343,279 9,461,615 1,881,664
===================================================================================================================
Total open foreign
currency contracts $ 9,505,441
===================================================================================================================
</Table>
<Table>
<Caption>
CLOSED FOREIGN CURRENCY CONTRACTS
- --------------------------------------------------------------------------------------------------------------------
CONTRACT TO
CLOSED ------------------------------------------
DATE DELIVER RECEIVE VALUE REALIZED GAIN
- --------------------------------------------------------------------------------------------------------------------
08/18/08 USD 4,495,232 CHF 4,935,000 $ 4,665,564 $ 170,332
- --------------------------------------------------------------------------------------------------------------------
10/14/08 USD 6,352,823 EUR 4,630,000 7,102,420 749,597
- --------------------------------------------------------------------------------------------------------------------
10/28/08 USD 3,088,096 GBP 1,965,000 3,806,382 718,286
====================================================================================================================
Total closed foreign
currency contracts $ 1,638,215
====================================================================================================================
Total foreign currency
contracts $11,143,656
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
Currency Abbreviations:
<Table>
CHF -- Swiss Franc
EUR -- Euro
GBP -- British Pound Sterling
USD -- U.S. Dollar
</Table>
18 AIM GLOBAL HEALTH CARE FUND
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
OCTOBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
Ordinary income $ 33,434,549 $ --
- ---------------------------------------------------------------------------------------------------------
Long-term capital gain 101,351,386 138,566,184
=========================================================================================================
Total distributions $134,785,935 $138,566,184
_________________________________________________________________________________________________________
=========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -------------------------------------------------------------------------------------------------
Undistributed long-term gain $ 27,351,899
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (102,823,551)
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (178,968)
- -------------------------------------------------------------------------------------------------
Temporary book/tax differences (241,136)
- -------------------------------------------------------------------------------------------------
Shares of beneficial interest 1,054,894,216
=================================================================================================
Total net assets $ 979,002,460
_________________________________________________________________________________________________
=================================================================================================
</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
and straddle loss deferrals.
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 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2008 was $766,905,347 and
$908,127,947, respectively. Cost of investments on a tax basis includes the
adjustments for financial reporting purposes as of the most recently completed
Federal income tax reporting period-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 96,963,928
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (199,787,479)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(102,823,551)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $1,178,472,656.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, net operating losses and proxy costs on October 31, 2008,
undistributed net investment income (loss) was increased by $547,648,
undistributed net realized gain was increased by $822,381 and shares of
beneficial interest decreased by $1,370,029. This reclassification had no effect
on the net assets of the Fund.
19 AIM GLOBAL HEALTH CARE FUND
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2008(a) 2007
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,455,793 $ 67,157,762 1,290,957 $ 39,138,862
- -------------------------------------------------------------------------------------------------------------------------
Class B 451,681 10,562,000 348,032 9,236,345
- -------------------------------------------------------------------------------------------------------------------------
Class C 460,404 10,743,517 210,479 5,576,512
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) 28,826 704,292 -- --
- -------------------------------------------------------------------------------------------------------------------------
Investor Class 740,849 20,102,280 556,539 16,741,332
=========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,754,174 50,678,079 1,572,712 45,026,746
- -------------------------------------------------------------------------------------------------------------------------
Class B 452,740 11,336,611 527,134 13,362,840
- -------------------------------------------------------------------------------------------------------------------------
Class C 151,999 3,809,103 149,665 3,796,993
- -------------------------------------------------------------------------------------------------------------------------
Investor Class 2,061,557 59,578,984 2,351,710 67,352,959
=========================================================================================================================
Issued in connection with acquisitions:(c)
Class A -- -- 4,379,336 133,533,342
- -------------------------------------------------------------------------------------------------------------------------
Class B -- -- 115,538 3,111,032
- -------------------------------------------------------------------------------------------------------------------------
Class C -- -- 90,627 2,442,233
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 399,819 10,543,557 250,972 7,148,844
- -------------------------------------------------------------------------------------------------------------------------
Class B (462,393) (10,543,557) (282,296) (7,148,844)
=========================================================================================================================
Reacquired:(d)
Class A(b) (4,832,598) (126,880,861) (4,625,374) (139,282,236)
- -------------------------------------------------------------------------------------------------------------------------
Class B (1,098,440) (25,268,432) (1,386,357) (37,302,716)
- -------------------------------------------------------------------------------------------------------------------------
Class C (441,843) (10,114,650) (529,473) (14,062,485)
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) (4) (74) -- --
- -------------------------------------------------------------------------------------------------------------------------
Investor Class(b) (3,051,610) (81,872,441) (4,974,298) (149,392,103)
=========================================================================================================================
Net increase (decrease) in share activity (929,046) $ (9,463,830) 45,903 $ (720,344)
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
(a) There is an entity that is a record owner of more than 5% of the
outstanding shares of the Fund and owns 7% of the outstanding shares of the
Fund. IADI has an agreement with this entity to sell Fund shares. The Fund,
Invesco Aim and/or Invesco Aim affiliates may make payments to this entity,
which is considered to be related to the Fund, for providing services to
the Fund, Invesco Aim and/or Invesco Aim affiliates including but not
limited to services such as securities brokerage, distribution, third party
record keeping and account servicing. The Trust has no knowledge as to
whether all or any portion of the shares owned of record by this entity is
also 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 28,349 $ 692,848
- --------------------------------------------------------------------------------------------------
Class A (16,325) (398,983)
- --------------------------------------------------------------------------------------------------
Investor Class (12,019) (293,865)
__________________________________________________________________________________________________
==================================================================================================
</Table>
(c) As of the open of business on April 23, 2007, the Fund acquired all the net
assets of AIM Advantage Health Sciences Fund pursuant to a plan of
reorganization approved by the Trustees of the Fund on November 8, 2006 and
by the shareholders of AIM Advantage Health Sciences Fund on April 12,
2007. The acquisition was accomplished by a tax-free exchange of 4,585,501
shares of the Fund for 8,205,142 shares outstanding of AIM Advantage Health
Sciences Fund as of the close of business on April 20, 2007. Each class of
AIM Advantage Health Sciences Fund was exchanged for the like class of
shares of the Fund based on the relative net asset value of AIM Advantage
Health Sciences Fund to the net asset value of the Fund on the close of
business, April 20, 2007. AIM Advantage Health Sciences Fund's net assets
at that date of $139,086,607 including $7,484,339 of unrealized
appreciation, were combined with those of the Fund immediately before the
acquisition was $1,413,468,633. The combined aggregate net assets
subsequent to the reorganization were $1,552,555,240
(d) Net of redemption fees of $36,049 and $11,940 which were allocated among
the classes based on relative net assets of each class for the years ended
October 31, 2008 and 2007, respectively.
20 AIM GLOBAL HEALTH CARE FUND
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.
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)
NET ASSET NET ON SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM DISTRIBUTIONS NET ASSET NET ASSETS,
BEGINNING INCOME REALIZED AND INVESTMENT FROM NET VALUE, END TOTAL END OF PERIOD
OF PERIOD (LOSS) UNREALIZED) OPERATIONS REALIZED GAINS OF PERIOD(a) RETURN(b) (000S OMITTED)
- -------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 $31.94 $ 0.01(d)(e) $(7.66) $(7.65) $(2.88) $21.41 (26.28)% 425,928
Year ended 10/31/07 31.28 (0.13)(d) 3.79 3.66 (3.00) 31.94 12.82 642,561
Year ended 10/31/06 29.77 (0.15) 2.59 2.44 (0.93) 31.28 8.31 539,666
Year ended 10/31/05 26.38 (0.18)(d) 3.57 3.39 -- 29.77 12.85 554,679
Year ended 10/31/04 24.09 (0.17)(d) 2.46 2.29 -- 26.38 9.51 550,319
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 28.09 (0.17)(d)(e) (6.61) (6.78) (2.88) 18.43 (26.84) 66,561
Year ended 10/31/07 28.06 (0.32)(d) 3.35 3.03 (3.00) 28.09 11.96 119,886
Year ended 10/31/06 26.99 (0.36) 2.36 2.00 (0.93) 28.06 7.52 138,788
Year ended 10/31/05 24.08 (0.33)(d) 3.24 2.91 -- 26.99 12.08 153,766
Year ended 10/31/04 22.09 (0.27)(d) 2.26 1.99 -- 24.08 9.01 168,468
- -------------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 28.11 (0.17)(d)(e) (6.61) (6.78) (2.88) 18.45 (26.82) 29,588
Year ended 10/31/07 28.08 (0.32)(d) 3.35 3.03 (3.00) 28.11 11.96 40,297
Year ended 10/31/06 27.01 (0.36) 2.36 2.00 (0.93) 28.08 7.51 42,463
Year ended 10/31/05 24.09 (0.33)(d) 3.25 2.92 -- 27.01 12.12 45,591
Year ended 10/31/04 22.11 (0.27)(d) 2.25 1.98 -- 24.09 8.95 42,863
- -------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(g) 24.44 0.00(d)(e) (3.03) (3.03) -- 21.41 (12.40) 617
- -------------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
Year ended 10/31/08 31.94 0.01(d)(e) (7.66) (7.65) (2.88) 21.41 (26.28) 456,309
Year ended 10/31/07 31.29 (0.13)(d) 3.78 3.65 (3.00) 31.94 12.78 688,705
Year ended 10/31/06 29.77 (0.15) 2.60 2.45 (0.93) 31.29 8.35 739,183
Year ended
10/31/05(g) 28.95 (0.04)(d) 0.86 0.82 -- 29.77 2.83 807,560
_______________________________________________________________________________________________________________________________
===============================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS ASSETS WITHOUT 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 10/31/08 1.21%(f) 1.22%(f) 0.03%(e)(f) 61%
Year ended 10/31/07 1.19 1.19 (0.44) 46
Year ended 10/31/06 1.22 1.22 (0.46) 83
Year ended 10/31/05 1.48 1.60 (0.64) 92
Year ended 10/31/04 1.89 1.91 (0.63) 64
- ----------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 1.96(f) 1.97(f) (0.72)(e)(f) 61
Year ended 10/31/07 1.94 1.94 (1.19) 46
Year ended 10/31/06 1.97 1.97 (1.21) 83
Year ended 10/31/05 2.14 2.26 (1.30) 92
Year ended 10/31/04 2.39 2.41 (1.13) 64
- ----------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 1.96(f) 1.97(f) (0.72)(e)(f) 61
Year ended 10/31/07 1.94 1.94 (1.19) 46
Year ended 10/31/06 1.97 1.97 (1.21) 83
Year ended 10/31/05 2.14 2.26 (1.30) 92
Year ended 10/31/04 2.39 2.41 (1.13) 64
- ----------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(g) 0.96(f)(h) 0.97(f)(h) 0.28(e)(f)(h) 61
- ----------------------------------------------------------------------------------------
INVESTOR CLASS
Year ended 10/31/08 1.21(f) 1.22(f) 0.03(e)(f) 61
Year ended 10/31/07 1.19 1.19 (0.44) 46
Year ended 10/31/06 1.22 1.22 (0.46) 83
Year ended
10/31/05(g) 1.25(h) 1.25(h) (0.41)(h) 92
________________________________________________________________________________________
========================================================================================
</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. For the period ending
October 31, 2007, the portfolio turnover calculation excludes the value of
securities purchased of $132,508,164, and sold of $38,304,911 in the effort
to realign the Fund's portfolio holdings after the reorganization of AIM
Advantage Health Sciences Fund into the Fund.
(d) Calculated using average shares outstanding.
(e) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend of
$5.23 per share owned of Allscripts-Misys Healthcare Solutions, Inc. on
October 13, 2008. Net investment income (loss) per share and the ratio of
net investment income (loss) to average net assets excluding the special
dividend are $(0.05) and (0.19)%, $(0.23) and (0.94)%, $(0.23) and (0.94)%,
$0.00 and 0.06% and $(0.05) and (0.19)% for Class A, Class B, Class C,
Class Y and Investor Class, respectively.
(f) Ratios are based on average daily net assets (000's omitted) of $564,591,
$97,231, $36,287, $609 and $601,923 for Class A, Class B, Class C, Class Y
and Investor Class shares, respectively.
(g) Class Y and Investor class shares commenced on October 3, 2008 and July 15,
2005, respectively.
(h) Annualized.
21 AIM GLOBAL HEALTH CARE FUND
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On May 23, 2008, the Securities and Exchange Commission ("SEC") publicly posted
its final approval of the Distribution Plans ("Distribution Plans") for the
distribution of monies placed into two separate Fair Funds created pursuant to a
settlement reached on October 8, 2004 between Invesco Funds Group, Inc. ("IFG"),
Invesco Aim Advisors, Inc. ("Invesco Aim") and Invesco Aim Distributors, Inc.
("IADI") and the SEC (the "Order"). One of the Fair Funds consists of $325
million, plus interest and any contributions by other settling parties, for
distribution to shareholders of certain mutual funds formerly advised by IFG who
may have been harmed by market timing and related activity. The second Fair Fund
consists of $50 million, plus interest and any contributions by other settling
parties, for distribution to shareholders of mutual funds advised by Invesco Aim
who may have been harmed by market timing and related activity. The Distribution
Plans provide for the distribution to all eligible investors to compensate such
investors for injury they may have suffered as a result of market timing in the
affected funds. The Distribution Plans include a provision for any residual
amounts in the Fair Funds to be distributed in the future to the affected funds.
Because the distribution of the Fair Funds has not yet commenced, management of
Invesco Aim and the Fund are unable to estimate the amount of distribution to be
made to the Fund, if any.
At the request of the trustees of the AIM Funds, Invesco Ltd. ("Invesco"), the
parent company of IFG and Invesco Aim, has agreed to reimburse expenses incurred
by the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into
certain arrangements permitting market timing of the AIM Funds and failed to
disclose these arrangements in the prospectuses for such Funds, and conclusions
of law to the effect that Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, Invesco Aim's time to respond to that Order has been indefinitely
suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI
and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various Invesco Aim- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund
Derivative Complaint purportedly brought on behalf of the AIM Funds and fund
registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA
purportedly brought on behalf of participants in the Invesco 401(k) plan. Based
on orders issued by the MDL Court, all claims asserted against the AIM Funds
that have been transferred to the MDL Court have been dismissed, although
certain Funds remain nominal defendants in the Consolidated Amended Fund
Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco
defendants' motion to dismiss the Amended Class Action Complaint for Violations
of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and
remanded this lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing
full cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco Aim and the Fund are unable to
estimate the impact, if any, that the outcome of the Pending Litigation and
Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund.
22 AIM GLOBAL HEALTH CARE FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Global Health Care Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Global Health Care Fund (one of
the funds constituting AIM Investment Funds, hereafter referred to as the
"Fund") at October 31, 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 October 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2008
Houston, Texas
23 AIM GLOBAL HEALTH CARE 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 May 1, 2008, through
October 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 October 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 October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $807.30 $5.54 $1,019.00 $6.19 1.22%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 804.10 8.93 1,015.23 9.98 1.97
- ---------------------------------------------------------------------------------------------------
C 1,000.00 804.30 8.93 1,015.23 9.98 1.97
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 876.00 0.71 1,020.31 4.88 0.96
- ---------------------------------------------------------------------------------------------------
Investor 1,000.00 807.30 5.54 1,019.00 6.19 1.22
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 31, 2008 (as of close of
business October 3, 2008, through October 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 29
(as of close of business October 3, 2008, through October 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 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 the Class Y
shares of the Fund and other funds because such data is based on a full six
month period.
24 AIM GLOBAL HEALTH CARE FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM their assigned funds. During the contract ated the information provided differently
Investment Funds is required under the renewal process, the Trustees receive from one another and attributed different
Investment Company Act of 1940 to approve comparative performance and fee data weight to the various factors. The
annually the renewal of the AIM Global regarding the AIM Funds prepared by an Trustees recognized that the advisory
Health Care Fund's (the Fund) investment independent company, Lipper, Inc. arrangements and resulting advisory fees
advisory agreement with Invesco Aim (Lipper), under the direction and for the Fund and the other AIM Funds are
Advisors, Inc. (Invesco Aim). During supervision of the independent Senior the result of years of review and
contract renewal meetings held on June Officer who also prepares a separate negotiation between the Trustees and
18-19, 2008, the Board as a whole and the analysis of this information for the Invesco Aim, that the Trustees may focus
disinterested or "independent" Trustees, Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of
voting separately, approved the recommendations to the Investments these arrangements in some years than in
continuance of the Fund's investment Committee regarding the performance, fees others, and that the Trustees'
advisory agreement for another year, and expenses of their assigned funds. The deliberations and conclusions in a
effective July 1, 2008. In doing so, the Investments Committee considers each particular year may be based in part on
Board determined that the Fund's Sub-Committee's recommendations and makes their deliberations and conclusions of
investment advisory agreement is in the its own recommendations regarding the these same arrangements throughout the
best interests of the Fund and its performance, fees and expenses of the AIM year and in prior years.
shareholders and that the compensation to Funds to the full Board. The Investments
Invesco Aim under the Fund's investment Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF
advisory agreement is fair and reasonable. Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION
its annual recommendation to the Board
The independent Trustees met separately whether to approve the continuance of each The discussion below serves as a summary
during their evaluation of the Fund's AIM Fund's investment advisory agreement of the Senior Officer's independent
investment advisory agreement with and sub-advisory agreements for another written evaluation with respect to the
independent legal counsel from whom they year. Fund's investment advisory agreement as
received independent legal advice, and the well as a discussion of the material
independent Trustees also received The independent Trustees are assisted factors and related conclusions that
assistance during their deliberations from in their annual evaluation of the Fund's formed the basis for the Board's approval
the independent Senior Officer, a investment advisory agreement by the of the Fund's investment advisory
full-time officer of the AIM Funds who independent Senior Officer. One agreement and sub-advisory agreements.
reports directly to the independent responsibility of the Senior Officer is to Unless otherwise stated, information set
Trustees. manage the process by which the AIM Funds' forth below is as of June 19, 2008 and
proposed management fees are negotiated does not reflect any changes that may have
THE BOARD'S FUND EVALUATION PROCESS during the annual contract renewal process occurred since that date, including but
to ensure that they are negotiated in a not limited to changes to the Fund's
The Board's Investments Committee has manner that is at arms' length and performance, advisory fees, expense
established three Sub-Committees that are reasonable. Accordingly, the Senior limitations and/or fee waivers.
responsible for overseeing the management Officer must either supervise a
of a number of the series portfolios of competitive bidding process or prepare an I. Investment Advisory Agreement
the AIM Funds. This Sub-Committee independent written evaluation. The Senior
structure permits the Trustees to focus on Officer has recommended that an A. Nature, Extent and Quality of
the performance of the AIM Funds that have independent written evaluation be provided Services Provided by Invesco Aim
been assigned to them. The Sub-Committees and, at the direction of the Board, has
meet throughout the year to review the prepared an independent written The Board reviewed the advisory services
performance of their assigned funds, and evaluation. provided to the Fund by Invesco Aim under
the Sub-Committees review monthly and the Fund's investment advisory agreement,
quarterly comparative performance During the annual contract renewal the performance of Invesco Aim in
information and periodic asset flow data process, the Board considered the factors providing these services, and the
for their assigned funds. These materials discussed below under the heading "Factors credentials and experience of the officers
are prepared under the direction and and Conclusions and Summary of Independent and employees of Invesco Aim who provide
supervision of the independent Senior Written Fee Evaluation" in evaluating the these services. The Board's review of the
Officer. Over the course of each year, the fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide
Sub-Committees meet with portfolio investment advisory agreement and these services included the Board's
managers for their assigned funds and sub-advisory agreements at the contract consideration of Invesco Aim's portfolio
other members of management and review renewal meetings and at their meetings and product review process, various back
with these individuals the performance, throughout the year as part of their office support functions provided by
investment objective(s), policies, ongoing oversight of the Fund. The Fund's Invesco Aim and its affiliates, and
strategies and limitations of these funds. investment advisory agreement and Invesco Aim's equity and fixed income
sub-advisory agreements were considered trading operations. The Board concluded
In addition to their meetings separately, although the Board also that the nature, extent and quality of the
throughout the year, the Sub-Committees considered the common interests of all of advisory services provided to the Fund by
meet at designated contract renewal the AIM Funds in their deliberations. The Invesco Aim were appropriate and that
meetings each year to conduct an in-depth Board considered all of the information Invesco Aim currently is providing
review of the performance, fees and provided to them and did not identify any satisfactory advisory services in
expenses of particular factor that was controlling. accordance with the terms of the Fund's
Each Trustee may have evalu- investment advisory agreement. In
addition, based on their ongoing meetings
throughout the year
continued
25 AIM GLOBAL HEALTH CARE FUND
with the Fund's portfolio manager or improve the quality and efficiency of the D. Economies of Scale and Breakpoints
managers, the Board concluded that these services that Invesco Aim provides to the
individuals are competent and able to AIM Funds. The Board concluded that The Board considered the extent to which
continue to carry out their Invesco Aim continues to be responsive to there are economies of scale in Invesco
responsibilities under the Fund's the Board's focus on fund performance. Aim's provision of advisory services to
investment advisory agreement. Although the independent written the Fund. The Board also considered
evaluation of the Fund's Senior Officer whether the Fund benefits from such
In determining whether to continue the only considered Fund performance through economies of scale through contractual
Fund's investment advisory agreement, the the most recent calendar year, the Board breakpoints in the Fund's advisory fee
Board considered the prior relationship also reviewed more recent Fund performance schedule or through advisory fee waivers
between Invesco Aim and the Fund, as well and this review did not change their or expense limitations. The Board noted
as the Board's knowledge of Invesco Aim's conclusions. that the Fund's contractual advisory fee
operations, and concluded that it was schedule includes six breakpoints and
beneficial to maintain the current C. Advisory Fees and Fee Waivers that the level of the Fund's advisory
relationship, in part, because of such fees, as a percentage of the Fund's net
knowledge. The Board also considered the The Board compared the Fund's contractual assets, has decreased as net assets
steps that Invesco Aim and its affiliates advisory fee rate to the contractual increased because of the breakpoints. The
have taken over the last several years to advisory fee rates of funds in the Fund's Board also noted that Invesco Aim's
improve the quality and efficiency of the Lipper expense group that are not managed contractual advisory fee waiver discussed
services they provide to the AIM Funds in by Invesco Aim, at a common asset level above includes breakpoints based on net
the areas of investment performance, and as of the end of the past calendar asset levels. Based on this information,
product line diversification, year. The Board noted that the Fund's the Board concluded that the Fund's
distribution, fund operations, shareholder contractual advisory fee rate was below advisory fees appropriately reflect
services and compliance. The Board the median contractual advisory fee rate economies of scale at current asset
concluded that the quality and efficiency of funds in its expense group. The Board levels. The Board also noted that the Fund
of the services Invesco Aim and its also reviewed the methodology used by shares directly in economies of scale
affiliates provide to the AIM Funds in Lipper in determining contractual fee through lower fees charged by third party
each of these areas generally have rates. service providers based on the combined
improved, and support the Board's approval size of all of the AIM Funds and
of the continuance of the Fund's The Board also compared the Fund's affiliates.
investment advisory agreement. effective fee rate (the advisory fee after
any advisory fee waivers and before any E. Profitability and Financial
B. Fund Performance expense limitations/waivers) to the Resources of Invesco Aim
advisory fee rates of other clients of
The Board compared the Fund's performance Invesco Aim and its affiliates with The Board reviewed information from
during the past one, three and five investment strategies comparable to those Invesco Aim concerning the costs of the
calendar years to the performance of funds of the Fund, including one mutual fund advisory and other services that Invesco
in the Fund's performance group that are advised by Invesco Aim and one mutual fund Aim and its affiliates provide to the Fund
not managed by Invesco Aim, and against sub-advised by an Invesco Aim affiliate. and the profitability of Invesco Aim and
the performance of all funds in the Lipper The Board noted that the Fund's rate was: its affiliates in providing these
Health/Biotechnology Funds Index. The (i) below the rate for the mutual fund; services. The Board also reviewed
Board also reviewed the criteria used by and (ii) above the sub-advisory fee rate information concerning the financial
Invesco Aim to identify the funds in the for the sub-advised mutual fund. condition of Invesco Aim and its
Fund's performance group for inclusion in affiliates. The Board also reviewed with
the Lipper reports. The Board noted that The Board noted that Invesco Aim has Invesco Aim the methodology used to
the Fund's performance was in the third contractually agreed to waive advisory prepare the profitability information. The
quintile of its performance group for the fees of the Fund through December 31, 2009 Board considered the overall profitability
one year period, the fourth quintile for and that this fee waiver includes of Invesco Aim, as well as the
the three year period, and the fifth breakpoints based on net asset levels. The profitability of Invesco Aim in connection
quintile for the five year period (the Board considered the contractual nature of with managing the Fund. The Board noted
first quintile being the best performing this fee waiver and noted that it remains that Invesco Aim continues to operate at a
funds and the fifth quintile being the in effect until December 31, 2009. The net profit, although increased expenses in
worst performing funds). The Board noted Board also noted that Invesco Aim proposed recent years have reduced the
that the Fund's performance was above the that the contractual expense limitation of profitability of Invesco Aim and its
performance of the Index for the one year the Fund expire on June 30, 2008. Invesco affiliates. The Board concluded that the
period, and below the performance of the Aim advised the Board that the expense Fund's fees were fair and reasonable, and
Index for the three and five year periods. limitation had not resulted in any waivers that the level of profits realized by
The Board noted that Invesco Aim made for at least the past two fiscal years of Invesco Aim and its affiliates from
changes to the Fund's portfolio management the Fund. providing services to the Fund was not
team in 2005 and 2006, which appear to be excessive in light of the nature, quality
producing encouraging results, but Invesco After taking account of the Fund's and extent of the services provided. The
Aim will continue to monitor the Fund. The contractual advisory fee rate, as well as Board considered whether Invesco Aim is
Board also considered the steps Invesco the comparative advisory fee information financially sound and has the resources
Aim has taken over the last several years and the expiration of the expense necessary to perform its obligations under
to limitation discussed above, the Board the Fund's investment advisory agreement,
concluded that the Fund's advisory fees and concluded that Invesco Aim has the
were fair and reasonable. financial resources necessary to fulfill
these obligations.
continued
26 AIM GLOBAL HEALTH CARE FUND
F. Independent Written Evaluation of were appropriate. The Board also concluded economies of various countries and
the Fund's Senior Officer that, based on their review and securities of companies located in such
representations made by Invesco Aim, these countries or on various types of
The Board noted that, at their direction, arrangements were consistent with investments and investment techniques, and
the Senior Officer of the Fund, who is regulatory requirements. providing investment advisory services.
independent of Invesco Aim and Invesco The Board concluded that the sub-advisory
Aim's affiliates, had prepared an The Board considered the fact that the agreements will benefit the Fund and its
independent written evaluation to assist Fund's uninvested cash and cash collateral shareholders by permitting Invesco Aim to
the Board in determining the from any securities lending arrangements utilize the additional resources and
reasonableness of the proposed management may be invested in money market funds talent of the Affiliated Sub-Advisers in
fees of the AIM Funds, including the Fund. advised by Invesco Aim pursuant to managing the Fund.
The Board noted that they had relied upon procedures approved by the Board. The
the Senior Officer's written evaluation Board noted that Invesco Aim will receive B. Fund Performance
instead of a competitive bidding process. advisory fees from these affiliated money
In determining whether to continue the market funds attributable to such The Board did not view Fund performance as
Fund's investment advisory agreement, the investments, although Invesco Aim has a relevant factor in considering whether
Board considered the Senior Officer's contractually agreed to waive through at to approve the sub-advisory agreements for
written evaluation. least June 30, 2009, the advisory fees the Fund, as no Affiliated Sub-Adviser
payable by the Fund in an amount equal to currently manages any portion of the
G. Collateral Benefits to Invesco Aim 100% of the net advisory fees Invesco Aim Fund's assets.
and its Affiliates receives from the affiliated money market
funds with respect to the Fund's C. Sub-Advisory Fees
The Board considered various other investment of uninvested cash, but not
benefits received by Invesco Aim and its cash collateral. The Board considered the The Board considered the services to be
affiliates resulting from Invesco Aim's contractual nature of this fee waiver and provided by the Affiliated Sub-Advisers
relationship with the Fund, including the noted that it remains in effect until at pursuant to the sub-advisory agreements
fees received by Invesco Aim and its least June 30, 2009. The Board concluded and the services to be provided by Invesco
affiliates for their provision of that the Fund's investment of uninvested Aim pursuant to the Fund's investment
administrative, transfer agency and cash and cash collateral from any advisory agreement, as well as the
distribution services to the Fund. The securities lending arrangements in the allocation of fees between Invesco Aim and
Board considered the performance of affiliated money market funds is in the the Affiliated Sub-Advisers pursuant to
Invesco Aim and its affiliates in best interests of the Fund and its the sub-advisory agreements. The Board
providing these services and the shareholders. noted that the sub-advisory fees have no
organizational structure employed by direct effect on the Fund or its
Invesco Aim and its affiliates to provide II. Sub-Advisory Agreements shareholders, as they are paid by Invesco
these services. The Board also considered Aim to the Affiliated Sub-Advisers, and
that these services are provided to the A. Nature, Extent and Quality of that Invesco Aim and the Affiliated
Fund pursuant to written contracts which Services Provided by Affiliated Sub-Advisers are affiliates. After taking
are reviewed and approved on an annual Sub-Advisers account of the Fund's contractual
basis by the Board. The Board concluded sub-advisory fee rate, as well as other
that Invesco Aim and its affiliates were The Board reviewed the services to be relevant factors, the Board concluded that
providing these services in a satisfactory provided by Invesco Trimark Ltd., Invesco the Fund's sub-advisory fees were fair and
manner and in accordance with the terms of Asset Management Deutschland, GmbH, reasonable.
their contracts, and were qualified to Invesco Asset Management Limited, Invesco
continue to provide these services to the Asset Management (Japan) Limited, Invesco D. Financial Resources of the
Fund. Australia Limited, Invesco Global Asset Affiliated Sub-Advisers
Management (N.A.), Inc., Invesco Hong Kong
The Board considered the benefits realized Limited, Invesco Institutional (N.A.), The Board considered whether each
by Invesco Aim as a result of portfolio Inc. and Invesco Senior Secured Affili-ated Sub-Adviser is financially
brokerage transactions executed through Management, Inc. (collectively, the sound and has the resources necessary to
"soft dollar" arrangements. Under these "Affiliated Sub-Advisers") under the perform its obligations under its
arrangements, portfolio brokerage sub-advisory agreements and the respective sub-advisory agreement, and
commissions paid by the Fund and/or other credentials and experience of the officers concluded that each Affiliated Sub-Adviser
funds advised by Invesco Aim are used to and employees of the Affiliated has the financial resources necessary to
pay for research and execution services. Sub-Advisers who will provide these fulfill these obligations.
The Board noted that soft dollar services. The Board concluded that the
arrangements shift the payment obligation nature, extent and quality of the services
for the research and execution services to be provided by the Affiliated
from Invesco Aim to the funds and Sub-Advisers were appropriate. The Board
therefore may reduce Invesco Aim's noted that the Affiliated Sub-Advisers,
expenses. The Board also noted that which have offices and personnel that are
research obtained through soft dollar geographically dispersed in financial
arrangements may be used by Invesco Aim in centers around the world, have been formed
making investment decisions for the Fund in part for the purpose of researching and
and may therefore benefit Fund compiling information and making
shareholders. The Board concluded that recommendations on the markets and
Invesco Aim's soft dollar arrangements
27 AIM GLOBAL HEALTH CARE 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 October 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $101,351,388
Qualified Dividend Income* 21.76%
Corporate Dividends Received Deduction* 13.72%
</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 January 31, 2008, April 30, 2008, July 31, 2008 and
October 31, 2008 were 28.02%, 24.69%, 20.83%, and 20.93%, respectively.
28 AIM GLOBAL HEALTH CARE FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee
oversees 103 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 2003 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 1997 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, Policy
Trustee firm) Studies, Inc. and
Van Gilder Insurance
Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 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 2001 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 2001 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 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.
29 AIM GLOBAL HEALTH CARE 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 2004 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
30 AIM GLOBAL HEALTH CARE 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:
o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will
trees used to produce paper. be sent via email as soon as they're available.
o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer
expenses and put more capital back in your fund's returns. with a few clicks of your mouse.
This service is provided by Invesco Aim Investment Services, Inc.
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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 811-05426 and 033-19338.
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 January 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 [INVESCO AIM LOGO]
refer to each fund's prospectus for information on the fund's subadvisors. Invesco Aim Distributors, Inc. -- SERVICE MARK --
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.
invescoaim.com GHC-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM INTERNATIONAL TOTAL RETURN FUND
- -- SERVICE MARK -- Annual Report to Shareholders - October 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
22 Financial Highlights
24 Auditor's Report
25 Fund Expenses
26 Approval of Investment Advisory Agreement
29 Tax Information
30 Trustees and Officers
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 recent market developments and
provide some perspective and encouragement to my fellow long-term investors.
[TAYLOR
PHOTO] MARKET OVERVIEW
At the start of the fiscal year in November 2007, 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
Philip Taylor (the Fed) repeatedly cut short-term interest rate targets to stimulate economic
growth and expand market liquidity.(1) Also, Congress and the president worked
together to enact an economic stimulus plan that included billions of dollars in
rebates to taxpayers.
These actions helped the economy and the U.S. stock market until the spring of
2008, when other factors came to the forefront -- triggering a severe correction that eventually
drove major stock-market indexes to multi-year lows.(2)
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.
The recent volatility in the stock, fixed-income and credit markets has driven home the
importance of three timeless investing principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
o 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.
o 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.
o 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 capitalize on
this situation.
MANAGING MONEY IS OUR FOCUS
As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain
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, 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 we 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) Lipper Inc.
2 AIM INTERNATIONAL TOTAL RETURN FUND
Dear Fellow Shareholders:
As I write this letter, turbulent financial markets are causing considerable
investor anxiety, reminding us again that markets are cyclical and the correction
[CROCKETT of excess is often painful, at least in the short term. Your Board of Trustees
PHOTO] believes in the wisdom of a long-term perspective and consistent investment
discipline. We continue to put your interests first in the effort to improve
investment performance, contain shareholder costs and uphold the highest ethical
standards.
We remain enthusiastic about the global reach and investment expertise that
Invesco, a leading independent global investment management company, brings to
the management of AIM Funds as the parent company of the advisors. The diverse
Bruce Crockett investment strategies deployed throughout the worldwide network of Invesco
investment centers has helped strengthen the management of many AIM Funds. The
rebranding of the Funds' management company as Invesco Aim was followed by the
launch of an upgraded, investor-friendly website (invescoaim.com); a new mountain
logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and a new ad
campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in financial
publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between
the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual
process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory
Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your
behalf to double the number of votes in favor of separating the roles of chairman and CEO at the
companies whose shares your Funds hold. We also continued to support the movement for shareholders
to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a
matter of policy, and I would be interested to hear your thoughts on this policy.
As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com.
The dialogue that has been established in this way has been instructive for your Board, and we want
it to continue. Although the production schedule for Fund annual reports and prospectuses allows me
to write these letters of general report and response just twice a year, please be assured that your
comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM INTERNATIONAL TOTAL RETURN FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
======================================================================================= return above a specific benchmark) as well
PERFORMANCE SUMMARY as the risk parameters for the Fund.
Investment vehicles are evaluated for
For the fiscal year ended October 31, 2008, Class A Shares of AIM International Total liquidity and risk versus relative value.
Return Fund, at net asset value (NAV), underperformed the Barclays Capital Global
Aggregate ex U.S. Index (unhedged). The majority of this underperformance resulted from Sell decisions are based on:
the Fund's currency exposure to the Japanese yen relative to the U.S. dollar during the
summer of 2008 and its allocation to investment-grade and high yield corporate bonds. o A conscious decision to alter the
Fund's overall risk exposure (e.g.,
Your Fund's long-term performance appears later in this report. duration, yield curve positioning,
sector exposure).
FUND VS. INDEXES
o The need to limit or reduce exposure to
Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does a particular sector or issuer.
not include applicable contingent deferred sales charges (CDSC) or front-end sales
charges, which would have reduced performance. o Degradation of an issuer's credit
quality.
Class A Shares -6.22%
Class B Shares -6.95 o Realignment of a valuation target.
Class C Shares -6.95
Class Y Shares* -6.22 o Presentation of a better relative value
Barclays Capital Global Aggregate ex U.S. Index(triangle)** opportunity.
(Broad Market/Style-Specific Index) -4.35
Lipper International Income Funds Index(triangle) (Peer Group Index) -5.48 MARKET CONDITIONS AND YOUR FUND
(triangle) Lipper Inc. Rising concerns over the health of the
global financial system weighed heavily on
* Share class incepted during the fiscal year. See page 7 for a detailed explanation world markets during the fiscal year. A
of Fund performance. decade or more of lax lending practices,
excessive leverage, unsound business
** Effective 11/03/08, the Lehman Brothers indexes were rebranded as Barclays Capital models, inadequate attention to
indexes. counterparty risks and regulatory failure
======================================================================================= culminated in the collapse of several
major financial institutions. In addition
HOW WE INVEST invest in derivative instruments such as to the troubled financial system, general
futures contracts and swap agreements, economic issues, such as housing prices,
We believe dynamic and complex fixed including but not limited to credit unemployment and the availability of
income markets create opportunities for default swaps. Foreign currency credit, adveresely affected investment
investors that are best captured by investments may include spot contracts, markets.
independent specialist decision makers forward currency contracts, currency
interconnected as a global team. We use swaps, currency options, currency futures September alone was a historic month as
this philosophy in the Fund in an endeavor and options on currency futures. Lehman Brothers went into bankruptcy.
to realize the maximum amount of total Additionally, the U.S. government took
return. Our security selection is supported by over Freddie Mac and Fannie Mae and bailed
a team of independent specialists. Team out American International Group (AIG).
We invest primarily in a diversified members conduct top-down macroeconomic as Merrill Lynch was taken over by Bank of
portfolio of foreign government and well as bottom-up analysis on individual America and Washington Mutual, one of the
corporate debt securities, generally securities. Recommendations are largest U.S. savings and loans, was taken
represented by the sector categories communicated to portfolio managers through over by JP Morgan Chase.
within the Barclays Capital Global proprietary technology that allows all
Aggregate ex U.S. Index (unhedged) which investment professionals to communicate in Initially, the adverse effects of the
includes foreign currency investments. We a timely manner. credit crisis were mitigated mainly by the
also invest in debt securities that U.S. Federal Reserve (the Fed) cutting
include foreign sovereign, corporate or Portfolio construction begins with a interest rates and creating different
agency securities, including securitized well-defined Fund design that establishes methods by which banks and other
securities, such as asset-backed and the target investment vehicles for
mortgage-backed securities. We may also generating the desired "alpha" (the extra
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 10 FIXED INCOME ISSUERS Total Net Assets $95.3 million
By sector Total Number of Holdings 60
1. Bundesrepublik Deutschland 7.7% ==========================================
Sovereign Debt 59.6% 2. Development Bank of Japan 6.2
Financials 32.8 3. France Government 5.4
Consumer Staples 1.5 4. United Kingdom Treasury 5.1
Telecommunication Services 1.2 5. Dexia Municipal Agency 5.1
Information Technology 0.7 6. Spanish Government 4.9
Utilities 0.5 7. Austria Government 4.9
Materials 0.4 8. Netherlands Government 4.6
Consumer Discretionary 0.1 9. Network Rail Infrastructure
Energy 0.1 Finance PLC 4.3
Other Assets Less Liabilities 3.1 10. European Investment Bank 4.3
========================================== ==========================================
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
4 AIM INTERNATIONAL TOTAL RETURN FUND
institutions could obtain temporary during the last few months of the fiscal The views and opinions expressed in
liquidity from the central bank. More year as long-term government bond yields management's discussion of Fund
recently, the Fed stepped up its lending fell by less than short-term government performance are those of Invesco Aim
by granting wider access to its funding, bond yields.(1) Advisors, Inc. These views and opinions
expanding the range of collateral for Fed are subject to change at any time based on
loans, and enlarging international swap In Europe, while our active yield curve factors such as market and economic
facilities to provide U.S. dollars to management contributed to relative conditions. These views and opinions may
foreign central banks. In addition, on performance during the first part of the not be relied upon as investment advice or
October 1, 2008, the U.S. Senate approved fiscal year, it was ineffective over the recommendations, or as an offer for a
the Troubled Assets Relief Program, which last few months of the period. particular security. The information is
included a comprehensive bailout plan to not a complete analysis of every aspect of
acquire up to $700 billion of illiquid Fluctuations in currency exchange rates any market, country, industry, security or
assets of U.S. commercial banks. Moreover, were a significant driver of the Fund`s the Fund. Statements of fact are from
central banks around the world cut performance over the period. Given the sources considered reliable, but Invesco
interest rates in a coordinated effort, deteriorating economic conditions in the Aim Advisors, Inc. makes no representation
trying to rescue global economies from the U.S., we actively managed the Fund's or warranty as to their completeness or
intensified financial crisis. exposure to the U.S. dollar. During the accuracy. Although historical performance
first few months of 2008, we maintained an is no guarantee of future results, these
During the reporting period, surging underweight in the U.S. dollar relative to insights may help you understand our
demand for liquidity along with growing the euro and Japanese yen. However, more investment management philosophy.
concerns about counterparty risk led to a recently, we moved to an overweight
significant sell-off in the credit position as the U.S. dollar began to gain See important Fund and index disclosures
markets.(1) Investors became more risk strength, especially relative to the euro. later in this report.
averse and continued to seek the Consequently, this strategy had a positive
stability, safety and liquidity of U.S. impact on relative performance. (1) Barclays Capital
Treasury securities and other short-term
government bonds. The result was a rally Our overweight exposure to the Japanese (2) U.S. Department of the Treasury
in U.S. Treasury and government security yen versus the U.S. Dollar was negative
prices with a signifi-cant decline in for performance, due to the appreciation RUSSEL MATTHEWS
yields and steeper yield curves in all of the U.S dollar relative to the yen
markets.(2) during the summer of 2008. In peripheral Portfolio manager, is lead manager of AIM
markets, while the Fund's overweight International Total Return Fund. Mr.
In this environment, we actively positions in the Australian dollar and the Matthews joined Invesco Ltd. in 2000. He
managed the Fund's duration to mitigate Canadian dollar were positive for relative earned a B.A. in economics and journalism
the impact of interest rate fluctuations performance, an overweight position in the from Rhodes University, South Africa, and
in different countries on the Fund's British pound detracted from returns. a Post Graduate diploma in management from
performance. During the first part of the The University of Cape Town.
reporting period, our underweight duration Throughout the reporting period, we
exposure in the U.S. relative to the maintained a fairly diversified portfolio MARK NASH
benchmark detracted from performance, as of corporate bonds and focused mainly on
U.S. Treasury yields declined in response investment-grade issues from developed Chartered Financial Analyst, portfolio
to the Fed's several rate cuts. While our regions. We also maintained a relatively manager, is co-manager of AIM
move to an overweight duration stance small allocation to high yield corporate International Total Return Fund. He joined
relative to the benchmark during the last bonds. While over the fiscal year we Invesco Ltd. in 2001. Mr. Nash earned a
few months was positive for performance, steadily reduced our positions in B.S. with honors in chemistry and a M.S.
it was not enough to offset the earlier corporate bonds globally, investment-grade in materials engineering from the
losses from our duration underweight in and high yield securities continued to University of Nottingham.
the U.S. underperform government issues as the
liquidity diminished and credit spreads
In Europe, we maintained a relative widened dramatically.(1) Consequently, our
overweight duration, expecting bond yields exposure to investment-grade and high
to decline because of deteriorating yield corporate bonds detracted from
economic fundamentals. As government bond relative performance.
yields declined, our duration exposure to
Europe benefited relative performance. Thank you for your continued investment
in AIM International Total Return Fund.
We used government bond futures,
including U.S. Treasury futures, to
actively manage duration and adjust the
Fund's interest rate exposure. In our
view, gaining an exposure to global bond
markets through bond futures is a more
effective way to employ the Fund's cash
for duration management purposes versus
buying cash bonds.
Over the period, the Fund was
positioned with a yield-curve-steepening
bias in the U.S. This positioning was
beneficial
5 AIM INTERNATIONAL TOTAL RETURN FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee contingent deferred sales charges. Index
comparable future results. results include reinvested dividends, but
they do not reflect sales charges.
The data shown in the chart include Performance of an index of funds reflects
reinvested distributions, applicable sales fund expenses and management fees;
charges and Fund expenses including performance of a market index does not.
management fees. Results for Class B Performance shown in the chart and
shares are calculated as if a hypothetical table(s) does not reflect deduction of
shareholder had liquidated his entire taxes a shareholder would pay on Fund
investment in the Fund at the close of the distributions or sale of Fund shares.
reporting period and paid the applicable
continued from page 8
OTHER INFORMATION accepted accounting principles require o Industry classifications used in this
adjustments to be made to the net report are generally according to the
o The Chartered Financial Analyst--REGIS- assets of the Fund at period end for Global Industry Classification
TERED TRADEMARK-- (CFA--REGISTERED financial reporting purposes, and as Standard, which was developed by and is
TRADEMARK--) designation is a globally such, the net asset values for the exclusive property and a service
recognized standard for measuring the shareholder transactions and the mark of MSCI Inc. and Standard &
competence and integrity of investment returns based on those net asset values Poor's.
professionals. may differ from the net asset values
and returns reported in the Financial
o The returns shown in management's Highlights.
discussion of Fund performance are
based on net asset values calculated
for shareholder transactions. Generally
6 AIM INTERNATIONAL TOTAL RETURN FUND
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- CLASS A, B AND C SHARES (OLDEST SHARE CLASSES WITH SALES CHARGES)
Fund and index data from 3/31/06
AIM International AIM International AIM International Barclays Capital Lipper
Total Return Fund- Total Return Fund- Total Return Fund- Global Aggregate International Income
Date Class A Shares Class B Shares Class C Shares ex-U.S. Index(1) Funds Index(1)
3/31/06 $ 9525 $10000 $10000 $10000 $10000
4/06 9913 10400 10400 10324 10192
5/06 10064 10542 10542 10547 10262
6/06 9954 10419 10419 10400 10203
7/06 10024 10487 10487 10480 10263
8/06 10095 10555 10555 10577 10355
9/06 10013 10462 10462 10517 10304
10/06 10110 10553 10564 10639 10433
11/06 10365 10823 10823 10985 10641
12/06 10181 10625 10625 10788 10559
1/07 10064 10493 10494 10618 10412
2/07 10287 10717 10728 10871 10627
3/07 10319 10751 10751 10913 10687
4/07 10437 10863 10863 11077 10799
5/07 10251 10659 10659 10850 10671
6/07 10197 10602 10592 10793 10651
7/07 10394 10787 10786 11094 10820
8/07 10473 10869 10868 11228 10844
9/07 10840 11251 11239 11586 11200
10/07 11038 11446 11444 11826 11386
11/07 11195 11599 11597 12055 11473
12/07 11128 11516 11514 11978 11485
1/08 11508 11910 11907 12384 11862
2/08 11806 12208 12205 12702 12127
3/08 12112 12512 12520 13095 12288
4/08 11668 12042 12050 12719 12061
5/08 11504 11871 11870 12555 11933
6/08 11484 11839 11838 12577 11908
7/08 11546 11893 11902 12611 11921
8/08 11143 11476 11474 12196 11575
9/08 10945 11271 11269 11835 11243
10/08 10349 10352 10650 11312 10762
====================================================================================================================================
(1) Lipper Inc.
========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/08, including maximum As of 9/30/08, the most recent calendar
applicable sales charges quarter-end, including maximum applicable
sales charges
CLASS A SHARES
Inception (3/31/06) 1.34% CLASS A SHARES
1 Year -10.70 Inception (3/31/06) 3.66%
1 Year -3.87
CLASS B SHARES
Inception (3/31/06) 1.35% CLASS B SHARES
1 Year -11.41 Inception (3/31/06) 3.78%
1 Year -4.61
CLASS C SHARES
Inception (3/31/06) 2.46% CLASS C SHARES
1 Year -7.84 Inception (3/31/06) 4.90%
1 Year -0.69
CLASS Y SHARES ==========================================
Inception 3.27%
1 Year -6.22 REPORT THAT ARE BASED ON EXPENSES INCURRED
========================================== DURING THE PERIOD COVERED BY THIS REPORT.
CLASS Y SHARES' INCEPTION DATE IS OCTOBER CLASS A SHARE PERFORMANCE REFLECTS THE
3, 2008; RETURNS SINCE THAT DATE ARE MAXIMUM 4.75% SALES CHARGE, AND CLASS B
ACTUAL RETURNS. ALL OTHER RETURNS ARE AND CLASS C SHARE PERFORMANCE REFLECTS THE
BLENDED RETURNS OF ACTUAL CLASS Y SHARE APPLICABLE CONTINGENT DEFERRED SALES
PERFORMANCE AND RESTATED CLASS A SHARE CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
PERFORMANCE (FOR PERIODS PRIOR TO THE CDSC ON CLASS B SHARES DECLINES FROM 5%
INCEPTION DATE OF CLASS Y SHARES) AT NET BEGINNING AT THE TIME OF PURCHASE TO 0% AT
ASSET VALUE. THE RESTATED CLASS A SHARE THE BEGINNING OF THE SEVENTH YEAR. THE
PERFORMANCE REFLECTS THE RULE 12B-1 FEES CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
APPLICABLE TO CLASS A SHARES AS WELL AS YEAR AFTER PURCHASE. CLASS Y SHARES DO NOT
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS HAVE A FRONT-END SALES CHARGE OR A CDSC;
RECEIVED BY CLASS A SHARES. CLASS A SHARES THEREFORE, PERFORMANCE IS AT NET ASSET
INCEPTION DATE IS MARCH 31, 2006. VALUE.
THE PERFORMANCE DATA QUOTED REPRESENT THE PERFORMANCE OF THE FUND'S SHARE
PAST PERFORMANCE AND CANNOT GUARANTEE CLASSES WILL DIFFER PRIMARILY DUE TO
COMPARABLE FUTURE RESULTS; CURRENT DIFFERENT SALES CHARGE STRUCTURES AND
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CLASS EXPENSES.
VISIT INVESCOAIM.COM FOR THE MOST RECENT
MONTH-END PERFORMANCE. PERFORMANCE FIGURES A REDEMPTION FEE OF 2% WILL BE IMPOSED
REFLECT REINVESTED DISTRIBUTIONS, CHANGES ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
IN NET ASSET VALUE AND THE EFFECT OF THE THE FUND WITHIN 31 DAYS OF PURCHASE.
MAXIMUM SALES CHARGE UNLESS OTHERWISE EXCEPTIONS TO THE REDEMPTION FEE ARE
STATED. INVESTMENT RETURN AND PRINCIPAL LISTED IN THE FUND'S PROSPECTUS.
VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL SHARES. HAD THE ADVISOR NOT WAIVED FEES AND/OR
REIMBURSED EXPENSES, PERFORMANCE WOULD
THE NET ANNUAL FUND OPERATING EXPENSE HAVE BEEN LOWER.
RATIO SET FORTH IN THE MOST RECENT FUND
PROSPECTUS AS OF THE DATE OF THIS REPORT (1) Total annual operating expenses less
FOR CLASS A, CLASS B, CLASS C AND CLASS Y any contractual fee waivers and/or
SHARES WAS 1.12%, 1.87%, 1.87% AND 0.87%, expense reimbursements by the advisor
RESPECTIVELY.(1) THE TOTAL ANNUAL FUND in effect through at least June 30,
OPERATING EXPENSE RATIO SET FORTH IN THE 2009. See current prospectus for more
MOST RECENT FUND PROSPECTUS AS OF THE DATE information.
OF THIS REPORT FOR CLASS A, CLASS B, CLASS
C AND CLASS Y SHARES WAS 2.07%, 2.82%,
2.82% AND 1.82%, RESPECTIVELY. THE EXPENSE
RATIOS PRESENTED ABOVE MAY VARY FROM THE
EXPENSE RATIOS PRESENTED IN OTHER SECTIONS
OF THIS
7 AIM INTERNATIONAL TOTAL RETURN FUND
AIM INTERNATIONAL TOTAL RETURN FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE TOTAL RETURN.
o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES o Lower rated securities may be more o The Fund may engage in active and
susceptible to real or perceived frequent trading of portfolio
o Effective September 30, 2003, only adverse economic and competitive securities to achieve its investment
previously established qualified plans industry conditions, and the secondary objective. If a fund does trade in this
are eligible to purchase Class B shares markets in which lower rated securities way, it may incur increased costs,
of any AIM fund. are traded may be less liquid than which can lower the actual return of
higher grade securities. The loans in the fund. Active trading may also
o Class Y shares are available to only which the Fund may invest are typically increase short term gains and losses,
certain investors. Please see the noninvestment-grade and involve a which may affect taxes that must be
prospectus for more information. greater risk of default on interest and paid.
principal payments and of price changes
PRINCIPAL RISKS OF INVESTING IN THE FUND due to the changes in the credit ABOUT INDEXES USED IN THIS REPORT
quality of the issuer.
o Since a large percentage of the Fund's o The BARCLAYS CAPITAL GLOBAL AGGREGATE
assets may be invested in securities of o Interest rate risk refers to the risk EX U.S. INDEX provides a broad-based
a limited number of companies, each that bond prices generally fall as measure of the global investment-grade
investment has a greater effect on the interest rates rise and vice versa. fixed income markets excluding the U.S.
Fund's overall performance, and any market.
change in the value of those securities o The Fund may use enhanced investment
could significantly affect the value of techniques such as leveraging and o The LIPPER INTERNATIONAL INCOME FUNDS
your investment in the Fund. derivatives. Leveraging entails risks INDEX is an equally weighted
such as magnifying changes in the value representation of the largest funds in
o Credit risk is the risk of loss on an of the portfolio's securities. the Lipper International Income Funds
investment due to the deterioration of Derivatives are subject to counterparty category. These funds state in their
an issuer's financial health. Such a risk-the risk that the other party prospectus that they invest primarily
deterioration of financial health may will not complete the transaction with in U.S. dollar and non-U.S. dollar debt
result in a reduction of the credit the fund. securities of issuers located in at
rating of the issuer's securities and least three countries, excluding the
may lead to the issuer's inability to o There is no guarantee that the United States, except in periods of
honor its contractual obligations, investment techniques and risk analysis market weakness.
including making timely payment of used by the Fund's portfolio managers
interest and principal. will produce the desired results. o The Fund is not managed to track the
performance of any particular index,
o The Fund is subject to o The prices of securities held by the including the indexes defined here, and
currency/exchange rate risk because it fund may decline in response to market consequently, the performance of the
may buy or sell currencies other than risks. Fund may deviate significantly from the
the U.S. dollar. performance of the indexes.
o The Fund may invest in mortgage- and
o Investing in developing countries can asset-backed securities. These o A direct investment cannot be made in
add additional risk, such as high rates securities are subject to prepayment or an index. Unless otherwise indicated,
of inflation or sharply devalued call risk, which is the risk that index results include reinvested
currencies against the U.S. dollar. payments from the borrower may be dividends, and they do not reflect
Transaction costs are often higher, and received earlier or later than expected sales charges. Performance of an index
there may be delays in settlement due to changes in the rate at which the of funds reflects fund expenses;
procedures. underlying loans are prepaid. performance of a market index does not.
o Foreign securities have additional o Sovereign debt securities are subject
risks, including exchange rate changes, to the additional risk that-under some
political and economic upheaval, political, diplomatic, social or
relative lack of information, economic circumstances-some developing
relatively low market liquidity, and countries that issue lower quality debt
the potential lack of strict financial securities may be unable or unwilling
and accounting controls and standards. to make principal or interest payments
as they come due. continued on page 6
======================================================================================= ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares AUBAX
======================================================================================= Class B Shares AUBBX
Class C Shares AUBCX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class Y Shares AUBYX
==========================================
8 AIM INTERNATIONAL TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS(a)
October 31, 2008
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------
NON U.S. DOLLAR DENOMINATED BONDS & NOTES-96.89%(b)
AUSTRIA-7.13%
Austria Government,
Medium-Term Euro Notes,
3.80%, 10/20/13(c) EUR 3,650,000 $ 4,627,935
- -----------------------------------------------------------------------------------
Pfandbriefstelle der Oesterreichischen Landes-
Hypothekenbanken-Series 2, Tranche 2, Sr. Unsec.
Unsub. Medium-Term Euro Notes,
1.60%, 02/15/11 JPY 210,000,000 2,163,961
===================================================================================
6,791,896
===================================================================================
BELGIUM-1.93%
Belgium Government-Series 48,
Sr. Euro Bonds,
4.00%, 03/28/22 EUR 1,560,000 1,840,578
===================================================================================
BERMUDA-0.10%
Central European Media Enterprises Ltd.-REGS,
Sr. Sec. Gtd. Euro Notes,
8.25%, 05/15/12
(Acquired 10/15/07; Cost $149,562)(c) EUR 100,000 90,482
===================================================================================
BRAZIL-0.37%
Brazilian Government,
Unsec. Unsub. Euro Bonds,
9.50%, 01/24/11 EUR 160,000 203,945
- -----------------------------------------------------------------------------------
Unsec. Unsub. Global Bonds,
7.38%, 02/03/15 EUR 130,000 147,034
===================================================================================
350,979
===================================================================================
CANADA-2.82%
Canadian Government,
Bonds,
4.50%, 06/01/15 CAD 810,000 718,063
- -----------------------------------------------------------------------------------
5.50%, 06/01/09 CAD 290,000 244,708
- -----------------------------------------------------------------------------------
Notes,
4.00%, 06/01/17 CAD 2,035,000 1,723,434
===================================================================================
2,686,205
===================================================================================
CHINA-1.09%
China Government,
Unsec. Euro Bonds,
4.25%, 10/28/14 EUR 880,000 1,033,997
===================================================================================
FINLAND-2.77%
Finland Government,
Euro Bonds,
5.00%, 04/25/09 EUR 2,050,000 2,638,238
===================================================================================
FRANCE-11.39%
Dexia Municipal Agency,
Sr. Sec. Medium-Term Euro Notes,
1.80%, 05/09/17 JPY 550,000,000 4,875,802
- -----------------------------------------------------------------------------------
Electricite de France,
Sr. Unsec. Unsub. Medium-Term Euro Notes,
5.00%, 05/30/14 EUR 400,000 508,275
- -----------------------------------------------------------------------------------
France Government Bond OAT,
Euro Bonds,
1.60%, 07/25/15 EUR 1,870,000 2,409,819
- -----------------------------------------------------------------------------------
6.50%, 04/25/11 EUR 1,950,000 2,689,490
- -----------------------------------------------------------------------------------
Lafarge S.A.,
Sr. Unsec. Unsub. Medium-Term Euro Notes,
5.75%, 05/27/11 EUR 250,000 305,760
- -----------------------------------------------------------------------------------
Rhodia S.A.-REGS,
Sr. Unsec. Floating Rate Euro Notes,
8.07%, 10/15/13(c)(d) EUR 70,000 57,539
===================================================================================
10,846,685
===================================================================================
GERMANY-11.84%
Bayerische Landesbank-Series 103, Tranche 1, Sr.
Unsec. Unsub. Medium-Term Euro Notes,
1.40%, 04/22/13 JPY 230,000,000 2,362,294
- -----------------------------------------------------------------------------------
Bundesrepublik Deutschland
-Series 00, Euro Bonds,
5.50%, 01/04/31 EUR 4,360,000 6,190,301
- -----------------------------------------------------------------------------------
-Series 06, Euro Bonds,
3.75%, 01/04/17 EUR 910,000 1,149,281
- -----------------------------------------------------------------------------------
Kreditanstalt fuer Wiederaufbau,
Sr. Unsec. Gtd. Unsub. Global Notes,
2.05%, 02/16/26 JPY 4,000,000 37,963
- -----------------------------------------------------------------------------------
Landwirtschaftliche Rentenbank,
Unsec. Gtd. Unsub. Medium-Term Euro Notes,
1.38%, 04/25/13 JPY 150,000,000 1,538,958
===================================================================================
11,278,797
===================================================================================
GREECE-3.42%
Hellenic Republic Government,
Euro Bonds,
5.25%, 05/18/12 EUR 2,500,000 3,260,705
===================================================================================
HUNGARY-0.09%
Agrokor,
Sr. Sec. Gtd. Euro Notes,
7.00%, 11/23/11 EUR 100,000 88,889
===================================================================================
IRELAND-2.43%
Depfa ACS Bank-Series 686, Tranche 1, Sr. Sec.
Unsub. Medium-Term Euro Notes,
1.65%, 12/20/16 JPY 270,000,000 2,003,414
- -----------------------------------------------------------------------------------
Irish Life Assurance PLC,
Jr. Unsec. Sub. Euro Bonds,
5.25%(e) EUR 300,000 202,629
- -----------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM INTERNATIONAL TOTAL RETURN FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------
IRELAND-(CONTINUED)
TransCapitallnvest Ltd. for OJSC AK Transneft-
REGS,
Sr. Sec. Loan Participation Euro Notes,
5.38%, 06/27/12 (Acquired 10/23/07; Cost
$209,850)(c) EUR 150,000 $ 111,351
===================================================================================
2,317,394
===================================================================================
ITALY-3.11%
Intesa Sanpaolo S.p.A,
Sr. Unsec. Medium-Term Euro Notes,
5.00%, 04/28/11 EUR 400,000 515,602
- -----------------------------------------------------------------------------------
Italy Buoni Poliennali Del Tesoro,
Euro Bonds,
5.75%, 02/01/33 EUR 250,000 331,430
- -----------------------------------------------------------------------------------
4.50%, 08/01/10 EUR 1,630,000 2,111,723
===================================================================================
2,958,755
===================================================================================
JAPAN-10.24%
Development Bank of Japan,
Unsec. Gtd. Global Bonds,
1.75%, 03/17/17 JPY 570,000,000 5,920,004
- -----------------------------------------------------------------------------------
Japan Finance Corp. for Municipal Enterprises,
Unsec. Gtd. Unsub. Global Bonds,
1.55%, 02/21/12 JPY 370,000,000 3,835,899
===================================================================================
9,755,903
===================================================================================
MEXICO-0.24%
Mexico Government,
Sr. Unsec. Unsub. Medium-Term Global Notes,
5.38%, 06/10/13 EUR 100,000 112,083
- -----------------------------------------------------------------------------------
-Series A, Medium-Term Euro Notes,
4.25%, 06/16/15 EUR 120,000 120,431
===================================================================================
232,514
===================================================================================
NETHERLANDS-5.84%
Netherlands Government,
Euro Bonds,
5.00%, 07/15/12 EUR 690,000 924,073
- -----------------------------------------------------------------------------------
3.75%, 07/15/09 EUR 2,670,000 3,417,463
- -----------------------------------------------------------------------------------
Rabobank Nederland N.V.-Series 1691A, Tranche 1,
Sr. Unsec. Unsub. Medium-Term Euro Notes,
1.05%, 01/22/10 JPY 100,000,000 1,018,264
- -----------------------------------------------------------------------------------
Royal KPN N.V.-Series 12,
Tranche 1, Sr. Unsec. Unsub. Medium-Term Euro
Notes,
4.75%, 01/17/17 EUR 200,000 204,824
===================================================================================
5,564,624
===================================================================================
NORWAY-1.41%
Eksportfinans A.S.,
Medium-Term Global Notes,
1.60%, 03/20/14 JPY 130,000,000 1,345,320
===================================================================================
PORTUGAL-0.69%
Portugal Obrigacoes do Tesouro O.T.,
Euro Bonds,
4.10%, 04/15/37 EUR 590,000 658,510
===================================================================================
SPAIN-6.06%
Caixa d'Estalvis de Catalunya,
Sec. Mortgage-Backed Euro Notes,
3.50%, 03/07/16 EUR 1,000,000 1,135,371
- -----------------------------------------------------------------------------------
Spanish Government,
Euro Bonds,
4.20%, 07/30/13 EUR 1,290,000 1,675,172
- -----------------------------------------------------------------------------------
4.20%, 01/31/37 EUR 370,000 412,788
- -----------------------------------------------------------------------------------
5.15%, 07/30/09 EUR 1,970,000 2,546,650
===================================================================================
5,769,981
===================================================================================
SUPRANATIONAL-8.10%
Asian Development Bank-Series 339-00-1, Sr. Unsec.
Medium-Term Global Notes,
2.35%, 06/21/27 JPY 360,000,000 3,655,021
- -----------------------------------------------------------------------------------
European Investment Bank,
Sr. Unsec. Unsub. Global Bonds,
1.40%, 06/20/17 JPY 410,000,000 4,056,602
===================================================================================
7,711,623
===================================================================================
SWEDEN-0.94%
Swedish Government-Series 1046,
Domestic Bonds,
5.50%, 10/08/12 SEK 6,360,000 894,456
===================================================================================
SWITZERLAND-0.55%
Credit Suisse,
Sr. Unsec. Medium-Term Euro Notes,
6.13%, 08/05/13 EUR 400,000 527,901
===================================================================================
UNITED KINGDOM-12.73%
Bank of Scotland PLC-Series 1646/08,
Sr. Unsec. Gtd. Unsub. Medium-Term
Euro Notes,
5.63%, 05/23/13 EUR 400,000 488,812
- -----------------------------------------------------------------------------------
BAT International Finance PLC,
Sr. Unsec. Gtd. Unsub. Medium-Term
Euro Notes,
5.38%, 06/29/17 EUR 400,000 427,106
- -----------------------------------------------------------------------------------
British Telecommunications PLC-Series 20081,
Tranche 1, Sr. Unsec. Unsub. Medium-Term Euro
Notes,
6.50%, 07/07/15 EUR 750,000 913,445
- -----------------------------------------------------------------------------------
Imperial Tobacco Finance PLC-Series 19, Tranche 1,
Sr. Unsec. Gtd. Unsub. Medium-Term Euro Notes,
4.38%, 11/22/13 EUR 400,000 410,748
- -----------------------------------------------------------------------------------
Network Rail Infrastructure Finance PLC-Series 41,
Tranche 1, Sec. Gtd. Medium-Term Euro Notes,
4.88%, 03/07/12 GBP 2,500,000 4,119,334
- -----------------------------------------------------------------------------------
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM INTERNATIONAL TOTAL RETURN FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Royal Bank of Scotland Group PLC-Series 2958,
Tranche 1, Sr. Unsec. Unsub. Medium-Term Euro
Notes,
5.25%, 05/15/13 EUR 300,000 $ 369,091
- -----------------------------------------------------------------------------------
Tesco PLC-Series 62, Tranche 1,
Sr. Unsec. Medium-Term Euro Notes,
5.63%, 09/12/12 EUR 400,000 514,324
- -----------------------------------------------------------------------------------
United Kingdom Treasury Bonds,
5.00%, 03/07/12 GBP 1,720,000 2,887,000
- -----------------------------------------------------------------------------------
4.50%, 03/07/13 GBP 1,210,000 1,990,970
===================================================================================
12,120,830
===================================================================================
UNITED STATES-1.60%
General Electric Capital Corp.,
Sr. Unsec. Unsub. Medium-Term Euro Notes,
0.75%, 02/05/09 JPY 50,000,000 505,109
- -----------------------------------------------------------------------------------
IBM Corp.,
Medium-Term Euro Notes,
6.63%, 01/30/14 EUR 550,000 707,404
- -----------------------------------------------------------------------------------
Wachovia Corp.-Series E, Tranche 1,
Unsec. Sub. Medium-Term Euro Notes,
4.38%, 11/27/18 EUR 400,000 307,937
===================================================================================
1,520,450
===================================================================================
TOTAL INVESTMENTS-96.89% (Cost $98,955,781) 92,285,712
===================================================================================
OTHER ASSETS LESS LIABILITIES-3.11% 2,967,003
===================================================================================
NET ASSETS-100.00% $95,252,715
___________________________________________________________________________________
===================================================================================
</Table>
Investment Abbreviations:
<Table>
CAD - Canadian Dollar
EUR - Euro
GBP - British Pound Sterling
Gtd. - Guaranteed
JPY - Japanese Yen
Jr. - Junior
REGS - Regulation S
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
Sub. - Subordinated
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) Foreign denominated security. Principal amount is denominated in currency
indicated.
(c) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at October 31, 2008 was $4,887,307, which represented 5.13% of the Fund's
Net Assets.
(d) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on October 31, 2008.
(e) Perpetual bond with no specified maturity date.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM INTERNATIONAL TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$98,955,781) $ 92,285,712
- ------------------------------------------------------
Foreign currencies, at value (Cost
$4,687,286) 4,696,285
- ------------------------------------------------------
Receivables for:
Investments sold 4,762,844
- ------------------------------------------------------
Fund shares sold 69,066
- ------------------------------------------------------
Dividends and Interest 1,413,275
- ------------------------------------------------------
Deposits with brokers for open
futures contracts 312,021
- ------------------------------------------------------
Fund expenses absorbed 20,772
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 4,325
- ------------------------------------------------------
Other assets 29,306
======================================================
Total assets 103,593,606
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 5,034,718
- ------------------------------------------------------
Fund shares reacquired 2,271,985
- ------------------------------------------------------
Amount due custodian 742,771
- ------------------------------------------------------
Foreign currency contracts
outstanding 55,746
- ------------------------------------------------------
Variation margin 77,996
- ------------------------------------------------------
Accrued fees to affiliates 60,667
- ------------------------------------------------------
Accrued other operating expenses 90,953
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 6,055
======================================================
Total liabilities 8,340,891
======================================================
Net assets applicable to shares
outstanding $ 95,252,715
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $102,628,383
- ------------------------------------------------------
Undistributed net investment income (487,087)
- ------------------------------------------------------
Undistributed net realized gain (loss) (100,222)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (6,788,359)
======================================================
$ 95,252,715
______________________________________________________
======================================================
NET ASSETS:
Class A $ 39,418,292
______________________________________________________
======================================================
Class B $ 11,431,567
______________________________________________________
======================================================
Class C $ 16,262,171
______________________________________________________
======================================================
Class Y $ 24,064
______________________________________________________
======================================================
Institutional Class $ 28,116,621
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 3,956,647
______________________________________________________
======================================================
Class B 1,149,810
______________________________________________________
======================================================
Class C 1,635,253
______________________________________________________
======================================================
Class Y 2,415
______________________________________________________
======================================================
Institutional Class 2,822,036
______________________________________________________
======================================================
Class A:
Net asset value per share $ 9.96
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $9.96 divided
by 95.25%) $ 10.46
______________________________________________________
======================================================
Class B:
Net asset value and offering price
per share $ 9.94
______________________________________________________
======================================================
Class C:
Net asset value and offering price
per share $ 9.94
______________________________________________________
======================================================
Class Y:
Net asset value and offering price
per share $ 9.96
______________________________________________________
======================================================
Institutional Class:
Net asset value and offering price
per share $ 9.96
______________________________________________________
======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM INTERNATIONAL TOTAL RETURN FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<Table>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $7,438) $ 3,150,176
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds 69,659
================================================================================================
Total investment income 3,219,835
================================================================================================
EXPENSES:
Advisory fees 641,966
- ------------------------------------------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------------------------------------------
Custodian fees 43,758
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 88,372
- ------------------------------------------------------------------------------------------------
Class B 99,850
- ------------------------------------------------------------------------------------------------
Class C 177,247
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C and Y 151,712
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 3,811
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 18,108
- ------------------------------------------------------------------------------------------------
Other 162,224
================================================================================================
Total expenses 1,437,048
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (235,004)
================================================================================================
Net expenses 1,202,044
================================================================================================
Net investment income 2,017,791
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (1,586,145)
- ------------------------------------------------------------------------------------------------
Foreign currencies (1,804,296)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts (220,326)
- ------------------------------------------------------------------------------------------------
Futures contracts (902,619)
================================================================================================
(4,513,386)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (8,316,216)
- ------------------------------------------------------------------------------------------------
Foreign currencies (148,382)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts (52,630)
- ------------------------------------------------------------------------------------------------
Futures contracts 42,085
================================================================================================
(8,475,143)
================================================================================================
Net realized and unrealized gain (loss) (12,988,529)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(10,970,738)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM INTERNATIONAL TOTAL RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,017,791 $ 875,958
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) (4,513,386) 1,281,500
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (8,475,143) 1,368,852
=========================================================================================================
Net increase (decrease) in net assets resulting from operations (10,970,738) 3,526,310
=========================================================================================================
Distributions to shareholders from net investment income:
Class A (349,769) (81,558)
- ---------------------------------------------------------------------------------------------------------
Class B (101,092) (30,031)
- ---------------------------------------------------------------------------------------------------------
Class C (114,872) (18,901)
- ---------------------------------------------------------------------------------------------------------
Institutional Class (1,186,641) (571,737)
=========================================================================================================
Total distributions from net investment income (1,752,374) (702,227)
=========================================================================================================
Return of Capital:
Class A (631,371) --
- ---------------------------------------------------------------------------------------------------------
Class B (107,655) --
- ---------------------------------------------------------------------------------------------------------
Class C (197,492) --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (712,570) --
=========================================================================================================
Total return of capital (1,649,088) --
=========================================================================================================
Share transactions-net:
Class A 39,317,503 2,604,594
- ---------------------------------------------------------------------------------------------------------
Class B 10,746,056 243,905
- ---------------------------------------------------------------------------------------------------------
Class C 17,196,426 (447,829)
- ---------------------------------------------------------------------------------------------------------
Class Y 25,438 --
- ---------------------------------------------------------------------------------------------------------
Institutional Class (4,253,902) 14,377,227
=========================================================================================================
Net increase in net assets resulting from share transactions 63,031,521 16,777,897
=========================================================================================================
Net increase in net assets 48,659,321 19,601,980
_________________________________________________________________________________________________________
=========================================================================================================
NET ASSETS:
Beginning of year 46,593,394 26,991,414
=========================================================================================================
End of year (includes undistributed net investment income of $(487,087)
and $1,731,748, respectively) $ 95,252,715 $46,593,394
_________________________________________________________________________________________________________
=========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
14 AIM INTERNATIONAL TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM International Total Return Fund (the "Fund") is a series portfolio of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware statutory
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of nine separate series portfolios, each authorized to issue an unlimited number
of shares of beneficial interest. The 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 to provide total return.
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.
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.
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.
15 AIM INTERNATIONAL TOTAL RETURN 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 realized and unrealized capital gains and losses to a
class based on the relative net assets of each class. The Fund allocates
income to a class based on the relative value of the settled shares of
each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, 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. 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. 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.
16 AIM INTERNATIONAL TOTAL RETURN FUND
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.
L. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts.
Initial margin deposits required upon entering into futures contracts are
satisfied by the segregation of specific securities as collateral for the
account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contracts are open, changes in
the value of the contracts are recognized as unrealized gains or losses by
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.
M. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with 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 0.65%
- -------------------------------------------------------------------
Next $250 million 0.59%
- -------------------------------------------------------------------
Next $500 million 0.565%
- -------------------------------------------------------------------
Next $1.5 billion 0.54%
- -------------------------------------------------------------------
Next $2.5 billion 0.515%
- -------------------------------------------------------------------
Next $5 billion 0.49%
- -------------------------------------------------------------------
Over $10 billion 0.465%
___________________________________________________________________
===================================================================
</Table>
Under the terms of a master sub-advisory agreement 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).
Previously, under the terms of a master sub-advisory agreement between the
Advisor and Invesco Asset Management Limited, the Advisor paid Invesco Asset
Management Limited 40% of the amount of the Advisor's compensation on sub-
advised assets. This agreement terminated on May 1, 2008.
The Advisor has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C, Class Y
and Institutional Class shares to 1.10%, 1.85%, 1.85%, 0.85% and 0.85% of
average daily net assets, respectively, through at least June 30, 2009. In
determining the Advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with Invesco Ltd. ("Invesco")
described more fully below, the expense offset arrangements from which the Fund
may benefit are in the form of credits that the Fund receives from banks where
the Fund or its transfer agent has deposit accounts in which it holds uninvested
cash. These credits are used to pay certain expenses incurred by the Fund.
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash in such affiliated money market
funds.
For the year ended October 31, 2008, the Advisor waived advisory fees $77,045
and reimbursed class level expenses of $83,573, $23,607, $41,906, $1 and $3,811
expenses of Class A, Class B, Class C, Class Y and Institutional Class shares,
respectively.
At the request of the Trustees of the Trust, 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
17 AIM INTERNATIONAL TOTAL RETURN FUND
reimbursement are included in the Statement of Operations. For the year ended
October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $247.
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 October 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 October 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 October 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 October 31, 2008, IADI
advised the Fund that IADI retained $32,733 in front-end sales commissions from
the sale of Class A shares and $548, $17,118 and $17,304 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--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 October 31, 2008, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $4,814.
NOTE 4--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 October 31, 2008, the Fund paid legal fees of $2,901 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--CASH BALANCES
The Fund may borrow for leveraging in an amount up to 5% of the Fund's total
assets (excluding the amount borrowed) at the time the borrowing is made. In
doing so, 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. A Fund may not purchase additional securities when any borrowings
from banks exceeds 5% of the Fund's total assets.
18 AIM INTERNATIONAL TOTAL RETURN FUND
NOTE 6--FOREIGN CURRENCY CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS
- ------------------------------------------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT ----------------------------------------- UNREALIZED
DATE DELIVER RECEIVE VALUE APPRECIATION
- ------------------------------------------------------------------------------------------------------------------
01/07/09 EUR 1,160,000 USD 1,577,020 $1,475,819 $ 101,201
- ------------------------------------------------------------------------------------------------------------------
01/07/09 EUR 790,000 USD 1,062,301 1,005,084 57,217
- ------------------------------------------------------------------------------------------------------------------
01/07/09 EUR 968,147 USD 1,250,000 1,231,733 18,267
- ------------------------------------------------------------------------------------------------------------------
01/07/09 GBP 614,154 EUR 790,000 1,005,084 20,704
- ------------------------------------------------------------------------------------------------------------------
01/07/09 USD 2,461,599 JPY 250,000,000 2,546,139 84,540
- ------------------------------------------------------------------------------------------------------------------
01/07/09 USD 2,078,179 JPY 210,000,000 2,138,756 60,577
==================================================================================================================
$ 342,506
==================================================================================================================
<Caption>
CONTRACT TO UNREALIZED
SETTLEMENT ----------------------------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------
01/07/09 EUR 660,000 USD 838,901 $ 839,690 $ (789)
- ------------------------------------------------------------------------------------------------------------------
01/07/09 JPY 417,000,000 USD 4,047,365 4,246,959 (199,594)
- ------------------------------------------------------------------------------------------------------------------
01/07/09 JPY 310,000,000 USD 3,121,224 3,157,211 (35,987)
- ------------------------------------------------------------------------------------------------------------------
01/07/09 USD 1,592,100 EUR 1,160,000 1,475,819 (116,281)
- ------------------------------------------------------------------------------------------------------------------
01/07/09 USD 717,781 JPY 66,000,000 672,180 (45,601)
==================================================================================================================
$(398,252)
==================================================================================================================
Total open foreign
currency contracts $ (55,746)
==================================================================================================================
</Table>
Currency Abbreviations:
<Table>
EUR - Euro
GBP - British Pound Sterling
JPY - Japanese Yen
USD - U.S. Dollar
</Table>
NOTE 7--FUTURES CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FUTURES CONTRACTS
- -------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF MONTH/ APPRECIATION
CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
Canada 10 Year Bonds 17 December-08/Long $ 1,647,765 $(33,802)
- -------------------------------------------------------------------------------------------------------------------------
Long Gilt 38 December-08/Long 6,803,432 37,459
- -------------------------------------------------------------------------------------------------------------------------
U.S. Long Bonds 21 December-08/Long 2,375,625 (37,743)
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 2 Year Notes 23 December-08/Long 4,941,047 14,375
- -------------------------------------------------------------------------------------------------------------------------
Subtotal $15,767,869 $(19,711)
- -------------------------------------------------------------------------------------------------------------------------
Euro-Bonds 25 December-08/Short (3,627,337) 25,553
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 18 December-08/Short (2,038,641) 2,109
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 12 December-08/Short (1,356,938) 33,000
- -------------------------------------------------------------------------------------------------------------------------
Subtotal $(7,022,916) $ 60,662
=========================================================================================================================
Total $ 8,744,953 $ 40,951
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
OCTOBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -----------------------------------------------------------------------------------------------------
Ordinary income $1,752,374 $702,227
- -----------------------------------------------------------------------------------------------------
Return of Capital 1,649,088 --
=====================================================================================================
Total distributions $3,401,462 $702,227
_____________________________________________________________________________________________________
=====================================================================================================
</Table>
19 AIM INTERNATIONAL TOTAL RETURN FUND
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments $ (7,073,330)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (211,467)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (7,745)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (83,126)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 102,628,383
================================================================================================
Total net assets $ 95,252,715
________________________________________________________________________________________________
================================================================================================
</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,
deferral of losses on certain straddles, the realization for tax purposes of
unrealized gains on certain foreign currency contracts and futures contracts.
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 utilized $233,696 of capital loss carryforward in the current period
to offset net realized capital gain for federal income tax purposes. The Fund
has a capital loss carryforward as of October 31, 2008 which expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
October 31, 2015 $83,126
_______________________________________________________________________________________________
===============================================================================================
</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 October 31, 2008 was $255,680,263 and
$196,483,291, respectively. During the same period, purchases and sales of U.S.
Treasury obligations were $4,608,603 and $4,655,950. 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 $ 2,610,578
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (9,683,908)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(7,073,330)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $99,359,042.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, net operating losses and return of capital, on October 31, 2008,
undistributed net investment income was decreased by $835,164, undistributed net
realized gain (loss) was increased by $4,726,207 and shares of beneficial
interest decreased by $3,891,043. This reclassification had no effect on the net
assets of the Fund.
20 AIM INTERNATIONAL TOTAL RETURN FUND
NOTE 11--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------
2008(a) 2007
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Sold:
Class A 6,412,511 $ 72,336,768 475,993 $ 5,082,041
- -----------------------------------------------------------------------------------------------------------------
Class B 1,630,848 18,302,435 156,531 1,660,568
- -----------------------------------------------------------------------------------------------------------------
Class C 3,235,713 36,733,961 184,184 1,989,022
- -----------------------------------------------------------------------------------------------------------------
Class Y(b) 2,501 26,337 -- --
- -----------------------------------------------------------------------------------------------------------------
Institutional Class 409,934 4,556,953 1,460,210 15,319,071
=================================================================================================================
Issued as reinvestment of dividends:
Class A 79,107 862,060 6,707 70,917
- -----------------------------------------------------------------------------------------------------------------
Class B 16,797 181,836 2,134 22,496
- -----------------------------------------------------------------------------------------------------------------
Class C 23,652 256,244 1,353 14,280
- -----------------------------------------------------------------------------------------------------------------
Institutional Class 175,775 1,899,210 54,099 571,737
=================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 149,759 1,649,879 24,061 256,680
- -----------------------------------------------------------------------------------------------------------------
Class B (150,105) (1,649,879) (24,111) (256,680)
=================================================================================================================
Reacquired:(c)
Class A(b) (3,243,428) (35,531,204) (268,139) (2,805,044)
- -----------------------------------------------------------------------------------------------------------------
Class B (562,336) (6,088,336) (114,167) (1,182,479)
- -----------------------------------------------------------------------------------------------------------------
Class C (1,803,320) (19,793,779) (234,880) (2,451,131)
- -----------------------------------------------------------------------------------------------------------------
Class Y(b) (86) (899) -- --
- -----------------------------------------------------------------------------------------------------------------
Institutional Class (979,286) (10,710,065) (142,430) (1,513,581)
=================================================================================================================
Net increase in share activity 5,398,036 $ 63,031,521 1,581,545 $16,777,897
_________________________________________________________________________________________________________________
=================================================================================================================
</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 11% 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, 31% 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 1,503 $ 15,837
-------------------------------------------------------------------------------------------------
Class A (1,503) (15,837)
_________________________________________________________________________________________________
=================================================================================================
</Table>
(c) Net of redemption fees of $49,434 and $2,160 allocated among the classes
based on relative net assets of each class for the years ended October 31,
2008 and 2007, respectively.
NOTE 12--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 INTERNATIONAL TOTAL RETURN FUND
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 NET ASSET
VALUE, NET (BOTH TOTAL FROM FROM NET RETURN VALUE,
BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT OF TOTAL END OF TOTAL
OF PERIOD INCOME(A) UNREALIZED) OPERATIONS INCOME CAPITAL DISTRIBUTIONS PERIOD(B) RETURN(C)
- -------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 $11.18 $0.24 $(0.90) $(0.66) $(0.41) $(0.15) $(0.56) $ 9.96 (6.22)%
Year ended 10/31/07 10.44 0.25 0.69 0.94 (0.20) -- (0.20) 11.18 9.17
Year ended
10/31/06(f) 10.00 0.13 0.48 0.61 (0.06) (0.11) (0.17) 10.44 6.14
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 11.16 0.16 (0.90) (0.74) (0.40) (0.08) (0.48) 9.94 (6.95)
Year ended 10/31/07 10.42 0.17 0.70 0.87 (0.13) -- (0.13) 11.16 8.44
Year ended
10/31/06(f) 10.00 0.09 0.46 0.55 (0.05) (0.08) (0.13) 10.42 5.55
- -------------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 11.16 0.16 (0.90) (0.74) (0.40) (0.08) (0.48) 9.94 (6.95)
Year ended 10/31/07 10.43 0.17 0.69 0.86 (0.13) -- (0.13) 11.16 8.34
Year ended
10/31/06(f) 10.00 0.09 0.47 0.56 (0.05) (0.08) (0.13) 10.43 5.65
- -------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(f) 10.54 0.02 (0.60) (0.58) -- -- -- 9.96 (5.50)
- -------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 11.18 0.27 (0.90) (0.63) (0.42) (0.17) (0.59) 9.96 (5.99)
Year ended 10/31/07 10.44 0.28 0.69 0.97 (0.23) -- (0.23) 11.18 9.42
Year ended
10/31/06(f) 10.00 0.15 0.48 0.63 (0.07) (0.12) (0.19) 10.44 6.27
_______________________________________________________________________________________________________________________________
===============================================================================================================================
<Caption>
RATIO OF RATIO OF
EXPENSES EXPENSES
TO AVERAGE TO AVERAGE NET RATIO OF NET
NET ASSETS, NET ASSETS ASSETS WITHOUT INVESTMENT
END OF WITH FEE WAIVERS FEE WAIVERS INCOME
PERIOD (000S AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(D)
- -----------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 $39,418 1.11%(e) 1.42%(e) 2.16%(e) 224%
Year ended 10/31/07 6,247 1.12 2.06 2.39 509
Year ended
10/31/06(f) 3,341 1.14(g) 3.92(g) 2.20(g) 231
- -----------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 11,432 1.86(e) 2.17(e) 1.41(e) 224
Year ended 10/31/07 2,395 1.87 2.81 1.64 509
Year ended
10/31/06(f) 2,025 1.89(g) 4.67(g) 1.45(g) 231
- -----------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 16,262 1.86(e) 2.17(e) 1.41(e) 224
Year ended 10/31/07 1,999 1.87 2.81 1.64 509
Year ended
10/31/06(f) 2,383 1.89(g) 4.67(g) 1.45(g) 231
- -----------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(f) 24 0.86(e)(g) 1.20(e)(g) 2.41(e)(g) 224
- -----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 28,117 0.85(e) 0.94(e) 2.42(e) 224
Year ended 10/31/07 35,952 0.86 1.55 2.64 509
Year ended
10/31/06(f) 19,243 0.89(g) 3.50(g) 2.45(g) 231
_______________________________________________________________________________________________
===============================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes redemption fees added to shares of beneficial interest which were
less than $0.01 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 $35,349,
$9,985, $17,725, $25 and $35,704 for Class A, Class B, Class C, Class Y
and Institutional Class shares, respectively.
(f) Class A, Class B, Class C and Institutional Class shares commenced on
March 31, 2006 and Class Y shares commenced on October 3, 2008.
(g) Annualized.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into
certain arrangements permitting market timing of the AIM Funds and failed to
disclose these arrangements in the prospectuses for such Funds, and conclusions
of law to the effect that Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, Invesco Aim's time to respond to that Order has been indefinitely
suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals,
depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws 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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various Invesco Aim- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund
Derivative Complaint purportedly brought on behalf of the AIM Funds and fund
registrants;
22 AIM INTERNATIONAL TOTAL RETURN FUND
NOTE 14--LEGAL PROCEEDINGS--(CONTINUED)
and (iii) an Amended Class Action Complaint for Violations of ERISA purportedly
brought on behalf of participants in the Invesco 401(k) plan. Based on orders
issued by the MDL Court, all claims asserted against the AIM Funds that have
been transferred to the MDL Court have been dismissed, although certain Funds
remain nominal defendants in the Consolidated Amended Fund Derivative Complaint.
On September 15, 2006, the MDL Court granted the Invesco defendants' motion to
dismiss the Amended Class Action Complaint for Violations of ERISA and dismissed
such Complaint. Plaintiff appealed this ruling. On June 16, 2008, the Fourth
Circuit Court of Appeals reversed the dismissal and remanded this lawsuit back
to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing
full cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco Aim and the Fund are unable to
estimate the impact, if any, that the outcome of the Pending Litigation and
Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund.
23 AIM INTERNATIONAL TOTAL RETURN FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM International Total Return 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 Total Return
Fund, (one of the funds constituting AIM Investment Funds, hereafter referred to
as the "Fund") at October 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 October
31, 2008 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2008
Houston, TX
24 AIM INTERNATIONAL TOTAL RETURN 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 May 1, 2008, through
October 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 October 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 October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $887.10 $5.22 $1,019.61 $5.58 1.10%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 884.30 8.76 1,015.84 9.37 1.85
- ---------------------------------------------------------------------------------------------------
C 1,000.00 883.50 8.76 1,015.84 9.37 1.85
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 945.00 0.66 1,020.81 4.37 0.86
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 31, 2008 (as of close of
business October 3, 2008, through October 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 29
(as of close of business October 3, 2008, through October 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 INTERNATIONAL TOTAL RETURN FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM renewal process, the Trustees receive ent weight to the various factors. The
Investment Funds is required under the comparative performance and fee data Trustees recognized that the advisory
Investment Company Act of 1940 to approve regarding the AIM Funds prepared by an arrangements and resulting advisory fees
annually the renewal of the AIM independent company, Lipper, Inc. for the Fund and the other AIM Funds are
International Total Return Fund's (the (Lipper), under the direction and the result of years of review and
Fund) investment advisory agreement with supervision of the independent Senior negotiation between the Trustees and
Invesco Aim Advisors, Inc. (Invesco Aim). Officer who also prepares a separate Invesco Aim, that the Trustees may focus
During contract renewal meetings held on analysis of this information for the to a greater extent on certain aspects of
June 18-19, 2008, the Board as a whole and Trustees. Each Sub-Committee then makes these arrangements in some years than in
the disinterested or "independent" recommendations to the Investments others, and that the Trustees'
Trustees, voting separately, approved the Committee regarding the performance, fees deliberations and conclusions in a
continuance of the Fund's investment and expenses of their assigned funds. The particular year may be based in part on
advisory agreement for another year, Investments Committee considers each their deliberations and conclusions of
effective July 1, 2008. In doing so, the Sub-Committee's recommendations and makes these same arrangements throughout the
Board determined that the Fund's its own recommendations regarding the year and in prior years.
investment advisory agreement is in the performance, fees and expenses of the AIM
best interests of the Fund and its Funds to the full Board. The Investments FACTORS AND CONCLUSIONS AND SUMMARY OF
shareholders and that the compensation to Committee also considers each INDEPENDENT WRITTEN FEE EVALUATION
Invesco Aim under the Fund's investment Sub-Committee's recommendations in making
advisory agreement is fair and reasonable. its annual recommendation to the Board The discussion below serves as a summary
whether to approve the continuance of each of the Senior Officer's independent
The independent Trustees met separately AIM Fund's investment advisory agreement written evaluation with respect to the
during their evaluation of the Fund's and sub-advisory agreements for another Fund's investment advisory agreement as
investment advisory agreement with year. well as a discussion of the material
independent legal counsel from whom they factors and related conclusions that
received independent legal advice, and the The independent Trustees are assisted formed the basis for the Board's approval
independent Trustees also received in their annual evaluation of the Fund's of the Fund's investment advisory
assistance during their deliberations from investment advisory agreement by the agreement and sub-advisory agreements.
the independent Senior Officer, a independent Senior Officer. One Unless otherwise stated, information set
full-time officer of the AIM Funds who responsibility of the Senior Officer is to forth below is as of June 19, 2008 and
reports directly to the independent manage the process by which the AIM Funds' does not reflect any changes that may have
Trustees. proposed management fees are negotiated occurred since that date, including but
during the annual contract renewal process not limited to changes to the Fund's
THE BOARD'S FUND EVALUATION PROCESS to ensure that they are negotiated in a performance, advisory fees, expense
manner that is at arms' length and limitations and/or fee waivers.
The Board's Investments Committee has reasonable. Accordingly, the Senior
established three Sub-Committees that are Officer must either supervise a I. Investment Advisory Agreement
responsible for overseeing the management competitive bidding process or prepare an
of a number of the series portfolios of independent written evaluation. The Senior A. Nature, Extent and Quality of
the AIM Funds. This Sub-Committee Officer has recommended that an Services Provided by Invesco Aim
structure permits the Trustees to focus on independent written evaluation be provided
the performance of the AIM Funds that have and, at the direction of the Board, has The Board reviewed the advisory services
been assigned to them. The Sub-Committees prepared an independent written provided to the Fund by Invesco Aim under
meet throughout the year to review the evaluation. the Fund's investment advisory agreement,
performance of their assigned funds, and the performance of Invesco Aim in
the Sub-Committees review monthly and During the annual contract renewal providing these services, and the
quarterly comparative performance process, the Board considered the factors credentials and experience of the officers
information and periodic asset flow data discussed below under the heading "Factors and employees of Invesco Aim who provide
for their assigned funds. These materials and Conclusions and Summary of Independent these services. The Board's review of the
are prepared under the direction and Written Fee Evaluation" in evaluating the qualifications of Invesco Aim to provide
supervision of the independent Senior fairness and reasonableness of the Fund's these services included the Board's
Officer. Over the course of each year, the investment advisory agreement and consideration of Invesco Aim's portfolio
Sub-Committees meet with portfolio sub-advisory agreements at the contract and product review process, various back
managers for their assigned funds and renewal meetings and at their meetings office support functions provided by
other members of management and review throughout the year as part of their Invesco Aim and its affiliates, and
with these individuals the performance, ongoing oversight of the Fund. The Fund's Invesco Aim's equity and fixed income
investment objective(s), policies, investment advisory agreement and trading operations. The Board concluded
strategies and limitations of these funds. sub-advisory agreements were considered that the nature, extent and quality of the
separately, although the Board also advisory services provided to the Fund by
In addition to their meetings considered the common interests of all of Invesco Aim were appropriate and that
throughout the year, the Sub-Committees the AIM Funds in their deliberations. The Invesco Aim currently is providing
meet at designated contract renewal Board considered all of the information satisfactory advisory services in
meetings each year to conduct an in-depth provided to them and did not identify any accordance with the terms of the Fund's
review of the performance, fees and particular factor that was controlling. investment advisory agreement. In
expenses of their assigned funds. During Each Trustee may have evaluated the addition, based on their ongoing meetings
the contract information provided differently from one throughout the year with the Fund's
another and attributed differ- portfolio manager or managers, the Board
concluded that these individuals are
competent and able
continued
26 AIM INTERNATIONAL TOTAL RETURN FUND
to continue to carry out their aged by Invesco Aim, at a common asset tured, the Fund has yet to benefit from
responsibilities under the Fund's level and as of the end of the past the breakpoints. Based on this
investment advisory agreement. calendar year. The Board noted that the information, the Board concluded that the
Fund's contractual advisory fee rate was Fund's advisory fees would reflect
In determining whether to continue the at the median contractual advisory fee economies of scale at higher asset levels.
Fund's investment advisory agreement, the rate of funds in its expense group. The The Board also noted that the Fund shares
Board considered the prior relationship Board also reviewed the methodology used directly in economies of scale through
between Invesco Aim and the Fund, as well by Lipper in determining contractual fee lower fees charged by third party service
as the Board's knowledge of Invesco Aim's rates. providers based on the combined size of
operations, and concluded that it was all of the AIM Funds and affiliates.
ben-eficial to maintain the current The Board also compared the Fund's
relationship, in part, because of such effective fee rate (the advisory fee after E. Profitability and Financial
knowledge. The Board also considered the any advisory fee waivers and before any Resources of Invesco Aim
steps that Invesco Aim and its affiliates expense limitations/waivers) to the total
have taken over the last several years to advisory fees paid by several separately The Board reviewed information from
improve the quality and efficiency of the managed accounts/wrap accounts advised by Invesco Aim concerning the costs of the
services they provide to the AIM Funds in Invesco Aim affiliates. The Board noted advisory and other services that Invesco
the areas of investment performance, that the Fund's rate was above the rates Aim and its affiliates provide to the Fund
product line diversification, for the separately managed accounts/wrap and the profitability of Invesco Aim and
distribution, fund operations, shareholder accounts. The Board considered that its affiliates in providing these
services and compliance. The Board management of the separately managed services. The Board also reviewed
concluded that the quality and efficiency accounts/ wrap accounts by the Invesco Aim information concerning the financial
of the services Invesco Aim and its affiliates involves different levels of condition of Invesco Aim and its
affiliates provide to the AIM Funds in services and different operational and affiliates. The Board also reviewed with
each of these areas have generally regulatory requirements than Invesco Aim's Invesco Aim the methodology used to
improved, and support the Board's approval management of the Fund. The Board prepare the profitability information. The
of the continuance of the Fund's concluded that these differences are Board considered the overall profitability
investment advisory agreement. appropriately reflected in the fee of Invesco Aim, as well as the
structure for the Fund. profitability of Invesco Aim in connection
B. Fund Performance with managing the Fund. The Board noted
The Board noted that Invesco Aim has that Invesco Aim continues to operate at a
The Board noted that the Fund recently contractually agreed to waive fees and/or net profit, although increased expenses in
began operations and that only one limit expenses of the Fund through at recent years have reduced the
calendar year of comparative performance least June 30, 2009 in an amount necessary profitability of Invesco Aim and its
data was available. The Board compared the to limit total annual operating expenses affiliates. The Board concluded that the
Fund's performance during the past to a specified percentage of average daily Fund's fees were fair and reasonable, and
calendar year to the performance of funds net assets for each class of the Fund. The that the level of profits realized by
in the Fund's performance group that are Board considered the contractual nature of Invesco Aim and its affiliates from
not managed by Invesco Aim, and against this fee waiver and noted that it remains providing services to the Fund was not
the performance of all funds in the Lipper in effect until at least June 30, 2009. excessive in light of the nature, quality
International Income Funds Index. The The Board also considered the effect this and extent of the services provided. The
Board also reviewed the criteria used by expense limitation would have on the Board considered whether In-vesco Aim is
Invesco Aim to identify the funds in the Fund's estimated total expenses. financially sound and has the resources
Fund's performance group for inclusion in necessary to perform its obligations under
the Lipper reports. The Board noted that After taking account of the Fund's the Fund's investment advisory agreement,
the Fund's performance was in the second contractual advisory fee rate, as well as and concluded that Invesco Aim has the
quintile of its performance group for the the comparative advisory fee information financial resources necessary to fulfill
one year period (the first quintile being and the expense limitation discussed these obligations.
the best performing funds and the fifth above, the Board concluded that the Fund's
quintile being the worst performing advisory fees were fair and reasonable. F. Independent Written Evaluation of
funds). The Board noted that the Fund's the Fund's Senior Officer
performance was above the performance of D. Economies of Scale and Breakpoints
the Index for the one year period. The The Board noted that, at their direction,
Board also considered the steps Invesco The Board considered the extent to which the Senior Officer of the Fund, who is
Aim has taken over the last several years there are economies of scale in Invesco independent of Invesco Aim and Invesco
to improve the quality and efficiency of Aim's provision of advisory services to Aim's affiliates, had prepared an
the services that Invesco Aim provides to the Fund. The Board also considered independent written evaluation to assist
the AIM Funds. The Board concluded that whether the Fund benefits from such the Board in determining the
Invesco Aim continues to be responsive to economies of scale through contractual reasonableness of the proposed management
the Board's focus on fund performance. breakpoints in the Fund's advisory fee fees of the AIM Funds, including the Fund.
schedule or through advisory fee waivers The Board noted that they had relied upon
C. Advisory Fees and Fee Waivers or expense limitations. The Board noted the Senior Officer's written evaluation
that the Fund's contractual advisory fee instead of a competitive bidding process.
The Board compared the Fund's contractual schedule includes six breakpoints but In determining whether to continue the
advisory fee rate to the contractual that, due to the Fund's asset level at the Fund's investment advisory agreement, the
advisory fee rates of funds in the Fund's end of the past calendar year and the way Board considered the Senior Officer's
Lipper expense group that are not man- in which the breakpoints have been written evaluation.
struc-
continued
27 AIM INTERNATIONAL TOTAL RETURN FUND
G. Collateral Benefits to Invesco Aim to 100% of the net advisory fees Invesco recently began operations and that only
and its Affiliates Aim receives from the affiliated money one calendar year of comparative
market funds with respect to the Fund's performance data was available. The Board
The Board considered various other investment of uninvested cash, but not compared the Fund's performance during the
benefits received by Invesco Aim and its cash collateral. The Board considered the past calendar year to the performance of
affiliates resulting from Invesco Aim's contractual nature of this fee waiver and funds in the Fund's performance group that
relationship with the Fund, including the noted that it remains in effect until at are not managed by Invesco Aim, and
fees received by Invesco Aim and its least June 30, 2009. The Board concluded against the performance of all funds in
affiliates for their provision of that the Fund's investment of uninvested the Lipper International Income Funds
administrative, transfer agency and cash and cash collateral from any Index. The Board also reviewed the
distribution services to the Fund. The securities lending arrangements in the criteria used by Invesco Aim to identify
Board considered the performance of affiliated money market funds is in the the funds in the Fund's performance group
Invesco Aim and its affiliates in best interests of the Fund and its for inclusion in the Lipper reports. The
providing these services and the shareholders. Board noted that the Fund's performance
organizational structure employed by was in the second quintile of its
Invesco Aim and its affiliates to provide II. Sub-Advisory Agreements performance group for the one year period
these services. The Board also considered (the first quintile being the best
that these services are provided to the A. Nature, Extent and Quality of performing funds and the fifth quintile
Fund pursuant to written contracts which Services Provided by Affiliated being the worst performing funds). The
are reviewed and approved on an annual Sub-Advisors Board noted that the Fund's performance
basis by the Board. The Board concluded was above the performance of the Index for
that Invesco Aim and its affiliates were The Board reviewed the services to be the one year period. The Board also
providing these services in a satisfactory provided by Invesco Trimark Ltd., Invesco considered the steps Invesco Aim has taken
manner and in accordance with the terms of Asset Management Deutschland, GmbH, over the last several years to improve the
their contracts, and were qualified to Invesco Asset Management Limited, In-vesco quality and efficiency of the services
continue to provide these services to the Asset Management (Japan) Limited, Invesco that Invesco Aim provides to the AIM
Fund. Australia Limited, Invesco Global Asset Funds. The Board concluded that Invesco
Management (N.A.), Inc., Invesco Hong Kong Aim continues to be responsive to the
The Board considered the benefits Limited, Invesco Institutional (N.A.), Board's focus on fund performance.
realized by Invesco Aim as a result of Inc. and Invesco Senior Secured
portfolio brokerage transactions executed Management, Inc. (collectively, the C. Sub-Advisory Fees
through "soft dollar" arrangements. Under "Affiliated Sub-Advisers") under the
these arrangements, portfolio brokerage sub-advisory agreements and the The Board considered the services to be
commissions paid by the Fund and/or other credentials and experience of the officers provided by the Affiliated Sub-Advisers
funds advised by Invesco Aim are used to and employees of the Affiliated pursuant to the sub-advisory agreements
pay for research and execution services. Sub-Advisers who will provide these and the services to be provided by Invesco
The Board noted that soft dollar services. The Board concluded that the Aim pursuant to the Fund's investment
arrangements shift the payment obligation nature, extent and quality of the services advisory agreement, as well as the
for the research and execution services to be provided by the Affiliated allocation of fees between Invesco Aim and
from Invesco Aim to the funds and Sub-Advisers were appropriate. The Board the Affiliated Sub-Advisers pursuant to
therefore may reduce Invesco Aim's noted that the Affiliated Sub-Advisers, the sub-advisory agreements. The Board
expenses. The Board also noted that which have offices and personnel that are noted that the sub-advisory fees have no
research obtained through soft dollar geographically dispersed in financial direct effect on the Fund or its
arrangements may be used by Invesco Aim in centers around the world, have been formed shareholders, as they are paid by Invesco
making investment decisions for the Fund in part for the purpose of researching and Aim to the Affiliated Sub-Advisers, and
and may therefore benefit Fund compiling information and making that Invesco Aim and the Affiliated
shareholders. The Board concluded that recommendations on the markets and Sub-Advisers are affiliates. After taking
Invesco Aim's soft dollar arrangements economies of various countries and account of the Fund's contractual
were appropriate. The Board also concluded securities of companies located in such sub-advisory fee rate, as well as other
that, based on their review and countries or on various types of relevant factors, the Board concluded that
representations made by Invesco Aim, these investments and investment techniques, and the Fund's sub-advisory fees were fair and
arrangements were consistent with providing investment advisory services. reasonable.
regulatory requirements. The Board concluded that the sub-advisory
agreements will benefit the Fund and its D. Financial Resources of the
The Board considered the fact that the shareholders by permitting In-vesco Aim to Affiliated Sub-Advisers
Fund's uninvested cash and cash collateral utilize the additional resources and
from any securities lending arrangements talent of the Affiliated Sub-Advisers in The Board considered whether each
may be invested in money market funds managing the Fund. Affili-ated Sub-Adviser is financially
advised by Invesco Aim pursuant to sound and has the resources necessary to
procedures approved by the Board. The B. Fund Performance perform its obligations under its
Board noted that Invesco Aim will receive respective sub-advisory agreement, and
advisory fees from these affiliated money The Board did view Fund performance as a concluded that each Affiliated Sub-Adviser
market funds attributable to such relevant factor in considering whether to has the financial resources necessary to
investments, although Invesco Aim has approve the sub-advisory agreements for fulfill these obligations.
contractually agreed to waive through at the Fund, as one of the Affiliated
least June 30, 2009, the advisory fees Sub-Advisers currently manages the Fund's
payable by the Fund in an amount equal assets. The Board noted that the Fund
28 AIM INTERNATIONAL TOTAL RETURN 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.
ADDITIONAL NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008 and
October 31, 2008 were 99.74%, 99.12%, 99.84%, and 99.99%, respectively.
29 AIM INTERNATIONAL TOTAL RETURN FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee
oversees 103 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 2003 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 1997 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, Policy
Trustee firm) Studies, Inc. and
Van Gilder Insurance
Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 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 2001 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 2001 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 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.
30 AIM INTERNATIONAL TOTAL RETURN 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 2004 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
31 AIM INTERNATIONAL TOTAL RETURN FUND
Supplement to Annual Report dated 10/31/08
AIM INTERNATIONAL TOTAL RETURN FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS A redemption fee of 2% will be
For periods ended 10/31/08 imposed on certain redemptions or
The following information has been exchanges out of the Fund within 31 days
prepared to provide Institutional Class Inception (3/31/06) 3.51% of purchase. Exceptions to the
shareholders with a performance overview 1 Year -5.99 redemption fee are listed in the Fund's
specific to their holdings. Institutional ========================================== prospectus.
Class shares are offered exclusively to
institutional investors, including defined ========================================== Had the advisor not waived fees
contribution plans that meet certain AVERAGE ANNUAL TOTAL RETURNS and/or reimbursed expenses, performance
criteria. For periods ended 9/30/08, most recent would have been lower.
calendar quarter-end
Please note that past performance
Inception (3/31/06) 5.96% is not indicative of future results.
1 Year 1.21 More recent returns may be more or less
========================================== than those shown. All returns assume
reinvestment of distributions at NAV.
Institutional Class shares have no sales Investment return and principal value
charge; therefore, performance is at net will fluctuate so your shares, when
asset value (NAV). Performance of redeemed, may be worth more or less than
Institutional Class shares will differ their original cost. See full report for
from performance of other share classes information on comparative benchmarks.
primarily due to differing sales charges Please consult your Fund prospectus for
and class expenses. more information. For the most current
month-end performance, please call 800
The net annual Fund operating expense 451 4246 or visit invescoaim.com.
ratio set forth in the most recent Fund
prospectus as of the date of this (1) Total annual operating expenses
supplement for Institutional Class shares less any contractual fee waivers
was 0.86%.(1) The total annual Fund and/or expense reimbursements by
operating expense ratio set forth in the the advisor in effect through at
most recent Fund prospectus as of the date least June 30, 2009. See current
of this supplement for Institutional Class prospectus for more information.
shares was 1.55%. 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.
==========================================
NASDAQ SYMBOL AUBIX
==========================================
Information on your Fund's expenses is shown later in this supplement.
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]
invescoaim.com ITR-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
Supplement to Annual Report dated 10/31/08
AIM INTERNATIONAL TOTAL RETURN FUND
Past performance cannot guarantee The performance data shown in the
comparable future results. chart above is that of the Fund's
institutional share class. The performance
The data shown in the chart above data shown in the chart in the annual
includes reinvested distributions and Fund report is that of the Fund's Class A, B
expenses including management fees. Index and C shares. The performance of the
results include reinvested dividends. Fund's other share classes will differ
Performance of an index of funds reflects primarily due to different sales charge
fund expenses and management fees; structures and class expenses, and may be
performance of a market index does not. greater than or less than the performance
Performance shown in the chart and of the Fund's Institutional Class shares
table(s) does not reflect deduction of shown in the chart above.
taxes a shareholder would pay on Fund
distributions or sale of Fund shares.
Performance of the indexes does not
reflect the effects of taxes.
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]
invescoaim.com ITR-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
==================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- INSTITUTIONAL CLASS SHARES
Fund and index data from 3/31/06
AIM International
Total Return Fund- Barclays Capital
Institutional Class Global Aggregate ex Lipper International
Date Shares U.S. Index(1) Income Funds Index(1)
3/31/06 $10000 $10000 $10000
4/06 10409 10324 10192
5/06 10561 10547 10262
6/06 10447 10400 10203
7/06 10524 10480 10263
8/06 10601 10577 10355
9/06 10516 10517 10304
10/06 10628 10639 10433
11/06 10898 10985 10641
12/06 10707 10788 10559
1/07 10584 10618 10412
2/07 10819 10871 10627
3/07 10860 10913 10687
4/07 10984 11077 10799
5/07 10788 10850 10671
6/07 10737 10793 10651
7/07 10934 11094 10820
8/07 11027 11228 10844
9/07 11421 11586 11200
10/07 11628 11826 11386
11/07 11795 12055 11473
12/07 11731 11978 11485
1/08 12131 12384 11862
2/08 12445 12702 12127
3/08 12775 13095 12288
4/08 12307 12719 12061
5/08 12134 12555 11933
6/08 12121 12577 11908
7/08 12186 12611 11921
8/08 11761 12196 11575
9/08 11558 11835 11243
10/08 10932 11312 10762
==================================================================================================================================
(1) Lipper Inc.
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management fees
and other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with ongoing costs of investing in other mutual funds. The example is based on
an investment of $1,000 invested at the beginning of the period and held for the
entire period May 1, 2008, through October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $888.20 $4.03 $1,020.86 $4.32 0.85%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 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 TOTAL RETURN 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:
o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents
trees used to produce paper. will be sent via email as soon as they're available.
o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home
expenses and put more capital back in your fund's returns. 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 811-05426 and 033-19338.
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 January 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 [INVESCO AIM LOGO]
investment advisors for the products and services represented by Invesco Aim; they each provide -- SERVICE MARK --
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.
invescoaim.com ITR-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM LIBOR ALPHA FUND
--SERVICE MARK-- Annual Report to Shareholders o October 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
22 Financial Highlights
24 Auditor's Report
25 Fund Expenses
26 Approval of Investment Advisory Agreement
29 Tax Information
30 Trustees and Officers
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 recent market developments and
[TAYLOR provide some perspective and encouragement to my fellow long-term investors.
PHOTO]
MARKET OVERVIEW
At the start of the fiscal year in November 2007, we saw warning signs of
increasing economic ills -- a weakening housing market, rising inflation and
Philip Taylor slowing job growth, among others. In response, the U.S. Federal Reserve Board
(the Fed) repeatedly cut short-term interest rate targets to stimulate economic
growth and expand market liquidity.(1) Also, Congress and the president worked
together to enact an economic stimulus plan that included billions of dollars in
rebates to taxpayers.
These actions helped the economy and the U.S. stock market until the spring of
2008, when other factors came to the forefront -- triggering a severe correction that eventually
drove major stock-market indexes to multi-year lows.(2)
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.
The recent volatility in the stock, fixed-income and credit markets has driven home the
importance of three timeless investing principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
o 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.
o 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.
o 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 capitalize on
this situation.
MANAGING MONEY IS OUR FOCUS
As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain
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, 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 we 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) Lipper Inc.
2 AIM LIBOR ALPHA FUND
Dear Fellow Shareholders:
As I write this letter, turbulent financial markets are causing considerable
investor anxiety, reminding us again that markets are cyclical and the correction
[CROCKETT of excess is often painful, at least in the short term. Your Board of Trustees
PHOTO] believes in the wisdom of a long-term perspective and consistent investment
discipline. We continue to put your interests first in the effort to improve
investment performance, contain shareholder costs and uphold the highest ethical
standards.
We remain enthusiastic about the global reach and investment expertise that
Invesco, a leading independent global investment management company, brings to
Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse
investment strategies deployed throughout the worldwide network of Invesco
investment centers has helped strengthen the management of many AIM Funds. The
rebranding of the Funds' management company as Invesco Aim was followed by the
launch of an upgraded, investor-friendly website (invescoaim.com); a new
mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and
a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in
financial publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between
the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual
process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory
Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your
behalf to double the number of votes in favor of separating the roles of chairman and CEO at the
companies whose shares your Funds hold. We also continued to support the movement for shareholders
to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a
matter of policy, and I would be interested to hear your thoughts on this policy.
As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com.
The dialogue that has been established in this way has been instructive for your Board, and we want
it to continue. Although the production schedule for Fund annual reports and prospectuses allows me
to write these letters of general report and response just twice a year, please be assured that your
comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM LIBOR ALPHA FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
======================================================================================= Sell decisions are based on:
PERFORMANCE SUMMARY
o A conscious decision to alter the
For the fiscal year ended October 31, 2008, Class A Shares of AIM LIBOR Alpha Fund, at Fund's macro risk exposure (such as
net asset value (NAV), underperformed the Fund's broad market and style-specific duration, yield curve positioning,
indexes.(triangle) The majority of this underperformance came from the Fund's exposure to sector exposure).
corporate bonds in both investment-grade and high yield markets, and its allocation to
asset-backed securities (ABS). In addition, the Fund's exposure to the financial sector o The need to limit or reduce exposure to
was negative for performance as financial market turmoil deepened during the period. a particular sector or issuer.
Your Fund's long-term performance appears later in this report. o Degradation of an issuer's credit
quality.
FUND VS. INDEXES
o Realignment of a valuation target.
Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does
not include applicable contingent deferred sales charges (CDSC) or front-end sales o Presentation of a better relative value
charges, which would have reduced performance. opportunity.
Class A Shares -8.13% MARKET CONDITIONS AND YOUR FUND
Class C Shares -8.36
Class R Shares -8.36 Rising concerns over the health of the
Class Y Shares* -8.11 global financial system weighed heavily on
Barclays Capital U.S. Aggregate Bond Index(triangle)** (Broad Market Index) 0.30 world markets during the fiscal year. A
U.S. Three-Month LIBOR(triangle) (Style-Specific Index) 3.52 decade or more of lax lending practices,
Lipper Short Investment Grade Debt Funds Index(triangle) (Peer Group Index) -3.58 excessive leverage, unsound business
models, inadequate attention to
(triangle) Lipper Inc. counterparty risks and regulatory failure
culminated in the collapse of several
* Share class incepted during the fiscal year. See page 7 for a detailed major financial institutions. In addition
explanation of Fund performance. to the troubled financial system, general
economic issues, such as housing prices,
** Effective 11/03/08, the Lehman Brothers indexes were rebranded as Barclays Capital unemployment and availability of credit,
indexes. had strong effects on investment markets.
=======================================================================================
September alone was a historic month as
HOW WE INVEST forward currency contracts, currency Lehman Brothers filed for bankruptcy, and
swaps, currency options, currency futures the U.S. government took over Freddie Mac
AIM LIBOR Alpha Fund's objective is to and options on currency futures. and Fannie Mae. A bailout was approved for
provide total return. The Fund seeks to American International Group (AIG).
meet this objective by attempting to Our security selection is supported by Merrill Lynch was taken over by Bank of
exceed the return of the U.S. Three-Month a team of independent specialists. Team America and Washington Mutual, one of the
LIBOR. members conduct top-down macroeconomic as largest U.S. savings and loans, was taken
well as bottom-up analysis on individual over by JP Morgan.
We invest in a diversified portfolio of securities. Recommendations are
foreign and domestic government and communicated to portfolio managers through Initially, the adverse effects of the
corporate debt securities, including proprietary technology that allows all credit crisis were mitigated mainly by the
securities of emerging markets. We may investment professionals to communicate in U.S. Federal Reserve (the Fed) cutting
invest in securitized debt securities, a timely manner. interest rates and creating different
such as asset-backed securities and both methods by which banks and other
residential and commercial mortgage-backed Portfolio construction begins with a institutions could obtain temporary
securities. We may also use synthetic and well-defined Fund design that establishes liquidity from the central bank. More
derivative instruments, such as futures the target investment vehicles for recently, the Fed stepped up its lending
contracts and swap agreements, including generating the desired "alpha" (the extra by granting wider access to its funding,
but not limited to credit default swaps. return above a specific benchmark) as well expanding the range of collateral for Fed
Foreign currency instruments may include as the risk parameters for the Fund.
spot contracts, Investment vehicles are evaluated for
liquidity and risk versus relative value.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP 10 FIXED INCOME ISSUERS* Total Net Assets $17.6 million
By sector Total Number of Holdings* 55
1. Wells Fargo ==========================================
Financials 69.4% Mortgage Backed Securities
Health Care 5.9 Trust 5.6%
Industrials 5.6 2. Freddie Mac REMICS 5.5
Consumer Discretionary 2.7 3. U.S. Mortgage-Backed Securities 5.2
Information Technology 2.6 4. Wells Fargo Home Equity Trust 4.5
Materials 2.0 5. Fannie Mae REMICS 4.0
Short-Term Investments Plus 6. Banc of America Mortgage
Other Assets Less Liabilities 11.8 Securities 4.0
========================================== 7. HSBC America Capital Trust II 3.5 The Fund's holdings are subject to change,
8. Morgan Stanley ABS Capital I 3.1 and there is no assurance that the Fund
9. Saxon Asset Securities Trust 2.8 will continue to hold any particular
10. Bank of America Credit Card security.
Trust 2.6
========================================== * Excluding Short-Term Investments.
4 AIM LIBOR ALPHA FUND
loans and enlarging international swap with a small allocation to the high yield BRENDAN GAU
facilities to provide U.S. dollars to sector. Credit spreads widened Chartered Financial Analyst,
foreign central banks. In addition, on considerably, as a lack of market [GAU portfolio manager, is lead
October 1, 2008, the U.S. Senate approved liquidity depressed corporate valuations PHOTO] manager of AIM LIBOR Alpha
the government rescue bill, which included to extremely low levels.(2) Consequently, Fund. He joined Invesco Aim
a comprehensive bailout plan to acquire up investment-grade and high yield corporate in 1996 as a portfolio analyst for fixed
to $700 billion of illiquid assets of U.S. bonds significantly underperformed U.S. income securities and has also served as a
commercial banks. Moreover, central banks Treasury securities, which was negative fixed-income and foreign currency trader.
around the world cut interest rates in a for Fund performance.(2) He earned a B.A. degree in mathematics,
coordinated effort, trying to rescue physics and economics from Rice
global economies from intensified In the corporate bond sector, we University.
financial crisis. maintained an overweight in banking and
finance credits, including exposure to CHUCK BURGE
During the fiscal year, surging demand AIG. While the Fund's weights in AIG and Senior portfolio manager, is
for liquidity along with growing concerns other financial bonds represented very [BURGE co-manager of AIM LIBOR Alpha
about counterparty risk led to a small positions, the price declines were PHOTO] Fund. Mr. Burge began his
significant sell-off in the credit significant, causing the Fund's net asset investment career in 1994,
markets. Investors became more risk averse value to decrease. We sold AIG. serving as an analyst and assistant
and continued to seek the stability, portfolio manager before joining Invesco
safety and liquidity of U.S. Treasury In the securitized sector, we were Ltd.'s Fixed Income division in 2002.
securities and other short-term government invested in mortgage-backed securities He earned a B.S. degree from Texas A&M
bonds. The result was a rally in U.S. (MBS) and asset-backed securites (ABS). University and an M.B.A. from Rice
Treasury and government security prices Asset-backed bonds underperformed many University.
with a significant decline in yields and other major fixed income assets as spreads
steeper yield curves in all markets.(1) on ABS reached all-time highs in response MARK GILLEY
to the on-going financial crisis.(2) In Chartered Financial Analyst,
In this environment, we actively addition, the MBS market underperformed [GILLEY portfolio manager, is
managed the Fund's duration to mitigate U.S. Treasury securities as a result of a PHOTO] co-manager of AIM LIBOR Alpha
the impact of interest rate fluctuations general flight-to-safety.(2) Consequently, Fund. Mr. Gilley began his
in different countries on the Fund's the Fund's positions in securitized investment career in 1992 and joined
performance. During the first part of the segments of the bond market were negative Invesco Aim in 1996. He earned his B.B.A.
reporting period, our short duration for returns. degree in marketing from The University of
positioning in the U.S. detracted from Texas at Austin and an M.B.A. from the
performance, as U.S. Treasury yields During the period we actively managed University of Missouri at Kansas City.
declined in response to the Fed's several the Fund's foreign currency exposures. Our
rate cuts. While moving to a longer underweight in the euro was positive for Assisted by the Taxable Investment Grade
duration position during the last few performance as the U.S. dollar gained Bond Team
months was positive for performance, it strength relative to the euro over the
was not enough to offset the earlier second part of the period. However, our
losses from our short duration posture in overweight exposure to the Japanese yen
the U.S. In Europe, we maintained a long detracted from performance, driven by the
duration stance, expecting bond yields to weakness of the yen relative to the U.S.
decline on deteriorating economic dollar during the summer of 2008.
fundamentals. As government bond yields
fell during the period, our duration Thank you for your continued investment
exposure to Europe benefited performance. in AIM LIBOR Alpha Fund.
We used government bond futures, (1) U.S. Department of the Treasury
including U.S. Treasury futures, to
actively manage duration and adjust the (2) Barclays Capital
Fund's interest rate exposure. In our
view, gaining an exposure to global bond The views and opinions expressed in
markets through bond futures is a more management's discussion of Fund
effective way to employ the Fund's cash performance are those of Invesco Aim
for duration management purposes versus Advisors, Inc. These views and opinions
buying cash bonds. are subject to change at any time based on
factors such as market and economic
Over the period, we positioned the Fund conditions. These views and opinions may
for a steepening of the different yield not be relied upon as investment advice or
curves. As long term government bond recommendations, or as an offer for a
yields fell by less than short term rates particular security. The information is
across major markets, yield curves not a complete analysis of every aspect of
steepened, which benefited Fund any market, country, industry, security or
performance. the Fund. Statements of fact are from
sources considered reliable, but Invesco
Throughout the reporting period, we Aim Advisors, Inc. makes no representation
remained invested in fixed and or warranty as to their completeness or
floating-rate corporate bonds, focusing accuracy. Although historical performance
primarily on investment-grade corporate is no guarantee of future results, these
bonds, insights may help you understand our
investment management philosophy.
See important Fund and index disclosures
later in this report.
5 AIM LIBOR ALPHA 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.
continued from page 8
o The returns shown in management's o Industry Classifications used in this
discussion of Fund performance are report are generally according to the
based on net asset values calculated Global Industry Classification
for shareholder transactions. Generally Standard, which was developed by and is
accepted accounting principles require the exclusive property and a service
adjustments to be made to the net mark of MSCI Inc. and Standard &
assets of the Fund at period end for Poor's.
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.
6 AIM LIBOR ALPHA FUND
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- CLASS A, C AND R SHARES (OLDEST SHARE CLASSES WITH SALES CHARGES)
Fund and index data from 3/31/06
AIM LIBOR Alpha AIM LIBOR Alpha AIM LIBOR Alpha Barclays Capital Lipper Short Investment
Fund-Class A Fund-Class C Fund-Class R U.S. Aggregate U.S. Three-Month Grade Bond
Date Shares Shares Shares Bond Index(1) LIBOR(1) Funds Index(1)
3/31/06 $ 9750 $10000 $10000 $10000 $10000 $10000
4/06 9809 10069 10069 9982 10038 10031
5/06 9810 10058 10058 9971 10084 10047
6/06 9805 10060 10050 9992 10128 10063
7/06 9842 10086 10086 10127 10175 10138
8/06 9840 10092 10082 10283 10222 10212
9/06 9867 10108 10108 10373 10266 10268
10/06 9926 10166 10166 10441 10314 10314
11/06 10004 10244 10244 10563 10360 10375
12/06 10054 10304 10293 10501 10404 10382
1/07 10105 10344 10344 10497 10454 10408
2/07 10157 10394 10394 10659 10497 10494
3/07 10216 10453 10453 10659 10543 10532
4/07 10257 10492 10492 10717 10591 10573
5/07 10329 10564 10564 10635 10638 10559
6/07 10379 10623 10612 10604 10683 10587
7/07 10326 10556 10556 10692 10733 10651
8/07 10263 10500 10490 10823 10781 10664
9/07 10346 10583 10572 10906 10828 10754
10/07 10375 10600 10600 11004 10879 10778
11/07 10151 10369 10369 11201 10922 10877
12/07 10178 10394 10394 11233 10969 10880
1/08 10081 10293 10293 11422 11012 11014
2/08 10087 10308 10297 11437 11039 11033
3/08 10028 10235 10235 11476 11068 10896
4/08 10079 10284 10284 11452 11092 10896
5/08 10222 10428 10428 11368 11118 10888
6/08 10156 10371 10360 11359 11144 10867
7/08 10167 10370 10369 11350 11170 10799
8/08 10135 10346 10334 11458 11195 10836
9/08 9796 9987 9986 11304 11223 10598
10/08 9529 9714 9714 11037 11261 10392
====================================================================================================================================
(1) Lipper Inc.
========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/08, including maximum As of 9/30/08, the most recent calendar
applicable sales charges quarter-end, including maximum
applicable sales charges
CLASS A SHARES
Inception (3/31/06) -1.85% CLASS A SHARES
1 Year -10.41 Inception (3/31/06) -0.83%
1 Year -7.66
CLASS C SHARES
Inception (3/31/06) -1.12 CLASS C SHARES
1 Year -8.36 Inception (3/31/06) -0.06
1 Year -5.65
CLASS R SHARES
Inception (3/31/06) -1.12 CLASS R SHARES
1 Year -8.36 Inception (3/31/06) -0.06
1 Year -5.56
CLASS Y SHARES ==========================================
Inception -0.86
1 Year -8.11
==========================================
CLASS Y SHARES' INCEPTION DATE IS OCTOBER MAY VARY FROM THE EXPENSE RATIOS PRESENTED
3, 2008; RETURNS SINCE THAT DATE ARE IN OTHER SECTIONS OF THIS REPORT THAT ARE
ACTUAL RETURNS. ALL OTHER RETURNS ARE BASED ON EXPENSES INCURRED DURING THE
BLENDED RETURNS OF ACTUAL CLASS Y SHARE PERIOD COVERED BY THIS REPORT.
PERFORMANCE AND RESTATED CLASS A SHARE
PERFORMANCE (FOR PERIODS PRIOR TO THE CLASS A SHARE PERFORMANCE REFLECTS THE
INCEPTION DATE OF CLASS Y SHARES) AT NET MAXIMUM 2.50% SALES CHARGE. CLASS C SHARES
ASSET VALUE. THE RESTATED CLASS A SHARE DO NOT HAVE A FRONT-END SALES CHARGE OR A
PERFORMANCE REFLECTS THE RULE 12B-1 FEES CDSC; THEREFORE, PERFORMANCE QUOTED IS AT
APPLICABLE TO CLASS A SHARES AS WELL AS NET ASSET VALUE. CLASS R SHARES DO NOT
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS HAVE A FRONT-END SALES CHARGE; RETURNS
RECEIVED BY CLASS A SHARES. CLASS A SHARES SHOWN ARE AT NET ASSET VALUE AND DO NOT
INCEPTION DATE IS MARCH 31, 2006. REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
ON A TOTAL REDEMPTION OF RETIREMENT PLAN
THE PERFORMANCE DATA QUOTED REPRESENT ASSETS WITHIN THE FIRST YEAR. CLASS Y
PAST PERFORMANCE AND CANNOT GUARANTEE SHARES DO NOT HAVE A FRONT-END SALES
COMPARABLE FUTURE RESULTS; CURRENT CHARGE OR A CDSC; THEREFORE, PERFORMANCE
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE IS AT NET ASSET VALUE.
VISIT INVESCOAIM.COM FOR THE MOST RECENT
MONTH-END PERFORMANCE. PERFORMANCE FIGURES THE PERFORMANCE OF THE FUND'S SHARE
REFLECT REINVESTED DISTRIBUTIONS, CHANGES CLASSES WILL DIFFER PRIMARILY DUE TO
IN NET ASSET VALUE AND THE EFFECT OF THE DIFFERENT SALES CHARGE STRUCTURES AND
MAXIMUM SALES CHARGE UNLESS OTHERWISE CLASS EXPENSES.
STATED. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE HAD THE ADVISOR NOT WAIVED FEES AND/OR
A GAIN OR LOSS WHEN YOU SELL SHARES. REIMBURSED EXPENSES, PERFORMANCE WOULD
HAVE BEEN LOWER.
THE NET ANNUAL FUND OPERATING EXPENSE
RATIO SET FORTH IN THE MOST RECENT FUND (1) Total annual operating expenses less
PROSPECTUS AS OF THE DATE OF THIS REPORT any contractual fee waivers and/or
FOR CLASS A, CLASS C, CLASS R AND CLASS Y expense reimbursements by the advisor
SHARES WAS 0.86%, 1.11%, 1.11% AND 0.61%, in effect through at least June 30,
RESPECTIVELY.(1,2) THE TOTAL ANNUAL FUND 2009. See current prospectus for more
OPERATING EXPENSE RATIO SET FORTH IN THE information.
MOST RECENT FUND PROSPECTUS AS OF THE DATE
OF THIS REPORT FOR CLASS A, CLASS C, CLASS (2) Total annual operating expenses less
R AND CLASS Y SHARES WAS 1.37%, 2.12%, any contractual fee waivers by the
1.62% AND 1.12%, RESPECTIVELY. THE EXPENSE distributor in effect through at least
RATIOS PRESENTED ABOVE June 30, 2009. See current prospectus
for more information.
7 AIM LIBOR ALPHA FUND
AIM LIBOR ALPHA FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE TOTAL RETURN.
o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES grade securities. The loans in which ABOUT INDEXES USED IN THIS REPORT
the Fund may invest are typically
o Class R shares are available only to noninvestment-grade and involve a o The BARCLAYS CAPITAL U.S. AGGREGATE
certain retirement plans. Please see greater risk of default on interest and BOND INDEX covers U.S. investment-grade
the prospectus for more information. principal payments and of price changes fixed-rate bonds with components for
due to the changes in the credit government and corporate securities,
o Class Y shares are available to only quality of the issuer. mortgage pass-throughs, and
certain investors. Please see the asset-backed securities.
prospectus for more information. o Interest rate risk refers to the risk
that bond prices generally fall as o The U.S. THREE-MONTH LIBOR (London
PRINCIPAL RISKS OF INVESTING IN THE FUND interest rates rise and vice versa. Interbank Offered Rate) is an average
rate derived from the quotations
o Since a large percentage of the Fund's o The Fund may use enhanced investment provided by the banks determined by the
assets may be invested in securities of techniques such as leveraging and British Bankers' Association for a
a limited number of companies, each derivatives. Leveraging entails risks 3-month deposit in U.S. Dollars during
investment has a greater effect on the such as magnifying changes in the value a given month. USD Libor is calculated
Fund's overall performance, and any of the portfolio's securities. on an ACT/360 basis and for value two
change in the value of those securities Derivatives are subject to counterparty business days after the fixing.
could significantly affect the value of risk-the risk that the other party
your investment in the Fund. will not complete the transaction with o The LIPPER SHORT INVESTMENT GRADE DEBT
the fund. FUNDS INDEX is an equally weighted
o Credit risk is the risk of loss on an representation of the largest funds in
investment due to the deterioration of o There is no guarantee that the the Lipper Short Investment Grade Bond
an issuer's financial health. Such a investment techniques and risk analysis Funds category. These funds invest
deterioration of financial health may used by the fund's portfolio managers primarily in investment grade debt
result in a reduction of the credit will produce the desired results. issues with dollar-weighted average
rating of the issuer's securities and maturities of less than three years.
may lead to the issuer's inability to o The prices of securities held by the
honor its contractual obligations, fund may decline in response to market o The Fund is not managed to track the
including making timely payment of risks. performance of any particular index,
interest and principal. including the indexes defined here, and
o The Fund may invest in mortgage- and consequently, the performance of the
o The Fund is subject to asset-backed securities. These Fund may deviate significantly from the
currency/exchange rate risk because it securities are subject to prepayment or performance of the indexes.
may buy or sell currencies other than call risk, which is the risk that
the U.S. dollar. payments from the borrower may be o A direct investment cannot be made in
received earlier or later than expected an index. Unless otherwise indicated,
o Investing in developing countries can due to changes in the rate at which the index results include reinvested
add additional risk, such as high rates underlying loans are prepaid. dividends, and they do not reflect
of inflation or sharply devalued sales charges. Performance of an index
currencies against the U.S. dollar. o The Fund may engage in active and of funds reflects fund expenses;
Transaction costs are often higher, and frequent trading of portfolio performance of a market index does not.
there may be delays in settlement securities to achieve its investment
procedures. objective. If a fund does trade in this OTHER INFORMATION
way, it may incur increased costs,
o Foreign securities have additional which can lower the actual return of o The Chartered Financial Analyst--REGIS-
risks, including exchange rate changes, the fund. Active trading may also TERED TRADEMARK-- (CFA--REGISTERED
political and economic upheaval, increase short term gains and losses, TRADEMARK--) designation is a globally
relative lack of information, which may affect taxes that must be recognized standard for measuring the
relatively low market liquidity, and paid. competence and integrity of investment
the potential lack of strict financial professionals.
and accounting controls and standards. o Since a large percentage of the Fund's
assets may be invested in securities of continued on page 6
o Lower rated securities may be more a limited number of companies, each
susceptible to real or perceived investment has a greater effect on the
adverse economic and competitive Fund's overall performance, and any
industry conditions, and the secondary change in the value of those securities
markets in which lower rated securities could significantly affect the value of
are traded may be less liquid than your investment in the Fund.
higher
======================================================================================= ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares EASBX
======================================================================================= Class C Shares CESBX
Class R Shares RESBX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class Y Shares LIBYX
==========================================
8 AIM LIBOR ALPHA FUND
SCHEDULE OF INVESTMENTS(a)
October 31, 2008
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------
ASSET-BACKED SECURITIES-43.48%
ASSET-BACKED SECURITIES-MANUFACTURED HOUSING-0.97%
Vanderbilt Mortgage Finance,
Series 2002-B, Class A4, Pass Through Ctfs.,
5.84%, 02/07/26 79,414 $ 72,846
- -----------------------------------------------------------------------------
Series 2002-C, Class A4, Pass Through Ctfs.,
6.57%, 08/07/24 105,000 98,125
=============================================================================
170,971
=============================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS-33.55%
Banc Of America Mortgage Securities,
Series 2004-D, Class 2A2, Floating Rate
Pass Through Ctfs.,
4.19%, 05/25/34(b) 844,476 701,323
- -----------------------------------------------------------------------------
Countrywide Asset-Backed Ctfs.,
Series 2007-BC2, Class 2A1, Floating Rate
Pass Through Ctfs.,
3.35%, 06/25/37(b) 475,580 444,594
- -----------------------------------------------------------------------------
Fannie Mae REMICS,
Series 2003-112, Class FA, Floating Rate
Pass Through Ctfs.,
3.76%, 01/25/28(b) 708,792 703,575
- -----------------------------------------------------------------------------
Fannie Mae Whole Loan,
Series 2004-W5, Class F1, Floating Rate
Pass Through Ctfs.,
3.71%, 02/25/47(b) 346,822 347,001
- -----------------------------------------------------------------------------
Freddie Mac REMICS,
Series 2399, Class XF, Floating Rate Pass
Through Ctfs.,
5.54%, 01/15/32(b) 372,855 371,813
- -----------------------------------------------------------------------------
Series 2470, Class JF, Floating Rate
Pass Through Ctfs.,
5.59%, 12/15/31(b) 598,650 603,411
- -----------------------------------------------------------------------------
GS Mortgage Securities Corp. II,
Series 2007-EOP, Class J, Floating Rate
Pass Through Ctfs.,
4.90%, 03/06/20(b)(c) 225,000 175,265
- -----------------------------------------------------------------------------
JP Morgan Chase Commercial Mortgage
Securities Corp.,
Series 2005-FL1A, Class A1, Floating Rate
Pass Through Ctfs.,
4.67%, 02/15/19(b)(c) 14,130 13,155
- -----------------------------------------------------------------------------
Morgan Stanley ABS Capital I,
Series 2007-NC2, Class A2A, Floating Rate
Pass Through Ctfs.,
3.37%, 02/25/37(b) 569,092 541,092
- -----------------------------------------------------------------------------
Morgan Stanley Capital I,
Series 2007-IQ16, Class A4, Pass Through Ctfs.,
5.81%, 12/12/49 320,000 239,938
- -----------------------------------------------------------------------------
Structured Adjustable Rate Mortgage Loan Trust,
Series 2004-1, Class 3A1, Pass Through Ctfs.,
5.68%, 02/25/34 172,700 143,105
- -----------------------------------------------------------------------------
Series 2005-11, Class 1A1, Pass Through Ctfs.,
5.10%, 05/25/35 152,267 100,833
- -----------------------------------------------------------------------------
Wells Fargo Home Equity Trust,
Series 2007-2, Class A1, Floating Rate
Pass Through Ctfs.,
3.35%, 04/25/37(b) 586,602 543,302
- -----------------------------------------------------------------------------
Wells Fargo Mortgage Backed Securities Trust,
Series 2004-S, Class A1, Floating Rate
Pass Through Ctfs.,
3.70%, 09/25/34(b) 1,170,420 980,692
=============================================================================
5,909,099
=============================================================================
CREDIT CARDS-3.65%
Bank Of America Credit Card Trust,
Series 2006-C7, Class C7, Floating Rate
Pass Through Ctfs.,
4.79%, 03/15/12(b) 500,000 458,202
- -----------------------------------------------------------------------------
Capital One Multi-Asset Execution Trust,
Series 2007-A6, Class A6, Floating Rate
Pass Through Ctfs.,
4.63%, 05/15/13(b) 200,000 184,695
=============================================================================
642,897
=============================================================================
HOME EQUITY LOAN-5.31%
Countrywide Asset-Backed Ctfs.,
Series 2007-9, Class B, Floating Rate
Pass Through Ctfs.,
5.76%, 06/25/47(b)(c) 140,000 6,717
- -----------------------------------------------------------------------------
Long Beach Mortgage Loan Trust,
Series 2006-7, Class 2A1, Floating
Rate Pass Through Ctfs.,
3.31%, 08/25/36(b) 201,295 197,607
- -----------------------------------------------------------------------------
Saxon Asset Securities Trust,
Series 2004-2, Class MV3, Floating Rate
Pass Through Ctfs.,
5.16%, 08/25/35(b) 712,243 491,106
- -----------------------------------------------------------------------------
Wells Fargo Home Equity Trust,
Series 2006-3, Class A1, Floating Rate
Pass Through Ctfs.,
3.31%, 01/25/37(b) 247,033 240,857
=============================================================================
936,287
=============================================================================
Total Asset-Backed Securities (Cost
$8,657,317) 7,659,254
=============================================================================
BONDS & NOTES-39.54%
AEROSPACE & DEFENSE-1.41%
DRS Technologies, Inc.,
Sr. Unsec. Gtd. Notes,
6.63%, 02/01/16 250,000 247,912
=============================================================================
CASINOS & GAMING-1.31%
Mandalay Resort Group,
Sr. Unsec. Gtd. Global Notes,
6.50%, 07/31/09 250,000 230,000
=============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM LIBOR ALPHA FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------
COMPUTER HARDWARE-0.87%
NCR Corp.,
Sr. Unsec. Unsub. Global Notes,
7.13%, 06/15/09 150,000 $ 152,506
=============================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.88%
Caterpillar Financial Services Corp.,
Series F, Sr. Unsec. Floating Rate
Medium-Term Notes,
2.87%, 05/18/09(b) 160,000 155,627
=============================================================================
CONSUMER FINANCE-2.03%
American Express Credit Corp.,
Series C, Sr. Unsec. Floating Rate
Medium-Term Notes,
4.66%, 05/27/10(b) 250,000 217,857
- -----------------------------------------------------------------------------
Ford Motor Credit Co., LLC,
Sr. Unsec. Unsub. Global Notes,
5.80%, 01/12/09 150,000 140,438
=============================================================================
358,295
=============================================================================
DIVERSIFIED BANKS-9.02%
First Union Capital I,
-Series A, Jr. Unsec. Gtd. Sub. Trust Pfd.
Capital Securities,
7.94%, 01/15/27 500,000 371,400
- -----------------------------------------------------------------------------
HSBC America Capital Trust II, Gtd. Trust Pfd.
Capital Securities,
8.38%, 05/15/27(c) 610,000 612,418
- -----------------------------------------------------------------------------
Sovereign Bancorp Inc.,
Sr. Unsec. Floating Rate Global Notes,
3.09%, 03/01/09(b) 250,000 237,300
- -----------------------------------------------------------------------------
Wachovia Capital Trust I, Jr. Sub. Trust Pfd.
Capital Securities,
7.64%, 01/15/27(c) 495,000 367,686
=============================================================================
1,588,804
=============================================================================
HEALTH CARE EQUIPMENT-0.75%
Covidien International Finance S.A., (Luxembourg),
Sr. Unsec. Gtd. Unsub. Global Notes,
6.00%, 10/15/17 150,000 132,241
=============================================================================
HEALTH CARE FACILITIES-2.86%
Healthsouth Corp.,
Sr. Unsec. Gtd. Global Notes,
10.75%, 06/15/16 150,000 135,750
- -----------------------------------------------------------------------------
Impress Holdings B.V., (Netherlands),
Sr. Sec. Gtd. Floating Rate Bonds,
7.88%, 09/15/13(b)(c) 575,000 368,911
=============================================================================
504,661
=============================================================================
HOMEBUILDING-0.84%
D.R. Horton Inc.,
Sr. Unsec. Gtd. Unsub. Notes,
5.00%, 01/15/09 150,000 147,188
=============================================================================
INDUSTRIAL CONGLOMERATES-1.20%
General Electric Capital Corp.,
Sr. Unsec. Floating Rate Medium-Term
Global Notes,
3.57%, 10/26/09(b) 120,000 116,457
- -----------------------------------------------------------------------------
4.57%, 01/20/10(b) 100,000 95,159
=============================================================================
211,616
=============================================================================
MANAGED HEALTH CARE-2.27%
UnitedHealth Group Inc.,
Sr. Unsec. Notes,
3.75%, 02/10/09 400,000 400,070
=============================================================================
MULTI-LINE INSURANCE-1.03%
International Lease Finance Corp.,
Sr. Unsec. Floating Rate Medium-Term Notes,
4.84%, 04/20/09(b) 100,000 87,025
- -----------------------------------------------------------------------------
3.63%, 06/26/09(b) 110,000 94,641
=============================================================================
181,666
=============================================================================
MULTI-SECTOR HOLDINGS-1.11%
Capmark Financial Group, Inc.,
Sr. Unsec. Gtd. Floating Rate Global Notes,
3.45%, 05/10/10(b) 500,000 195,250
=============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-5.55%
BankAmerica Capital II,
-Series 2, Jr. Unsec. Gtd. Sub. Trust Pfd.
Capital Securities,
8.00%, 12/15/26 370,000 287,712
- -----------------------------------------------------------------------------
JPM Chase Capital XXIII,
Unsec. Sub. Gtd. Floating Rate Global Notes,
3.80%, 05/15/47(b) 750,000 340,057
- -----------------------------------------------------------------------------
NB Capital Trust II,
Jr. Unsec. Gtd. Sub. Trust Pfd. Capital
Securities,
7.83%, 12/15/26 455,000 349,192
=============================================================================
976,961
=============================================================================
PAPER PRODUCTS-1.99%
Cellu Tissue Holdings, Inc.,
Sec. Gtd. Global Notes,
9.75%, 03/15/10 250,000 218,750
- -----------------------------------------------------------------------------
Mercer International Inc.,
Sr. Unsec. Global Notes,
9.25%, 02/15/13 200,000 131,500
=============================================================================
350,250
=============================================================================
PROPERTY & CASUALTY INSURANCE-0.87%
Chubb Corp.,
Sr. Notes,
5.75%, 05/15/18 100,000 82,377
- -----------------------------------------------------------------------------
Travelers Cos. Inc. (The),
Sr. Unsec. Notes,
5.80%, 05/15/18 85,000 71,271
=============================================================================
153,648
=============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM LIBOR ALPHA FUND
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------
PUBLISHING-0.54%
Dex Media West LLC/Dex Media Finance Co.,
Series B, Sr. Unsec. Sub. Global Notes,
9.88%, 08/15/13 250,000 $ 95,000
=============================================================================
SEMICONDUCTORS-1.79%
Viasystems Inc.,
Sr. Unsec. Gtd. Sub. Global Notes,
10.50%, 01/15/11 400,000 316,000
=============================================================================
SPECIALIZED FINANCE-1.12%
CIT Group Inc.,
Sr. Unsec. Unsub. Medium-Term Notes,
5.00%, 11/24/08 200,000 197,256
=============================================================================
TRUCKING-2.10%
Roadway Corp.,
Sr. Sec. Gtd. Global Notes,
8.25%, 12/01/08 370,000 370,205
=============================================================================
Total Bonds & Notes (Cost $8,635,479) 6,965,156
=============================================================================
COMMERCIAL PAPER-6.52%
ELECTRIC UTILITIES-1.42%
Progress Energy Inc.
6.50%, 11/10/08(c)(d) 250,000 249,594
=============================================================================
FOOD RETAIL-1.42%
Safeway Inc.
5.45%, 11/04/08(c)(d) 250,000 249,886
=============================================================================
HOUSEHOLD APPLIANCES-1.42%
Whirlpool Corp.
6.45%, 11/17/08(c)(d) 250,000 249,283
=============================================================================
OIL & GAS DRILLING-1.41%
Transocean Inc.
6.15%, 11/24/08(c)(d) 250,000 249,018
=============================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-0.85%
Virginia Electric & Power Co.
6.06%, 11/05/08 150,000 149,899
=============================================================================
Total Commercial Paper (Cost $1,147,680) 1,147,680
=============================================================================
U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES-5.18%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-4.14%
Floating Rate Pass Through Ctfs.
6.53%, 07/01/36(b) 711,508 728,714
=============================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-1.04%
Floating Rate Pass Through Ctfs.
6.11%, 11/01/32(b) 183,197 183,291
=============================================================================
Total U.S. Government Mortgage-Backed
Securities (Cost $906,396) 912,005
=============================================================================
U.S. GOVERNMENT AGENCY SECURITIES-0.88%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-0.77%
Sr. Unsec. Disc. Notes,
3.83%, 11/14/08(d)(e) 110,000 109,909
- -----------------------------------------------------------------------------
2.28%, 11/20/08(d)(e) 25,000 24,970
=============================================================================
134,879
=============================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-0.11%
Sr. Unsec. Disc. Notes,
2.00%, 11/24/08(d)(e) 20,000 19,974
=============================================================================
Total U.S. Government Agency Securities (Cost
$154,853) 154,853
=============================================================================
TOTAL INVESTMENTS-95.60% (Cost $19,501,725) 16,838,948
=============================================================================
OTHER ASSETS LESS LIABILITIES-4.40% 775,039
=============================================================================
NET ASSETS-100.00% $17,613,987
_____________________________________________________________________________
=============================================================================
</Table>
Investment Abbreviations:
<Table>
Ctfs. - Certificates
Disc. - Discounted
Gtd. - Guaranteed
Jr. - Junior
Pfd. - Preferred
REMICS - Real Estate Mortgage Investment Conduits
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
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) Interest or dividend rate is redetermined periodically. Rate shown is the
rate in effect on October 31, 2008.
(c) Security purchased or received in a transaction exempt from registration
under the Securities Act of 1933, as amended. The security may be resold
pursuant to an exemption from registration under the 1933 Act, typically
to qualified institutional buyers. The aggregate value of these securities
at October 31, 2008 was $2,541,933, which represented 14.43% of the Fund's
Net Assets.
(d) Security may be traded on a discount basis. The interest rate shown
represents the discount rate at the time of purchase by the Fund.
(e) All or a portion of the value was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1K and Note 7.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM LIBOR ALPHA FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<Table>
ASSETS:
Investments, at value (Cost $19,501,725) $16,838,948
- ------------------------------------------------------
Cash 230,168
- ------------------------------------------------------
Foreign currencies, at value (Cost $324) 235
- ------------------------------------------------------
Receivables for:
Investments sold 1,183,379
- ------------------------------------------------------
Variation margin 18,355
- ------------------------------------------------------
Fund shares sold 290
- ------------------------------------------------------
Dividends and Interest 236,226
- ------------------------------------------------------
Fund expenses absorbed 12,653
- ------------------------------------------------------
Principal paydowns 12,084
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 4,269
- ------------------------------------------------------
Premiums paid on swap agreements 51,679
- ------------------------------------------------------
Other assets 19,757
======================================================
Total assets 18,608,043
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 788,626
- ------------------------------------------------------
Fund shares reacquired 18,281
- ------------------------------------------------------
Accrued fees to affiliates 12,678
- ------------------------------------------------------
Accrued other operating expenses 70,546
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 5,516
- ------------------------------------------------------
Unrealized depreciation on swap
agreements 98,409
======================================================
Total liabilities 994,056
======================================================
Net assets applicable to shares
outstanding $17,613,987
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $22,451,307
- ------------------------------------------------------
Undistributed net investment income 110,501
- ------------------------------------------------------
Undistributed net realized gain (loss) (2,232,664)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (2,715,157)
======================================================
$17,613,987
______________________________________________________
======================================================
NET ASSETS:
Class A $10,679,607
______________________________________________________
======================================================
Class C $ 6,588,038
______________________________________________________
======================================================
Class R $ 19,514
______________________________________________________
======================================================
Class Y $ 316,734
______________________________________________________
======================================================
Institutional Class $ 10,094
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 1,270,135
______________________________________________________
======================================================
Class C 783,312
______________________________________________________
======================================================
Class R 2,321
______________________________________________________
======================================================
Class Y 37,646
______________________________________________________
======================================================
Institutional Class 1,200
______________________________________________________
======================================================
Class A:
Net asset value per share $ 8.41
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $8.41 divided
by 97.50%) $ 8.63
______________________________________________________
======================================================
Class C:
Net asset value and offering price per
share $ 8.41
______________________________________________________
======================================================
Class R:
Net asset value and offering price per
share $ 8.41
______________________________________________________
======================================================
Class Y:
Net asset value and offering price per
share $ 8.41
______________________________________________________
======================================================
Institutional Class:
Net asset value and offering price per
share $ 8.41
______________________________________________________
======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM LIBOR ALPHA FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<Table>
INVESTMENT INCOME:
Interest $ 1,634,582
- ------------------------------------------------------------------------------------------------
Dividends 61,622
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds 32,626
================================================================================================
Total investment income 1,728,830
================================================================================================
EXPENSES:
Advisory fees 126,973
- ------------------------------------------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------------------------------------------
Custodian fees 15,864
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 42,712
- ------------------------------------------------------------------------------------------------
Class C 110,320
- ------------------------------------------------------------------------------------------------
Class R 98
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, C, R and Y 32,658
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 18
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 16,131
- ------------------------------------------------------------------------------------------------
Registration and filing fees 45,197
- ------------------------------------------------------------------------------------------------
Professional services fees 59,675
- ------------------------------------------------------------------------------------------------
Other 42,321
================================================================================================
Total expenses 541,967
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (276,083)
================================================================================================
Net expenses 265,884
================================================================================================
Net investment income 1,462,946
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (includes net gains (losses) from securities sold to
affiliates of $(1,410)) (1,241,247)
- ------------------------------------------------------------------------------------------------
Foreign currencies (489)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts (131,680)
- ------------------------------------------------------------------------------------------------
Futures contracts (137,615)
- ------------------------------------------------------------------------------------------------
Swap agreements (134,138)
================================================================================================
(1,645,169)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (2,278,221)
- ------------------------------------------------------------------------------------------------
Foreign currencies (363)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts 92,877
- ------------------------------------------------------------------------------------------------
Futures contracts 99,857
- ------------------------------------------------------------------------------------------------
Swap agreements (17,426)
================================================================================================
(2,103,276)
================================================================================================
Net realized and unrealized gain (loss) (3,748,445)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(2,285,499)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM LIBOR ALPHA FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,462,946 $ 2,373,236
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) (1,645,169) 638,338
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (2,103,276) (811,220)
========================================================================================================
Net increase (decrease) in net assets resulting from operations (2,285,499) 2,200,354
========================================================================================================
Distributions to shareholders from net investment income:
Class A (1,273,883) (1,526,075)
- --------------------------------------------------------------------------------------------------------
Class C (801,361) (826,199)
- --------------------------------------------------------------------------------------------------------
Class R (1,391) (21,819)
- --------------------------------------------------------------------------------------------------------
Class Y (1,797) --
- --------------------------------------------------------------------------------------------------------
Institutional Class (4,336) (26,416)
========================================================================================================
Total distributions from net investment income (2,082,768) (2,400,509)
========================================================================================================
Share transactions-net:
Class A (14,215,379) (5,262,874)
- --------------------------------------------------------------------------------------------------------
Class C (7,895,573) (1,420,351)
- --------------------------------------------------------------------------------------------------------
Class R 3,022 (762,826)
- --------------------------------------------------------------------------------------------------------
Class Y 327,128 --
- --------------------------------------------------------------------------------------------------------
Institutional Class (43,853) (763,354)
========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (21,824,655) (8,209,405)
========================================================================================================
Net increase (decrease) in net assets (26,192,922) (8,409,560)
========================================================================================================
NET ASSETS:
Beginning of year 43,806,909 52,216,469
========================================================================================================
End of year (includes undistributed net investment income of $110,501
and $442,520, respectively) $ 17,613,987 $43,806,909
________________________________________________________________________________________________________
========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
14 AIM LIBOR ALPHA FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM LIBOR Alpha Fund (the "Fund") is a series portfolio of AIM Investment Funds
(the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of nine
separate series portfolios, each authorized to issue an unlimited number of
shares of beneficial interest. The 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 to provide total return.
The Fund currently consists of five different classes of shares: Class A,
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 C, 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.
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.
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.
15 AIM LIBOR ALPHA FUND
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 realized and unrealized capital gains and losses to a
class based on the relative net assets of each class. The Fund allocates
income to a class based on the relative value of the settled shares of
each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, 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 generally declared and paid
monthly. Distributions from net realized capital gain, if any, are
generally paid annually and recorded on ex-dividend date. The Fund may
elect to treat a portion of the proceeds from redemptions as distributions
for federal income tax purposes.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements
of Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial
statements.
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. 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.
J. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to
attempt to minimize the risk to the Fund from adverse changes in the
relationship between currencies. The Fund may also enter into a foreign
currency contract for the purchase or sale of a security denominated in a
foreign currency in
16 AIM LIBOR ALPHA FUND
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.
K. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts.
Initial margin deposits required upon entering into futures contracts are
satisfied by the segregation of specific securities as collateral for the
account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contracts are open, changes in
the value of the contracts are recognized as unrealized gains or losses by
recalculating the value of the contracts on a daily basis. Variation
margin payments are received or made depending upon whether unrealized
gains or losses are incurred. When the contracts are closed, the Fund
recognizes a realized gain or loss equal to the difference between the
proceeds from, or cost of, the closing transaction and the Fund's basis in
the contract. If the Fund were unable to liquidate a futures contract
and/or enter into an offsetting closing transaction, the Fund would
continue to be subject to market risk with respect to the value of the
contracts and continue to be required to maintain the margin deposits on
the futures contracts. Risks may exceed amounts recognized in the
Statement of Assets and Liabilities.
L. SWAP AGREEMENTS -- The Fund may enter into various swap transactions,
including interest rate, index, currency exchange rate and credit default
swap contracts ("CDS") for investment purposes or to manage interest rate,
currency or credit risk.
Interest rate, index, and currency exchange rate swap agreements are
two-party contracts entered into primarily to exchange the returns (or
differentials in rates of returns) earned or realized on particular
predetermined investments or instruments. The gross returns to be
exchanged or "swapped" between the parties are calculated with respect to
a notional amount, i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index.
A CDS is an agreement between two parties ("Counterparties") to exchange
the credit risk of an issuer. A buyer of a CDS is said to buy protection
by paying an upfront payment and/or a fixed payment over the life of the
agreement to the seller of the CDS. If a defined credit event occurs (such
as payment default or bankruptcy), the Fund as a protection buyer would
cease paying its fixed payment, the Fund would deliver the corresponding
bonds, or other similar bonds issued by the same reference entity to the
seller, and the seller would pay the full notional value, or the "par
value", of the referenced obligation to the Fund. A seller of a CDS is
said to sell protection and thus would receive an upfront payment and/or a
fixed payment over the life of the agreement. If a credit event occurs,
the Fund as a protection seller would cease to receive the fixed payment
stream, the Fund would pay the buyer the full notional value of the
referenced obligation, and the Fund would receive the corresponding bonds
or similar bonds issued by the same reference entity. If no credit event
occurs, the Fund receives the fixed payment over the life of the
agreement. As the seller, the Fund would effectively add leverage to its
portfolio because, in addition to its total net assets, the Fund would be
subject to investment exposure on the notional amount of the CDS. Because
the CDS is a bilateral agreement between Counterparties, the transaction
can alternatively be settled by a cash payment in the case of a credit
event.
Changes in the value of swap agreements are recognized as unrealized
gains (losses) in the Statement of Operations by "marking to market" on a
daily basis to reflect the value of the swap agreement at the end of each
trading day. Payments received or paid at the beginning of the agreement
are reflected as such on the Statement of Assets and Liabilities and may
be referred to as upfront payments. The Fund amortizes upfront payments
and/or accrues for the fixed payment stream on swap agreements on a daily
basis with the net amount, recorded as a component of realized gain (loss)
on the Statement of Operations. A liquidation payment received or made at
the termination of a swap agreement is recorded as realized gain (loss) on
the Statement of Operations. The Fund segregates liquid securities having
a value at least equal to the amount of the potential obligation of a Fund
under any swap transaction. Entering into these agreements involves, to
varying degrees, lack of liquidity and elements of credit, market, and
counterparty risk in excess of amounts recognized on the Statement of
Assets and Liabilities.
M. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with 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 $1 billion 0.45%
- -------------------------------------------------------------------
Next $4 billion 0.425%
- -------------------------------------------------------------------
Over $5 billion 0.40%
___________________________________________________________________
===================================================================
</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).
Previously, under the terms of a master sub-advisory agreement between the
Advisor and Invesco Institutional (N.A), Inc., the Advisor paid Invesco
Institutional (N.A), Inc. 40% of the amount of the Advisor's compensation on
sub-advised assets. This agreement terminated on May 1, 2008.
The Advisor has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class C, Class R, Class Y
and Institutional Class shares to 0.85%, 1.10% (after distribution fee waivers),
1.10%, 0.60% and 0.60% of average daily net assets, respectively, through at
least June 30, 2009. In determining the Advisor's obligation to waive advisory
fees
17 AIM LIBOR ALPHA FUND
and/or reimburse expenses, the following expenses are not taken into account,
and could cause the net annual operating expenses to exceed the numbers
reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short
sales; (iv) extraordinary items; (v) expenses related to a merger or
reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses
that the Fund has incurred but did not actually pay because of an expense offset
arrangement. Currently, in addition to the expense reimbursement arrangement
with Invesco Ltd. ("Invesco") described more fully below, the expense offset
arrangements from which the Fund may benefit are in the form of credits that the
Fund receives from banks where the Fund or its transfer agent has deposit
accounts in which it holds uninvested cash. These credits are used to pay
certain expenses incurred by the Fund.
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash in such affiliated money market
funds.
For the year ended October 31, 2008, the Advisor waived advisory fees and
reimbursed expenses of $174,121 and reimbursed class level expenses of $19,506,
$12,596, $22, $23 and $18 for Class A, Class C, Class R, Class Y and
Institutional Class shares in proportion to the relative net assets of such
classes.
At the request of the Trustees of the Trust, 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
October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $113.
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 October 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 October 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
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 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 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. IADI has contractually agreed to waive
0.50% of Rule 12b-1 plan fees on Class C shares through at least June 30, 2009.
12b-1fees before fee waivers under this agreement are shown as distribution fees
in the Statement of Operations. Fees incurred after fee waivers for Class C
shares were $55,160
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 October 31, 2008, IADI
advised the Fund that IADI retained $1,831 in front-end sales commissions from
the sale of Class A shares and $9,779 and $87 from Class A and Class C shares,
respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
Invesco Aim, IAIS and/or IADI.
NOTE 3--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended October 31, 2008, the Fund
engaged in securities purchases of $530,093 and securities sales of $4,533,612,
which resulted in net realized gains (losses) of $(1,410).
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 October 31, 2008, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $14,524.
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
18 AIM LIBOR ALPHA FUND
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 October 31, 2008, the Fund paid legal fees of $2,821 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 may borrow for leveraging in an amount up to 5% of the Fund's total
assets (excluding the amount borrowed) at the time the borrowing is made. In
doing so, 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. A Fund may not purchase additional securities when any borrowings
from banks exceeds 5% of the Fund's total assets.
NOTE 7--FUTURES CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FUTURES CONTRACTS
- -------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF MONTH/ APPRECIATION
CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
Australian Treasury 3 Year Bonds 15 December-08/Long $ 1,038,337 $ (7,986)
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes 4 December-08/Long 453,031 3,365
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes 7 December-08/Long 791,547 (23,140)
- -------------------------------------------------------------------------------------------------------------------------
Subtotal $ 2,282,915 $(27,761)
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Long Bonds 19 December-08/Short (2,149,375) 73,879
- -------------------------------------------------------------------------------------------------------------------------
Total $ 133,540 $ 46,118
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
NOTE 8--CREDIT DEFAULT SWAP AGREEMENTS AT PERIOD-END
<Table>
<Caption>
OPEN CREDIT DEFAULT SWAP AGREEMENTS
- -----------------------------------------------------------------------------------------------------------------------------
NOTIONAL UNREALIZED
BUY/SELL (PAY)/RECEIVE EXPIRATION AMOUNT APPRECIATION
COUNTERPARTY REFERENCE ENTITY PROTECTION FIXED RATE DATE (000) (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------------
Bank of America, N.A. AMBAC Financial Buy (5.00%)(a) 12/20/08 $ 830 $(69,333)
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International AMBAC Financial Sell 6.75% 12/20/08 500 (9,430)
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch International Morgan Stanley Sell 2.30% 12/20/08 325 (1,847)
- -----------------------------------------------------------------------------------------------------------------------------
UBS AG AMBAC Financial Sell 11.00% 12/20/08 435 (5,551)
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
UBS AG CDX North America Sell 1.50%(b) 12/20/13 1,000 7,364
Investment Grade
High Volatility
Index
- -----------------------------------------------------------------------------------------------------------------------------
UBS AG IStar Financial Inc. Sell 5.00%(c) 03/20/09 155 (15,410)
- -----------------------------------------------------------------------------------------------------------------------------
UBS AG MBIA Inc. Sell 7.10% 12/20/08 450 (4,545)
- -----------------------------------------------------------------------------------------------------------------------------
UBS AG Pulte Homes, Inc. Sell 4.20% 12/20/08 1,000 343
=============================================================================================================================
Total Credit Default $4,695 $(98,409)
Swap Agreements
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</Table>
(a) Unamortized discount at period-end of $87,064.
(b) Unamortized premium at period-end of $30,599.
(c) Unamortized premium at period-end of $4,786.
19 AIM LIBOR ALPHA FUND
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
OCTOBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Distributions paid from ordinary income $2,082,768 $2,400,509
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- -----------------------------------------------------------------------------------------------
Undistributed ordinary income $ 117,685
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (2,662,777)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (106,485)
- -----------------------------------------------------------------------------------------------
Temporary book/tax differences (7,184)
- -----------------------------------------------------------------------------------------------
Capital loss carryforward (2,178,559)
- -----------------------------------------------------------------------------------------------
Shares of beneficial interest 22,451,307
===============================================================================================
Total net assets $17,613,987
_______________________________________________________________________________________________
===============================================================================================
</Table>
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 October 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
October 31, 2014 $ 358,143
- -----------------------------------------------------------------------------------------------
October 31, 2016 1,820,416
===============================================================================================
Total capital loss carryforward $2,178,559
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2008 was $30,269,243 and $54,791,287,
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 $ 33,382
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,696,159)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(2,662,777)
________________________________________________________________________________________________
================================================================================================
Investments have the same cost for tax and financial statement purposes.
</Table>
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of credit default swaps,
foreign currency transactions, paydowns on mortgage-backed securities and net
operating losses, on October 31, 2008, undistributed net investment income was
increased by $287,803, undistributed net realized gain (loss) was decreased by
$283,084 and shares of beneficial interest decreased by $4,719. This
reclassification had no effect on the net assets of the Fund.
20 AIM LIBOR ALPHA FUND
NOTE 12--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
-----------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 496,602 $ 4,640,781 1,551,792 $ 15,443,481
- ------------------------------------------------------------------------------------------------------------------------
Class C 153,241 1,429,066 1,090,240 10,867,889
- ------------------------------------------------------------------------------------------------------------------------
Class R 181 1,631 -- --
- ------------------------------------------------------------------------------------------------------------------------
Class Y(b) 46,826 406,922 -- --
========================================================================================================================
Issued as reinvestment of dividends:
Class A 119,025 1,100,413 127,364 1,282,136
- ------------------------------------------------------------------------------------------------------------------------
Class C 76,136 704,488 72,242 718,250
- ------------------------------------------------------------------------------------------------------------------------
Class R 151 1,391 2,191 21,818
- ------------------------------------------------------------------------------------------------------------------------
Class Y(b) 209 1,797 -- --
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 470 4,336 2,653 26,416
========================================================================================================================
Reacquired:
Class A(b) (2,143,337) (19,956,573) (2,208,829) (21,988,491)
- ------------------------------------------------------------------------------------------------------------------------
Class C (1,083,682) (10,029,127) (1,305,363) (13,006,490)
- ------------------------------------------------------------------------------------------------------------------------
Class R -- -- (77,955) (784,644)
- ------------------------------------------------------------------------------------------------------------------------
Class Y(b) (9,389) (81,591) -- --
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class (5,550) (48,189) (78,451) (789,770)
========================================================================================================================
Net increase (decrease) share activity (2,349,117) $(21,824,655) (824,116) $ (8,209,405)
________________________________________________________________________________________________________________________
========================================================================================================================
</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 47% 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 45,676 $ 396,921
===================================================================================================
Class A (45,676) ($396,921)
___________________________________________________________________________________________________
===================================================================================================
</Table>
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 LIBOR ALPHA 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
NET ASSET (LOSSES)
VALUE, ON SECURITIES (BOTH TOTAL FROM
BEGINNING NET INVESTMENT REALIZED AND INVESTMENT DIVIDENDS FROM NET NET ASSET VALUE,
OF PERIOD INCOME (LOSS)(A) UNREALIZED) OPERATIONS INVESTMENT INCOME END OF PERIOD
- -------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 $ 9.86 $0.49 $(1.25) $(0.76) $(0.69) $8.41
Year ended 10/31/07 9.91 0.48 (0.04) 0.44 (0.49) 9.86
Year ended
10/31/06(e) 10.00 0.26 (0.08) 0.18 (0.27) 9.91
- -------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 9.86 0.46 (1.25) (0.79) (0.66) 8.41
Year ended 10/31/07 9.91 0.46 (0.04) 0.42 (0.47) 9.86
Year ended
10/31/06(e) 10.00 0.25 (0.09) 0.16 (0.25) 9.91
- -------------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 10/31/08 9.86 0.46 (1.25) (0.79) (0.66) 8.41
Year ended 10/31/07 9.91 0.46 (0.04) 0.42 (0.47) 9.86
Year ended
10/31/06(e) 10.00 0.25 (0.09) 0.16 (0.25) 9.91
- -------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(e) 8.69 0.04 (0.27) (0.23) (0.05) 8.41
- -------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 9.86 0.51 (1.26) (0.75) (0.70) 8.41
Year ended 10/31/07 9.91 0.51 (0.04) 0.47 (0.52) 9.86
Year ended
10/31/06(e) 10.00 0.28 (0.09) 0.19 (0.28) 9.91
_________________________________________________________________________________________________________________________
=========================================================================================================================
<Caption>
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE NET TO AVERAGE NET INVESTMENT
NET ASSETS, END OF ASSETS WITH FEE ASSETS WITHOUT FEE INCOME
TOTAL PERIOD (000S WAIVERS AND/OR WAIVERS AND/OR TO AVERAGE PORTFOLIO
RETURN(B) OMITTED) EXPENSES ABSORBED EXPENSES ABSORBED NET ASSETS TURNOVER(C)
- ----------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 (8.13)% $10,680 0.90%(d) 1.63%(d) 5.23%(d) 116%
Year ended 10/31/07 4.52 27,579 0.85 1.36 4.85 218
Year ended
10/31/06(e) 1.82 32,980 0.87(f) 1.66(f) 4.49(f) 134
- ----------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 (8.36) 6,588 1.15(d) 2.38(d) 4.98(d) 116
Year ended 10/31/07 4.27 16,147 1.10 2.11 4.60 218
Year ended
10/31/06(e) 1.67 17,653 1.12(f) 2.41(f) 4.24(f) 134
- ----------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 10/31/08 (8.36) 20 1.15(d) 1.88(d) 4.98(d) 116
Year ended 10/31/07 4.26 20 1.10 1.61 4.60 218
Year ended
10/31/06(e) 1.67 771 1.12(f) 1.91(f) 4.24(f) 134
- ----------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(e) (2.68) 317 0.66(d)(f) 2.24(d)(f) 5.47(d)(f) 116
- ----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 (7.90) 10 0.65(d) 1.30(d) 5.48(d) 116
Year ended 10/31/07 4.79 62 0.60 1.02 5.10 218
Year ended
10/31/06(e) 1.97 813 0.61(f) 1.34(f) 4.75(f) 134
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges 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) Ratios are based on average daily net assets (000's omitted) of $17,085,
$11,032, $20, $326 and $57 for Class A, Class C, Class R, Class Y and
Institutional Class shares, respectively.
(e) Class A, Class C and Institutional Class shares commenced on March 31,
2006. Class Y shares commenced on October 3, 2008.
(f) Annualized.
22 AIM LIBOR ALPHA FUND
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to Invesco Aim and IADI (Order No. 05-1318). The WVASC makes
findings of fact that Invesco Aim and IADI entered into certain arrangements
permitting market timing of the AIM Funds and failed to disclose these
arrangements in the prospectuses for such Funds, and conclusions of law to the
effect that Invesco Aim and IADI violated the West Virginia securities laws. The
WVASC orders Invesco Aim and IADI to cease any further violations and seeks to
impose monetary sanctions, including restitution to affected investors,
disgorgement of fees, reimbursement of investigatory, administrative and legal
costs and an "administrative assessment," to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. By agreement with the Commissioner of Securities, Invesco Aim's time to
respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals,
depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws 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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various Invesco Aim- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund
Derivative Complaint purportedly brought on behalf of the AIM Funds and fund
registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA
purportedly brought on behalf of participants in the Invesco 401(k) plan. Based
on orders issued by the MDL Court, all claims asserted against the AIM Funds
that have been transferred to the MDL Court have been dismissed, although
certain Funds remain nominal defendants in the Consolidated Amended Fund
Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco
defendants' motion to dismiss the Amended Class Action Complaint for Violations
of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and
remanded this lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing
full cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco Aim and the Fund are unable to
estimate the impact, if any, that the outcome of the Pending Litigation and
Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund.
23 AIM LIBOR ALPHA FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM LIBOR Alpha 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 LIBOR Alpha Fund, (one of the
funds constituting AIM Investment Funds, hereafter referred to as the "Fund") at
October 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 October 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2008
Houston, Texas
24 AIM LIBOR ALPHA 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 May 1, 2008, through
October 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 October 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 October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $945.70 $4.50 $1,020.51 $4.67 0.92%
- ---------------------------------------------------------------------------------------------------
C 1,000.00 944.50 5.72 1,019.25 5.94 1.17
- ---------------------------------------------------------------------------------------------------
R 1,000.00 944.60 5.72 1,019.25 5.94 1.17
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 973.20 0.52 1,021.82 3.35 0.66
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 31, 2008 (as of close of
business October 3, 2008, through October 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 29
(as of close of business October 3, 2008, through October 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 LIBOR ALPHA FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM renewal process, the Trustees receive from one another and attributed different
Investment Funds is required under the comparative performance and fee data weight to the various factors. The
Investment Company Act of 1940 to approve regarding the AIM Funds prepared by an Trustees recognized that the advisory
annually the renewal of the AIM LIBOR independent company, Lipper, Inc. arrangements and resulting advisory fees
Alpha Fund's (the Fund) investment (Lipper), under the direction and for the Fund and the other AIM Funds are
advisory agreement with Invesco Aim supervision of the independent Senior the result of years of review and
Advisors, Inc. (Invesco Aim). During Officer who also prepares a separate negotiation between the Trustees and
contract renewal meetings held on June analysis of this information for the Invesco Aim, that the Trustees may focus
18-19, 2008, the Board as a whole and the Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of
disinterested or "independent" Trustees, recommendations to the Investments these arrangements in some years than in
voting separately, approved the Committee regarding the performance, fees others, and that the Trustees'
continuance of the Fund's investment and expenses of their assigned funds. The deliberations and conclusions in a
advisory agreement for another year, Investments Committee considers each particular year may be based in part on
effective July 1, 2008. In doing so, the Sub-Committee's recommendations and makes their deliberations and conclusions of
Board determined that the Fund's its own recommendations regarding the these same arrangements throughout the
investment advisory agreement is in the performance, fees and expenses of the AIM year and in prior years.
best interests of the Fund and its Funds to the full Board. The Investments
shareholders and that the compensation to Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF
Invesco Aim under the Fund's investment Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION
advisory agreement is fair and reasonable. its annual recommendation to the Board
whether to approve the continuance of each The discussion below serves as a summary
The independent Trustees met separately AIM Fund's investment advisory agreement of the Senior Officer's independent
during their evaluation of the Fund's and sub-advisory agreements for another written evaluation with respect to the
investment advisory agreement with year. Fund's investment advisory agreement as
independent legal counsel from whom they well as a discussion of the material
received independent legal advice, and the The independent Trustees are assisted factors and related conclusions that
independent Trustees also received in their annual evaluation of the Fund's formed the basis for the Board's approval
assistance during their deliberations from investment advisory agreement by the of the Fund's investment advisory
the independent Senior Officer, a independent Senior Officer. One agreement and sub-advisory agreements.
full-time officer of the AIM Funds who responsibility of the Senior Officer is to Unless otherwise stated, information set
reports directly to the independent manage the process by which the AIM Funds' forth below is as of June 19, 2008 and
Trustees. proposed management fees are negotiated does not reflect any changes that may have
during the annual contract renewal process occurred since that date, including but
THE BOARD'S FUND EVALUATION PROCESS to ensure that they are negotiated in a not limited to changes to the Fund's
manner that is at arms' length and performance, advisory fees, expense
The Board's Investments Committee has reasonable. Accordingly, the Senior limitations and/or fee waivers.
established three Sub-Committees that are Officer must either supervise a
responsible for overseeing the management competitive bidding process or prepare an I. Investment Advisory Agreement
of a number of the series portfolios of independent written evaluation. The Senior
the AIM Funds. This Sub-Committee Officer has recommended that an A. Nature, Extent and Quality of
structure permits the Trustees to focus on independent written evaluation be provided Services Provided by Invesco Aim
the performance of the AIM Funds that have and, at the direction of the Board, has
been assigned to them. The Sub-Committees prepared an independent written The Board reviewed the advisory services
meet throughout the year to review the evaluation. provided to the Fund by Invesco Aim under
performance of their assigned funds, and the Fund's investment advisory agreement,
the Sub-Committees review monthly and During the annual contract renewal the performance of Invesco Aim in
quarterly comparative performance process, the Board considered the factors providing these services, and the
information and periodic asset flow data discussed below under the heading "Factors credentials and experience of the officers
for their assigned funds. These materials and Conclusions and Summary of Independent and employees of Invesco Aim who provide
are prepared under the direction and Written Fee Evaluation" in evaluating the these services. The Board's review of the
supervision of the independent Senior fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide
Officer. Over the course of each year, the investment advisory agreement and these services included the Board's
Sub-Committees meet with portfolio sub-advisory agreements at the contract consideration of Invesco Aim's portfolio
managers for their assigned funds and renewal meetings and at their meetings and product review process, various back
other members of management and review throughout the year as part of their office support functions provided by
with these individuals the performance, ongoing oversight of the Fund. The Fund's Invesco Aim and its affiliates, and
investment objective(s), policies, investment advisory agreement and Invesco Aim's equity and fixed income
strategies and limitations of these funds. sub-advisory agreements were considered trading operations. The Board concluded
separately, although the Board also that the nature, extent and quality of the
In addition to their meetings considered the common interests of all of advisory services provided to the Fund by
throughout the year, the Sub-Committees the AIM Funds in their deliberations. The Invesco Aim were appropriate and that
meet at designated contract renewal Board considered all of the information Invesco Aim currently is providing
meetings each year to conduct an in-depth provided to them and did not identify any satisfactory advisory services in
review of the performance, fees and particular factor that was controlling. accordance with the terms of the Fund's
expenses of their assigned funds. During Each Trustee may have evaluated the investment advisory agreement. In
the contract information provided differently addition, based on their ongoing meetings
throughout the year with the Fund's
portfolio manager or
continued
26 AIM LIBOR ALPHA FUND
managers, the Board concluded that these Invesco Aim provides to the AIM Funds. The end of the past calendar year and the way
individuals are competent and able to Board concluded that Invesco Aim continues in which the breakpoints have been
continue to carry out their to be responsive to the Board's focus on structured, the Fund has yet to benefit
responsibilities under the Fund's fund performance. from the breakpoints. Based on this
investment advisory agreement. information, the Board concluded that the
C. Advisory Fees and Fee Waivers Fund's advisory fees would reflect
In determining whether to continue the economies of scale at higher asset levels.
Fund's investment advisory agreement, the The Board compared the Fund's contractual The Board also noted that the Fund shares
Board considered the prior relationship advisory fee rate to the contractual directly in economies of scale through
between Invesco Aim and the Fund, as well advisory fee rates of funds in the Fund's lower fees charged by third party service
as the Board's knowledge of Invesco Aim's Lipper expense group that are not managed providers based on the combined size of
operations, and concluded that it was by Invesco Aim, at a common asset level all of the AIM Funds and affiliates.
beneficial to maintain the current and as of the end of the past calendar
relationship, in part, because of such year. The Board noted that the Fund's E. Profitability and Financial
knowledge. The Board also considered the contractual advisory fee rate was below Resources of Invesco Aim
steps that Invesco Aim and its affiliates the median contractual advisory fee rate
have taken over the last several years to of funds in its expense group. The Board The Board reviewed information from
improve the quality and efficiency of the also reviewed the methodology used by Invesco Aim concerning the costs of the
services they provide to the AIM Funds in Lipper in determining contractual fee advisory and other services that Invesco
the areas of investment performance, rates. Aim and its affiliates provide to the Fund
product line diversification, and the profitability of Invesco Aim and
distribution, fund operations, shareholder The Board also compared the Fund's its affiliates in providing these
services and compliance. The Board effective fee rate (the advisory fee after services. The Board also reviewed
concluded that the quality and efficiency any advisory fee waivers and before any information concerning the financial
of the services Invesco Aim and its expense limitations/waivers) to the condition of Invesco Aim and its
affiliates provide to the AIM Funds in advisory fee rates of other clients of affiliates. The Board also reviewed with
each of these areas have generally Invesco Aim and its affiliates with Invesco Aim the methodology used to
improved, and support the Board's approval investment strategies comparable to those prepare the profitability information. The
of the continuance of the Fund's of the Fund, including one mutual fund Board considered the overall profitability
investment advisory agreement. advised by Invesco Aim. The Board noted of Invesco Aim, as well as the
that the Fund's rate was above the rate profitability of Invesco Aim in connection
B. Fund Performance for other mutual. with managing the Fund. The Board noted
that Invesco Aim continues to operate at a
The Board noted that the Fund recently The Board noted that Invesco Aim has net profit, although increased expenses in
began operations and that only one contractually agreed to waive fees and/or recent years have reduced the
calendar year of comparative performance limit expenses of the Fund through at profitability of Invesco Aim and its
data was available. The Board compared the least June 30, 2009 in an amount necessary affiliates. The Board concluded that the
Fund's performance during the past to limit total annual operating expenses Fund's fees were fair and reasonable, and
calendar year to the performance of funds to a specified percentage of average daily that the level of profits realized by
in the Fund's performance group that are net assets for each class of the Fund. The Invesco Aim and its affiliates from
not managed by Invesco Aim, and against Board considered the contractual nature of providing services to the Fund was not
the performance of all funds in the Lipper this fee waiver and noted that it remains excessive in light of the nature, quality
Short Investment Grade Debt Funds Index. in effect until at least June 30, 2009. and extent of the services provided. The
The Board also reviewed the criteria used The Board also considered the effect this Board considered whether Invesco Aim is
by Invesco Aim to identify the funds in expense limitation would have on the financially sound and has the resources
the Fund's performance group for inclusion Fund's estimated total expenses. necessary to perform its obligations under
in the Lipper reports. The Board noted the Fund's investment advisory agreement,
that the Fund's performance was in the After taking account of the Fund's and concluded that Invesco Aim has the
fifth quintile of its performance group contractual advisory fee rate, as well as financial resources necessary to fulfill
for the one year period (the first the comparative advisory fee information these obligations.
quintile being the best performing funds and the expense limitation discussed
and the fifth quintile being the worst above, the Board concluded that the Fund's F. Independent Written Evaluation of
performing funds). The Board noted that advisory fees were fair and reasonable. the Fund's Senior Officer
the Fund's performance was below the
performance of the Index for the one year D. Economies of Scale and Breakpoints The Board noted that, at their direction,
period. The Board noted that Invesco Aim the Senior Officer of the Fund, who is
made changes to the Fund's portfolio The Board considered the extent to which independent of Invesco Aim and Invesco
management team in 2007 and revised the there are economies of scale in Invesco Aim's affiliates, had prepared an
Fund's investment targets to be more Aim's provision of advisory services to independent written evaluation to assist
conservative, and Invesco Aim will the Fund. The Board also considered the Board in determining the
continue to monitor the Fund closely. The whether the Fund benefits from such reasonableness of the proposed management
Board also considered the steps Invesco economies of scale through contractual fees of the AIM Funds, including the Fund.
Aim has taken over the last several years breakpoints in the Fund's advisory fee The Board noted that they had relied upon
to improve the quality and efficiency of schedule or through advisory fee waivers the Senior Officer's written evaluation
the services that or expense limitations. The Board noted instead of a competitive bidding process.
that the Fund's contractual advisory fee In determining whether to continue the
schedule includes two breakpoints but Fund's investment advisory agreement,
that, due to the Fund's asset level at the
continued
27 AIM LIBOR ALPHA FUND
the Board considered the Senior Officer's least June 30, 2009, the advisory fees Fund's assets. The Board noted that the
written evaluation. payable by the Fund in an amount equal to Fund recently began operations and that
100% of the net advisory fees Invesco Aim only one calendar year of comparative
G. Collateral Benefits to Invesco Aim receives from the affiliated money market performance data was available. The Board
and its Affiliates funds with respect to the Fund's compared the Fund's performance during the
investment of uninvested cash, but not past calendar year to the performance of
The Board considered various other cash collateral. The Board considered the funds in the Fund's performance group that
benefits received by Invesco Aim and its contractual nature of this fee waiver and are not managed by Invesco Aim, and
affiliates resulting from Invesco Aim's noted that it remains in effect until at against the performance of all funds in
relationship with the Fund, including the least June 30, 2009. The Board concluded the Lipper Short Investment Grade Debt
fees received by Invesco Aim and its that the Fund's investment of uninvested Funds Index. The Board also reviewed the
affiliates for their provision of cash and cash collateral from any criteria used by Invesco Aim to identify
administrative, transfer agency and securities lending arrangements in the the funds in the Fund's performance group
distribution services to the Fund. The affiliated money market funds is in the for inclusion in the Lipper reports. The
Board considered the performance of best interests of the Fund and its Board noted that the Fund's performance
Invesco Aim and its affiliates in shareholders. was in the fifth quintile of its
providing these services and the performance group for the one year period
organizational structure employed by II. Sub-Advisory Agreements (the first quintile being the best
Invesco Aim and its affiliates to provide performing funds and the fifth quintile
these services. The Board also considered A. Nature, Extent and Quality of being the worst performing funds). The
that these services are provided to the Services Provided by Affiliated Board noted that the Fund's performance
Fund pursuant to written contracts which Sub-Advisors was below the performance of the Index for
are reviewed and approved on an annual the one year period. The Board also
basis by the Board. The Board concluded The Board reviewed the services to be considered the steps Invesco Aim has taken
that Invesco Aim and its affiliates were provided by Invesco Trimark Ltd., Invesco over the last several years to improve the
providing these services in a satisfactory Asset Management Deutschland, GmbH, quality and efficiency of the services
manner and in accordance with the terms of Invesco Asset Management Limited, Invesco that Invesco Aim provides to the AIM
their contracts, and were qualified to Asset Management (Japan) Limited, Invesco Funds. The Board concluded that Invesco
continue to provide these services to the Australia Limited, Invesco Global Asset Aim continues to be responsive to the
Fund. Management (N.A.), Inc., Invesco Hong Kong Board's focus on fund performance.
Limited, Invesco Institutional (N.A.),
The Board considered the benefits Inc. and Invesco Senior Secured C. Sub-Advisory Fees
realized by Invesco Aim as a result of Management, Inc. (collectively, the
portfolio brokerage transactions executed "Affiliated Sub-Advisers") under the The Board considered the services to be
through "soft dollar" arrangements. Under sub-advisory agreements and the provided by the Affiliated Sub-Advisers
these arrangements, portfolio brokerage credentials and experience of the officers pursuant to the sub-advisory agreements
commissions paid by the Fund and/or other and employees of the Affiliated and the services to be provided by Invesco
funds advised by Invesco Aim are used to Sub-Advisers who will provide these Aim pursuant to the Fund's investment
pay for research and execution services. services. The Board concluded that the advisory agreement, as well as the
The Board noted that soft dollar nature, extent and quality of the services allocation of fees between Invesco Aim and
arrangements shift the payment obligation to be provided by the Affiliated the Affiliated Sub-Advisers pursuant to
for the research and execution services Sub-Advisers were appropriate. The Board the sub-advisory agreements. The Board
from Invesco Aim to the funds and noted that the Affiliated Sub-Advisers, noted that the sub-advisory fees have no
therefore may reduce Invesco Aim's which have offices and personnel that are direct effect on the Fund or its
expenses. The Board also noted that geographically dispersed in financial shareholders, as they are paid by Invesco
research obtained through soft dollar centers around the world, have been formed Aim to the Affiliated Sub-Advisers, and
arrangements may be used by Invesco Aim in in part for the purpose of researching and that Invesco Aim and the Affiliated
making investment decisions for the Fund compiling information and making Sub-Advisers are affiliates. After taking
and may therefore benefit Fund recommendations on the markets and account of the Fund's contractual
shareholders. The Board concluded that economies of various countries and sub-advisory fee rate, as well as other
Invesco Aim's soft dollar arrangements securities of companies located in such relevant factors, the Board concluded that
were appropriate. The Board also concluded countries or on various types of the Fund's sub-advisory fees were fair and
that, based on their review and investments and investment techniques, and reasonable.
representations made by Invesco Aim, these providing investment advisory services.
arrangements were consistent with The Board concluded that the sub-advisory D. Financial Resources of the
regulatory requirements. agreements will benefit the Fund and its Affiliated Sub-Advisers
shareholders by permitting Invesco Aim to
The Board considered the fact that the utilize the additional resources and The Board considered whether each
Fund's uninvested cash and cash collateral talent of the Affiliated Sub-Advisers in Affiliated Sub-Adviser is financially
from any securities lending arrangements managing the Fund. sound and has the resources necessary to
may be invested in money market funds perform its obligations under its
advised by Invesco Aim pursuant to B. Fund Performance respective sub-advisory agreement, and
procedures approved by the Board. The concluded that each Affiliated Sub-Adviser
Board noted that Invesco Aim will receive The Board did view Fund performance as a has the financial resources necessary to
advisory fees from these affiliated money relevant factor in considering whether to fulfill these obligations.
market funds attributable to such approve the sub-advisory agreements for
investments, although Invesco Aim has the Fund, as one of the Affiliated
contractually agreed to waive through at Sub-Advisers currently manages the
28 AIM LIBOR ALPHA FUND
TAX INFORMATION
NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008 and
October 31, 2008 were 99.99%, 99.79%, 98.07%, and 99.97%, respectively.
29 AIM LIBOR ALPHA FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee
oversees 103 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 2003 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 1997 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, Policy
Trustee firm) Studies, Inc. and
Van Gilder Insurance
Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 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 2001 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 2001 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 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.
30 AIM LIBOR ALPHA 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 2004 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
31 AIM LIBOR ALPHA FUND
Supplement to Annual Report dated 10/31/08
AIM LIBOR ALPHA FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance is
For periods ended 10/31/08 not indicative of future results. More
The following information has been recent returns may be more or less than
prepared to provide Institutional Class Inception (3/31/06) -0.62% those shown. All returns assume
shareholders with a performance overview 1 Year -7.90 reinvestment of distributions at NAV.
specific to their holdings. Institutional ========================================== Investment return and principal value will
Class shares are offered exclusively to fluctuate so your shares, when redeemed,
institutional investors, including defined ========================================== may be worth more or less than their
contribution plans that meet certain AVERAGE ANNUAL TOTAL RETURNS original cost. See full report for
criteria. For periods ended 9/30/08, most recent information on comparative benchmarks.
calendar quarter-end Please consult your Fund prospectus for
more information. For the most current
Inception (3/31/06) 0.45% month-end performance, please call 800 451
1 Year -5.08 4246 or visit invescoaim.com.
==========================================
(1) Total annual operating expenses less
Institutional Class shares have no sales any contractual fee waivers and/or
charge; therefore, performance is at net expense reimbursements by the advisor
asset value (NAV). Performance of in effect through at least June 30,
Institutional Class shares will differ 2009. See current prospectus for more
from performance of other share classes information.
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 0.61%.(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 1.03%. 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.
Had the advisor not waived fees and/or
reimbursed expenses, performance would
have been lower.
==========================================
NASDAQ SYMBOL IAESX
==========================================
Information on your Fund's expenses is shown later in this supplement.
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]
invescoaim.com LAL-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
Supplement to Annual Report dated 10/31/08
AIM LIBOR ALPHA FUND
Past performance cannot guarantee The performance data shown in the
comparable future results. chart above is that of the Fund's
institutional share class. The performance
The data shown in the chart above data shown in the chart in the annual
includes reinvested distributions and Fund report is that of the Fund's Class A, C
expenses including management fees. Index and R shares. The performance of the
results include reinvested dividends. Fund's other share classes will differ
Performance of an index of funds reflects primarily due to different sales charge
fund expenses and management fees; structures and class expenses, and may be
performance of a market index does not. greater than or less than the performance
Performance shown in the chart and of the Fund's Institutional Class shares
table(s) does not reflect deduction of shown in the chart above,
taxes a shareholder would pay on Fund
distributions or sale of Fund shares.
Performance of the indexes does not
reflect the effects of taxes.
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]
invescoaim.com LAL-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
==================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT - INSTITUTIONAL CLASS SHARES
Fund and index data from 3/31/06
AIM LIBOR Alpha Barclays Capital U.S. Three-Month Lipper Short
Fund-Institutional U.S. Aggregate Bond LIBOR(1) Investment Grade
Date Class Shares Index(1) Debt Funds Index(1)
03/31/06 $10000 $ 10000 $10000 $10000
4/06 10074 9982 10038 10031
5/06 10068 9971 10084 10047
6/06 10065 9992 10128 10063
7/06 10105 10127 10175 10138
8/06 10105 10283 10222 10212
9/06 10136 10373 10266 10268
10/06 10197 10441 10314 10314
11/06 10280 10563 10360 10375
12/06 10333 10501 10404 10382
1/07 10388 10497 10454 10408
2/07 10443 10659 10497 10494
3/07 10506 10659 10543 10532
4/07 10551 10717 10591 10573
5/07 10628 10635 10638 10559
6/07 10681 10604 10683 10587
7/07 10629 10692 10733 10651
8/07 10566 10823 10781 10664
9/07 10654 10906 10828 10754
10/07 10686 11004 10879 10778
11/07 10457 11201 10922 10877
12/07 10486 11233 10969 10880
1/08 10377 11422 11012 11014
2/08 10397 11437 11039 11033
3/08 10339 11476 11068 10896
4/08 10393 11452 11092 10896
5/08 10542 11368 11118 10888
6/08 10477 11359 11144 10867
7/08 10491 11350 11170 10799
8/08 10459 11458 11195 10836
9/08 10112 11304 11223 10598
10/08 9841 11037 11261 10392
==================================================================================================================================
(1) Lipper Inc.
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management fees
and other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with ongoing costs of investing in other mutual funds. The example is based on
an investment of $1,000 invested at the beginning of the period and held for the
entire period May 1, 2008, through October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $946.90 $3.28 $1,021.77 $3.40 0.67%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 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 LIBOR ALPHA FUND
[GO PAPERLESS
GRAPHIC]
====================================================================================================================================
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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 811-05426 and 033-19338.
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 January 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 [INVESCO AIM LOGO]
investment advisory services to individual and institutional clients and do not sell securities. Please -- SERVICE MARK --
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.
invescoaim.com LAL-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM JAPAN FUND
- -- SERVICE MARK -- Annual Report to Shareholders o October 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 Approval of Investment Advisory Agreement
27 Tax Information
28 Trustees and Officers
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 recent market developments and
provide some perspective and encouragement to my fellow long-term investors.
[TAYLOR
PHOTO] MARKET OVERVIEW
At the start of the fiscal year in November 2007, 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
Philip Taylor (the Fed) repeatedly cut short-term interest rate targets to stimulate economic
growth and expand market liquidity.(1) Also, Congress and the president worked
together to enact an economic stimulus plan that included billions of dollars in
rebates to taxpayers.
These actions helped the economy and the U.S. stock market until the spring of
2008, when other factors came to the forefront -- triggering a severe correction that eventually
drove major stock-market indexes to multi-year lows.(2)
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.
The recent volatility in the stock, fixed-income and credit markets has driven home the
importance of three timeless investing principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
o 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.
o 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.
o 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 capitalize on
this situation.
MANAGING MONEY IS OUR FOCUS
As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain
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, 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 we 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) Lipper Inc.
2 AIM JAPAN FUND
Dear Fellow Shareholders:
As I write this letter, turbulent financial markets are causing considerable
investor anxiety, reminding us again that markets are cyclical and the correction
of excess is often painful, at least in the short term. Your Board of Trustees
[CROCKETT believes in the wisdom of a long-term perspective and consistent investment
PHOTO] discipline. We continue to put your interests first in the effort to improve
investment performance, contain shareholder costs and uphold the highest ethical
standards.
We remain enthusiastic about the global reach and investment expertise that
Invesco, a leading independent global investment management company, brings to
Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse
investment strategies deployed throughout the worldwide network of Invesco
investment centers has helped strengthen the management of many AIM Funds. The
rebranding of the Funds' management company as Invesco Aim was followed by the
launch of an upgraded, investor-friendly website (invescoaim.com); a new mountain
logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and a new ad
campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in financial
publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between
the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual
process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory
Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your
behalf to double the number of votes in favor of separating the roles of chairman and CEO at the
companies whose shares your Funds hold. We also continued to support the movement for shareholders
to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a
matter of policy, and I would be interested to hear your thoughts on this policy.
As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com.
The dialogue that has been established in this way has been instructive for your Board, and we want
it to continue. Although the production schedule for Fund annual reports and prospectuses allows me
to write these letters of general report and response just twice a year, please be assured that your
comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM JAPAN FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY MARKET CONDITIONS AND YOUR FUND
For the fiscal year ended October 31, 2008, Class A shares of AIM Japan Fund, at net Japanese equities declined sharply during
asset value (NAV), underperformed the Tokyo Stock Price Index, the MSCI EAFE Index and the fiscal year along with most world
the Lipper Japan Fund Index.(triangle)(square) markets, as a number of financial
institutions worldwide fell victim to the
We attribute our relative underperformance to our cyclical bias during the period broadening scope of the credit crisis.(1)
that was driven by our bottom-up stock selection process. The Fund's holdings in the
industrials and financials sectors detracted the most from performance. Select The period was remarkable for the sharp
investments in consumer discretionary made positive contributions to overall Fund increase in risk and volatility. Japan
returns. followed world stock markets lower on
increased concerns that the U.S. economy
Your Fund's long-term performance appears later in this report. may be in a recession.(1) A rally in the
Japanese yen, along with the U.S. Federal
FUND VS. INDEXES Reserve cutting its growth forecast for
the U.S. economy, had a negative impact on
Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does export-related stocks. In addition,
not include applicable contingent deferred sales charges (CDSC) or front-end sales further concerns over the world's
charges, which would have reduced performance. financial system provided a headwind for
equities. Toward the end of the fiscal
Class A Shares -48.29% year, the Japanese equity market was
Class B Shares -48.60 rocked by numerous negative issues
Class C Shares -48.65 including a worldwide credit crunch,
Class Y Shares* -48.19 declining global stock markets,
MSCI EAFE Index(triangle) (Broad Market Index) -46.62 appreciation in the yen and mounting fears
Tokyo Stock Price Index(square) (Price Only) (Style-Specific Index) -37.25 of a sharp downturn in corporate earnings.
Lipper Japan Funds Index(triangle) (Peer Group Index) -41.51
During the fiscal year, the Fund
(triangle)Lipper Inc.; (square)Invesco Aim, Bloomberg L.P. underper-formed its style-specific
benchmark. We attribute our
* Share class incepted during the fiscal year. See page 7 for a detailed explanation underperformance to our cyclical bias,
of Fund performance. which was driven by our bottom-up stock
======================================================================================= selection process. In terms of specific
stocks, the Fund was hurt by stock
HOW WE INVEST The result of company research is selection in the financials sector,
reflected in our proprietary stock including our holdings in MIZUHO FINANCIAL
We believe markets can often be valuation system. We score a company GROUP, SUMITOMO MITSUI FINANCIAL GROUP and
inefficient -- meaning that investors relative to five select research factors MITSUBISHI UFJ FINANCIAL.
frequently ignore information about and compare the company score to its
companies, particularly if those companies specific sector average. With this unique Our exposure to industrials also
are in industries or sectors that happen valuation system, we are able to account detracted from Fund performance during the
to be out of favor. We believe that such for earnings growth and valuation/ quality period. Within this sector JAPAN STEEL
information is not always fully discounted measures. WORKS and MITSUI O.S.K. LINES were among
even after the market has recognized it. the largest detractors.
When selecting stocks for the Fund, we We believe disciplined sell decisions
focus on companies with positive earnings are a key determinant of successful
growth and attractive valuations. investing. We consider selling a security
for several reasons, including:
Our team-managed investment process is
driven by bottom-up stock selection. o A stock reaches its target price.
Company research is conducted across
sectors with each Fund manager performing o A company's fundamentals deteriorate.
many company visits each year.
o A more attractive opportunity is
identified.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
1. Toyota Motor Corp. 4.2%
Financials 24.2% 1. Diversified Banks 11.3% 2. Mitsubishi UFJ Financial
Consumer Discretionary 22.6 2. Pharmaceuticals 7.2 Group, Inc. 3.8
Industrials 10.6 3. Apparel Retail 4.9 3. Tokyo Electric Power Co., Inc.
Consumer Staples 9.9 4. Consumer Finance 4.9 (The) 3.6
Health Care 9.8 5. Household Products 4.2 4. Nitori Co., Ltd. 3.3
Information Technology 6.6 ========================================== 5. Sumitomo Mitsui Financial
Utilities 4.9 Group, Inc. 3.2
Materials 4.6 6. NTT DoCoMo, Inc. 3.0
Telecommunications Services 3.0 7. Benesse Corp. 3.0
Money Market Funds ========================================== 8. Hisamitsu Pharmaceutical Co.,
Plus Other Assets Less Liabilities 3.8 Total Net Assets $4.6 million Inc. 2.9
========================================== 9. Mizuho Financial Group, Inc. 2.9
Total Number of Holdings* 56 10. ORIX Corp. 2.8
========================================== ==========================================
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 JAPAN FUND
The largest contributors to Fund outlook. We increased the weighting in KIYOHIDE NAGATA
performance were select holdings in the more stable growth companies whose Chartered Financial Analyst,
consumer discretionary sector. FAST earnings seemed to be relatively [NAGATA head of Japan Large Cap
RETAILING, SANKYO, which we sold, and unaffected by the economic downturn. PHOTO] Equity with Invesco Asset
SHIMAMURA all posted double-digit gains Management (Japan) Limited,
during the fiscal year. In addition, our We thank you for your investment in AIM portfolio manager of AIM Japan Fund. He
relatively small cash position helped the Japan Fund. joined Invesco in 2003. Mr. Nagata is a
Fund's performance in a falling market Chartered Member of the Society Analysts
environment. (1) Lipper Inc. Association of Japan.
While the rising yen hurt Japanese The views and opinions expressed in YASUHIRO SHIMBAYASHI
stock market performance overall, the management's discussion of Fund Senior fund manager with
Fund's exposure to the appreciating performance are those of Invesco Aim [SHIMBAYASHI Invesco Asset Management
currency, compared with the U.S. dollar, Advisors, Inc. These views and opinions PHOTO] (Japan) Limited, portfolio
contributed to the Fund's overall return. are subject to change at any time based on manager of AIM Japan Fund.
As we do not typically hedge currencies -- factors such as market and economic Mr. Shimbayashi joined Invesco in 2004.
we instead buy stocks in their local conditions. These views and opinions may He is a Chartered Member of the Security
currency and then translate that value not be relied upon as investment advice or Analysts Association of Japan.
back into dollars for the Fund -- foreign recommendations, or as an offer for a
currency appreciation helped the Fund's particular security. The information is TOMOYUKI SHIOYA
relative performance. not a complete analysis of every aspect of Fund manager with Invesco
any market, country, industry, security or [SHIOYA Asset Management (Japan)
Although the world's financial the Fund. Statements of fact are from PHOTO] Limited, portfolio manager
authorities have taken aggressive measures sources considered reliable, but Invesco of AIM Japan Fund. He joined
to help prevent a financial meltdown, the Aim Advisors, Inc. makes no representation Invesco in 2005. Mr. Shioya earned a B.A.
market turmoil has already worked its way or warranty as to their completeness or in economics from Waseda University. He is
into the real economy and brought about a accuracy. Although historical performance a Chartered Member of the Securities
negative wealth effect, in which people is no guarantee of future results, these Analysts Association of Japan.
react to the shrinking value of their nest insights may help you understand our
eggs by tightening their purse strings. investment management philosophy. TOMOMITSU YANABA
Corporations are also scaling down or Fund manager with Invesco
postponing their originally projected See important Fund and index disclosures [YANABA Asset Management (Japan)
capital spending due to increased later in this report. PHOTO] Limited, portfolio manager
uncertainties in their business outlook. of AIM Japan Fund. He
joined Invesco in 2004. Mr. Yanaba is a
On the other hand, we think investor Chartered Member of the Securities
sentiment has already become too cautious Analysts Association of Japan.
and too pessimistic, contributing to
historic swings of volatility in October.
At the close of the fiscal year, we were
in the middle of interim results
announcement season in Japan and about 83%
of companies in terms of market
capitalization had provided earnings
reports. We saw downward revisions in
earnings, particularly in the second half
of the year, but stock prices did not
always react negatively in response to
such revisions. We believe this may mean
that the market, to a large extent, has
discounted such negative factors in
advance.
Having said that, we were cautious
about the corporate earnings outlook
especially as the yen still appeared to be
appreciating and the global economy
continued to weaken. At the same time, we
believed declining energy and material
prices could help a wide range of Japanese
companies.
Given the uncertainty in the market and
our cautious outlook, we reduced the
weighting of cyclical stocks considering
the decreased visibility of their earnings
5 AIM JAPAN FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee contingent deferred sales charges. Index
comparable future results. results include reinvested dividends, but
they do not reflect sales charges.
The data shown in the chart include Performance of an index of funds reflects
reinvested distributions, applicable sales fund expenses and management fees;
charges and Fund expenses including performance of a market index does not.
management fees. Results for Class B Performance shown in the chart and
shares are calculated as if a hypothetical table(s) does not reflect deduction of
shareholder had liquidated his entire taxes a shareholder would pay on Fund
investment in the Fund at the close of the distributions or sale of Fund shares.
reporting period and paid the applicable
6 AIM JAPAN FUND
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- CLASS A, B AND C SHARES (OLDEST SHARE CLASSES WITH SALES CHARGES)
Fund and index data from 3/31/06
AIM Japan Fund- AIM Japan Fund- AIM Japan Fund- Tokyo Stock Price Lipper Japan
Date Class A Shares Class B Shares Class C Shares MSCI EAFE Index(1) Index(2) Funds Index(1)
3/31/06 $9450 $10000 $10000 $10000 $10000 $10000
4/06 9412 9950 9960 10478 10254 10095
5/06 8836 9340 9340 10071 9560 9317
6/06 8562 9040 9041 10070 9426 9109
7/06 8222 8680 8681 10170 9325 8759
8/06 8402 8860 8851 10449 9468 8947
9/06 8335 8780 8781 10465 9280 8901
10/06 8344 8790 8791 10873 9422 9010
11/06 8373 8810 8811 11197 9418 8953
12/06 8543 8980 8981 11549 9599 9141
1/07 8533 8970 8971 11627 9683 9207
2/07 8826 9270 9271 11721 10066 9562
3/07 8656 9090 9091 12020 9909 9414
4/07 8523 8950 8941 12554 9658 9105
5/07 8826 9250 9251 12774 9800 9313
6/07 8836 9260 9261 12789 9791 9357
7/07 8996 9420 9422 12601 9730 9427
8/07 8713 9121 9112 12404 9433 9047
9/07 8817 9221 9222 13068 9575 9231
10/07 8864 9261 9272 13581 9563 9350
11/07 8402 8781 8781 13135 9394 9095
12/07 7919 8271 8271 12839 8895 8624
1/08 7268 7581 7581 11653 8600 8123
2/08 7116 7421 7421 11820 8640 8022
3/08 7088 7391 7381 11695 8259 7968
4/08 7513 7831 7831 12330 8851 8412
5/08 7674 7991 7991 12450 9073 8641
6/08 7078 7361 7361 11432 8453 8015
7/08 6710 6970 6971 11065 8209 7670
8/08 6265 6510 6510 10617 7843 7214
9/08 5529 5740 5740 9082 6963 6571
10/08 4584 4617 4760 7249 6000 5468
====================================================================================================================================
(1) Lipper Inc.
(2) Invesco Aim; Bloomberg L.P.
========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/08, including maximum As of 9/30/08, the most recent calendar
applicable sales charges quarter-end, including maximum applicable
sales charges
CLASS A SHARES
Inception (3/31/06) -26.04% CLASS A SHARES
1 Year -51.16 Inception (3/31/06) -21.09%
CLASS B SHARES 1 Year -40.73
Inception (3/31/06) -25.83% CLASS B SHARES
1 Year -51.17 Inception (3/31/06) -20.87%
CLASS C SHARES 1 Year -40.86
Inception (3/31/06) -24.95% CLASS C SHARES
1 Year -49.16 Inception (3/31/06) -19.90%
CLASS Y SHARES 1 Year -38.37
Inception -24.35% ==========================================
1 Year -48.19
==========================================
CLASS Y SHARES' INCEPTION DATE IS OCTOBER WAS 4.56%, 5.31%, 5.31% AND 4.31%,
3, 2008; RETURNS SINCE THAT DATE ARE RESPECTIVELY. THE EXPENSE RATIOS PRESENTED
ACTUAL RETURNS. ALL OTHER RETURNS ARE ABOVE MAY VARY FROM THE EXPENSE RATIOS
BLENDED RETURNS OF ACTUAL CLASS Y SHARE PRESENTED IN OTHER SECTIONS OF THIS REPORT
PERFORMANCE AND RESTATED CLASS A SHARE THAT ARE BASED ON EXPENSES INCURRED DURING
PERFORMANCE (FOR PERIODS PRIOR TO THE THE PERIOD COVERED BY THIS REPORT.
INCEPTION DATE OF CLASS Y SHARES) AT NET
ASSET VALUE. THE RESTATED CLASS A SHARE CLASS A SHARE PERFORMANCE REFLECTS THE
PERFORMANCE REFLECTS THE RULE 12B-1 FEES MAXIMUM 5.50% SALES CHARGE, AND CLASS B
APPLICABLE TO CLASS A SHARES AS WELL AS AND CLASS C SHARE PERFORMANCE REFLECTS THE
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS APPLICABLE CONTINGENT DEFERRED SALES
RECEIVED BY CLASS A SHARES. CLASS A SHARES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
INCEPTION DATE IS MARCH 31, 2006. CDSC ON CLASS B SHARES DECLINES FROM 5%
BEGINNING AT THE TIME OF PURCHASE TO 0% AT
THE PERFORMANCE DATA QUOTED REPRESENT THE BEGINNING OF THE SEVENTH YEAR. THE
PAST PERFORMANCE AND CANNOT GUARANTEE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
COMPARABLE FUTURE RESULTS; CURRENT YEAR AFTER PURCHASE. CLASS Y SHARES DO NOT
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE HAVE A FRONT-END SALES CHARGE OR A CDSC;
VISIT INVESCOAIM.COM FOR THE MOST RECENT THEREFORE, PERFORMANCE IS AT NET ASSET
MONTH-END PERFORMANCE. PERFORMANCE FIGURES VALUE.
REFLECT REINVESTED DISTRIBUTIONS, CHANGES
IN NET ASSET VALUE AND THE EFFECT OF THE THE PERFORMANCE OF THE FUND'S SHARE
MAXIMUM SALES CHARGE UNLESS OTHERWISE CLASSES WILL DIFFER PRIMARILY DUE TO
STATED. INVESTMENT RETURN AND PRINCIPAL DIFFERENT SALES CHARGE STRUCTURES AND
VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE CLASS EXPENSES.
A GAIN OR LOSS WHEN YOU SELL SHARES.
A REDEMPTION FEE OF 2% WILL BE IMPOSED
THE NET ANNUAL FUND OPERATING EXPENSE ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
RATIO SET FORTH IN THE MOST RECENT FUND THE FUND WITHIN 31 DAYS OF PURCHASE.
PROSPECTUS AS OF THE DATE OF THIS REPORT EXCEPTIONS TO THE REDEMPTION FEE ARE
FOR CLASS A, CLASS B, CLASS C AND CLASS Y LISTED IN THE FUND'S PROSPECTUS.
SHARES WAS 1.72%, 2.47%, 2.47% AND 1.47%,
RESPECTIVELY.(1) THE TOTAL ANNUAL FUND HAD THE ADVISOR NOT WAIVED FEES AND/OR
OPERATING EXPENSE RATIO SET FORTH IN THE REIMBURSED EXPENSES, PERFORMANCE WOULD
MOST RECENT FUND PROSPECTUS AS OF THE DATE HAVE BEEN LOWER.
OF THIS REPORT FOR CLASS A, CLASS B, CLASS
C AND CLASS Y SHARES (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.
8 AIM JAPAN FUND
AIM JAPAN FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES o Political and economic conditions and OTHER INFORMATION
changes in regulatory, tax or economic
o Effective September 30, 2003, only policy in Japan could significantly o The Chartered Financial Analyst
previously established qualified plans affect the market in that country and --REGISTERED TRADEMARK-- (CFA
are eligible to purchase Class B shares surrounding or related countries. --REGISTERED TRADEMARK--) designation
of any AIM fund. is a globally recognized standard for
o The prices of securities held by the measuring the competence and integrity
o Class Y shares are available to only Fund may decline in response to market of investment professionals
certain investors. Please see the risks.
prospectus for more information. o The returns shown in management's
o The Fund may engage in active and discussion of Fund performance are
PRINCIPAL RISKS OF INVESTING IN THE FUND frequent trading of portfolio based on net asset values calculated
securities to achieve its investment for shareholder transactions. Generally
o Since a large percentage of the Fund's objective. If a fund does trade in this accepted accounting principles require
assets may be invested in securities of way, it may incur increased costs, adjustments to be made to the net
a limited number of companies, each which can lower the actual return of assets of the Fund at period end for
investment has a greater effect on the the fund. Active trading may also financial reporting purposes, and as
Fund's overall performance, and any increase short term gains and losses, such, the net asset values for
change in the value of those securities which may affect taxes that must be shareholder transactions and the
could significantly affect the value of paid. returns based on those net asset values
your investment in the Fund. may differ from the net asset values
ABOUT INDEXES USED IN THIS REPORT and returns reported in the Financial
o The Fund is subject to Highlights.
currency/exchange rate risk because it o The MSCI EAFE--REGISTERED TRADEMARK--
may buy or sell currencies other than INDEX is a free float-adjusted market o Industry classifications used in this
the U.S. dollar. capitalization index that is designed report are generally according to the
to measure developed market equity Global Industry Classification
o Prices of equity securities change in performance, excluding the U.S. and Standard, which was developed by and is
response to many factors, including the Canada. the exclusive property and a service
historical and prospective earnings of mark of MSCI Inc. and Standard &
the issuer, the value of its assets, o The TOKYO STOCK PRICE INDEX Poor's.
general economic conditions, interest (price-only) is a
rates, investor perceptions and market capitalization-weighted index of first
liquidity. section stocks (larger companies)
listed on the Tokyo Stock Exchange.
o Foreign securities have additional
risks, including exchange rate changes, o The LIPPER JAPAN FUNDS INDEX is an
political and economic upheaval, equally weighted representation of the
relative lack of information, largest funds in the Lipper Japan Funds
relatively low market liquidity, and category. These funds concentrate their
the potential lack of strict financial investments in equity securities of
and accounting controls and standards. Japanese companies.
o Investing in a single-country mutual o The Fund is not managed to track the
fund involves greater risk than performance of any particular index,
investing in a more diversified Fund including the indexes defined here, and
due to lack of exposure to other consequently, the performance of the
countries. Fund may deviate significantly from the
performance of the indexes.
o There is no guarantee that the
investment techniques and risk analysis o A direct investment cannot be made in
used by the fund's portfolio managers an index. Unless otherwise indicated,
will produce the desired results. index results include reinvested
dividends, and they do not reflect
o The prices of securities held by the sales charges. Performance of an index
fund may decline in response to market of funds reflects fund expenses;
risks. performance of a market index does not.
======================================================================================= ==========================================
FUND NASDAQ SYMBOLS
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS,
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. Class A Shares AJFAX
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class B Shares AJFBX
======================================================================================= Class C Shares AJFCX
Class Y Shares AJFYX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE ==========================================
9 AIM JAPAN FUND
SCHEDULE OF INVESTMENTS(a)
October 31, 2008
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
FOREIGN STOCKS (JAPAN)-96.16%
APPAREL RETAIL-4.94%
Fast Retailing Co., Ltd. 900 $ 94,825
- --------------------------------------------------------------------------
Point Inc.(b) 700 34,751
- --------------------------------------------------------------------------
Shimamura Co., Ltd.(b) 1,400 97,001
==========================================================================
226,577
==========================================================================
AUTOMOBILE MANUFACTURERS-4.21%
Toyota Motor Corp. 4,900 193,152
==========================================================================
COMPUTER & ELECTRONICS RETAIL-0.97%
Yamada Denki Co., Ltd. 820 44,432
==========================================================================
CONSUMER ELECTRONICS-2.06%
Sanyo Electric Co., Ltd.(b)(c) 31,000 46,398
- --------------------------------------------------------------------------
Sony Corp.(b) 2,100 48,041
==========================================================================
94,439
==========================================================================
CONSUMER FINANCE-4.91%
Aeon Credit Service Co., Ltd.(b) 3,400 36,935
- --------------------------------------------------------------------------
Orient Corp.(b)(c) 52,000 58,072
- --------------------------------------------------------------------------
ORIX Corp. 1,230 130,533
==========================================================================
225,540
==========================================================================
DIVERSIFIED BANKS-11.33%
Mitsubishi UFJ Financial Group, Inc. 28,000 172,411
- --------------------------------------------------------------------------
Mizuho Financial Group, Inc.(b) 55 131,715
- --------------------------------------------------------------------------
Sumitomo Mitsui Financial Group, Inc.(b) 36 146,145
- --------------------------------------------------------------------------
Sumitomo Trust & Banking Co., Ltd. (The) 15,000 69,753
==========================================================================
520,024
==========================================================================
DIVERSIFIED REAL ESTATE ACTIVITIES-2.42%
Mitsubishi Estate Co. Ltd. 4,000 70,405
- --------------------------------------------------------------------------
Tokyo Tatemono Co., Ltd.(b) 10,000 40,861
==========================================================================
111,266
==========================================================================
DRUG RETAIL-1.12%
Matsumotokiyoshi Holdings Co., Ltd.(b) 2,600 51,421
==========================================================================
EDUCATION SERVICES-3.03%
Benesse Corp. 3,300 138,884
==========================================================================
ELECTRIC UTILITIES-3.63%
Tokyo Electric Power Co., Inc. (The) 5,800 166,516
==========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.78%
Furukawa Electric Co., Ltd. (The) 12,000 35,931
==========================================================================
ELECTRONIC COMPONENTS-3.28%
Hoya Corp. 2,300 42,630
- --------------------------------------------------------------------------
Nidec Corp. 2,100 108,049
==========================================================================
150,679
==========================================================================
FOOD RETAIL-2.38%
Seven & I Holdings Co., Ltd.(b) 3,900 109,220
==========================================================================
GAS UTILITIES-1.23%
Tokyo Gas Co., Ltd. 13,000 56,620
==========================================================================
GENERAL MERCHANDISE STORES-0.93%
Ryohin Keikaku Co., Ltd. 900 42,727
==========================================================================
HEALTH CARE EQUIPMENT-2.57%
Terumo Corp. 2,800 118,024
==========================================================================
HEAVY ELECTRICAL EQUIPMENT-0.94%
Mitsubishi Electric Corp. 7,000 43,139
==========================================================================
HOME IMPROVEMENT RETAIL-1.12%
Komeri Co., Ltd. 2,300 51,516
==========================================================================
HOMEFURNISHING RETAIL-3.27%
Nitori Co., Ltd.(b) 2,400 150,037
==========================================================================
HOUSEHOLD PRODUCTS-4.22%
Kao Corp. 3,000 86,717
- --------------------------------------------------------------------------
Unicharm Corp. 1,500 107,031
==========================================================================
193,748
==========================================================================
INDUSTRIAL MACHINERY-3.36%
Japan Steel Works, Ltd. (The)(b) 11,000 77,491
- --------------------------------------------------------------------------
Mitsubishi Heavy Industries, Ltd.(b) 24,000 76,649
==========================================================================
154,140
==========================================================================
IT CONSULTING & OTHER SERVICES-1.78%
IT Holdings Corp.(c) 1,900 20,848
- --------------------------------------------------------------------------
Nihon Unisys, Ltd.(b) 200 1,915
- --------------------------------------------------------------------------
NTT Data Corp. 18 59,008
==========================================================================
81,771
==========================================================================
LEISURE PRODUCTS-0.58%
Heiwa Corp.(b) 3,900 26,828
==========================================================================
LIFE & HEALTH INSURANCE-1.44%
Sony Financial Holdings Inc. 20 65,898
==========================================================================
MARINE-0.69%
Mitsui O.S.K. Lines, Ltd. 6,000 31,769
==========================================================================
OFFICE ELECTRONICS-1.12%
Canon Inc. 1,500 51,613
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM JAPAN FUND
<Table>
<Caption>
SHARES VALUE
- --------------------------------------------------------------------------
PACKAGED FOODS & MEATS-2.17%
Nissin Foods Holdings Co., Ltd.(b) 2,500 $ 71,734
- --------------------------------------------------------------------------
Yakult Honsha Co., Ltd.(b) 1,100 27,762
==========================================================================
99,496
==========================================================================
PHARMACEUTICALS-7.24%
Daiichi Sankyo Co., Ltd. 3,900 79,804
- --------------------------------------------------------------------------
Hisamitsu Pharmaceutical Co., Inc.(b) 3,200 133,767
- --------------------------------------------------------------------------
Shionogi & Co., Ltd. 7,000 118,776
==========================================================================
332,347
==========================================================================
PROPERTY & CASUALTY INSURANCE-2.11%
Tokio Marine Holdings, Inc. 3,100 96,689
==========================================================================
RAILROADS-2.48%
East Japan Railway Co. 16 113,689
==========================================================================
REAL ESTATE OPERATING COMPANIES-1.97%
AEON Mall Co., Ltd. 3,700 90,484
==========================================================================
SEMICONDUCTOR EQUIPMENT-0.43%
Tokyo Electron Ltd.(b) 600 19,834
==========================================================================
SPECIALTY CHEMICALS-2.05%
Shin-Etsu Chemical Co., Ltd. 1,800 94,192
==========================================================================
STEEL-2.50%
Hitachi Metals Ltd. 5,000 37,529
- --------------------------------------------------------------------------
Sumitomo Metal Industries, Ltd. 29,000 77,072
==========================================================================
114,601
==========================================================================
TIRES & RUBBER-1.51%
Bridgestone Corp. 4,000 69,319
==========================================================================
TRADING COMPANIES & DISTRIBUTORS-2.35%
Mitsubishi Corp. 4,000 66,387
- --------------------------------------------------------------------------
Sojitz Corp. 24,400 41,708
==========================================================================
108,095
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.04%
NTT DoCoMo, Inc. 88 139,606
- --------------------------------------------------------------------------
Total Foreign Stocks (Japan) (Cost $5,624,787) 4,414,263
==========================================================================
MONEY MARKET FUNDS-7.24%
Liquid Assets Portfolio-Institutional Class(d) 166,338 166,338
- --------------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 166,338 166,338
==========================================================================
Total Money Market Funds (Cost $332,676) 332,676
==========================================================================
TOTAL INVESTMENTS (excluding investments purchased
with cash collateral from securities on
loan)-103.40% (Cost $5,957,463) 4,746,939
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES
ON LOAN
MONEY MARKET FUNDS-18.09%
Liquid Assets Portfolio-Institutional Class (Cost
$830,229)(d)(e) 830,229 830,229
==========================================================================
TOTAL INVESTMENTS(f)-121.49% (Cost $6,787,692) 5,577,168
==========================================================================
OTHER ASSETS LESS LIABILITIES-(21.49)% (986,501)
==========================================================================
NET ASSETS-100.00% $4,590,667
__________________________________________________________________________
==========================================================================
</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 October 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 1K.
(f) The majority of foreign securities were fair valued using adjusted closing
market prices.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM JAPAN FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<Table>
ASSETS:
Investments, at value (Cost $5,624,787)* $ 4,414,263
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 1,162,905
======================================================
Total investments (Cost $6,787,692) 5,577,168
======================================================
Receivables for:
Investments sold 44,393
- ------------------------------------------------------
Fund shares sold 28,689
- ------------------------------------------------------
Dividends 41,686
- ------------------------------------------------------
Fund expenses absorbed 16,589
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 4,159
- ------------------------------------------------------
Other assets 20,839
======================================================
Total assets 5,733,523
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 226,359
- ------------------------------------------------------
Fund shares reacquired 5,461
- ------------------------------------------------------
Collateral upon return of securities
loaned 830,229
- ------------------------------------------------------
Accrued fees to affiliates 12,481
- ------------------------------------------------------
Accrued other operating expenses 64,167
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 4,159
======================================================
Total liabilities 1,142,856
======================================================
Net assets applicable to shares
outstanding $ 4,590,667
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 9,191,572
- ------------------------------------------------------
Undistributed net investment income
(loss) (7,611)
- ------------------------------------------------------
Undistributed net realized gain (loss) (3,386,231)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (1,207,063)
======================================================
$ 4,590,667
______________________________________________________
======================================================
NET ASSETS:
Class A $ 2,541,522
______________________________________________________
======================================================
Class B $ 627,466
______________________________________________________
======================================================
Class C $ 871,910
______________________________________________________
======================================================
Class Y $ 183,351
______________________________________________________
======================================================
Institutional Class $ 366,418
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 523,792
______________________________________________________
======================================================
Class B 131,829
______________________________________________________
======================================================
Class C 183,255
______________________________________________________
======================================================
Class Y 37,743
______________________________________________________
======================================================
Institutional Class 75,001
______________________________________________________
======================================================
Class A:
Net asset value per share $ 4.85
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $4.85 divided
by 94.50%) $ 5.13
______________________________________________________
======================================================
Class B:
Net asset value and offering price per
share $ 4.76
______________________________________________________
======================================================
Class C:
Net asset value and offering price per
share $ 4.76
______________________________________________________
======================================================
Class Y:
Net asset value and offering price per
share $ 4.86
______________________________________________________
======================================================
Institutional Class:
Net asset value and offering price per
share $ 4.89
______________________________________________________
======================================================
</Table>
* At October 31, 2008, securities with an aggregate value of $786,658 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM JAPAN FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $8,205) $ 110,217
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds (includes securities lending income
of $9,162) 14,999
================================================================================================
Total investment income 125,216
================================================================================================
EXPENSES:
Advisory fees 66,837
- ------------------------------------------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------------------------------------------
Custodian fees 15,547
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 10,606
- ------------------------------------------------------------------------------------------------
Class B 10,022
- ------------------------------------------------------------------------------------------------
Class C 13,348
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C and Y 29,858
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 19
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 15,795
- ------------------------------------------------------------------------------------------------
Registration and filing fees 46,048
- ------------------------------------------------------------------------------------------------
Professional services fees 46,619
- ------------------------------------------------------------------------------------------------
Other 29,894
================================================================================================
Total expenses 334,593
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (196,936)
================================================================================================
Net expenses 137,657
================================================================================================
Net investment income (loss) (12,441)
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (2,109,160)
- ------------------------------------------------------------------------------------------------
Foreign currencies (10,813)
================================================================================================
(2,119,973)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (2,269,748)
- ------------------------------------------------------------------------------------------------
Foreign currencies 3,664
================================================================================================
(2,266,084)
================================================================================================
Net realized and unrealized gain (loss) (4,386,057)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(4,398,498)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM JAPAN FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (12,441) $ (56,949)
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) (2,119,973) (736,679)
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (2,266,084) 1,211,373
=======================================================================================================
Net increase (decrease) in net assets resulting from operations (4,398,498) 417,745
=======================================================================================================
Share transactions-net:
Class A (474,491) 929,063
- -------------------------------------------------------------------------------------------------------
Class B (30,510) 216,649
- -------------------------------------------------------------------------------------------------------
Class C 1,384 551,692
- -------------------------------------------------------------------------------------------------------
Class Y 206,379 --
- -------------------------------------------------------------------------------------------------------
Institutional Class 387 432
=======================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (296,851) 1,697,836
=======================================================================================================
Net increase (decrease) in net assets (4,695,349) 2,115,581
_______________________________________________________________________________________________________
=======================================================================================================
NET ASSETS:
Beginning of year 9,286,016 7,170,435
=======================================================================================================
End of year (includes undistributed net investment income (loss) of
$(7,611) and $(9,794), respectively) $ 4,590,667 $9,286,016
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM JAPAN FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Japan Fund (the "Fund") is a series portfolio of AIM Investment Funds (the
"Trust"). The Trust is organized as a Delaware statutory trust and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of nine separate series
portfolios, each authorized to issue an unlimited number of shares of beneficial
interest. The 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 JAPAN 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. OTHER RISKS -- Investing in a single-country mutual fund involves greater
risk than investing in a more diversified fund due to lack of exposure to
other countries. The political and economic conditions and changes in
regulatory, tax or economic policy in a single country could significantly
affect the market in that country and in surrounding or related countries.
J. 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.
K. 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.
15 AIM JAPAN FUND
L. 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.
M. 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).
Previously, under the terms of a master sub-advisory agreement between the
Advisor and Invesco Asset Management (Japan) Limited, the Advisor paid Invesco
Asset Management (Japan) Limited 40% of the amount of the Advisor's compensation
on sub-advised assets. This agreement terminated on May 1, 2008.
The Advisor has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C, Class Y
and Institutional Class shares to 1.70%, 2.45%, 2.45%, 1.45% and 1.45% of
average daily net assets, respectively, through at least June 30, 2009. In
determining the Advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with Invesco Ltd. ("Invesco")
described more fully below, the expense offset arrangements from which the Fund
may benefit are in the form of credits that the Fund receives from banks where
the Fund or its transfer agent has deposit accounts in which it holds uninvested
cash. These credits are used to pay certain expenses incurred by the Fund.
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash (excluding investments of cash
collateral from securities lending) in such affiliated money market funds.
16 AIM JAPAN FUND
For the year ended October 31, 2008, the Advisor waived advisory fees and
reimbursed Fund expenses of $166,946 and reimbursed class level expenses of
$18,787, $4,438, $5,910, $75 and $19 expenses of Class A, Class B, Class C,
Class Y and Institutional Class shares, respectively.
At the request of the Trustees of the Trust, 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
October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $113.
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 October 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 October 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 October 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 October 31, 2008, IADI
advised the Fund that IADI retained $3,289 in front-end sales commissions from
the sale of Class A shares and $0, $1,222 and $743 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--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended October 31, 2008, the
Fund received credits from this arrangement, which resulted in the reduction of
the Fund's total expenses of $648.
NOTE 4--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 October 31, 2008, the Fund paid legal fees of $2,760 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--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.
17 AIM JAPAN FUND
NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
There were no ordinary income or long term capital gain distributions paid
during the years ended October 31, 2008 and 2007.
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments $(1,386,761)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments 3,459
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (5,782)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (3,211,821)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 9,191,572
================================================================================================
Total net assets $ 4,590,667
________________________________________________________________________________________________
================================================================================================
</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 October 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
October 31, 2014 $ 516,097
- -----------------------------------------------------------------------------------------------
October 31, 2015 653,306
- -----------------------------------------------------------------------------------------------
October 31, 2016 2,042,418
===============================================================================================
Total capital loss carryforward $3,211,821
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2008 was $10,967,042 and $11,076,030,
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 $ 56,142
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,442,903)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(1,386,761)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $6,963,929.
</Table>
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and net operating losses, on October 31, 2008, undistributed net
investment income (loss) was increased by $14,624, undistributed net realized
gain (loss) was increased by $10,813 and shares of beneficial interest decreased
by $25,437. This reclassification had no effect on the net assets of the Fund.
18 AIM JAPAN FUND
NOTE 9--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
2008(a) 2007
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
Sold:
Class A 286,555 $ 2,126,546 696,155 $ 6,346,121
- ---------------------------------------------------------------------------------------------------------------------
Class B 32,194 235,834 45,503 412,714
- ---------------------------------------------------------------------------------------------------------------------
Class C 76,182 569,415 132,084 1,203,331
- ---------------------------------------------------------------------------------------------------------------------
Class Y(b) 37,743 206,371 -- --
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 518 4,331 -- --
=====================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 4,766 35,414 4,505 41,370
- ---------------------------------------------------------------------------------------------------------------------
Class B (4,845) (35,414) (4,549) (41,370)
=====================================================================================================================
Reacquired: (c)
Class A(b) (365,825) (2,636,451) (602,418) (5,458,428)
- ---------------------------------------------------------------------------------------------------------------------
Class B (33,487) (230,930) (17,261) (154,695)
- ---------------------------------------------------------------------------------------------------------------------
Class C (75,420) (568,031) (72,973) (651,639)
- ---------------------------------------------------------------------------------------------------------------------
Class Y(b) -- 8 -- --
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class (518) (3,944) -- 432
=====================================================================================================================
Net increase (decrease) in share activity (42,137) $ (296,851) 181,046 $ 1,697,836
_____________________________________________________________________________________________________________________
=====================================================================================================================
</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 12% 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, 32% of the outstanding shares of the Fund are owned 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 35,799 $ 195,821
- ------------------------------------------------------------------------------------------------
Class A (35,799) (195,821)
________________________________________________________________________________________________
================================================================================================
</Table>
(c) Net of redemption fees of $2,627 and $5,556 which were allocated among the
classes based on relative net assets of each class for the year ended
October 31, 2008 and the year ended October 31, 2007, respectively.
19 AIM JAPAN FUND
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
(LOSSES) REDEMPTION
NET ASSET NET ON SECURITIES FEES ADDED TO
VALUE, INVESTMENT (BOTH TOTAL FROM SHARES OF NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT BENEFICIAL VALUE, END TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INTEREST OF PERIOD RETURN(a)
- -----------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
10/31/08 $ 9.38 $ 0.00(c) $(4.53) $(4.53) $0.00 $4.85 (48.29)
Year ended
10/31/07 8.83 (0.04) 0.58 0.54 0.01 9.38 6.23
Year ended
10/31/06(e) 10.00 (0.04) (1.14) (1.18) 0.01 8.83 (11.70)
- -----------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended
10/31/08 9.26 (0.05)(c) (4.45) (4.50) 0.00 4.76 (48.60)
Year ended
10/31/07 8.79 (0.10) 0.56 0.46 0.01 9.26 5.35
Year ended
10/31/06(e) 10.00 (0.08) (1.14) (1.22) 0.01 8.79 (12.10)
- -----------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended
10/31/08 9.27 (0.05)(c) (4.46) (4.51) 0.00 4.76 (48.65)
Year ended
10/31/07 8.79 (0.10) 0.57 0.47 0.01 9.27 5.46
Year ended
10/31/06(e) 10.00 (0.08) (1.14) (1.22) 0.01 8.79 (12.10)
- -----------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(e) 5.47 0.00(c) (0.61) (0.61) 0.00 4.86 (11.15)
- -----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
CLASS
Year ended
10/31/08 9.41 0.02(c) (4.54) (4.52) 0.00 4.89 (48.03)
Year ended
10/31/07 8.85 (0.02) 0.57 0.55 0.01 9.41 6.33
Year ended
10/31/06(e) 10.00 (0.03) (1.13) (1.16) 0.01 8.85 (11.50)
_______________________________________________________________________________________________________________________
=======================================================================================================================
<Caption>
RATIO OF
EXPENSES RATIO OF
TO AVERAGE EXPENSES
NET ASSETS TO AVERAGE NET RATIO OF NET
WITH FEE WAIVERS ASSETS WITHOUT INVESTMENT
NET ASSETS, AND/OR FEE WAIVERS INCOME (LOSS)
END OF PERIOD EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO
(000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(B)
- ----------------------------------------------------------------------------------------------------------
CLASS A
Year ended
10/31/08 $2,542 1.71%(d) 4.49%(d) 0.04%(d) 154%
Year ended
10/31/07 5,611 1.72 4.56 (0.45) 128
Year ended
10/31/06(e) 4,417 1.77(f) 6.96(f) (0.87)(f) 37
- ----------------------------------------------------------------------------------------------------------
CLASS B
Year ended
10/31/08 627 2.46(d) 5.24(d) (0.71)(d) 154
Year ended
10/31/07 1,278 2.47 5.31 (1.20) 128
Year ended
10/31/06(e) 1,005 2.52(f) 7.71(f) (1.62)(f) 37
- ----------------------------------------------------------------------------------------------------------
CLASS C
Year ended
10/31/08 872 2.46(d) 5.24(d) (0.71)(d) 154
Year ended
10/31/07 1,691 2.47 5.31 (1.20) 128
Year ended
10/31/06(e) 1,085 2.52(f) 7.71(f) (1.62)(f) 37
- ----------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(e) 183 1.46(d) (f) 6.25(d) (f) 0.29(d) (f) 154
- ----------------------------------------------------------------------------------------------------------
INSTITUTIONAL
CLASS
Year ended
10/31/08 366 1.45(d) 3.79(d) 0.30(d) 154
Year ended
10/31/07 706 1.46 3.97 (0.19) 128
Year ended
10/31/06(e) 664 1.52(f) 6.41(f) (0.62)(f) 37
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values 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 $4,243,
$1,002, $1,335, $183 and $556 for Class A, Class B, Class C, Class Y and
Institutional Class shares, respectively.
(e) Commencement date of Class A, Class B Class C and Institutional Class
shares was March 31, 2006. Commencement date of Class Y shares was October
3, 2008.
(f) Annualized.
20 AIM JAPAN FUND
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to Invesco Aim and IADI (Order No. 05-1318). The WVASC makes
findings of fact that Invesco Aim and IADI entered into certain arrangements
permitting market timing of the AIM Funds and failed to disclose these
arrangements in the prospectuses for such Funds, and conclusions of law to the
effect that Invesco Aim and IADI violated the West Virginia securities laws. The
WVASC orders Invesco Aim and IADI to cease any further violations and seeks to
impose monetary sanctions, including restitution to affected investors,
disgorgement of fees, reimbursement of investigatory, administrative and legal
costs and an "administrative assessment," to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. By agreement with the Commissioner of Securities, Invesco Aim's time to
respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals,
depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws 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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various Invesco Aim- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund
Derivative Complaint purportedly brought on behalf of the AIM Funds and fund
registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA
purportedly brought on behalf of participants in the Invesco 401(k) plan. Based
on orders issued by the MDL Court, all claims asserted against the AIM Funds
that have been transferred to the MDL Court have been dismissed, although
certain Funds remain nominal defendants in the Consolidated Amended Fund
Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco
defendants' motion to dismiss the Amended Class Action Complaint for Violations
of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and
remanded this lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing
full cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco Aim and the Fund are unable to
estimate the impact, if any, that the outcome of the Pending Litigation and
Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund.
21 AIM JAPAN FUND
NOTE 11--LEGAL PROCEEDINGS--(CONTINUED)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Japan Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Japan Fund (one of the funds
constituting AIM Investment Funds, hereafter referred to as the "Fund") at
October 31, 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 October 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2008
Houston, Texas
22 AIM JAPAN 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 May 1, 2008, through
October 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 October 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 October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2, 3) RATIO
- ----------------------------------------------------------------------------------------------------
A $1,000.00 $610.10 $6.92 $1,016.54 $ 8.67 1.71%
- ----------------------------------------------------------------------------------------------------
B 1,000.00 607.90 9.94 1,012.77 12.45 2.46
- ----------------------------------------------------------------------------------------------------
C 1,000.00 607.90 9.94 1,012.77 12.45 2.46
- ----------------------------------------------------------------------------------------------------
Y 1,000.00 888.50 1.09 1,017.80 7.41 1.46
- ----------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 31, 2008 (as of close of
business October 3, 2008, through October 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 29
(as of close of business October 3, 2008, through October 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 JAPAN FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM an independent company, Lipper, Inc. are the result of years of review and
Investment Funds is required under the (Lipper), under the direction and negotiation between the Trustees and
Investment Company Act of 1940 to approve supervision of the independent Senior Invesco Aim, that the Trustees may focus
annually the renewal of the AIM Japan Officer who also prepares a separate to a greater extent on certain aspects of
Fund's (the Fund) investment advisory analysis of this information for the these arrangements in some years than in
agreement with Invesco Aim Advisors, Inc. Trustees. Each Sub-Committee then makes others, and that the Trustees'
(Invesco Aim). During contract renewal recommendations to the Investments deliberations and conclusions in a
meetings held on June 18-19, 2008, the Committee regarding the performance, fees particular year may be based in part on
Board as a whole and the disinterested or and expenses of their assigned funds. The their deliberations and conclusions of
"independent" Trustees, voting separately, Investments Committee considers each these same arrangements throughout the
approved the continuance of the Fund's Sub-Committee's recommendations and makes year and in prior years.
investment advisory agreement for another its own recommendations regarding the
year, effective July 1, 2008. In doing so, performance, fees and expenses of the AIM FACTORS AND CONCLUSIONS AND SUMMARY OF
the Board determined that the Fund's Funds to the full Board. The Investments INDEPENDENT WRITTEN FEE EVALUATION
investment advisory agreement is in the Committee also considers each
best interests of the Fund and its Sub-Committee's recommendations in making The discussion below serves as a summary
shareholders and that the compensation to its annual recommendation to the Board of the Senior Officer's independent
Invesco Aim under the Fund's investment whether to approve the continuance of each written evaluation with respect to the
advisory agreement is fair and reasonable. AIM Fund's investment advisory agreement Fund's investment advisory agreement as
and sub-advisory agreements for another well as a discussion of the material
The independent Trustees met separately year. factors and related conclusions that
during their evaluation of the Fund's formed the basis for the Board's approval
investment advisory agreement with The independent Trustees are assisted of the Fund's investment advisory
independent legal counsel from whom they in their annual evaluation of the Fund's agreement and sub-advisory agreements.
received independent legal advice, and the investment advisory agreement by the Unless otherwise stated, information set
independent Trustees also received independent Senior Officer. One forth below is as of June 19, 2008 and
assistance during their deliberations from responsibility of the Senior Officer is to does not reflect any changes that may have
the independent Senior Officer, a manage the process by which the AIM Funds' occurred since that date, including but
full-time officer of the AIM Funds who proposed management fees are negotiated not limited to changes to the Fund's
reports directly to the independent during the annual contract renewal process performance, advisory fees, expense
Trustees. to ensure that they are negotiated in a limitations and/or fee waivers.
manner that is at arms' length and
THE BOARD'S FUND EVALUATION PROCESS reasonable. Accordingly, the Senior I. Investment Advisory Agreement
Officer must either supervise a
The Board's Investments Committee has competitive bidding process or prepare an A. Nature, Extent and Quality of
established three Sub-Committees that are independent written evaluation. The Senior Services Provided by Invesco Aim
responsible for overseeing the management Officer has recommended that an
of a number of the series portfolios of independent written evaluation be provided The Board reviewed the advisory services
the AIM Funds. This Sub-Committee and, at the direction of the Board, has provided to the Fund by Invesco Aim under
structure permits the Trustees to focus on prepared an independent written the Fund's investment advisory agreement,
the performance of the AIM Funds that have evaluation. the performance of Invesco Aim in
been assigned to them. The Sub-Committees providing these services, and the
meet throughout the year to review the During the annual contract renewal credentials and experience of the officers
performance of their assigned funds, and process, the Board considered the factors and employees of Invesco Aim who provide
the Sub-Committees review monthly and discussed below under the heading "Factors these services. The Board's review of the
quarterly comparative performance and Conclusions and Summary of Independent qualifications of Invesco Aim to provide
information and periodic asset flow data Written Fee Evaluation" in evaluating the these services included the Board's
for their assigned funds. These materials fairness and reasonableness of the Fund's consideration of Invesco Aim's portfolio
are prepared under the direction and investment advisory agreement and and product review process, various back
supervision of the independent Senior sub-advisory agreements at the contract office support functions provided by
Officer. Over the course of each year, the renewal meetings and at their meetings Invesco Aim, and Invesco Aim's equity and
Sub-Committees meet with portfolio throughout the year as part of their fixed income trading operations. The Board
managers for their assigned funds and ongoing oversight of the Fund. The Fund's concluded that the nature, extent and
other members of management and review investment advisory agreement and quality of the advisory services provided
with these individuals the performance, sub-advisory agreements were considered to the Fund by Invesco Aim were
investment objective(s), policies, separately, although the Board also appropriate and that Invesco Aim currently
strategies and limitations of these funds. considered the common interests of all of is providing satisfactory advisory
the AIM Funds in their deliberations. The services in accordance with the terms of
In addition to their meetings Board considered all of the information the Fund's investment advisory agreement.
throughout the year, the Sub-Committees provided to them and did not identify any In addition, based on their ongoing
meet at designated contract renewal particular factor that was controlling. meetings throughout the year with the
meetings each year to conduct an in-depth Each Trustee may have evaluated the Fund's portfolio manager or managers, the
review of the performance, fees and information provided differently from one Board concluded that these individuals are
expenses of their assigned funds. During another and attributed different weight to competent and able to continue to carry
the contract renewal process, the Trustees the various factors. The Trustees out their responsibilities under the
receive comparative performance and fee recognized that the advisory arrangements Fund's investment advisory agreement.
data regarding the AIM Funds prepared by and resulting advisory fees for the Fund
and the other AIM Funds In determining whether to continue the
Fund's investment advisory agreement, the
Board considered the prior
continued
24 AIM JAPAN FUND
relationship between Invesco Aim and the Lipper in determining contractual fee schedule or through advisory fee waivers
Fund, as well as the Board's knowledge of rates. or expense limitations. The Board noted
Invesco Aim's operations, and concluded that the Fund's contractual advisory fee
that it was beneficial to maintain the The Board also compared the Fund's schedule includes seven breakpoints but
current relationship, in part, because of effective fee rate (the advisory fee after that, due to the Fund's asset level at the
such knowledge. The Board also considered any advisory fee waivers and before any end of the past calendar year and the way
the steps that Invesco Aim and its expense limitations/waivers) to the in which the breakpoints have been
affiliates have taken over the last advisory fee rates of other clients of structured, the Fund has yet to benefit
several years to improve the quality and Invesco Aim and its affiliates with from the breakpoints. Based on this
efficiency of the services they provide to investment strategies comparable to those information, the Board concluded that the
the AIM Funds in the areas of investment of the Fund, including nine offshore funds Fund's advisory fees would reflect
performance, product line diversification, advised by the Invesco Aim affiliate that economies of scale at higher asset levels.
distribution, fund operations, shareholder sub-advises the Fund. The Board noted that The Board also noted that the Fund shares
services and compliance. The Board the Fund's rate was above the rates for directly in economies of scale through
concluded that the quality and efficiency four of the offshore funds, below the lower fees charged by third party service
of the services Invesco Aim and its rates for four of the offshore funds and providers based on the combined size of
affiliates provide to the AIM Funds in the same as the rate for one of the all of the AIM Funds and affiliates.
each of these areas have generally offshore funds advised by the Invesco Aim
improved, and support the Board's approval affiliate. E. Profitability and Financial
of the continuance of the Fund's Resources of Invesco Aim
investment advisory agreement. Additionally, the Board compared the
Fund's effective fee rate to the total The Board reviewed information from
B. Fund Performance advisory fees paid by numerous separately Invesco Aim concerning the costs of the
managed accounts/wrap accounts advised by advisory and other services that Invesco
The Board noted that the Fund recently Invesco Aim affiliates. The Board noted Aim and its affiliates provide to the Fund
began operations and that only one that the Fund's rate was generally above and the profitability of Invesco Aim and
calendar year of comparative performance the rates for the separately managed its affiliates in providing these
data was available. The Board compared the accounts/ wrap accounts. The Board services. The Board also reviewed
Fund's performance during the past considered that management of the information concerning the financial
calendar year to the performance of funds separately managed accounts/wrap accounts condition of Invesco Aim and its
in the Fund's performance group that are by the Invesco Aim affiliates involves affiliates. The Board also reviewed with
not managed by Invesco Aim, and against different levels of services and different Invesco Aim the methodology used to
the performance of all funds in the Lipper operational and regulatory requirements prepare the profitability information. The
Japanese Funds Index. The Board also than Invesco Aim's management of the Fund. Board considered the overall profitability
reviewed the criteria used by Invesco Aim The Board concluded that these differences of Invesco Aim, as well as the
to identify the funds in the Fund's are appropriately reflected in the fee profitability of Invesco Aim in connection
performance group for inclusion in the structure for the Fund. with managing the Fund. The Board noted
Lipper reports. The Board noted that the that Invesco Aim continues to operate at a
Fund's performance was in the third The Board noted that Invesco Aim has net profit, although increased expenses in
quintile of its performance group for the contractually agreed to waive fees and/or recent years have reduced the
one year period (the first quintile being limit expenses of the Fund through at profitability of Invesco Aim and its
the best performing funds and the fifth least June 30, 2009 in an amount necessary affiliates. The Board concluded that the
quintile being the worst performing to limit total annual operating expenses Fund's fees were fair and reasonable, and
funds). The Board noted that the Fund's to a specified percentage of average daily that the level of profits realized by
performance was below the performance of net assets for each class of the Fund. The Invesco Aim and its affiliates from
the Index for the one year period. The Board considered the contractual nature of providing services to the Fund was not
Board also considered the steps Invesco this fee waiver and noted that it remains excessive in light of the nature, quality
Aim has taken over the last several years in effect until at least June 30, 2009. and extent of the services provided. The
to improve the quality and efficiency of The Board also considered the effect this Board considered whether Invesco Aim is
the services that Invesco Aim provides to expense limitation would have on the financially sound and has the resources
the AIM Funds. The Board concluded that Fund's estimated total expenses. necessary to perform its obligations under
Invesco Aim continues to be responsive to the Fund's investment advisory agreement,
the Board's focus on fund performance. After taking account of the Fund's and concluded that Invesco Aim has the
contractual advisory fee rate, as well as financial resources necessary to fulfill
C. Advisory Fees and Fee Waivers the comparative advisory fee information these obligations.
and the expense limitation discussed
The Board compared the Fund's contractual above, the Board concluded that the Fund's F. Independent Written Evaluation of
advisory fee rate to the contractual advisory fees were fair and reasonable. the Fund's Senior Officer
advisory fee rates of funds in the Fund's
Lipper expense group that are not managed D. Economies of Scale and Breakpoints The Board noted that, at their direction,
by Invesco Aim, at a common asset level the Senior Officer of the Fund, who is
and as of the end of the past calendar The Board considered the extent to which independent of Invesco Aim and Invesco
year. The Board noted that the Fund's there are economies of scale in Invesco Aim's affiliates, had prepared an
contractual advisory fee rate was below Aim's provision of advisory services to independent written evaluation to assist
the median contractual advisory fee rate the Fund. The Board also considered the Board in determining the
of funds in its expense group. The Board whether the Fund benefits from such reasonableness of the proposed management
also reviewed the methodology used by economies of scale through contractual fees of the AIM Funds, including the Fund.
breakpoints in the Fund's advisory fee The Board noted that they had relied upon
continued
25 AIM JAPAN FUND
the Senior Officer's written evaluation money market funds attributable to such for the Fund, as one of the Affiliated
instead of a competitive bidding process. investments, although Invesco Aim has Sub-Advisers currently manages the Fund's
In determining whether to continue the contractually agreed to waive through at assets. The Board noted that the Fund
Fund's investment advisory agreement, the least June 30, 2009, the advisory fees recently began operations and that only
Board considered the Senior Officer's payable by the Fund in an amount equal to one calendar year of comparative
written evaluation. 100% of the net advisory fees Invesco Aim performance data was available. The Board
receives from the affiliated money market compared the Fund's performance during the
G. Collateral Benefits to Invesco Aim funds with respect to the Fund's past calendar year to the performance of
and its Affiliates investment of uninvested cash, but not funds in the Fund's performance group that
cash collateral. The Board considered the are not managed by Invesco Aim, and
The Board considered various other contractual nature of this fee waiver and against the performance of all funds in
benefits received by Invesco Aim and its noted that it remains in effect until at the Lipper Japanese Funds Index. The Board
affiliates resulting from Invesco Aim's least June 30, 2009. The Board concluded also reviewed the criteria used by Invesco
relationship with the Fund, including the that the Fund's investment of uninvested Aim to identify the funds in the Fund's
fees received by Invesco Aim and its cash and cash collateral from any performance group for inclusion in the
affiliates for their provision of securities lending arrangements in the Lipper reports. The Board noted that the
administrative, transfer agency and affiliated money market funds is in the Fund's performance was in the third
distribution services to the Fund. The best interests of the Fund and its quintile of its performance group for the
Board considered the performance of shareholders. one year period (the first quintile being
Invesco Aim and its affiliates in the best performing funds and the fifth
providing these services and the II. Sub-Advisory Agreements quintile being the worst performing
organizational structure employed by funds). The Board noted that the Fund's
Invesco Aim and its affiliates to provide A. Nature, Extent and Quality of performance was below the performance of
these services. The Board also considered Services Provided by Affiliated the Index for the one year period. The
that these services are provided to the Sub-Advisers Board also considered the steps Invesco
Fund pursuant to written contracts which Aim has taken over the last several years
are reviewed and approved on an annual The Board reviewed the services to be to improve the quality and efficiency of
basis by the Board. The Board concluded provided by Invesco Trimark Ltd., Invesco the services that Invesco Aim provides to
that Invesco Aim and its affiliates were Asset Management Deutschland, GmbH, the AIM Funds. The Board concluded that
providing these services in a satisfactory Invesco Asset Management Limited, Invesco Invesco Aim continues to be responsible to
manner and in accordance with the terms of Asset Management (Japan) Limited, Invesco the Board's focus on fund performance.
their contracts, and were qualified to Australia Limited, Invesco Global Asset
continue to provide these services to the Management (N.A.), Inc., Invesco Hong Kong C. Sub-Advisory Fees
Fund. Limited, Invesco Institutional (N.A.),
Inc. and Invesco Senior Secured The Board considered the services to be
The Board considered the benefits Management, Inc. (collectively, the provided by the Affiliated Sub-Advisers
realized by Invesco Aim as a result of "Affiliated Sub-Advisers") under the pursuant to the sub-advisory agreements
portfolio brokerage transactions executed sub-advisory agreements and the and the services to be provided by Invesco
through "soft dollar" arrangements. Under credentials and experience of the officers Aim pursuant to the Fund's investment
these arrangements, portfolio brokerage and employees of the Affiliated advisory agreement, as well as the
commissions paid by the Fund and/or other Sub-Advisers who will provide these allocation of fees between Invesco Aim and
funds advised by Invesco Aim are used to services. The Board concluded that the the Affiliated Sub-Advisers pursuant to
pay for research and execution services. nature, extent and quality of the services the sub-advisory agreements. The Board
The Board noted that soft dollar to be provided by the Affiliated noted that the sub-advisory fees have no
arrangements shift the payment obligation Sub-Advisers were appropriate. The Board direct effect on the Fund or its
for the research and execution services noted that the Affiliated Sub-Advisers, shareholders, as they are paid by Invesco
from Invesco Aim to the funds and which have offices and personnel that are Aim to the Affiliated Sub-Advisers, and
therefore may reduce Invesco Aim's geographically dispersed in financial that Invesco Aim and the Affiliated
expenses. The Board also noted that centers around the world, have been formed Sub-Advisers are affiliates. After taking
research obtained through soft dollar in part for the purpose of researching and account of the Fund's contractual
arrangements may be used by Invesco Aim in compiling information and making sub-advisory fee rate, as well as other
making investment decisions for the Fund recommendations on the markets and relevant factors, the Board concluded that
and may therefore benefit Fund economies of various countries and the Fund's sub-advisory fees were fair and
shareholders. The Board concluded that securities of companies located in such reasonable.
Invesco Aim's soft dollar arrangements countries or on various types of
were appropriate. The Board also concluded investments and investment techniques, and D. Financial Resources of the
that, based on their review and providing investment advisory services. Affiliated Sub-Advisers
representations made by Invesco Aim, these The Board concluded that the sub-advisory
arrangements were consistent with agreements will benefit the Fund and its The Board considered whether each
regulatory requirements. shareholders by permitting Invesco Aim to Affiliated Sub-Adviser is financially
utilize the additional resources and sound and has the resources necessary to
The Board considered the fact that the talent of the Affiliated Sub-Advisers in perform its obligations under its
Fund's uninvested cash and cash collateral managing the Fund. respective sub-advisory agreement, and
from any securities lending arrangements concluded that each Affiliated Sub-Adviser
may be invested in money market funds B. Fund Performance has the financial resources necessary to
advised by Invesco Aim pursuant to fulfill these obligations.
procedures approved by the Board. The The Board did view Fund performance as a
Board noted that Invesco Aim will receive relevant factor in considering whether to
advisory fees from these affiliated approve the sub-advisory agreements
26 AIM JAPAN FUND
TAX INFORMATION
NON-RESIDENT ALIEN SHAREHOLDER INFORMATION
The percentages of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008 and
October 31, 2008 were 99.90%, 99.42%, 99.92%, and 99.55%, respectively.
27 AIM JAPAN FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee
oversees 103 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 2003 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 1997 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, Policy
Trustee firm) Studies, Inc. and
Van Gilder Insurance
Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 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 2001 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 2001 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 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.
28 AIM JAPAN 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 2004 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
29 AIM JAPAN FUND
Supplement to Annual Report dated 10/31/08
AIM JAPAN FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS A redemption fee of 2% will be imposed
For periods ended 10/31/08 on certain redemptions or exchanges out of
The following information has been the Fund within 31 days of purchase.
prepared to provide Institutional Class Inception (3/31/06) -24.16% Exceptions to the redemption fee are
shareholders with a performance overview 1 Year -48.03 listed in the Fund's prospectus.
specific to their holdings. Institutional ==========================================
Class shares are offered exclusively to Had the advisor not waived fees and/or
institutional investors, including defined ========================================== reimbursed expenses, performance would
contribution plans that meet certain AVERAGE ANNUAL TOTAL RETURNS have been lower.
criteria. For periods ended 9/30/08, most recent
calendar quarter-end Please note that past performance is
not indicative of future results. More
Inception (3/31/06) -19.07% recent returns may be more or less than
1 Year -37.07 those shown. All returns assume
========================================== reinvestment of distributions at NAV.
Investment return and principal value will
Institutional Class shares have no sales fluctuate so your shares, when redeemed,
charge; therefore, performance is at net may be worth more or less than their
asset value (NAV). Performance of original cost. See full report for
Institutional Class shares will differ information on comparative benchmarks.
from performance of other share classes Please consult your Fund prospectus for
primarily due to differing sales charges more information. For the most current
and class expenses. month-end performance, please call 800 451
4246 or visit invescoaim.com.
The net annual Fund operating expense
ratio set forth in the most recent Fund (1) Total annual operating expenses less
prospectus as of the date of this any contractual fee waivers and/or
supplement for Institutional Class shares expense reimbursements by the advisor
was 1.46%.(1) The total annual Fund in effect through at least June 30,
operating expense ratio set forth in the 2009. See current prospectus for more
most recent Fund prospectus as of the date information.
of this supplement for Institutional Class
shares was 3.98%. 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.
==========================================
NASDAQ SYMBOL AJFIX
==========================================
Information on your Fund's expenses is shown later in this supplement.
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]
invescoaim.com JAP-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
Supplement to Annual Report dated 10/31/08
AIM JAPAN FUND
Past performance cannot guarantee The performance data shown in the chart
comparable future results. above is that of the Fund's institutional
share class. The performance data shown in
The data shown in the chart above the chart in the annual report is that of
includes reinvested distributions and Fund the Fund's Class A, B and C shares. The
expenses including management fees. Index performance of the Fund's other share
results include reinvested dividends. classes will differ primarily due to
Performance of an index of funds reflects different sales charge structures and
fund expenses and management fees; class expenses, and may be greater than or
performance of a market index does not. less than the performance of the Fund's
Performance shown in the chart and Institutional Class shares shown in the
table(s) does not reflect deduction of chart above.
taxes a shareholder would pay on Fund
distributions or sale of Fund shares.
Performance of the indexes does not
reflect the effects of taxes.
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]
invescoaim.com JAP-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- INSTITUTIONAL CLASS SHARES
Fund and index data from 3/31/06
AIM Japan Fund-
Institutional Tokyo Stock Price Lipper Japan
Date Class Shares MSCI EAFE Index(1) Index (2) (price-only) Funds Index(1)
3/31/06 $10000 $10000 $10000 $10000
4/06 9960 10478 10254 10095
5/06 9360 10071 9560 9317
6/06 9070 10070 9426 9109
7/06 8710 10170 9325 8759
8/06 8890 10449 9468 8947
9/06 8831 10465 9280 8901
10/06 8851 10873 9422 9010
11/06 8872 11197 9418 8953
12/06 9052 11549 9599 9141
1/07 9052 11627 9683 9207
2/07 9362 11721 10066 9562
3/07 9182 12020 9909 9414
4/07 9042 12554 9658 9105
5/07 9362 12774 9800 9313
6/07 9382 12789 9791 9357
7/07 9551 12601 9730 9427
8/07 9252 12404 9433 9047
9/07 9362 13068 9575 9231
10/07 9411 13581 9563 9350
11/07 8931 13135 9394 9095
12/07 8421 12839 8895 8624
1/08 7732 11653 8600 8123
2/08 7572 11820 8640 8022
3/08 7541 11695 8259 7968
4/08 8001 12330 8851 8412
5/08 8172 12450 9073 8641
6/08 7532 11432 8453 8015
7/08 7142 11065 8209 7670
8/08 6672 10617 7843 7214
9/08 5892 9082 6963 6571
10/08 4890 7249 6000 5468
====================================================================================================================================
(1) Lipper Inc.
(2) Invesco Aim, Bloomberg L.P.
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 May 1, 2008, through October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $611.20 $5.87 $1,017.85 $7.35 1.45%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 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 JAPAN 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:
o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will
trees used to produce paper. be sent via email as soon as they're available.
o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer
expenses and put more capital back in your fund's returns. 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 811-05426 and 033-19338.
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 January 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 [INVESCO AIM LOGO]
investment advisory services to individual and institutional clients and do not sell securities. Please -- SERVICE MARK --
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.
invescoaim.com JAP-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM TRIMARK ENDEAVOR FUND
- -- SERVICE MARK -- Annual Report to Shareholders o October 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
10 Financial Statements
13 Notes to Financial Statements
19 Financial Highlights
21 Auditor's Report
22 Fund Expenses
23 Approval of Investment Advisory Agreement
26 Tax Information
27 Trustees and Officers
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 recent market developments and
provide some perspective and encouragement to my fellow long-term investors.
[TAYLOR
PHOTO] MARKET OVERVIEW
At the start of the fiscal year in November 2007, we saw warning signs of
increasing economic ills -- a weakening housing market, rising inflation and
Philip Taylor slowing job growth, among others. In response, the U.S. Federal Reserve Board
(the Fed) repeatedly cut short-term interest rate targets to stimulate economic
growth and expand market liquidity.(1) Also, Congress and the president worked
together to enact an economic stimulus plan that included billions of dollars in
rebates to taxpayers.
These actions helped the economy and the U.S. stock market until the spring of
2008, when other factors came to the forefront -- triggering a severe correction that eventually
drove major stock-market indexes to multi-year lows.(2)
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.
The recent volatility in the stock, fixed-income and credit markets has driven home the
importance of three timeless investing principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
o 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.
o 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.
o 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 capitalize on
this situation.
MANAGING MONEY IS OUR FOCUS
As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain
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, 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 we 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) Lipper Inc.
2 AIM TRIMARK ENDEAVOR FUND
Dear Fellow Shareholders:
As I write this letter, turbulent financial markets are causing considerable
investor anxiety, reminding us again that markets are cyclical and the correction
of excess is often painful, at least in the short term. Your Board of Trustees
[CROCKETT believes in the wisdom of a long-term perspective and consistent investment
PHOTO] discipline. We continue to put your interests first in the effort to improve
investment performance, contain PHOTO] shareholder costs and uphold the highest
ethical standards.
We remain enthusiastic about the global reach and investment expertise that
Invesco, a leading independent global investment management company, brings to
Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse
investment strategies deployed throughout the worldwide network of Invesco
investment centers has helped strengthen the management of many AIM Funds. The
rebranding of the Funds' management company as Invesco Aim was followed by the
launch of an upgraded, investor-friendly website (invescoaim.com); a new
mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and
a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in
financial publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between the
AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual process at
invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory Agreement
Renewals."
We have recently completed another active proxy voting season during which we acted on your
behalf to double the number of votes in favor of separating the roles of chairman and CEO at the
companies whose shares your Funds hold. We also continued to support the movement for shareholders
to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a
matter of policy, and I would be interested to hear your thoughts on this policy.
As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com.
The dialogue that has been established in this way has been instructive for your Board, and we want
it to continue. Although the production schedule for Fund annual reports and prospectuses allows me
to write these letters of general report and response just twice a year, please be assured that your
comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM TRIMARK ENDEAVOR FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY tion, our primary method of attempting to
reduce risk is to purchase businesses that
For the fiscal year ended October 31, 2008, all share classes of AIM Trimark Endeavor are trading below their estimated
Fund, at net asset value, underperformed the Fund's broad market and peer group indexes intrinsic value. Thus, if our assessment
but performed in line with the Fund's style-specific index.(triangle) of the company's future is incorrect and
the stock declines in price, the impact
Your Fund's underperformance versus its broad market index was driven largely by should be tempered since we originally
below-market returns from select investments in the consumer discretionary and acquired the stock at less than its
finan-cials sectors. The largest positive contributors to absolute Fund performance, estimated intrinsic value.
and Fund performance relative to the S&P 500 Index, were select retail and health care
investments. Holdings are considered for sale if:
Your Fund's long-term performance appears later in this report. o A more attractive investment
opportunity exists
FUND VS. INDEXES
o Full value of the investment is deemed
Total returns, 10/31/07 to 10/31/08, at net asset value (NA V). Performance shown does to have been realized
not include applicable contingent deferred sales charges (CDSC) or front-end sales
charges, which would have reduced performance. Holdings are also considered for sale
if the original thesis for buying the
Class A Shares -40.93% company changes due to a fundamental
Class B Shares -41.35 negative change in management strategy or
Class C Shares -41.35 a fundamental negative change in the
Class R Shares -41.00 competitive environment.
Class Y Shares* -40.93
S&P 500 Index(triangle) (Broad Market Index) -36.08 MARKET CONDITIONS AND YOUR FUND
Russell Midcap Index(triangle) (Style-Specific Index) -40.67
Lipper Mid-Cap Core Funds Index(triangle) (Peer Group Index) -37.50 Equity markets declined sharply during the
fiscal year as the financial crisis
(triangle) Lipper Inc. intensified and global economic conditions
weakened.1 The price volatility in the
* Share class incepted during the fiscal year. See page 7 for a detailed explanation markets that began in July 2007
of Fund performance. accelerated during the fiscal year.
======================================================================================= Additionally, record-high crude oil
prices, falling home values and the weak
HOW WE INVEST o Sustainable competitive advantages U.S. dollar placed significant pressure on
the purchasing power of U.S. consumers.
We view ourselves as business people o Strong growth prospects Later in the fiscal year, consumer
buying businesses, and we consider the confi-dence fell and market volatility
purchase of a stock as an ownership o High barriers to entry increased even further as evidence of a
interest in a business. We strive to global recession emerged.
develop a proprietary view of a business o Honest and capable management teams
through in-depth, fundamental research Our investment approach focuses on
that includes careful financial statement Also central to the Trimark discipline individual businesses rather than market
analysis and meetings with company is our adherence to an investment horizon sectors. Therefore, your Fund shares
management teams. We then seek to purchase of three to five years. We use this little in common with sector weightings of
businesses whose stock prices are below long-term approach because we believe good the Fund's indexes. However, if we were to
what we have calculated to be the true business strategies usually take that broadly categorize businesses with which
value of the company based on its future amount of time to implement and to produce we had the most success during the fiscal
cash flows, management performance and strong earnings growth. We also use a year, select investments in the retail
business fundamentals. concentrated portfolio approach, industry and the health care sector made
constructing a portfolio of about 25 to 50 the biggest contributions to Fund
In conducting a comprehensive analysis stocks. We believe this allows each
of a company, we strive to identify investment opportunity to materially
primarily U.S. stocks which have: impact the Fund performance.
While deliberate efforts are made to
reduce risk through industry diversifica-
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
1. Health Care Equipment 11.0% 1. Tempur-Pedic International Inc. 6.4%
Consumer Discretionary 23.1% 2. Brewers 7.5 2. UnitedHealth Group Inc. 5.8
Industrials 22.7 3. Home Furnishings 6.4 3. Molson Coors Brewing Co.-Class B 5.8
Health Care 22.1 4. Communications Equipment 5.9 4. Kinetic Concepts, Inc. 5.6
Financials 14.0 5. Managed Health Care 5.8 5. Zimmer Holdings, Inc. 5.4
Information Technology 8.6 ========================================== 6. Unum Group 5.3
Consumer Staples 7.5 7. Pool Corp. 5.0
Money Market Funds Plus ========================================== 8. Jones Lang LaSalle Inc. 4.8
Other Assets Less Liabilities 2.0 Total Net Assets $83.8 million 9. Manpower Inc. 4.6
========================================== 10. Liz Claiborne, Inc. 4.5
Total Number of Holdings* 28 ==========================================
==========================================
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 TRIMARK ENDEAVOR FUND
performance. Select consumer discretionary profitability over the long term. CLAYTON ZACHARIAS
and financials holdings were the largest Chartered Financial Analyst,
detractors from Fund performance for the The estimated intrinsic values of most [ZACHARIAS portfolio manager, is lead
year. The Fund's small cash position also businesses are relatively stable over PHOTO] manager of AIM Trimark
contributed to performance relative to the time, but share prices fluctuate because Endeavor Fund. Mr. Zacharias
Russell Midcap Index in a falling market they can be driven by emotion. The began his financial services career in
environment. divergence between estimated intrinsic 1994. He joined Invesco Trimark
value and share price is usually at its Investments in 2002 and became a
Although the energy sector performed greatest during times of excessive portfolio manager in 2006. Mr. Zacharias
strongly during much of the fiscal year, optimism or pessimism in equity markets. earned a B.B.A. degree from Simon Fraser
we continued to avoid oil, gas and base Equity markets this year have been the University. He also is a chartered
metal company stocks as we believed the most stressed they have been in decades -- accountant.
risk/reward balance in those sectors was meaning there were many exceptional values
generally unattractive. Our avoidance of to be had. While others were panicking and
this sector detracted from your Fund's offering up these exceptional values, we
return relative to the Russell Midcap were taking advantage of these
Index. opportunities. A steadfast adherence to
the proven Trimark investment process and
We believe that it is extremely a long-term view allows us to remain calm
difficult to accurately forecast the price and rational while the markets are
of commodities, such as crude oil, in the anything but.
short term. As such, we have shied away
from investing in businesses whose During the fiscal year, we continued to
fortunes depend on the prices of focus on finding quality businesses
commodities. Generally, as the price of a trading at attractive valuations relative
commodity rises, consumers look for to what we believe are their long-term
substitutes or simply use less of it. At prospects. Given the many attractive
the same time, higher prices generally opportunities in the market, we added
lead to an increase in supply as producers several new companies to the Fund which we
of the commodity try to capitalize on the believe has increased the overall quality
higher prices. The combination of falling of the portfolio.
demand and increasing supply often leads
to lower prices for the commodity. We We remain confident in the Fund's
believe this pattern may be occurring in positioning over a three- to five-year
the current market cycle as oil prices time horizon, particularly considering the
declined sharply during the third quarter Fund's holdings are trading at meaningful
of 2008. discounts to their estimated intrinsic
values. These are high-quality companies
The top contributor to Fund performance that should benefit from a normalization
for the fiscal year was retailer ROSS in both earnings power and valuation
STORES. The company's share price multiples as the economy and financial
increased due to stronger-than-expected markets strengthen.
sales. Economic weakness caused consumers
to become more value-conscious and migrate As always, we thank you for your
to discount retailers. We reduced our investment in AIM Trimark Endeavor Fund
position in Ross Stores during the year and for sharing our long-term investment
based on valuation and our ability to find perspective.
more attractive risk/reward opportunities
elsewhere. (1) Lipper Inc.
While several retail stocks contributed The views and opinions expressed in
to Fund performance, LIZ CLAIBORNE was the management's discussion of Fund
largest detractor from Fund performance performance are those of lnvesco Aim
during the fiscal year. The company's Advisors, Inc. These views and opinions
share price declined significantly as are subject to change at any time based on
investors retreated from many consumer factors such as market and economic
discretionary stocks with little regard conditions. These views and opinions may
for the strong long-term fundamentals of not be relied upon as investment advice or
many of the underlying businesses. recommendations, or as an offer for a
Concerns about the U.S. economy generally particular security. The information is
and the strength of consumer spending in not a complete analysis of every aspect of
particular hurt many consumer any market, country, industry, security or
discretionary stocks, including Liz the Fund. Statements of fact are from
Claiborne. We believe investors have sources considered reliable, but Invesco
overreacted and we remain confident in the Aim Advisors, Inc. makes no representation
company's management team -- and their or warranty as to their completeness or
plans to revitalize the business and accuracy. Although historical performance
improve 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.
5 AIM TRIMARK ENDEAVOR FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee Performance of an index of funds reflects shown in the chart. The vertical axis,
comparable future results. fund expenses and management fees; the one that indicates the dollar value
performance of a market index does not. of an investment, is constructed with
The data shown in the chart include Performance shown in the chart and table(s) each segment representing a percent
reinvested distributions, applicable sales does not reflect deduction of taxes a change in the value of the investment.
charges and Fund expenses including shareholder would pay on Fund distributions In this chart, each segment represents a
management fees. Results for Class B or sale of Fund shares. doubling, or 100% change, in the value
shares are calculated as if a hypothetical of the investment. In other words, the
shareholder had liquidated his entire This chart, which is a logarithmic space between $5,000 and $10,000 is the
investment in the Fund at the close of the chart, presents the fluctuations in the same size as the space between $10,000
reporting period and paid the applicable value of the Fund and its indexes. We and $20,000.
contingent deferred sales charges. Index believe that a logarithmic chart is more
results include reinvested dividends, but effective than other types of charts in
they do not reflect sales charges. illustrating changes in value during the
early years
6 AIM TRIMARK ENDEAVOR FUND
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- CLASS A, B AND C SHARES (OLDEST SHARE CLASSES)
Index data from 10/31/03, Fund data from 11/4/03
AIM Trimark AIM Trimark AIM Trimark
Endeavor-Class A Endeavor-Class B Endeavor-Class C Russell Midcap Lipper Mid-Cap
Date Shares Shares Shares S&P 500 Index(1) Index(1) Core Funds Index(1)
10/31/03 $10000 $10000 $10000
11/03 $ 9648 $10210 $10210 10088 10281 10273
12/03 9818 10379 10379 10617 10589 10533
1/04 10082 10649 10649 10811 10896 10818
2/04 10271 10850 10850 10962 11131 11024
3/04 10441 11020 11020 10796 11133 10998
4/04 10281 10860 10860 10627 10725 10652
5/04 10441 11020 11020 10773 10991 10819
6/04 10810 11400 11400 10982 11295 11114
7/04 10403 10970 10970 10619 10801 10548
8/04 10252 10800 10800 10661 10848 10509
9/04 10828 11401 11401 10777 11200 10877
10/04 10895 11470 11470 10941 11509 11056
11/04 11433 12030 12030 11384 12210 11714
12/04 11887 12489 12489 11771 12730 12160
1/05 11755 12350 12350 11484 12415 11841
2/05 11820 12420 12420 11726 12798 12135
3/05 11754 12340 12340 11518 12697 12012
4/05 11254 11810 11810 11300 12293 11554
5/05 11546 12110 12110 11659 12882 12103
6/05 11943 12520 12520 11676 13228 12388
7/05 12340 12930 12930 12110 13925 12962
8/05 12208 12780 12780 11999 13828 12885
9/05 12000 12550 12550 12097 14011 12992
10/05 11839 12380 12380 11895 13590 12655
11/05 12369 12920 12920 12344 14193 13181
12/05 12767 13330 13330 12349 14340 13310
1/06 13202 13770 13770 12676 15077 13994
2/06 13212 13779 13779 12710 15059 13974
3/06 13922 14509 14509 12868 15432 14356
4/06 14178 14759 14759 13041 15540 14502
5/06 13458 14009 14009 12666 15017 13928
6/06 13496 14039 14039 12683 15035 13883
7/06 13269 13789 13789 12761 14705 13618
8/06 13629 14158 14158 13064 15079 13912
9/06 13950 14488 14488 13400 15352 14091
10/06 14831 15388 15388 13837 15956 14607
11/06 15314 15877 15877 14100 16531 15046
12/06 15729 16295 16295 14297 16529 15098
1/07 16387 16969 16969 14513 17087 15538
2/07 16655 17232 17232 14230 17115 15614
3/07 17013 17591 17591 14389 17252 15815
4/07 17492 18075 18075 15026 17909 16311
5/07 17701 18286 18275 15550 18585 17000
6/07 17462 18023 18023 15292 18166 16773
7/07 17223 17770 17771 14819 17489 16107
8/07 16855 17371 17371 15040 17519 16203
9/07 16666 17171 17171 15602 18095 16627
10/07 16676 17171 17171 15850 18387 16974
11/07 15689 16149 16149 15187 17509 16149
12/07 15038 15460 15460 15082 17454 16056
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
1/08 14907 15321 15321 14178 16317 15063
2/08 14370 14766 14766 13718 15944 14752
3/08 14053 14431 14431 13658 15713 14549
4/08 14391 14754 14766 14323 16775 15455
5/08 14643 15008 15009 14509 17535 16079
6/08 13253 13574 13586 13287 16133 14937
7/08 13691 14025 14025 13175 15722 14685
8/08 14304 14638 14638 13366 16013 14960
9/08 13188 13482 13482 12176 14050 13314
10/08 9853 9898 10072 10131 10909 10608
====================================================================================================================================
========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS BASED ON EXPENSES INCURRED DURING THE
As 10/31/08, including maximum applicable As of 9/30/08, the most recent calendar PERIOD COVERED BY THIS REPORT.
sales charges quarter-end, including maximum
applicable sales charges CLASS A SHARE PERFORMANCE REFLECTS THE
CLASS A SHARES MAXIMUM 5.50% SALES CHARGE, AND CLASS B
Inception (11/4/03) -0.30% CLASS A SHARES AND CLASS C SHARE PERFORMANCE REFLECTS THE
1 Year -44.17 Ineption (11/4/03) 5.81% APPLICABLE CONTINGENT DEFERRED SALES
1 Year -25.20 CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
CLASS B SHARES CDSC ON CLASS B SHARES DECLINES FROM 5%
Inception (11/4/03) -0.21% CLASS B SHARES BEGINNING AT THE TIME OF PURCHASE TO 0% AT
1 Year -44.02 Inception (11/4/03) 5.96% THE BEGINNING OF THE SEVENTH YEAR. THE
1 Year -25.06 CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
CLASS C SHARES YEAR AFTER PURCHASE. CLASS R SHARES DO NOT
Inception (11/4/03) 0.14% CLASS C SHARES HAVE A FRONT-END SALES CHARGE; RETURNS
1 Year -41.88 Inception (11/4/03) 6.28% SHOWN ARE AT NET ASSET VALUE AND DO NOT
1 Year -22.20 REFLECT A 0.75% CDSC THAT MAY BE IMPOSED
CLASS R SHARES ON A TOTAL REDEMPTION OF RETIREMENT PLAN
Inception 0.62% CLASS R SHARES ASSETS WITHIN THE FIRST YEAR. CLASS Y
1 Year -41.00 Inception 6.78% SHARES DO NOT HAVE A FRONT-END SALES
1 Year -21.04 CHARGE OR A CDSC; THEREFORE, PERFORMANCE
CLASS Y SHARES ========================================== IS AT NET ASSET VALUE.
Inception 0.84%
1 Year -40.93 THE PERFORMANCE DATA QUOTED REPRESENT THE PERFORMANCE OF THE FUND'S SHARE
========================================== PAST PERFORMANCE AND CANNOT GUARANTEE CLASSES WILL DIFFER PRIMARILY DUE TO
COMPARABLE FUTURE RESULTS; CURRENT DIFFERENT SALES CHARGE STRUCTURES AND
CLASS R SHARES' INCEPTION DATE IS APRIL PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CLASS EXPENSES.
30, 2004. RETURNS SINCE THAT DATE ARE VISIT INVESCOAIM.COM FOR THE MOST RECENT
HISTORICAL RETURNS. ALL OTHER RETURNS ARE MONTH-END PERFORMANCE. PERFORMANCE FIGURES (1) Total annual operating expenses less
BLENDED RETURNS OF HISTORICAL CLASS R REFLECT REINVESTED DISTRIBUTIONS, CHANGES any contractual fee waivers and/or
SHARE PERFORMANCE AND RESTATED CLASS A IN NET ASSET VALUE AND THE EFFECT OF THE expense reimbursements by the advisor
SHARE PERFORMANCE (FOR PERIODS PRIOR TO MAXIMUM SALES CHARGE UNLESS OTHERWISE in effect through at least June 30,
THE INCEPTION DATE OF CLASS R SHARES) AT STATED. INVESTMENT RETURN AND PRINCIPAL 2009. See current prospectus for more
NET ASSET VALUE, ADJUSTED TO REFLECT THE VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE information.
HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS A GAIN OR LOSS WHEN YOU SELL SHARES.
R SHARES. CLASS A SHARES' INCEPTION DATE
IS NOVEMBER 4, 2003. THE NET ANNUAL FUND OPERATING EXPENSE
RATIO SET FORTH IN THE MOST RECENT FUND
CLASS Y SHARES' INCEPTION DATE IS PROSPECTUS AS OF THE DATE OF THIS REPORT
OCTOBER 3, 2008; RETURNS SINCE THAT DATE FOR CLASS A, CLASS B, CLASS C, CLASS R AND
ARE ACTUAL RETURNS. ALL OTHER RETURNS ARE CLASS Y SHARES WAS 1.37%, 2.12%, 2.12%,
BLENDED RETURNS OF ACTUAL CLASS Y SHARE 1.62% AND 1.12%, RESPECTIVELY.(1) THE
PERFORMANCE AND RESTATED CLASS A SHARE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO
PERFORMANCE (FOR PERIODS PRIOR TO THE SET FORTH IN THE MOST RECENT FUND
INCEPTION DATE OF CLASS Y SHARES) AT NET PROSPECTUS AS OF THE DATE OF THIS REPORT
ASSET VALUE. THE RESTATED CLASS A SHARE FOR CLASS A, CLASS B, CLASS C, CLASS R AND
PERFORMANCE REFLECTS THE RULE 12B-1 FEES CLASS Y SHARES WAS 1.38%, 2.13%, 2.13%,
APPLICABLE TO CLASS A SHARES AS WELL AS 1.63% AND 1.13%, RESPECTIVELY. THE EXPENSE
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RATIOS PRESENTED ABOVE MAY VARY FROM THE
RECEIVED BY CLASS A SHARES. CLASS A EXPENSE RATIOS PRESENTED IN OTHER SECTIONS
SHARES' INCEPTION DATE IS NOVEMBER 4, OF THIS REPORT THAT ARE
7 AIM TRIMARK ENDEAVOR FUND
AIM TRIMARK ENDEAVOR FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION
o Effective September 30, 2003, only o The S&P 500--REGISTERED TRADEMARK-- o The Chartered Financial Analyst--REGIS-
previously established qualified plans INDEX is a market TERED TRADEMARK-- (CFA--REGISTERED
are eligible to purchase Class B shares capitalization-weighted index covering TRADEMARK--) designation is a globally
of any AIM fund. all major areas of the U.S. economy. It recognized standard for measuring the
is not the 500 largest companies, but competence and integrity of investment
o Class R shares are available only to rather the most widely held 500 professionals.
certain retirement plans. Please see companies chosen with respect to market
the prospectus for more information. size, liquidity, and their industry. o The returns shown in management's
discussion of Fund performance are
o Class Y shares are available only to o The RUSSELL MIDCAP--REGISTERED based on net asset values calculated
certain investors. Please see the TRADEMARK-- INDEX measures the for shareholder transactions. Generally
prospectus for more information. performance of the 800 smallest accepted accounting principles require
companies in the Russell adjustments to be made to the net
PRINCIPAL RISKS OF INVESTING IN THE FUND 1000--REGISTERED TRADEMARK-- Index, assets of the Fund at period end for
which represent approximately 30% of financial reporting purposes, and as
o Since a large percentage of the Fund's the total market capitalization of the such, the net asset values for
assets may be invested in securities of Russell 1000 Index. The Russell Midcap shareholder transactions and the
a limited number of companies, each Index and the Russell 1000 Index are returns based on those net asset values
investment has a greater effect on the trademarks/service marks of the Frank may differ from the net asset values
Fund's overall performance, and any Russell Company. Russell--REGISTERED and returns reported in the Financial
change in the value of those securities TRADEMARK-- is a trademark of the Frank Highlights.
could significantly affect the value of Russell Company.
your investment in the Fund. o Industry classifications used in this
o The LIPPER MID-CAP CORE FUNDS INDEX is report are generally according to the
o The values of convertible securities in an equally weighted representation of Global Industry Classification
which the Fund invests may be affected the largest funds in the Lipper Mid-Cap Standard, which was developed by and is
by market interest rates, the risk that Core Funds category. These funds have the exclusive property and a service
the issuer may default on interest or an average price-to-earnings ratio, mark of MSCI Inc. and Standard &
principal payments, and the value of price-to-book ratio, and three-year Poor's.
the underlying common stock into which sales-per-share growth value, compared
these securities may be converted. to the S&P MidCap 400 Index.
o Prices of equity securities change in o The Fund is not managed to track the
response to many factors, including the performance of any particular index,
historical and prospective earnings of including the indexes defined here, and
the issuer, the value of its assets, consequently, the performance of the
general economic conditions, interest Fund may deviate significantly from the
rates, investor perceptions and market performance of the indexes.
liquidity.
o A direct investment cannot be made in
o Foreign securities have additional an index. Unless otherwise indicated,
risks, including exchange rate changes, index results include reinvested
political and economic upheaval, dividends, and they do not reflect
relative lack of information, sales charges. Performance of an index
relatively low market liquidity, and of funds reflects fund expenses;
the potential lack of strict financial performance of a market index does not.
and accounting controls and standards.
o The prices of securities held by the
Fund may decline in response to market
risks.
======================================================================================= ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares ATDAX
======================================================================================= Class B Shares ATDBX
Class C Shares ATDCX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class R Shares ATDRX
Class Y Shares ATDYX
==========================================
8 AIM TRIMARK ENDEAVOR FUND
SCHEDULE OF INVESTMENTS(a)
October 31, 2008
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.03%
AIRLINES-1.83%
Ryanair Holdings PLC-ADR (Ireland)(b) 68,800 $ 1,532,176
===========================================================================
APPAREL RETAIL-2.80%
Ross Stores, Inc. 71,800 2,347,142
===========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-4.50%
Liz Claiborne, Inc. 462,200 3,766,930
===========================================================================
BREWERS-7.46%
Grupo Modelo, S.A. de C.V.-Series C (Mexico) 455,800 1,395,689
- ---------------------------------------------------------------------------
Molson Coors Brewing Co.-Class B 129,808 4,849,627
===========================================================================
6,245,316
===========================================================================
BROADCASTING-3.06%
Grupo Televisa S.A.-ADR (Mexico) 145,000 2,560,700
===========================================================================
BUILDING PRODUCTS-3.24%
Kingspan Group PLC (Ireland) 471,400 2,717,978
===========================================================================
COMMUNICATIONS EQUIPMENT-5.90%
Plantronics, Inc. 220,000 3,176,800
- ---------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(b) 35,000 1,765,050
===========================================================================
4,941,850
===========================================================================
DIVERSIFIED BANKS-0.00%
HBOS PLC (United Kingdom) -- 0
===========================================================================
DIVERSIFIED REAL ESTATE ACTIVITIES-4.82%
Jones Lang LaSalle Inc. 122,625 4,036,815
===========================================================================
HEALTH CARE DISTRIBUTORS-3.78%
Patterson Cos. Inc.(b) 125,000 3,166,250
===========================================================================
HEALTH CARE EQUIPMENT-11.00%
Kinetic Concepts, Inc.(b) 194,400 4,706,424
- ---------------------------------------------------------------------------
Zimmer Holdings, Inc.(b) 97,000 4,503,710
===========================================================================
9,210,134
===========================================================================
HEALTH CARE SERVICES-1.56%
AMN Healthcare Services, Inc.(b) 145,800 1,310,742
===========================================================================
HOME FURNISHINGS-6.42%
Tempur-Pedic International Inc.(b) 688,200 5,374,842
===========================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-4.61%
Manpower Inc. 124,000 3,860,120
===========================================================================
INDUSTRIAL CONGLOMERATES-4.07%
DCC PLC (Ireland) 218,800 3,410,198
===========================================================================
INDUSTRIAL MACHINERY-2.07%
Graco Inc. 70,300 1,738,519
===========================================================================
INTERNET SOFTWARE & SERVICES-2.73%
eBay Inc.(b) 150,000 2,290,500
===========================================================================
LEISURE PRODUCTS-4.97%
Pool Corp. 239,000 4,160,990
===========================================================================
LIFE & HEALTH INSURANCE-5.26%
Unum Group 280,000 4,410,000
===========================================================================
MANAGED HEALTH CARE-5.81%
UnitedHealth Group Inc. 205,000 4,864,650
===========================================================================
MULTI-LINE INSURANCE-3.91%
Vienna Insurance Group (Austria) 120,000 3,277,397
===========================================================================
RESTAURANTS-1.36%
Tim Hortons, Inc. (Canada) 3,000 75,183
- ---------------------------------------------------------------------------
Tim Hortons, Inc. (Canada)(c) 42,172 1,061,469
===========================================================================
1,136,652
===========================================================================
TRADING COMPANIES & DISTRIBUTORS-2.75%
Grafton Group PLC (Ireland)(b)(d) 763,200 2,299,778
===========================================================================
TRUCKING-4.12%
Con-way Inc. 101,300 3,448,252
===========================================================================
Total Common Stocks & Other Equity Interests
(Cost $130,344,060) 82,107,931
===========================================================================
MONEY MARKET FUNDS-0.97%
Liquid Assets Portfolio-Institutional Class(e) 407,532 407,532
- ---------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 407,532 407,532
===========================================================================
Total Money Market Funds (Cost $815,064) 815,064
===========================================================================
TOTAL INVESTMENTS-99.00% (Cost $131,159,124) 82,922,995
===========================================================================
OTHER ASSETS LESS LIABILITIES-1.00% 834,219
===========================================================================
NET ASSETS-100.00% $83,757,214
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector classifications used in this report are generally
according to the Global Industry Classification Standard, which was
developed by and is the exclusive property and a service mark of MSCI Inc.
and Standard & Poor's.
(b) Non-income producing security.
(c) Traded on New York Stock Exchange.
(d) Each unit is comprised of one ordinary share of Euro 0.05, one C share and
twenty Class A shares.
(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.
9 AIM TRIMARK ENDEAVOR FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$130,344,060) $ 82,107,931
- ------------------------------------------------------
Investments in affiliated money market
funds, at value and cost 815,064
======================================================
Total investments (Cost
$131,159,124) 82,922,995
======================================================
Cash 2,094,473
- ------------------------------------------------------
Foreign currencies, at value (Cost
$197,198) 179,967
- ------------------------------------------------------
Receivables for:
Investments sold 1,174,353
- ------------------------------------------------------
Fund shares sold 8,973
- ------------------------------------------------------
Dividends 72,606
- ------------------------------------------------------
Foreign currency contracts
outstanding 261,553
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 9,130
- ------------------------------------------------------
Other assets 44,416
======================================================
Total assets 86,768,466
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 2,820,193
- ------------------------------------------------------
Accrued fees to affiliates 91,948
- ------------------------------------------------------
Accrued other operating expenses 82,259
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 16,852
======================================================
Total liabilities 3,011,252
======================================================
Net assets applicable to shares
outstanding $ 83,757,214
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $144,022,921
- ------------------------------------------------------
Undistributed net investment income 267,156
- ------------------------------------------------------
Undistributed net realized gain (loss) (12,537,050)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (47,995,813)
======================================================
$ 83,757,214
______________________________________________________
======================================================
NET ASSETS:
Class A $ 54,056,132
______________________________________________________
======================================================
Class B $ 7,770,968
______________________________________________________
======================================================
Class C $ 14,941,206
______________________________________________________
======================================================
Class R $ 4,317,190
______________________________________________________
======================================================
Class Y $ 342,935
______________________________________________________
======================================================
Institutional Class $ 2,328,783
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 6,011,164
______________________________________________________
======================================================
Class B 893,058
______________________________________________________
======================================================
Class C 1,716,612
______________________________________________________
======================================================
Class R 484,532
______________________________________________________
======================================================
Class Y 38,103
______________________________________________________
======================================================
Institutional Class 255,184
______________________________________________________
======================================================
Class A:
Net asset value per share $ 8.99
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $8.99 divided
by 94.50%) $ 9.51
______________________________________________________
======================================================
Class B:
Net asset value and offering price
per share $ 8.70
______________________________________________________
======================================================
Class C:
Net asset value and offering price
per share $ 8.70
______________________________________________________
======================================================
Class R:
Net asset value and offering price
per share $ 8.91
______________________________________________________
======================================================
Class Y:
Net asset value and offering price
per share $ 9.00
______________________________________________________
======================================================
Institutional Class:
Net asset value and offering price
per share $ 9.12
______________________________________________________
======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM TRIMARK ENDEAVOR FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $27,346) $ 2,576,603
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds 358,645
- ------------------------------------------------------------------------------------------------
Interest 119,734
================================================================================================
Total investment income 3,054,982
================================================================================================
EXPENSES:
Advisory fees 1,176,391
- ------------------------------------------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------------------------------------------
Custodian fees 31,249
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 260,262
- ------------------------------------------------------------------------------------------------
Class B 148,256
- ------------------------------------------------------------------------------------------------
Class C 288,886
- ------------------------------------------------------------------------------------------------
Class R 28,247
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C, R and Y 450,335
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 493
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 20,190
- ------------------------------------------------------------------------------------------------
Other 273,204
================================================================================================
Total expenses 2,727,513
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (25,917)
================================================================================================
Net expenses 2,701,596
================================================================================================
Net investment income 353,386
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (12,769,772)
- ------------------------------------------------------------------------------------------------
Foreign currencies (75,833)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts 146,985
================================================================================================
(12,698,620)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (61,908,534)
- ------------------------------------------------------------------------------------------------
Foreign currencies (22,440)
- ------------------------------------------------------------------------------------------------
Foreign currency contracts 347,333
================================================================================================
(61,583,641)
================================================================================================
Net realized and unrealized gain (loss) (74,282,261)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(73,928,875)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM TRIMARK ENDEAVOR FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 353,386 $ 479,566
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (12,698,620) 18,022,812
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (61,583,641) (7,160,398)
==========================================================================================================
Net increase (decrease) in net assets resulting from operations (73,928,875) 11,341,980
==========================================================================================================
Distributions to shareholders from net investment income:
Class A (376,121) --
- ----------------------------------------------------------------------------------------------------------
Class R (7,345) --
- ----------------------------------------------------------------------------------------------------------
Institutional Class (39,223) --
==========================================================================================================
Total distributions from net investment income (422,689) --
==========================================================================================================
Distributions to shareholders from net realized gains:
Class A (11,984,664) (3,919,542)
- ----------------------------------------------------------------------------------------------------------
Class B (1,746,530) (773,210)
- ----------------------------------------------------------------------------------------------------------
Class C (3,294,859) (903,084)
- ----------------------------------------------------------------------------------------------------------
Class R (452,904) (43,605)
- ----------------------------------------------------------------------------------------------------------
Institutional Class (460,266) (244,108)
==========================================================================================================
Total distributions from net realized gains (17,939,223) (5,883,549)
==========================================================================================================
Share transactions-net:
Class A (43,987,396) 85,665,910
- ----------------------------------------------------------------------------------------------------------
Class B (5,712,928) 7,486,474
- ----------------------------------------------------------------------------------------------------------
Class C (10,160,311) 24,967,920
- ----------------------------------------------------------------------------------------------------------
Class R 2,611,447 4,124,431
- ----------------------------------------------------------------------------------------------------------
Class Y 426,655 --
- ----------------------------------------------------------------------------------------------------------
Institutional Class (1,191,859) 778,488
==========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (58,014,392) 123,023,223
==========================================================================================================
Net increase (decrease) in net assets (150,305,179) 128,481,654
==========================================================================================================
NET ASSETS:
Beginning of year 234,062,393 105,580,739
==========================================================================================================
End of year (includes undistributed net investment income of $267,156
and $404,418, respectively) $ 83,757,214 $234,062,393
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM TRIMARK ENDEAVOR FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Endeavor Fund (the "Fund") is a series portfolio of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of nine
separate series portfolios, each authorized to issue an unlimited number of
shares of beneficial interest. The 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.
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.
13 AIM TRIMARK ENDEAVOR 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. 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 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. 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.
J. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to
attempt to minimize the risk to the Fund from adverse changes in the
relationship between currencies. The Fund may also enter into a foreign
currency contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. dollar price of that
security. Fluctuations in the value of these contracts are recorded as
unrealized appreciation (depreciation) until the contracts are closed.
When these contracts are closed, realized gains (losses) are recorded.
Realized and unrealized gains and losses on these contracts are
14 AIM TRIMARK ENDEAVOR FUND
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).
Previously, under the terms of a master sub-advisory agreement between Invesco
Aim and Invesco Trimark Ltd. ("Invesco Trimark"), Invesco Aim paid Invesco
Trimark 40% of the amount of AIM's compensation on the sub-advised assets. This
agreement terminated on May 1, 2008.
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 in such affiliated money market
funds.
For the year ended October 31, 2008, the Advisor waived advisory fees of
$15,687.
At the request of the Trustees of the Trust, 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
October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of
$1,681.
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 October 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 October 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 October 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 October 31, 2008, IADI
advised the Fund that IADI retained $22,877 in front-end sales commissions from
the sale of Class A shares and $4,251, $44,577, $24,758 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--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 October 31, 2008, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $8,549.
15 AIM TRIMARK ENDEAVOR FUND
NOTE 4--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 October 31, 2008, the Fund paid legal fees of $3,169 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--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 6--FOREIGN CURRENCY CONTRACTS AT PERIOD-END
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS
- -----------------------------------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT ------------------------------------ UNREALIZED
DATE DELIVER RECEIVE VALUE APPRECIATION
- -----------------------------------------------------------------------------------------------------------
1/15/09 EUR 3,000,000 USD 4,077,600 $3,816,047 $261,553
___________________________________________________________________________________________________________
===========================================================================================================
</Table>
Currency Abbreviations:
<Table>
EUR - Euro
USD - U.S. Dollar
</Table>
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
OCTOBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Ordinary income $ 2,428,251 $ --
- -------------------------------------------------------------------------------------------------------
Long-term capital gain 15,933,661 5,883,549
=======================================================================================================
Total distributions $18,361,912 $5,883,549
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 287,575
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (48,236,443)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (21,237)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (20,419)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (12,275,183)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 144,022,921
================================================================================================
Total net assets $ 83,757,214
________________________________________________________________________________________________
================================================================================================
</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.
16 AIM TRIMARK ENDEAVOR FUND
The Fund has a capital loss carryforward as of October 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
October 31, 2016 $12,275,183
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2008 was $44,943,022 and
$109,848,393, 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 $ 2,326,891
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (50,563,334)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(48,236,443)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $131,159,438.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and proxy costs, on October 31, 2008, undistributed net investment
income was decreased by $67,959, undistributed net realized gain (loss) was
increased by $83,641 and shares of beneficial interest decreased by $15,682.
This reclassification had no effect on the net assets of the Fund.
17 AIM TRIMARK ENDEAVOR FUND
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
2008(a) 2007
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,030,805 $ 26,755,887 10,899,707 $ 186,278,865
- -------------------------------------------------------------------------------------------------------------------------
Class B 250,760 3,125,214 785,351 13,097,611
- -------------------------------------------------------------------------------------------------------------------------
Class C 503,298 6,504,617 2,003,231 33,506,822
- -------------------------------------------------------------------------------------------------------------------------
Class R 355,818 4,720,063 282,153 4,788,029
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) 39,944 443,919 -- --
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 119,428 1,555,730 375,994 6,448,262
=========================================================================================================================
Issued as reinvestment of dividends:
Class A 822,906 11,528,916 227,390 3,572,301
- -------------------------------------------------------------------------------------------------------------------------
Class B 120,565 1,644,511 46,017 709,126
- -------------------------------------------------------------------------------------------------------------------------
Class C 231,999 3,164,459 55,785 859,649
- -------------------------------------------------------------------------------------------------------------------------
Class R 33,111 460,249 2,793 43,605
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 35,325 499,489 15,411 244,108
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 143,172 1,826,640 97,635 1,624,360
- -------------------------------------------------------------------------------------------------------------------------
Class B (147,475) (1,826,640) (99,825) (1,624,360)
=========================================================================================================================
Reacquired:
Class A(b) (6,503,814) (84,098,839) (6,154,238) (105,809,616)
- -------------------------------------------------------------------------------------------------------------------------
Class B (696,141) (8,656,013) (282,598) (4,695,903)
- -------------------------------------------------------------------------------------------------------------------------
Class C (1,582,251) (19,829,387) (563,514) (9,398,551)
- -------------------------------------------------------------------------------------------------------------------------
Class R (200,019) (2,568,865) (41,449) (707,203)
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) (1,841) (17,264) -- --
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class (245,764) (3,247,078) (334,672) (5,913,882)
=========================================================================================================================
Net increase (decrease) in share activity (4,690,174) $(58,014,392) 7,315,171 $ 123,023,223
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 31% 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 38,884 $ 432,389
- --------------------------------------------------------------------------------------------------
Class A (38,884) (432,389)
__________________________________________________________________________________________________
==================================================================================================
</Table>
18 AIM TRIMARK ENDEAVOR FUND
NOTE 11--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 NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END
OF PERIOD (LOSS)(A) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
- -------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
10/31/08 $16.73 $ 0.05 $(6.42) $(6.37) $(0.04) $(1.33) $(1.37) $ 8.99
Year ended
10/31/07 15.66 0.07 1.82 1.89 -- (0.82) (0.82) 16.73
Year ended
10/31/06 12.53 (0.02) 3.18 3.16 (0.03) -- (0.03) 15.66
Year ended
10/31/05 11.53 0.01 0.99 1.00 -- -- -- 12.53
Year ended
10/31/04(e) 10.00 (0.05) 1.58 1.53 -- -- -- 11.53
- -------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended
10/31/08 16.30 (0.04) (6.23) (6.27) -- (1.33) (1.33) 8.70
Year ended
10/31/07 15.39 (0.06) 1.79 1.73 -- (0.82) (0.82) 16.30
Year ended
10/31/06 12.38 (0.13) 3.14 3.01 -- -- -- 15.39
Year ended
10/31/05 11.47 (0.08) 0.99 0.91 -- -- -- 12.38
Year ended
10/31/04(e) 10.00 (0.13) 1.60 1.47 -- -- -- 11.47
- -------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended
10/31/08 16.30 (0.04) (6.23) (6.27) -- (1.33) (1.33) 8.70
Year ended
10/31/07 15.39 (0.06) 1.79 1.73 -- (0.82) (0.82) 16.30
Year ended
10/31/06 12.38 (0.13) 3.14 3.01 -- -- -- 15.39
Year ended
10/31/05 11.47 (0.08) 0.99 0.91 -- -- -- 12.38
Year ended
10/31/04(e) 10.00 (0.13) 1.60 1.47 -- -- -- 11.47
- -------------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended
10/31/08 16.59 0.02 (6.35) (6.33) (0.02) (1.33) (1.35) 8.91
Year ended
10/31/07 15.58 0.03 1.80 1.83 -- (0.82) (0.82) 16.59
Year ended
10/31/06 12.48 (0.06) 3.18 3.12 (0.02) -- (0.02) 15.58
Year ended
10/31/05 11.51 (0.02) 0.99 0.97 -- -- -- 12.48
Year ended
10/31/04(e) 10.88 (0.04) 0.67 0.63 -- -- -- 11.51
- -------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(e) 11.18 0.00 (2.18) (2.18) -- -- -- 9.00
- -------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
CLASS
Year ended
10/31/08 16.94 0.12 (6.49) (6.37) (0.12) (1.33) (1.45) 9.12
Year ended
10/31/07 15.78 0.15 1.83 1.98 -- (0.82) (0.82) 16.94
Year ended
10/31/06 12.61 0.05 3.20 3.25 (0.08) -- (0.08) 15.78
Year ended
10/31/05 11.55 0.06 1.00 1.06 -- -- -- 12.61
Year ended
10/31/04(e) 10.88 (0.01) 0.68 0.67 -- -- -- 11.55
_________________________________________________________________________________________________________________________
=========================================================================================================================
<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(B) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(C)
- ------------------------------------------------------------------------------------------------------------
CLASS A
Year ended
10/31/08 (41.00)% $ 54,056 1.52%(d) 1.53%(d) 0.42%(d) 30%
Year ended
10/31/07 12.44 159,244 1.35 1.39 0.40 39
Year ended
10/31/06 25.26 69,660 1.56 1.62 (0.16) 28
Year ended
10/31/05 8.67 55,124 1.66 1.71 0.04 15
Year ended
10/31/04(e) 15.30 24,996 2.00(f) 3.02(f) (0.49)(f) 35
- ------------------------------------------------------------------------------------------------------------
CLASS B
Year ended
10/31/08 (41.41) 7,771 2.27(d) 2.28(d) (0.33)(d) 30
Year ended
10/31/07 11.58 22,258 2.10 2.14 (0.35) 39
Year ended
10/31/06 24.31 14,104 2.31 2.37 (0.91) 28
Year ended
10/31/05 7.93 13,237 2.35 2.40 (0.65) 15
Year ended
10/31/04(e) 14.70 6,403 2.65(f) 3.67(f) (1.14)(f) 35
- ------------------------------------------------------------------------------------------------------------
CLASS C
Year ended
10/31/08 (41.41) 14,941 2.27(d) 2.28(d) (0.33)(d) 30
Year ended
10/31/07 11.58 41,790 2.10 2.14 (0.35) 39
Year ended
10/31/06 24.31 16,437 2.31 2.37 (0.91) 28
Year ended
10/31/05 7.93 12,910 2.35 2.40 (0.65) 15
Year ended
10/31/04(e) 14.70 5,944 2.65(f) 3.67(f) (1.14)(f) 35
- ------------------------------------------------------------------------------------------------------------
CLASS R
Year ended
10/31/08 (41.06) 4,317 1.77(d) 1.78(d) 0.17(d) 30
Year ended
10/31/07 12.11 4,905 1.60 1.64 0.15 39
Year ended
10/31/06 25.04 812 1.81 1.87 (0.41) 28
Year ended
10/31/05 8.43 253 1.85 1.90 (0.15) 15
Year ended
10/31/04(e) 5.79 34 2.15(f) 3.17(f) (0.64)(f) 35
- ------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(e) (19.50) 343 1.32(d)(f) 1.34(d)(f) 0.62(d)(f) 30
- ------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
CLASS
Year ended
10/31/08 (40.66) 2,329 0.98(d) 0.99(d) 0.96(d) 30
Year ended
10/31/07 12.94 5,864 0.90 0.94 0.85 39
Year ended
10/31/06 25.91 4,567 1.05 1.11 0.35 28
Year ended
10/31/05 9.18 3,396 1.18 1.23 0.52 15
Year ended
10/31/04(e) 6.16 1,779 1.62(f) 2.64(f) (0.11)(f) 35
____________________________________________________________________________________________________________
============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net
asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year, if applicable.
(c) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year, if applicable.
(d) Ratios based on average daily net assets (000's omitted) of $104,105,
$14,826, $28,889, $5,649, $353 and $4,411 for Class A, Class B, Class C,
Class R, Class Y and Institutional Class shares, respectively.
(e) Class A, Class B and Class C shares commenced on November 4, 2003; Class R
and Institutional Class shares commenced on April 30, 2004 and Class Y
shares commenced on October 3, 2008.
(f) Annualized.
19 AIM TRIMARK ENDEAVOR FUND
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into
certain arrangements permitting market timing of the AIM Funds and failed to
disclose these arrangements in the prospectuses for such Funds, and conclusions
of law to the effect that Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, Invesco Aim's time to respond to that Order has been indefinitely
suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals,
depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws 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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various Invesco Aim- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund
Derivative Complaint purportedly brought on behalf of the AIM Funds and fund
registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA
purportedly brought on behalf of participants in the Invesco 401(k) plan. Based
on orders issued by the MDL Court, all claims asserted against the AIM Funds
that have been transferred to the MDL Court have been dismissed, although
certain Funds remain nominal defendants in the Consolidated Amended Fund
Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco
defendants' motion to dismiss the Amended Class Action Complaint for Violations
of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and
remanded this lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing
full cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco Aim and the Fund are unable to
estimate the impact, if any, that the outcome of the Pending Litigation and
Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund.
20 AIM TRIMARK ENDEAVOR FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Trimark Endeavor Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Trimark Endeavor Fund (one of
the funds constituting AIM Investment Funds, hereafter referred to as the
"Fund") at October 31, 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 October 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2008
Houston, Texas
21 AIM TRIMARK ENDEAVOR 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 May 1, 2008, through
October 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 October 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 October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $684.40 $6.77 $1,017.09 $ 8.11 1.60%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 682.60 9.94 1,013.32 11.89 2.35
- ---------------------------------------------------------------------------------------------------
C 1,000.00 682.10 9.94 1,013.32 11.89 2.35
- ---------------------------------------------------------------------------------------------------
R 1,000.00 684.60 7.83 1,015.84 9.37 1.85
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 805.00 0.94 1,018.50 6.70 1.32
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 31, 2008 (as of close of
business October 3, 2008, through October 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 29
(as of close of business October 3, 2008, through October 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.
22 AIM TRIMARK ENDEAVOR FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM (Lipper), under the direction and Invesco Aim, that the Trustees may focus
Investment Funds is required under the supervision of the independent Senior to a greater extent on certain aspects of
Investment Company Act of 1940 to approve Officer who also prepares a separate these arrangements in some years than in
annually the renewal of the AIM Trimark analysis of this information for the others, and that the Trustees'
Endeavor Fund's (the Fund) investment Trustees. Each Sub-Committee then makes deliberations and conclusions in a
advisory agreement with Invesco Aim recommendations to the Investments particular year may be based in part on
Advisors, Inc. (Invesco Aim). During Committee regarding the performance, fees their deliberations and conclusions of
contract renewal meetings held on June and expenses of their assigned funds. The these same arrangements throughout the
18-19, 2008, the Board as a whole and the Investments Committee considers each year and in prior years.
disinterested or "independent" Trustees, Sub-Committee's recommendations and makes
voting separately, approved the its own recommendations regarding the FACTORS AND CONCLUSIONS AND SUMMARY OF
continuance of the Fund's investment performance, fees and expenses of the AIM INDEPENDENT WRITTEN FEE EVALUATION
advisory agreement for another year, Funds to the full Board. The Investments
effective July 1, 2008. In doing so, the Committee also considers each The discussion below serves as a summary
Board determined that the Fund's Sub-Committee's recommendations in making of the Senior Officer's independent
investment advisory agreement is in the its annual recommendation to the Board written evaluation with respect to the
best interests of the Fund and its whether to approve the continuance of each Fund's investment advisory agreement as
shareholders and that the compensation to AIM Fund's investment advisory agreement well as a discussion of the material
Invesco Aim under the Fund's investment and sub-advisory agreements for another factors and related conclusions that
advisory agreement is fair and reasonable. year. formed the basis for the Board's approval
of the Fund's investment advisory
The independent Trustees met separately The independent Trustees are assisted agreement and sub-advisory agreements.
during their evaluation of the Fund's in their annual evaluation of the Fund's Unless otherwise stated, information set
investment advisory agreement with investment advisory agreement by the forth below is as of June 19, 2008 and
independent legal counsel from whom they independent Senior Officer. One does not reflect any changes that may have
received independent legal advice, and the responsibility of the Senior Officer is to occurred since that date, including but
independent Trustees also received manage the process by which the AIM Funds' not limited to changes to the Fund's
assistance during their deliberations from proposed management fees are negotiated performance, advisory fees, expense
the independent Senior Officer, a during the annual contract renewal process limitations and/or fee waivers.
full-time officer of the AIM Funds who to ensure that they are negotiated in a
reports directly to the independent manner that is at arms' length and I. Investment Advisory Agreement
Trustees. reasonable. Accordingly, the Senior
Officer must either supervise a A. Nature, Extent and Quality of
THE BOARD'S FUND EVALUATION PROCESS competitive bidding process or prepare an Services Provided by Invesco Aim
independent written evaluation. The Senior
The Board's Investments Committee has Officer has recommended that an The Board reviewed the advisory services
established three Sub-Committees that are independent written evaluation be provided provided to the Fund by Invesco Aim under
responsible for overseeing the management and, at the direction of the Board, has the Fund's investment advisory agreement,
of a number of the series portfolios of prepared an independent written the performance of Invesco Aim in
the AIM Funds. This Sub-Committee evaluation. providing these services, and the
structure permits the Trustees to focus on credentials and experience of the officers
the performance of the AIM Funds that have During the annual contract renewal and employees of Invesco Aim who provide
been assigned to them. The Sub-Committees process, the Board considered the factors these services. The Board's review of the
meet throughout the year to review the discussed below under the heading "Factors qualifications of Invesco Aim to provide
performance of their assigned funds, and and Conclusions and Summary of Independent these services included the Board's
the Sub-Committees review monthly and Written Fee Evaluation" in evaluating the consideration of Invesco Aim's portfolio
quarterly comparative performance fairness and reasonableness of the Fund's and product review process, various back
information and periodic asset flow data investment advisory agreement and office support functions provided by
for their assigned funds. These materials sub-advisory agreements at the contract Invesco Aim and its affiliates, and
are prepared under the direction and renewal meetings and at their meetings Invesco Aim's equity and fixed income
supervision of the independent Senior throughout the year as part of their trading operations. The Board concluded
Officer. Over the course of each year, the ongoing oversight of the Fund. The Fund's that the nature, extent and quality of the
Sub-Committees meet with portfolio investment advisory agreement and advisory services provided to the Fund by
managers for their assigned funds and sub-advisory agreements were considered Invesco Aim were appropriate and that
other members of management and review separately, although the Board also Invesco Aim currently is providing
with these individuals the performance, considered the common interests of all of satisfactory advisory services in
investment objective(s), policies, the AIM Funds in their deliberations. The accordance with the terms of the Fund's
strategies and limitations of these funds. Board considered all of the information investment advisory agreement. In
provided to them and did not identify any addition, based on their ongoing meetings
In addition to their meetings particular factor that was controlling. throughout the year with the Fund's
throughout the year, the Sub-Committees Each Trustee may have evaluated the portfolio manager or managers, the Board
meet at designated contract renewal information provided differently from one concluded that these individuals are
meetings each year to conduct an in-depth another and attributed different weight to competent and able to continue to carry
review of the performance, fees and the various factors. The Trustees out their responsibilities under the
expenses of their assigned funds. During recognized that the advisory arrangements Fund's investment advisory agreement.
the contract renewal process, the Trustees and resulting advisory fees for the Fund
receive comparative performance and fee and the other AIM Funds are the result of In determining whether to continue the
data regarding the AIM Funds prepared by years of review and negotiation between Fund's investment advisory agreement, the
an independent company, Lipper, Inc. the Trustees and Board considered the prior relationship
between Invesco Aim and the Fund, as well
as the Board's knowledge
continued
23 AIM TRIMARK ENDEAVOR FUND
of Invesco Aim's operations, and concluded tual advisory fee rate to the contractual schedule or through advisory fee waivers
that it was beneficial to maintain the advisory fee rates of funds in the Fund's or expense limitations. The Board noted
current relationship, in part, because of Lipper expense group that are not managed that the Fund's contractual advisory fee
such knowledge. The Board also considered by Invesco Aim, at a common asset level schedule includes seven breakpoints, but
the steps that Invesco Aim and its and as of the end of the past calendar that, due to the Fund's asset level at the
affiliates have taken over the last year. The Board noted that the Fund's end of the past calendar year and the way
several years to improve the quality and contractual advisory fee rate was below in which the breakpoints have been
efficiency of the services they provide to the median contractual advisory fee rate structured, the Fund is not benefiting
the AIM Funds in the areas of investment of funds in its expense group. The Board from the breakpoints. Based on this
performance, product line diversification, also reviewed the methodology used by information, the Board concluded that the
distribution, fund operations, shareholder Lipper in determining contractual fee Fund's advisory fees would reflect
services and compliance. The Board rates. economies of scale at higher asset levels.
concluded that the quality and efficiency The Board also noted that the Fund shares
of the services Invesco Aim and its The Board also compared the Fund's directly in economies of scale through
affiliates provide to the AIM Funds in effective fee rate (the advisory fee after lower fees charged by third party service
each of these areas have generally any advisory fee waivers and before any providers based on the combined size of
improved, and support the Board's approval expense limitations/waivers) to the all of the AIM Funds and affiliates.
of the continuance of the Fund's advisory fee rates of other clients of
investment advisory agreement. Invesco Aim and its affiliates with E. Profitability and Financial
investment strategies comparable to those Resources of Invesco Aim
B. Fund Performance of the Fund, including two mutual funds
advised by Invesco Aim. The Board noted The Board reviewed information from
The Board compared the Fund's performance that the Fund's rate was above the rates Invesco Aim concerning the costs of the
during the past one and three calendar for the two mutual funds. advisory and other services that Invesco
years to the performance of funds in the Aim and its affiliates provide to the Fund
Fund's performance group that are not Additionally, the Board compared the and the profitability of Invesco Aim and
managed by Invesco Aim, and against the Fund's effective fee rate to the total its affiliates in providing these
performance of all funds in the Lipper advisory fees paid by numerous separately services. The Board also reviewed
Mid-Cap Core Funds Index. The Board also managed accounts/wrap accounts advised by information concerning the financial
reviewed the criteria used by Invesco Aim an Invesco Aim affiliate. The Board noted condition of Invesco Aim and its
to identify the funds in the Fund's that the Fund's rate was generally above affiliates. The Board also reviewed with
performance group for inclusion in the the rates for the separately managed Invesco Aim the methodology used to
Lipper reports. The Board noted that the accounts/ wrap accounts. The Board prepare the profitability information. The
Fund's performance was in the fifth considered that management of the Board considered the overall profitability
quintile of its performance group for the separately managed accounts/wrap accounts of Invesco Aim, as well as the
one year period and the fourth quintile by the Invesco Aim affiliate involves profitability of Invesco Aim in connection
for the three year period (the first different levels of services and different with managing the Fund. The Board noted
quintile being the best performing funds operational and regulatory requirements that Invesco Aim continues to operate at a
and the fifth quintile being the worst than Invesco Aim's management of the Fund. net profit, although increased expenses in
performing funds). The Board noted that The Board concluded that these differences recent years have reduced the
the Fund's performance was below the are appropriately reflected in the fee profitability of Invesco Aim and its
performance of the Index for the one and structure for the Fund. affiliates. The Board concluded that the
three year periods. The Board noted that Fund's fees were fair and reasonable, and
Invesco Aim acknowledges the Fund's The Board noted that Invesco Aim has that the level of profits realized by
underperformance because of shorter term not proposed any advisory fee waivers or Invesco Aim and its affiliates from
performance results and continues to expense limitations for the Fund. The providing services to the Fund was not
monitor the Fund. The Board also Board concluded that it was not necessary excessive in light of the nature, quality
considered the steps Invesco Aim has taken at this time to discuss with Invesco Aim and extent of the services provided. The
over the last several years to improve the whether to implement any fee waivers or Board considered whether Invesco Aim is
quality and efficiency of the services expense limitations because the Fund's financially sound and has the resources
that Invesco Aim provides to the AIM total expenses for most classes were at or necessary to perform its obligations under
Funds. The Board concluded that Invesco below the median total expenses of the the Fund's investment advisory agreement,
Aim continues to be responsive to the funds in the Fund's Lipper expense group and concluded that Invesco Aim has the
Board's focus on fund performance. that are not managed by Invesco Aim. financial resources necessary to fulfill
However, due to the Fund's these obligations.
underperformance, the Board also After taking account of the Fund's
concluded that it would be appropriate for contractual advisory fee rate, as well as F. Independent Written Evaluation of
the Board to continue to monitor more the comparative advisory fee information the Fund's Senior Officer
closely the performance of the Fund. discussed above, the Board concluded that
Although the independent written the Fund's advisory fees were fair and The Board noted that, at their direction,
evaluation of the Fund's Senior Officer reasonable. the Senior Officer of the Fund, who is
only considered Fund performance through independent of Invesco Aim and Invesco
the most recent calendar year, the Board D. Economies of Scale and Breakpoints Aim's affiliates, had prepared an
also reviewed more recent Fund performance independent written evaluation to assist
and this review did not change their The Board considered the extent to which the Board in determining the
conclusions. there are economies of scale in Invesco reasonableness of the proposed management
Aim's provision of advisory services to fees of the AIM Funds, including the Fund.
C. Advisory Fees and Fee Waivers the Fund. The Board also considered The Board noted that they had relied upon
whether the Fund benefits from such the Senior Officer's written evaluation
The Board compared the Fund's contrac- economies of scale through contractual instead of a competitive bidding process.
breakpoints in the Fund's advisory fee
continued
24 AIM TRIMARK ENDEAVOR FUND
In determining whether to continue the payable by the Fund in an amount equal to of funds in the Fund's performance group
Fund's investment advisory agreement, the 100% of the net advisory fees Invesco Aim that are not managed by Invesco Aim, and
Board considered the Senior Officer's receives from the affiliated money market against the performance of all funds in
written evaluation. funds with respect to the Fund's the Lipper Mid-Cap Core Funds Index. The
investment of uninvested cash, but not Board also reviewed the criteria used by
G. Collateral Benefits to Invesco Aim cash collateral. The Board considered the Invesco Aim to identify the funds in the
and its Affiliates contractual nature of this fee waiver and Fund's performance group for inclusion in
noted that it remains in effect until at the Lipper reports. The Board noted that
The Board considered various other least June 30, 2009. The Board concluded the Fund's performance was in the fifth
benefits received by Invesco Aim and its that the Fund's investment of uninvested quintile of its performance group for the
affiliates resulting from Invesco Aim's cash and cash collateral from any one year period and the fourth quintile
relationship with the Fund, including the securities lending arrangements in the for the three year period (the first
fees received by Invesco Aim and its affiliated money market funds is in the quintile being the best performing funds
affiliates for their provision of best interests of the Fund and its and the fifth quintile being the worst
administrative, transfer agency and shareholders. performing funds). The Board noted that
distribution services to the Fund. The the Fund's performance was below the
Board considered the performance of II. Sub-Advisory Agreements performance of the Index for the one and
Invesco Aim and its affiliates in three year periods. The Board noted that
providing these services and the A. Nature, Extent and Quality of Invesco Aim acknowledges the Fund's
organizational structure employed by Services Provided by Affiliated underperformance because of shorter term
Invesco Aim and its affiliates to provide Sub-Advisers performance results and continues to
these services. The Board also considered monitor the Fund. The Board also
that these services are provided to the The Board reviewed the services to be considered the steps Invesco Aim has taken
Fund pursuant to written contracts which provided by Invesco Trimark Ltd., Invesco over the last several years to improve the
are reviewed and approved on an annual Asset Management Deutschland, GmbH, quality and efficiency of the services
basis by the Board. The Board concluded Invesco Asset Management Limited, Invesco that Invesco Aim provides to the AIM
that Invesco Aim and its affiliates were Asset Management (Japan) Limited, Invesco Funds. The Board concluded that Invesco
providing these services in a satisfactory Australia Limited, Invesco Global Asset Aim continues to be responsive to the
manner and in accordance with the terms of Management (N.A.), Inc., Invesco Hong Kong Board's focus on fund performance.
their contracts, and were qualified to Limited, Invesco Institutional (N.A.), However, due to the Fund's
continue to provide these services to the Inc. and Invesco Senior Secured underperformance, the Board also concluded
Fund. Management, Inc. (collectively, the that it would be appropriate for the Board
"Affiliated Sub-Advisers") under the to continue to closely monitor and review
The Board considered the benefits sub-advisory agreements and the the performance of the Fund. The Board
realized by Invesco Aim as a result of credentials and experience of the officers also reviewed more recent Fund performance
portfolio brokerage transactions executed and employees of the Affiliated and this review did not change their
through "soft dollar" arrangements. Under Sub-Advisers who will provide these conclusions.
these arrangements, portfolio brokerage services. The Board concluded that the
commissions paid by the Fund and/or other nature, extent and quality of the services C. Sub-Advisory Fees
funds advised by Invesco Aim are used to to be provided by the Affiliated
pay for research and execution services. Sub-Advisers were appropriate. The Board The Board considered the services to be
The Board noted that soft dollar noted that the Affiliated Sub-Advisers, provided by the Affiliated Sub-Advisers
arrangements shift the payment obligation which have offices and personnel that are pursuant to the sub-advisory agreements
for the research and execution services geographically dispersed in financial and the services to be provided by Invesco
from Invesco Aim to the funds and centers around the world, have been formed Aim pursuant to the Fund's investment
therefore may reduce Invesco Aim's in part for the purpose of researching and advisory agreement, as well as the
expenses. The Board also noted that compiling information and making allocation of fees between Invesco Aim and
research obtained through soft dollar recommendations on the markets and the Affiliated Sub-Advisers pursuant to
arrangements may be used by Invesco Aim in economies of various countries and the sub-advisory agreements. The Board
making investment decisions for the Fund securities of companies located in such noted that the sub-advisory fees have no
and may therefore benefit Fund countries or on various types of direct effect on the Fund or its
shareholders. The Board concluded that investments and investment techniques, and shareholders, as they are paid by Invesco
Invesco Aim's soft dollar arrangements providing investment advisory services. Aim to the Affiliated Sub-Advisers, and
were appropriate. The Board also concluded The Board concluded that the sub-advisory that Invesco Aim and the Affiliated
that, based on their review and agreements will benefit the Fund and its Sub-Advisers are affiliates. After taking
representations made by Invesco Aim, these shareholders by permitting Invesco Aim to account of the Fund's contractual
arrangements were consistent with utilize the additional resources and sub-advisory fee rate, as well as other
regulatory requirements. talent of the Affiliated Sub-Advisers in relevant factors, the Board concluded that
managing the Fund. the Fund's sub-advisory fees were fair and
The Board considered the fact that the reasonable.
Fund's uninvested cash and cash collateral B. Fund Performance
from any securities lending arrangements D. Financial Resources of the
may be invested in money market funds The Board did view Fund performance as a Affiliated Sub-Advisers
advised by Invesco Aim pursuant to relevant factor in considering whether to
procedures approved by the Board. The approve the sub-advisory agreements for The Board considered whether each
Board noted that Invesco Aim will receive the Fund, as one of the Affiliated Affiliated Sub-Adviser is financially
advisory fees from these affiliated money Sub-Advisers currently manages the Fund's sound and has the resources necessary to
market funds attributable to such assets. The Board compared the Fund's perform its obligations under its
investments, although Invesco Aim has performance during the past one and three respective sub-advisory agreement, and
contractually agreed to waive through at calendar years to the performance concluded that each Affiliated Sub-Adviser
least June 30, 2009, the advisory fees has the financial resources necessary to
fulfill these obligations.
25 AIM TRIMARK ENDEAVOR 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 October 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $15,933,661
Qualified Dividend Income* 88.42%
Corporate Dividends Received Deduction* 48.61%
U.S. Treasury Obligations* 4.02%
</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 January 31, 2008, April 30, 2008, July 31, 2008 and
October 31, 2008 were 24.84%, 34.38%, 33.98%, and 25.62%, respectively.
26 AIM TRIMARK ENDEAVOR FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee
oversees 103 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 2003 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 1997 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, Policy
Trustee firm) Studies, Inc. and
Van Gilder Insurance
Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 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 2001 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 2001 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 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 TRIMARK ENDEAVOUR 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 2004 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 TRIMARK ENDEAVOUR FUND
Supplement to Annual Report dated 10/31/08
AIM TRIMARK ENDEAVOR FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS The net annual Fund operating
For periods ended 10/31/08 expense ratio set forth in the most
The following information has been recent Fund prospectus as of the date of
prepared to provide Institutional Class Inception 1.27% this supplement for Institutional Class
shareholders with a performance overview 1 Year -40.59 shares was 0.92%.(1) The total annual
specific to their holdings. Institutional ========================================== Fund operating expense ratio set forth
Class shares are offered exclusively to in the most recent Fund prospectus as of
institutional investors, including defined ========================================== the date of this supplement for
contribution plans that meet certain AVERAGE ANNUAL TOTAL RETURNS Institutional Class shares was 0.93%.
criteria. For periods ended 9/30/08, most recent The expense ratios presented above may
calendar quarter-end vary from the expense ratios presented
in other sections of the actual report
Inception 7.48% that are based on expenses incurred
1 Year -20.46 during the period covered by the report.
==========================================
Please note that past performance
Institutional Class shares' inception date is not indicative of future results.
is April 30, 2004. Returns since that date More recent returns may be more or less
are historical returns. All other returns than those shown. All returns assume
are blended returns of historical reinvestment of distributions at NAV.
Institutional Class share performance and Investment return and principal value
restated Class A share performance (for will fluctuate so your shares, when
periods prior to the inception date of redeemed, may be worth more or less than
Institutional Class shares) at net asset their original cost. See full report for
value (NAV) and reflect the Rule 12b-1 information on comparative benchmarks.
fees applicable to Class A shares. Class A Please consult your Fund prospectus for
shares' inception date is November 4, more information. For the most current
2003. month-end performance, please call 800
451 4246 or visit invescoaim.com.
Institutional Class shares have no
sales charge; therefore, performance is at (1) Total annual operating expenses
NAV. Performance of Institutional Class less any contractual fee waivers
shares will differ from performance of and/or expense reimbursements by
other share classes primarily due to the advisor in effect through at
differing sales charges and class least June 30, 2009. See current
expenses. prospectus for more information.
==========================================
NASDAQ SYMBOL ATDIX
==========================================
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]
invescoaim.com T-END-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
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 May 1, 2008, through October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $687.00 $4.45 $1,019.86 $5.33 1.05%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 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 TRIMARK ENDEAVOR 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:
o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will
trees used to produce paper. be sent via email as soon as they're available.
o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer
expenses and put more capital back in your fund's returns. 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 811-05426 and 033-19338.
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 January 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 [INVESCO AIM LOGO]
investment advisory services to individual and institutional clients and do not sell securities. Please -- SERVICE MARK --
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.
invescoaim.com T-END-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM TRIMARK FUND
- -- SERVICE MARK -- Annual Report to Shareholders o October 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
10 Financial Statements
12 Notes to Financial Statements
18 Financial Highlights
20 Auditor's Report
21 Fund Expenses
22 Approval of Investment Advisory Agreement
25 Tax Information
26 Trustees and Officers
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 recent market developments and
provide some perspective and encouragement to my fellow long-term investors.
[TAYLOR
PHOTO] MARKET OVERVIEW
At the start of the fiscal year in November 2007, 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
Philip Taylor (the Fed) repeatedly cut short-term interest rate targets to stimulate economic
growth and expand market liquidity.(1) Also, Congress and the president worked
together to enact an economic stimulus plan that included billions of dollars in
rebates to taxpayers.
These actions helped the economy and the U.S. stock market until the spring of
2008, when other factors came to the forefront -- triggering a severe correction that eventually
drove major stock-market indexes to multi-year lows.(2)
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.
The recent volatility in the stock, fixed-income and credit markets has driven home the
importance of three timeless investing principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
o 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.
o 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.
o 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 capitalize on
this situation.
MANAGING MONEY IS OUR FOCUS
As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain
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, 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 we 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) Lipper Inc.
2 AIM TRIMARK FUND
Dear Fellow Shareholders:
As I write this letter, turbulent financial markets are causing considerable
investor anxiety, reminding us again that markets are cyclical and the correction
of excess is often painful, at least in the short term. Your Board of Trustees
[CROCKETT believes in the wisdom of a long-term perspective and consistent investment
PHOTO] discipline. We continue to put your interests first in the effort to improve
investment performance, contain shareholder costs and uphold the highest ethical
standards.
We remain enthusiastic about the global reach and investment expertise that
Invesco, a leading independent global investment management company, brings to
Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse
investment strategies deployed throughout the worldwide network of Invesco
investment centers has helped strengthen the management of many AIM Funds. The
rebranding of the Funds' management company as Invesco Aim was followed by the
launch of an upgraded, investor-friendly website (invescoaim.com); a new
mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and
a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in
financial publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between
the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual
process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory
Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your
behalf to double the number of votes in favor of separating the roles of chairman and CEO at the
companies whose shares your Funds hold. We also continued to support the movement for shareholders
to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a
matter of policy, and I would be interested to hear your thoughts on this policy.
As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com.
The dialogue that has been established in this way has been instructive for your Board, and we want
it to continue. Although the production schedule for Fund annual reports and prospectuses allows me
to write these letters of general report and response just twice a year, please be assured that your
comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM TRIMARK FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
=======================================================================================
PERFORMANCE SUMMARY thesis.
For the fiscal year ended October 31, 2008, Class A shares of AIM Trimark Fund, at net While efforts are made to manage risk
asset value, performed in line with the Fund's broad market and style-specific index, through diversifying by investment ideas,
but underperformed the Fund's peer group index.(triangle) our primary method of attempting to manage
risk is to purchase businesses that are
Drivers of performance were largely stock specific. Select holdings in the trading below their estimated intrinsic
financials, health care, consumer discretionary and industrials sectors were among the value. Thus, if our assessment of the
largest contributors to, and detractors from, Fund returns. Our avoidance of the energy company's future is incorrect and the
sector detracted from Fund results on a relative basis as oil prices were high for most stock declines in price, the impact should
of the fiscal year. be tempered since we originally acquired
the stock at less than its estimated
Your Fund's long-term performance appears later in this report. intrinsic value.
FUND VS. INDEXES Holdings are considered for sale if:
Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does o A more attractive investment
not include applicable contingent deferred sales charges (CDSC) or front-end sales opportunity exists
charges, which would have reduced performance.
o The original thesis for buying the
Class A Shares -42.94% company changes due to a fundamental
Class B Shares -43.37 negative change in management strategy
Class C Shares -43.41
Class R Shares -43.11 o A fundamental negative change in the
Class Y Shares* -43.01 competitive environment occurs
MSCI World Index(triangle) (Broad Market/Style-Specific Index) -41.85
Lipper Global Multi-Cap Core Funds Index(triangle) (Peer Group Index) -38.39 MARKET CONDITIONS AND YOUR FUND
(triangle) Lipper Inc. Global equity markets declined sharply
during the fiscal year as the financial
* Share class incepted during the fiscal year. See page 7 for a detailed explanation crisis intensified and global economic
of Fund performance. conditions weakened.(1) The price
======================================================================================= volatility in the markets that began in
July 2007 accelerated during the fiscal
HOW WE INVEST year. Additionally, record-high crude oil
prices, falling home values and the weak
We view ourselves as business people o Sustainable competitive advantages U.S. dollar placed significant pressure on
buying businesses and we consider the the purchasing power of U.S. consumers.
purchase of a stock as an ownership o Strong long-term growth prospects Later in the fiscal year, consumer
interest in a business. We strive to confidence fell and market volatility
develop a proprietary view of a business o High barriers to entry increased even further as evidence of a
through in-depth, fundamental research global recession emerged.
that includes careful financial statement o Honest and capable management teams
analysis and meetings with company Our investment approach focuses on
management teams. We then seek to purchase Also central to the Trimark discipline individual businesses rather than market
businesses whose stock prices are below is our adherence to an investment horizon sectors. Therefore, your Fund shares
what we have calculated to be the true of three to five years. We use this little in common with sector and/or
value of the company based on its future long-term approach because we believe good regional weightings of its indexes.
cash flows, management performance and business strategies usually take that However, if we were to broadly categorize
business fundamentals. amount of time to implement and to produce businesses with which we had the most
strong earnings growth. We also use a success during the fiscal year, our
In conducting a comprehensive analysis concentrated portfolio approach, holdings in consumer staples were
of a company, we strive to identify U.S. constructing with a portfolio of about 35
or foreign stocks which have: to 50 stocks. We believe this allows each
investment opportunity to materially
affect the Fund's performance. While the
portfolio is concentrated, it is also
diversified by business idea/investment
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES TOP 10 EQUITY HOLDINGS*
By sector
Health Care 24.5% 1. Pharmaceuticals 12.8% 1. Nestle S.A. 8.6%
Consumer Discretionary 21.8 2. Packaged Foods & Meats 9.8 2. Roche Holding AG 5.8
Information Technology 17.6 3. Communications Equipment 8.9 3. Novartis AG 5.7
Consumer Staples 13.6 4. Health Care Equipment 8.8 4. Kinetic Concepts, Inc. 5.3
Financials 11.8 5. Diversified Banks 7.1 5. Willis Group Holdings Ltd. 4.7
Industrials 8.5 ========================================== 6. Reed Elsevier PLC 4.7
Money Market Funds 7. Microsoft Corp. 4.7
Plus Other Assets Less Liabilities 2.2 ========================================== 8. Nokia Oyj 4.5
========================================== Total Net Assets $26.0 million 9. Cisco Systems, Inc. 4.4
Total Number of Holdings* 33 10. Grupo Televisa S.A.-ADR 4.0
========================================== ==========================================
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
* Excluding money market fund holdings.
4 AIM TRIMARK FUND
among the best performers. We took advantage of market volatility DANA LOVE
during the fiscal year to add to a number Chartered Financial Analyst,
Fund holdings in all sectors declined of existing Fund holdings and to initiate [LOVE portfolio manager, is lead
during the year and our collective some new positions. We also sold several PHOTO] manager of AIM Trimark Fund.
holdings in consumer discretionary and positions during the year based on He began his investment career
financial detracted the most from overall valuation and because we identified more in 1993 and joined Invesco Trimark Invest-
return. In terms of region, our attractive alternatives. In general, our ments in 1999. From 1995 to 1997, Mr. Love
investments in European companies hurt buy and sell decisions were driven by our worked as an investment specialist at
Fund performance the most, while our Latin attempt to upgrade the growth potential of another investment firm. He earned a M.Sc.
American holdings helped performance the the portfolio, replacing less attractive in finance from the London Business School
most versus the MSCI World Index. The businesses with stocks that we believe are and a B.A. in sociology from the
Fund's small cash position helped relative more attractive. University of Waterloo.
performance in a falling market
environment. We believe the investment environment JEFF HYRICH
may remain difficult in the near term; a Chartered Financial Analyst,
Although the energy sector performed quick resolution to a crisis of this [HYRICH portfolio manager, is manager
strongly during most of the fiscal year, proportion seems unlikely. However, PHOTO] of AIM Trimark Fund. He began
we continued to avoid oil, gas and base history has shown us that equity markets his investment career in
metal company stocks. This detracted from stricken by profound fear and outright 1997 and joined Invesco Trimark
your Fund's return relative to the MSCI panic, in which emotions, rather than Investments in 1999. Mr. Hyrich earned a
World Index. We believe that it is fundamentals, set prices, have presented Bachelor of Commerce degree from the
extremely difficult to accurately forecast investors with great opportunities to buy University of Manitoba.
the short-term prices of commodities, such high-quality companies at cheap
as crude oil. As such, we have shied away valuations. It is in markets like this
from investing in businesses whose that having a long-term outlook and a
fortunes depend on the prices of perspective based on underlying business
commodities. values rather than market prices is most
important.
Generally, as the price of a commodity
rises, consumers look for substitutes or We remain optimistic about the
simply use less of it. At the same time, prospects for the companies in the Fund.
higher prices generally lead to an During the market turmoil, we found
increase in supply as producers of the abundant opportunities that meet our
commodity try to capitalize on the higher investment criteria of purchasing
prices. The combination of falling demand high-quality businesses, run by talented
and increasing supply often leads to lower people at prices less than we believe they
prices for the commodity. We believe this are worth. However, we have been extremely
pattern may be occurring in the current disciplined in our investment selection.
market cycle as oil prices declined
sharply during the third quarter of 2008. In a market that continues to focus on
short-term results, we believe that
The top contributor to Fund performance shareholders are wise to maintain a
during the fiscal year was U.S. retailer long-term investment horizon. We thank you
ROSS STORES. The company's share price for your investment in AIM Trimark Fund
increased due to stronger-than-expected and for sharing our long-term investment
sales, as consumers became more value perspective.
conscious and migrated to discount
retailers. We eliminated our position in (1) Lipper Inc.
Ross Stores during the year based on
valuation and our ability to find more The views and opinions expressed in
attractive risk/reward opportunities management's discussion of Fund
elsewhere. performance are those of Invesco Aim
Advisors, Inc. These views and opinions
The largest detractor from Fund are subject to change at any time based on
performance for the year was ANGLO IRISH factors such as market and economic
BANK. The company's share price declined conditions. These views and opinions may
significantly along with many other not be relied upon as investment advice or
financial companies as the global credit recommendations, or as an offer for a
crisis intensified and a liquidity crisis particular security. The information is
emerged. Given its stable and high-quality not a complete analysis of every aspect of
client base, and conservative practice of any market, country, industry, security or
lending against the cash flow of the the Fund. Statements of fact are from
business, Anglo Irish Bank is one of the sources considered reliable, but Invesco
most cost-efficient and profitable banks Aim Advisors, Inc. makes no representation
in the world. We are confident in Anglo or warranty as to their completeness or
Irish Bank's long-term growth potential, accuracy. Although historical performance
its asset quality and the ability of its is no guarantee of future results, these
management team. insights may help you understand our
investment management philosophy.
See important Fund and index disclosures
later in this report.
5 AIM TRIMARK FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee Performance of an index of funds reflects shown in the chart. The vertical axis, the
comparable future results. fund expenses and management fees; one that indicates the dollar value of an
performance of a market index does not. investment, is constructed with each
The data shown in the chart include Performance shown in the chart and segment representing a percent change in
reinvested distributions, applicable sales table(s) does not reflect deduction of the value of the investment. In this
charges and Fund expenses including taxes a shareholder would pay on Fund chart, each segment represents a doubling,
management fees. Results for Class B distributions or sale of Fund shares. or 100% change, in the value of the
shares are calculated as if a hypothetical investment. In other words, the space
shareholder had liquidated his entire This chart, which is a logarithmic between $5,000 and $10,000 is the same
investment in the Fund at the close of the chart, presents the fluctuations in the size as the space between $10,000 and
reporting period and paid the applicable value of the Fund and its indexes. We $20,000.
contingent deferred sales charges. Index believe that a logarithmic chart is more
results include reinvested dividends, but effective than other types of charts in
they do not reflect sales charges. illustrating changes in value during the
early years
6 AIM TRIMARK FUND
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- CLASS A, B AND C SHARES (OLDEST SHARE CLASSES WITH SALES CHARGES)
Index data from 10/31/03, Fund data from 11/4/03
AIM Trimark Lipper Global Multi-
AIM Trimark Fund- Fund- AIM Trimark Fund- MSCI World Cap Core Funds
Date Class A Shares Class B Shares Class C Shares Index(1) Index(1)
10/31/03 $10000 $10000
11/03 $ 9545 $10090 $10090 10151 10199
12/03 9809 10369 10369 10787 10724
1/04 9950 10509 10509 10960 10937
2/04 10054 10620 10620 11144 11134
3/04 9997 10560 10560 11070 11108
4/04 9931 10480 10480 10843 10884
5/04 9940 10480 10480 10934 10951
6/04 10158 10710 10710 11167 11155
7/04 9629 10140 10140 10802 10789
8/04 9544 10039 10039 10849 10833
9/04 9723 10229 10229 11055 11054
10/04 9808 10309 10309 11325 11364
11/04 10365 10889 10889 11920 11928
12/04 10809 11349 11349 12375 12404
1/05 10648 11179 11179 12097 12247
2/05 10808 11339 11339 12480 12631
3/05 10591 11108 11108 12239 12400
4/05 10374 10868 10868 11971 12178
5/05 10592 11088 11088 12184 12385
6/05 10677 11178 11178 12289 12533
7/05 11064 11578 11578 12718 12992
8/05 11017 11518 11518 12814 13054
9/05 11045 11537 11537 13147 13413
10/05 10809 11287 11287 12828 13134
11/05 11168 11647 11657 13255 13486
12/05 11540 12041 12040 13549 13809
1/06 12028 12527 12526 14154 14334
2/06 11960 12456 12465 14133 14396
3/06 12410 12922 12921 14444 14688
4/06 12861 13378 13377 14882 15056
5/06 12372 12861 12861 14374 14672
6/06 12459 12942 12942 14370 14643
7/06 12287 12750 12759 14459 14724
8/06 12736 13216 13225 14835 15058
9/06 13148 13642 13640 15012 15280
10/06 13770 14271 14269 15563 15743
11/06 14123 14636 14634 15944 16087
12/06 14577 15085 15094 16268 16357
1/07 15074 15591 15599 16460 16614
2/07 15074 15591 15588 16374 16460
3/07 15442 15960 15967 16674 16734
4/07 16089 16613 16620 17409 17297
5/07 16755 17287 17295 17897 17833
6/07 16406 16919 16927 17759 17742
7/07 15899 16381 16390 17366 17333
8/07 15820 16298 16295 17353 17357
9/07 16079 16562 16559 18178 18081
10/07 16388 16856 16865 18735 18694
11/07 15741 16182 16191 17970 17870
12/07 15492 15915 15924 17738 17697
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
1/08 14477 14868 14876 16382 16441
2/08 14309 14691 14687 16287 16324
3/08 14477 14844 14851 16131 16181
4/08 15011 15397 15392 16979 16922
5/08 15502 15881 15886 17238 17247
6/08 13797 14126 14132 15863 15902
7/08 13463 13773 13779 15476 15572
8/08 13374 13679 13673 15258 15457
9/08 11869 12138 12132 13443 13850
10/08 9356 9386 9547 10894 11516
====================================================================================================================================
========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/08, including maximum As of 9/30/08, the most recent calendar
applicable sales charges quarter-end, including maximum applicable
sales charges
CLASS A SHARES
Inception (11/4/03) -1.33% CLASS A SHARES
1 Year -46.08 Inception (11/4/03) 3.57%
1 Year -30.24
CLASS B SHARES
Inception (11/4/03) -1.26% CLASS B SHARES
1 Year -45.90 Inception (11/4/03) 3.68%
1 Year -30.00
CLASS C SHARES
Inception (11/4/03) -0.93% CLASS C SHARES
1 Year -43.91 Inception (11/4/03) 4.02%
1 Year -27.38
CLASS R SHARES
Inception -0.43% CLASS R SHARES
1 Year -43.11 Inception 4.54%
1 Year -26.35
CLASS Y SHARES ==========================================
Inception -0.23%
1 Year -43.01
==========================================
CLASS R SHARES' INCEPTION DATE IS APRIL REINVESTED DISTRIBUTIONS, CHANGES IN NET THAT MAY BE IMPOSED ON A TOTAL REDEMPTION
30, 2004. RETURNS SINCE THAT DATE ARE ASSET VALUE AND THE EFFECT OF THE MAXIMUM OF RETIREMENT PLAN ASSETS WITHIN THE FIRST
HISTORICAL RETURNS. ALL OTHER RETURNS ARE SALES CHARGE UNLESS OTHERWISE STATED. YEAR. CLASS Y SHARES DO NOT HAVE A
BLENDED RETURNS OF HISTORICAL CLASS R INVESTMENT RETURN AND PRINCIPAL VALUE WILL FRONT-END SALES CHARGE OR A CDSC;
SHARE PERFORMANCE AND RESTATED CLASS A FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR THEREFORE, PERFORMANCE IS AT NET ASSET
SHARE PERFORMANCE (FOR PERIODS PRIOR TO LOSS WHEN YOU SELL SHARES. VALUE.
THE INCEPTION DATE OF CLASS R SHARES) AT
NET ASSET VALUE, ADJUSTED TO REFLECT THE THE TOTAL ANNUAL FUND OPERATING EXPENSE THE PERFORMANCE OF THE FUND'S SHARE
HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS RATIO SET FORTH IN THE MOST RECENT FUND CLASSES WILL DIFFER PRIMARILY DUE TO
R SHARES. CLASS A SHARES' INCEPTION DATE PROSPECTUS AS OF THE DATE OF THIS REPORT DIFFERENT SALES CHARGE STRUCTURES AND
IS NOVEMBER 4, 2003. FOR CLASS A, CLASS B, CLASS C, CLASS R AND CLASS EXPENSES.
CLASS Y SHARES WAS 1.68%, 2.43%, 2.43%,
CLASS Y SHARES' INCEPTION DATE IS 1.93% AND 1.43%, RESPECTIVELY. THE EXPENSE HAD THE ADVISOR NOT WAIVED FEES AND/OR
OCTOBER 3, 2008; RETURNS SINCE THAT DATE RATIOS PRESENTED ABOVE MAY VARY FROM THE REIMBURSED EXPENSES IN THE PAST,
ARE ACTUAL RETURNS. ALL OTHER RETURNS ARE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS PERFORMANCE WOULD HAVE BEEN LOWER.
BLENDED RETURNS OF ACTUAL CLASS Y SHARE OF THIS REPORT THAT ARE BASED ON EXPENSES
PERFORMANCE AND RESTATED CLASS A SHARE INCURRED DURING THE PERIOD COVERED BY THIS A REDEMPTION FEE OF 2% WILL BE IMPOSED
PERFORMANCE (FOR PERIODS PRIOR TO THE REPORT. ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF
INCEPTION DATE OF CLASS Y SHARES) AT NET THE FUND WITHIN 31 DAYS OF PURCHASE.
ASSET VALUE. THE RESTATED CLASS A SHARE CLASS A SHARE PERFORMANCE REFLECTS THE EXCEPTIONS TO THE REDEMPTION FEE ARE
PERFORMANCE REFLECTS THE RULE 12B-1 FEES MAXIMUM 5.50% SALES CHARGE, AND CLASS B LISTED IN THE FUND'S PROSPECTUS.
APPLICABLE TO CLASS A SHARES AS WELL AS AND CLASS C SHARE PERFORMANCE REFLECTS THE
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS APPLICABLE CONTINGENT DEFERRED SALES
RECEIVED BY CLASS A SHARES. CLASS A CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE
SHARES' INCEPTION DATE IS NOVEMBER 4, CDSC ON CLASS B SHARES DECLINES FROM 5%
2003. BEGINNING AT THE TIME OF PURCHASE TO 0% AT
THE BEGINNING OF THE SEVENTH YEAR. THE
THE PERFORMANCE DATA QUOTED REPRESENT CDSC ON CLASS C SHARES IS 1% FOR THE FIRST
PAST PERFORMANCE AND CANNOT GUARANTEE YEAR AFTER PURCHASE. CLASS R SHARES DO NOT
COMPARABLE FUTURE RESULTS; CURRENT HAVE A FRONT-END SALES CHARGE; RETURNS
PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE SHOWN ARE AT NET ASSET VALUE AND DO NOT
VISIT INVESCOAIM.COM FOR THE MOST RECENT REFLECT A 0.75% CDSC
MONTH-END PERFORMANCE. PERFORMANCE FIGURES
REFLECT
7 AIM TRIMARK FUND
AIM TRIMARK FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES o Foreign securities have additional OTHER INFORMATION
risks, including exchange rate changes,
o Effective September 30, 2003, only political and economic upheaval, o The Chartered Financial Analyst--REGIS-
previously established qualified plans relative lack of information, TERED TRADEMARK-- (CFA--REGISTERED
are eligible to purchase Class B shares relatively low market liquidity, and TRADEMARK--) designation is a globally
of any AIM fund. the potential lack of strict financial recognized standard for measuring the
and accounting controls and standards. competence and integrity of investment
o Class R shares are available only to professionals.
certain retirement plans. Please see o The prices of securities held by the
the prospectus for more information. Fund may decline in response to market o The returns shown in management's
risks. discussion of Fund performance are
o Class Y shares are available only to based on net asset values calculated
certain investors. Please see the ABOUT INDEXES USED IN THIS REPORT for shareholder transactions. Generally
prospectus for more information. accepted accounting principles require
o The MSCI WORLD INDEX--SERVICE MARK-- is adjustments to be made to the net
PRINCIPAL RISKS OF INVESTING IN THE FUND a free float-adjusted market assets of the Fund at period end for
capitalization index that is designed financial reporting purposes, and as
o Since a large percentage of the Fund's to measure global developed market such, the net asset values for
assets may be invested in securities of equity performance. shareholder transactions and the
a limited number of companies, each returns based on those net asset values
investment has a greater effect on the o The LIPPER GLOBAL MULTI-CAP CORE FUNDS may differ from the net asset values
Fund's overall performance, and any INDEX is an equally weighted and returns reported in the Financial
change in the value of those securities representation of the largest funds in Highlights.
could significantly affect the value of the Lipper Global Multi-Cap Core Funds
your investment in the Fund. category. These funds typically have an o Industry classifications used in this
average price-to-cash flow ratio, report are generally according to the
o The values of convertible securities in price-to-book ratio, and three-year Global Industry Classification
which the Fund invests may be affected sales-per-share growth value, compared Standard, which was developed by and is
by market interest rates, the risk that to the S&P/ Citigroup BMI. the exclusive property and a service
the issuer may default on interest or mark of MSCI Inc. and Standard &
principal payments, and the value of o The Fund is not managed to track the Poor's.
the underlying common stock into which performance of any particular index,
these securities may be converted. including the indexes defined here, and
consequently, the performance of the
o Investing in developing countries can Fund may deviate significantly from the
add additional risk, such as high rates performance of the indexes.
of inflation or sharply devalued
currencies against the U.S. dollar. o A direct investment cannot be made in
Transaction costs are often higher, and an index. Unless otherwise indicated,
there may be delays in settlement index results include reinvested
procedures. dividends, and they do not reflect
sales charges. Performance of an index
o Prices of equity securities change in of funds reflects fund expenses;
response to many factors, including the performance of a market index does not.
historical and prospective earnings of
the issuer, the value of its assets,
general economic conditions, interest
rates, investor perceptions and market
liquidity.
======================================================================================= ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares ATKAX
======================================================================================= Class B Shares ATKBX
Class C Shares ATKCX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class R Shares ATKRX
Class Y Shares ATKYX
==========================================
8 AIM TRIMARK FUND
SCHEDULE OF INVESTMENTS(a)
October 31, 2008
<Table>
<Caption>
SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.82%
AUSTRIA-3.06%
Erste Group Bank AG 8,861 $ 239,817
- ---------------------------------------------------------------------------
Wienerberger AG 33,252 556,647
===========================================================================
796,464
===========================================================================
DENMARK-1.29%
Alk-Abello A.S. 4,185 335,775
===========================================================================
FINLAND-6.68%
Nokia Oyj 76,200 1,162,145
- ---------------------------------------------------------------------------
Nokian Renkaat Oyj 43,949 576,991
===========================================================================
1,739,136
===========================================================================
FRANCE-3.32%
Accor S.A. 22,200 864,860
===========================================================================
GERMANY-4.89%
Adidas AG 19,700 689,188
- ---------------------------------------------------------------------------
Bayerische Motoren Werke AG 22,600 584,939
===========================================================================
1,274,127
===========================================================================
IRELAND-5.30%
Anglo Irish Bank Corp. PLC 249,482 810,184
- ---------------------------------------------------------------------------
Ryanair Holdings PLC-ADR(b) 25,679 571,871
===========================================================================
1,382,055
===========================================================================
MEXICO-4.71%
Cemex S.A.B. de C.V.-ADR(b) 1 5
- ---------------------------------------------------------------------------
Grupo Modelo, S.A. de C.V.-Series C 64,220 196,646
- ---------------------------------------------------------------------------
Grupo Televisa S.A.-ADR 58,300 1,029,578
===========================================================================
1,226,229
===========================================================================
SWITZERLAND-24.41%
Aryzta AG(b) 8,171 291,550
- ---------------------------------------------------------------------------
Nestle S.A. 57,766 2,250,962
- ---------------------------------------------------------------------------
Novartis AG 29,417 1,487,686
- ---------------------------------------------------------------------------
Roche Holding AG 9,900 1,514,863
- ---------------------------------------------------------------------------
Schindler Holding AG 3,247 150,095
- ---------------------------------------------------------------------------
Schindler Holding AG-Participation Ctfs. 15,200 663,824
===========================================================================
6,358,980
===========================================================================
UNITED KINGDOM-15.28%
Reed Elsevier PLC 139,979 1,227,291
- ---------------------------------------------------------------------------
Smiths Group PLC -- 4
- ---------------------------------------------------------------------------
Tesco PLC 148,820 812,571
- ---------------------------------------------------------------------------
Willis Group Holdings Ltd. 46,858 1,229,554
- ---------------------------------------------------------------------------
WPP Group PLC 118,000 711,872
===========================================================================
3,981,292
===========================================================================
UNITED STATES-28.88%
3M Co. 4,300 276,490
- ---------------------------------------------------------------------------
Altera Corp. 34,800 603,780
- ---------------------------------------------------------------------------
Cisco Systems, Inc.(b) 65,100 1,156,827
- ---------------------------------------------------------------------------
International Rectifier Corp.(b) 27,979 431,996
- ---------------------------------------------------------------------------
Kinetic Concepts, Inc.(b) 56,467 1,367,066
- ---------------------------------------------------------------------------
Medtronic, Inc. 22,800 919,524
- ---------------------------------------------------------------------------
Microsoft Corp. 54,700 1,221,451
- ---------------------------------------------------------------------------
WellPoint Inc.(b) 19,400 754,078
- ---------------------------------------------------------------------------
Wells Fargo & Co. 23,229 790,947
===========================================================================
7,522,159
===========================================================================
TOTAL INVESTMENTS-97.82% (Cost $34,959,934) 25,481,077
===========================================================================
OTHER ASSETS LESS LIABILITIES-2.18% 568,493
===========================================================================
NET ASSETS-100.00% $26,049,570
___________________________________________________________________________
===========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Ctfs. - Certificates
</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.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM TRIMARK FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<Table>
ASSETS:
Investments, at value (Cost $34,959,934) $25,481,077
- ------------------------------------------------------
Foreign currencies, at value (Cost
$1,021,157) 903,497
- ------------------------------------------------------
Receivables for:
Investments sold 417,629
- ------------------------------------------------------
Fund shares sold 31,959
- ------------------------------------------------------
Dividends 71,452
- ------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 8,640
- ------------------------------------------------------
Other assets 32,541
======================================================
Total assets 26,946,795
______________________________________________________
======================================================
LIABILITIES:
Payables for:
Investments purchased 43,784
- ------------------------------------------------------
Fund shares reacquired 17,812
- ------------------------------------------------------
Amount due custodian 720,781
- ------------------------------------------------------
Accrued fees to affiliates 28,464
- ------------------------------------------------------
Accrued other operating expenses 75,240
- ------------------------------------------------------
Trustee deferred compensation and
retirement plans 11,144
======================================================
Total liabilities 897,225
======================================================
Net assets applicable to shares
outstanding $26,049,570
______________________________________________________
======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $39,209,675
- ------------------------------------------------------
Undistributed net investment income 329,964
- ------------------------------------------------------
Undistributed net realized gain (loss) (3,883,091)
- ------------------------------------------------------
Unrealized appreciation (depreciation) (9,606,978)
======================================================
$26,049,570
______________________________________________________
======================================================
NET ASSETS:
Class A $16,511,763
______________________________________________________
======================================================
Class B $ 4,117,609
______________________________________________________
======================================================
Class C $ 4,743,751
______________________________________________________
======================================================
Class R $ 473,804
______________________________________________________
======================================================
Class Y $ 196,883
______________________________________________________
======================================================
Institutional Class $ 5,760
______________________________________________________
======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 1,971,169
______________________________________________________
======================================================
Class B 508,423
______________________________________________________
======================================================
Class C 585,374
______________________________________________________
======================================================
Class R 57,065
______________________________________________________
======================================================
Class Y 23,506
______________________________________________________
======================================================
Institutional Class 676.6
______________________________________________________
======================================================
Class A:
Net asset value per share $ 8.38
- ------------------------------------------------------
Maximum offering price per share
(Net asset value of $8.38 divided
by 94.50%) $ 8.87
______________________________________________________
======================================================
Class B:
Net asset value and offering price per
share $ 8.10
______________________________________________________
======================================================
Class C:
Net asset value and offering price per
share $ 8.10
______________________________________________________
======================================================
Class R:
Net asset value and offering price per
share $ 8.30
______________________________________________________
======================================================
Class Y:
Net asset value and offering price per
share $ 8.38
______________________________________________________
======================================================
Institutional Class:
Net asset value and offering price per
share $ 8.51
______________________________________________________
======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM TRIMARK FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $107,272) $ 1,615,659
- ------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds 19,062
================================================================================================
Total investment income 1,634,721
================================================================================================
EXPENSES:
Advisory fees 421,097
- ------------------------------------------------------------------------------------------------
Administrative services fees 50,000
- ------------------------------------------------------------------------------------------------
Custodian fees 39,019
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 84,507
- ------------------------------------------------------------------------------------------------
Class B 77,951
- ------------------------------------------------------------------------------------------------
Class C 104,082
- ------------------------------------------------------------------------------------------------
Class R 3,043
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C, R and Y 149,194
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 9
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 17,058
- ------------------------------------------------------------------------------------------------
Registration and filing fees 58,112
- ------------------------------------------------------------------------------------------------
Other 99,000
================================================================================================
Total expenses 1,103,072
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (4,212)
================================================================================================
Net expenses 1,098,860
================================================================================================
Net investment income 535,861
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities (3,302,955)
- ------------------------------------------------------------------------------------------------
Foreign currencies (189,606)
================================================================================================
(3,492,561)
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (21,356,703)
- ------------------------------------------------------------------------------------------------
Foreign currencies (163,959)
================================================================================================
(21,520,662)
================================================================================================
Net realized and unrealized gain (loss) (25,013,223)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(24,477,362)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM TRIMARK FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 535,861 $ 1,188,621
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (3,492,561) 5,230,672
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (21,520,662) 3,765,180
==========================================================================================================
Net increase (decrease) in net assets resulting from operations (24,477,362) 10,184,473
==========================================================================================================
Distributions to shareholders from net investment income:
Class A (826,569) --
- ----------------------------------------------------------------------------------------------------------
Class B (143,155) --
- ----------------------------------------------------------------------------------------------------------
Class C (194,314) --
- ----------------------------------------------------------------------------------------------------------
Class R (9,997) --
- ----------------------------------------------------------------------------------------------------------
Institutional Class (226) --
==========================================================================================================
Total distributions from net investment income (1,174,261) --
==========================================================================================================
Distributions to shareholders from net realized gains:
Class A (3,579,676) (1,351,670)
- ----------------------------------------------------------------------------------------------------------
Class B (881,905) (309,727)
- ----------------------------------------------------------------------------------------------------------
Class C (1,197,070) (277,417)
- ----------------------------------------------------------------------------------------------------------
Class R (48,071) (8,974)
- ----------------------------------------------------------------------------------------------------------
Institutional Class (813) (549)
==========================================================================================================
Total distributions from net realized gains (5,707,535) (1,948,337)
==========================================================================================================
Share transactions-net:
Class A (17,282,839) 16,686,274
- ----------------------------------------------------------------------------------------------------------
Class B (1,746,682) 2,005,802
- ----------------------------------------------------------------------------------------------------------
Class C (1,487,997) 4,518,745
- ----------------------------------------------------------------------------------------------------------
Class R 279,328 302,764
- ----------------------------------------------------------------------------------------------------------
Class Y 240,396 --
- ----------------------------------------------------------------------------------------------------------
Institutional Class 1,039 (6,149)
==========================================================================================================
Net increase (decrease) in net assets resulting from share
transactions (19,996,755) 23,507,436
==========================================================================================================
Net increase (decrease) in net assets (51,355,913) 31,743,572
__________________________________________________________________________________________________________
==========================================================================================================
NET ASSETS:
Beginning of year 77,405,483 45,661,911
==========================================================================================================
End of year (includes undistributed net investment income of $329,964
and $1,158,580, respectively) $ 26,049,570 $77,405,483
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Fund (the "Fund") is a series portfolio of AIM Investment Funds (the
"Trust"). The Trust is organized as a Delaware statutory trust and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of nine separate series
portfolios, each authorized to issue an unlimited number of shares of beneficial
interest. The 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
12 AIM TRIMARK FUND
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.
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
13 AIM TRIMARK FUND
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. 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.
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.
14 AIM TRIMARK 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 0.80%
- -------------------------------------------------------------------
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).
Previously, under the terms of a master sub-advisory agreement between the
Advisor and Invesco Trimark Ltd. ("Invesco Trimark"), the Advisor paid Invesco
Trimark 40% of the amount of the Advisor's compensation on the sub-advised
assets. This agreement terminated on May 1, 2008.
The Advisor has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C, Class R,
Class Y and Institutional Class shares to 2.15%, 2.90%, 2.90%, 2.40%, 1.90% and
1.90% of average daily net assets, respectively, through at least June 30, 2009.
In determining the Advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
net annual operating expenses to exceed the numbers reflected above: (i)
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary
items; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with Invesco Ltd. ("Invesco")
described more fully below, the expense offset arrangements from which the Fund
may benefit are in the form of credits that the Fund receives from banks where
the Fund or its transfer agent has deposit accounts in which it holds uninvested
cash. These credits are used to pay certain expenses incurred by the Fund. The
Advisor did not waive fees and/or reimburse expenses during the period under
this expense limitation.
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash in such affiliated money market
funds.
For the year ended October 31, 2008, the Advisor waived advisory fees of $631.
At the request of the Trustees of the Trust, 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
October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $601.
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 October 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 October 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 October 31, 2008, expenses incurred under the Plans
are shown in the Statement of Operations as distribution fees.
15 AIM TRIMARK FUND
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 October 31, 2008, IADI
advised the Fund that IADI retained $9,235 in front-end sales commissions from
the sale of Class A shares and $2,460, $13,952, $2,869 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--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended October 31, 2008, the
Fund received credits from this arrangement, which resulted in the reduction of
the Fund's total expenses of $2,980.
NOTE 4--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 October 31, 2008, the Fund paid legal fees of $2,883 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--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 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
OCTOBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- -------------------------------------------------------------------------------------------------------
Ordinary income $1,468,711 $ --
- -------------------------------------------------------------------------------------------------------
Long-term capital gain 5,413,085 1,948,337
=======================================================================================================
Total distributions $6,881,796 $1,948,337
_______________________________________________________________________________________________________
=======================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 344,484
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (10,454,270)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (128,121)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (14,521)
- ------------------------------------------------------------------------------------------------
Capital loss carryforward (2,907,677)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 39,209,675
================================================================================================
Total net assets $ 26,049,570
________________________________________________________________________________________________
================================================================================================
</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.
16 AIM TRIMARK FUND
The Fund has a capital loss carryforward as of October 31, 2008 which expires
as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------------------------
October 31, 2016 $2,907,677
_______________________________________________________________________________________________
===============================================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2008 was $21,299,203 and $46,982,070,
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 $ 245,578
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (10,699,848)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(10,454,270)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $35,935,347.
</Table>
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions and proxy costs, on October 31, 2008, undistributed net investment
income was decreased by $190,216, undistributed net realized gain (loss) was
increased by $195,066 and shares of beneficial interest decreased by $4,850.
This reclassification had no effect on the net assets of the Fund.
NOTE 9--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2008(a) 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 587,029 $ 7,621,006 2,722,152 $ 42,815,474
- ------------------------------------------------------------------------------------------------------------------------
Class B 91,754 1,187,518 295,420 4,563,966
- ------------------------------------------------------------------------------------------------------------------------
Class C 259,196 3,648,986 430,854 6,643,007
- ------------------------------------------------------------------------------------------------------------------------
Class R 22,116 268,136 66,448 1,051,503
- ------------------------------------------------------------------------------------------------------------------------
Class Y(b) 23,506 240,396 -- --
========================================================================================================================
Issued as reinvestment of dividends:
Class A 302,684 4,177,042 82,867 1,204,887
- ------------------------------------------------------------------------------------------------------------------------
Class B 70,269 943,717 19,727 280,311
- ------------------------------------------------------------------------------------------------------------------------
Class C 97,865 1,315,307 17,735 252,191
- ------------------------------------------------------------------------------------------------------------------------
Class R 4,235 58,068 621 8,975
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 74 1,039 38 549
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 80,526 992,455 56,435 886,906
- ------------------------------------------------------------------------------------------------------------------------
Class B (83,044) (992,455) (57,922) (886,906)
========================================================================================================================
Reacquired:(c)
Class A(b) (2,277,672) (30,073,342) (1,756,051) (28,220,993)
- ------------------------------------------------------------------------------------------------------------------------
Class B (235,916) (2,885,462) (127,938) (1,996,569)
- ------------------------------------------------------------------------------------------------------------------------
Class C (534,248) (6,452,290) (155,924) (2,376,453)
- ------------------------------------------------------------------------------------------------------------------------
Class R (3,992) (46,876) (47,736) (757,714)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- (399) (6,698)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in share activity (1,595,618) $(19,996,755) 1,546,327 $ 23,462,436
________________________________________________________________________________________________________________________
========================================================================================================================
</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
17 AIM TRIMARK FUND
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 into Class Y shares of the
Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
- -------------------------------------------------------------------------------------------------
Class Y 22,397 $ 229,344
- -------------------------------------------------------------------------------------------------
Class A (22,397) (229,344)
_________________________________________________________________________________________________
=================================================================================================
</Table>
(c) Net of redemption fees of $6,357 and $12,179 which were allocated among the
classes based on relative net assets of each class for the years ended
October 31, 2008 and 2007, respectively.
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
NET GAINS
NET ASSET NET (LOSSES) ON DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT SECURITIES (BOTH TOTAL FROM FROM NET FROM NET NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD(a)
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 $16.47 $ 0.17(d) $(6.60) $(6.43) $(0.31) $(1.35) $(1.66) $ 8.38
Year ended 10/31/07 14.38 0.30(d) 2.36 2.66 -- (0.57) (0.57) 16.47
Year ended 10/31/06 11.44 (0.04)(d) 3.14 3.10 -- (0.16) (0.16) 14.38
Year ended 10/31/05 10.38 (0.04) 1.10 1.06 -- -- -- 11.44
Year ended
10/31/04(f) 10.00 (0.05)(d) 0.43 0.38 -- -- -- 10.38
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 15.99 0.07(d) (6.39) (6.32) (0.22) (1.35) (1.57) 8.10
Year ended 10/31/07 14.08 0.18(d) 2.30 2.48 -- (0.57) (0.57) 15.99
Year ended 10/31/06 11.29 (0.13)(d) 3.08 2.95 -- (0.16) (0.16) 14.08
Year ended 10/31/05 10.31 (0.12) 1.10 0.98 -- -- -- 11.29
Year ended
10/31/04(f) 10.00 (0.12)(d) 0.43 0.31 -- -- -- 10.31
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 16.00 0.07(d) (6.40) (6.33) (0.22) (1.35) (1.57) 8.10
Year ended 10/31/07 14.09 0.18(d) 2.30 2.48 -- (0.57) (0.57) 16.00
Year ended 10/31/06 11.29 (0.13)(d) 3.09 2.96 -- (0.16) (0.16) 14.09
Year ended 10/31/05 10.31 (0.12) 1.10 0.98 -- -- -- 11.29
Year ended
10/31/04(f) 10.00 (0.12)(d) 0.43 0.31 -- -- -- 10.31
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 10/31/08 16.34 0.13(d) (6.54) (6.41) (0.28) (1.35) (1.63) 8.30
Year ended 10/31/07 14.31 0.26(d) 2.34 2.60 -- (0.57) (0.57) 16.34
Year ended 10/31/06 11.41 (0.07)(d) 3.13 3.06 -- (0.16) (0.16) 14.31
Year ended 10/31/05 10.37 (0.03) 1.07 1.04 -- -- -- 11.41
Year ended
10/31/04(f) 10.51 (0.04)(d) (0.10) (0.14) -- -- -- 10.37
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(f) 10.24 0.01(d) (1.87) (1.86) -- -- -- 8.38
- ----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 16.68 0.22(d) (6.67) (6.45) (0.37) (1.35) (1.72) 8.51
Year ended 10/31/07 14.51 0.36(d) 2.38 2.74 -- (0.57) (0.57) 16.68
Year ended 10/31/06 11.50 0.01(d) 3.16 3.17 -- (0.16) (0.16) 14.51
Year ended 10/31/05 10.40 (0.02) 1.12 1.10 -- -- -- 11.50
Year ended
10/31/04(f) 10.51 (0.01)(d) (0.10) (0.11) -- -- -- 10.40
__________________________________________________________________________________________________________________________________
==================================================================================================================================
<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(b) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(c)
- ---------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 (43.01)% $16,512 1.84%(e) 1.84%(e) 1.27%(e) 41%
Year ended 10/31/07 19.02 53,990 1.66 1.70 1.90 59
Year ended 10/31/06 27.40 31,258 2.03 2.08 (0.31) 59
Year ended 10/31/05 10.21 18,368 2.21 2.53 (0.46) 44
Year ended
10/31/04(f) 3.80 9,757 2.25(g) 3.84(g) (0.53)(g) 38
- ---------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 (43.44) 4,118 2.59(e) 2.59(e) 0.52(e) 41
Year ended 10/31/07 18.11 10,640 2.41 2.45 1.15 59
Year ended 10/31/06 26.42 7,549 2.78 2.83 (1.06) 59
Year ended 10/31/05 9.51 6,315 2.90 3.22 (1.15) 44
Year ended
10/31/04(f) 3.10 4,358 2.90(g) 4.49(g) (1.18)(g) 38
- ---------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 (43.48) 4,744 2.59(e) 2.59(e) 0.52(e) 41
Year ended 10/31/07 18.10 12,199 2.41 2.45 1.15 59
Year ended 10/31/06 26.51 6,621 2.78 2.83 (1.06) 59
Year ended 10/31/05 9.51 5,671 2.90 3.22 (1.15) 44
Year ended
10/31/04(f) 3.10 4,040 2.90(g) 4.49(g) (1.18)(g) 38
- ---------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 10/31/08 (43.17) 474 2.09(e) 2.09(e) 1.02(e) 41
Year ended 10/31/07 18.68 567 1.91 1.95 1.65 59
Year ended 10/31/06 27.12 220 2.28 2.33 (0.56) 59
Year ended 10/31/05 10.03 60 2.40 2.72 (0.65) 44
Year ended
10/31/04(f) (1.33) 10 2.40(g) 3.99(g) (0.68)(g) 38
- ---------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended
10/31/08(f) (18.16) 197 1.78(e)(g) 1.78(e)(g) 1.32(e)(g) 41
- ---------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 (42.68) 6 1.40(e) 1.40(e) 1.70(e) 41
Year ended 10/31/07 19.41 10 1.27 1.31 2.29 59
Year ended 10/31/06 27.87 14 1.64 1.69 0.08 59
Year ended 10/31/05 10.58 11 1.90 2.00 (0.15) 44
Year ended
10/31/04(f) (1.05) 10 1.90(g) 3.42(g) (0.18)(g) 38
_______________________________________________________________________________________________________________
===============================================================================================================
</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 $33,803,
$7,795, $10,408, $609, $196 and $9 for Class A, Class B, Class C, Class R,
Class Y and Institutional Class shares, respectively.
(f) Class A, Class B, Class C and Class R shares commenced on November 4, 2003.
Class Y and Institutional Class shares commenced on October 3, 2008 and
April 30, 2004, respectively.
(g) Annualized.
18 AIM TRIMARK FUND
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities
Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of
Right to Hearing to Invesco Aim and IADI (Order No. 05-1318). The WVASC makes
findings of fact that Invesco Aim and IADI entered into certain arrangements
permitting market timing of the AIM Funds and failed to disclose these
arrangements in the prospectuses for such Funds, and conclusions of law to the
effect that Invesco Aim and IADI violated the West Virginia securities laws. The
WVASC orders Invesco Aim and IADI to cease any further violations and seeks to
impose monetary sanctions, including restitution to affected investors,
disgorgement of fees, reimbursement of investigatory, administrative and legal
costs and an "administrative assessment," to be determined by the Commissioner.
Initial research indicates that these damages could be limited or capped by
statute. By agreement with the Commissioner of Securities, Invesco Aim's time to
respond to that Order has been indefinitely suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals,
depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws 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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various Invesco Aim- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund
Derivative Complaint purportedly brought on behalf of the AIM Funds and fund
registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA
purportedly brought on behalf of participants in the Invesco 401(k) plan. Based
on orders issued by the MDL Court, all claims asserted against the AIM Funds
that have been transferred to the MDL Court have been dismissed, although
certain Funds remain nominal defendants in the Consolidated Amended Fund
Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco
defendants' motion to dismiss the Amended Class Action Complaint for Violations
of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and
remanded this lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing
full cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco Aim and the Fund are unable to
estimate the impact, if any, that the outcome of the Pending Litigation and
Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund.
19 AIM TRIMARK FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Trimark Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Trimark Fund (one of the funds
constituting AIM Investment Funds, hereafter referred to as the "Fund") at
October 31, 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 October 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2008
Houston, Texas
20 AIM TRIMARK 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 May 1, 2008, through
October 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 October 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 October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $622.90 $ 7.95 $1,015.33 $ 9.88 1.95%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 620.00 10.99 1,011.56 13.65 2.70
- ---------------------------------------------------------------------------------------------------
C 1,000.00 620.00 10.99 1,011.56 13.65 2.70
- ---------------------------------------------------------------------------------------------------
R 1,000.00 621.50 8.97 1,014.08 11.14 2.20
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 818.40 1.28 1,016.19 9.02 1.78
- ---------------------------------------------------------------------------------------------------
</Table>
1 The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 31, 2008 (as of close of
business October 3, 2008, through October 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 29 (as of close of business October 3, 2008, through October 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 as 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 the
Class Y shares of the Fund and other funds because such data is based on a
full six month period.
21 AIM TRIMARK FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of regarding the AIM Funds prepared by an for the Fund and the other AIM Funds are
Invesco AIM Investment Funds is required independent company, Lipper, Inc. the result of years of review and
under the Investment Company Act of 1940 (Lipper), under the direction and negotiation between the Trustees and
to approve annually the renewal of the AIM supervision of the independent Senior Invesco Aim, that the Trustees may focus
Trimark Fund's (the Fund) investment Officer who also prepares a separate to a greater extent on certain aspects of
advisory agreement with Invesco Aim analysis of this information for the these arrangements in some years than in
Advisors, Inc. (Invesco Aim). During Trustees. Each Sub-Committee then makes others, and that the Trustees'
contract renewal meetings held on June recommendations to the Investments deliberations and conclusions in a
18-19, 2008, the Board as a whole and the Committee regarding the performance, fees particular year may be based in part on
disinterested or "independent" Trustees, and expenses of their assigned funds. The their deliberations and conclusions of
voting separately, approved the Investments Committee considers each these same arrangements throughout the
continuance of the Fund's investment Sub-Committee's recommendations and makes year and in prior years.
advisory agreement for another year, its own recommendations regarding the
effective July 1, 2008. In doing so, the performance, fees and expenses of the AIM FACTORS AND CONCLUSIONS AND SUMMARY OF
Board determined that the Fund's Funds to the full Board. The Investments INDEPENDENT WRITTEN FEE EVALUATION
investment advisory agreement is in the Committee also considers each
best interests of the Fund and its SubCommittee's recommendations in making The discussion below serves as a summary
shareholders and that the compensation to its annual recommendation to the Board of the Senior Officer's independent
Invesco Aim under the Fund's investment whether to approve the continuance of each written evaluation with respect to the
advisory agreement is fair and reasonable. AIM Fund's investment advisory agreement Fund's investment advisory agreement as
and sub-advisory agreements for another well as a discussion of the material
The independent Trustees met separately year. factors and related conclusions that
during their evaluation of the Fund's formed the basis for the Board's approval
investment advisory agreement with The independent Trustees are assisted of the Fund's investment advisory
independent legal counsel from whom they in their annual evaluation of the Fund's agreement and sub-advisory agreements.
received independent legal advice, and the investment advisory agreement by the Unless otherwise stated, information set
independent Trustees also received independent Senior Officer. One forth below is as of June 19, 2008 and
assistance during their deliberations from responsibility of the Senior Officer is to does not reflect any changes that may have
the independent Senior Officer, a manage the process by which the AIM Funds' occurred since that date, including but
full-time officer of the AIM Funds who proposed management fees are negotiated not limited to changes to the Fund's
reports directly to the independent during the annual contract renewal process performance, advisory fees, expense
Trustees. to ensure that they are negotiated in a limitations and/or fee waivers.
manner that is at arms' length and
THE BOARD'S FUND EVALUATION PROCESS reasonable. Accordingly, the Senior I. Investment Advisory Agreement
Officer must either supervise a
The Board's Investments Committee has competitive bidding process or prepare an A. Nature, Extent and Quality of
established three Sub-Committees that are independent written evaluation. The Senior Services Provided by Invesco Aim
responsible for overseeing the management Officer has recommended that an
of a number of the series portfolios of independent written evaluation be provided The Board reviewed the advisory services
the AIM Funds. This Sub-Committee and, at the direction of the Board, has provided to the Fund by Invesco Aim under
structure permits the Trustees to focus on prepared an independent written the Fund's investment advisory agreement,
the performance of the AIM Funds that have evaluation. the performance of Invesco Aim in
been assigned to them. The Sub-Committees providing these services, and the
meet throughout the year to review the During the annual contract renewal credentials and experience of the officers
performance of their assigned funds, and process, the Board considered the factors and employees of Invesco Aim who provide
the Sub-Committees review monthly and discussed below under the heading "Factors these services. The Board's review of the
quarterly comparative performance and Conclusions and Summary of Independent qualifications of Invesco Aim to provide
information and periodic asset flow data Written Fee Evaluation" in evaluating the these services included the Board's
for their assigned funds. These materials fairness and reasonableness of the Fund's consideration of Invesco Aim's portfolio
are prepared under the direction and investment advisory agreement and and product review process, various back
supervision of the independent Senior sub-advisory agreements at the contract office support functions provided by
Officer. Over the course of each year, the renewal meetings and at their meetings Invesco Aim and its affiliates, and
Sub-Committees meet with portfolio throughout the year as part of their Invesco Aim's equity and fixed income
managers for their assigned funds and ongoing oversight of the Fund. The Fund's trading operations. The Board concluded
other members of management and review investment advisory agreement and that the nature, extent and quality of the
with these individuals the performance, sub-advisory agreements were considered advisory services provided to the Fund by
investment objective(s), policies, separately, although the Board also Invesco Aim were appropriate and that
strategies and limitations of these funds. considered the common interests of all of Invesco Aim currently is providing
the AIM Funds in their deliberations. The satisfactory advisory services in
In addition to their meetings Board considered all of the information accordance with the terms of the Fund's
throughout the year, the Sub-Committees provided to them and did not identify any investment advisory agreement. In
meet at designated contract renewal particular factor that was controlling. addition, based on their ongoing meetings
meetings each year to conduct an in-depth Each Trustee may have evaluated the throughout the year with the Fund's
review of the performance, fees and information provided differently from one portfolio manager or managers, the Board
expenses of their assigned funds. During another and attributed different weight to concluded that these individuals are
the contract renewal process, the Trustees the various factors. The Trustees competent and able to continue to carry
receive comparative performance and fee recognized that the advisory arrangements out their responsibilities under the
data and resulting advisory fees Fund's investment advisory agreement.
continued
22 AIM TRIMARK FUND
In determining whether to continue the only considered Fund performance through in which the breakpoint has been
Fund's investment advisory agreement, the the most recent calendar year, the Board structured, the Fund is not benefiting
Board considered the prior relationship also reviewed more recent Fund performance from the breakpoint. Based on this
between Invesco Aim and the Fund, as well and this review did not change their information, the Board concluded that the
as the Board's knowledge of Invesco Aim's conclusions. Fund's advisory fees would reflect
operations, and concluded that it was economies of scale at higher asset levels.
beneficial to maintain the current C. Advisory Fees and Fee Waivers The Board also noted that the Fund shares
relationship, in part, because of such directly in economies of scale through
knowledge. The Board also considered the The Board compared the Fund's contractual lower fees charged by third party service
steps that Invesco Aim and its affiliates advisory fee rate to the contractual providers based on the combined size of
have taken over the last several years to advisory fee rates of funds in the Fund's all of the AIM Funds and affiliates.
improve the quality and efficiency of the Lipper expense group that are not managed
services they provide to the AIM Funds in by Invesco Aim, at a common asset level E. Profitability and Financial
the areas of investment performance, and as of the end of the past calendar Resources of Invesco Aim
product line diversification, year. The Board noted that the Fund's
distribution, fund operations, shareholder contractual advisory fee rate was below The Board reviewed information from
services and compliance. The Board the median contractual advisory fee rate Invesco Aim concerning the costs of the
concluded that the quality and efficiency of funds in its expense group. The Board advisory and other services that Invesco
of the services Invesco Aim and its also reviewed the methodology used by Aim and its affiliates provide to the Fund
affiliates provide to the AIM Funds in Lipper in determining contractual fee and the profitability of Invesco Aim and
each of these areas have generally rates. its affiliates in providing these
improved, and support the Board's approval services. The Board also reviewed
of the continuance of the Fund's The Board also compared the Fund's information concerning the financial
investment advisory agreement. effective fee rate (the advisory fee after condition of Invesco Aim and its
any advisory fee waivers and before any affiliates. The Board also reviewed with
B. Fund Performance expense limitations/waivers) to the Invesco Aim the methodology used to
advisory fee rates of other clients of prepare the profitability information. The
Because there were only four funds Invesco Aim and its affiliates with Board considered the overall profitability
identified by Invesco Aim in the Fund's investment strategies comparable to those of Invesco Aim, as well as the
performance group for inclusion in the of the Fund, including one mutual fund profitability of Invesco Aim in connection
Lipper reports, the Board compared the advised by Invesco Aim. The Board noted with managing the Fund. The Board noted
Fund's performance during the past one and that the Fund's rate was above the rate that Invesco Aim continues to operate at a
three calendar years to the performance of for the other mutual fund. net profit, although increased expenses in
funds in the Fund's performance universe recent years have reduced the
identified by Lipper, and against the The Board noted that Invesco Aim has profitability of Invesco Aim and its
performance of all funds in the Lipper contractually agreed to waive fees and/or affiliates. The Board concluded that the
Global Multi-Cap Core Funds Index. The limit expenses of the Fund through at Fund's fees were fair and reasonable, and
Board also reviewed the criteria used by least June 30, 2009 in an amount necessary that the level of profits realized by
Invesco Aim to identify the funds in the to limit total annual operating expenses Invesco Aim and its affiliates from
Fund's performance group for inclusion in to a specified percentage of average daily providing services to the Fund was not
the Lipper reports and the methodology net assets for each class of the Fund. The excessive in light of the nature, quality
used by Lipper to identify the performance Board considered the contractual nature of and extent of the services provided. The
universe. The Board noted that the Fund's this fee waiver and noted that it remains Board considered whether Invesco Aim is
performance was in the fourth quintile of in effect until at least June 30, 2009. financially sound and has the resources
its Lipper performance universe for the The Board also considered the effect this necessary to perform its obligations under
one year period and the second quintile fee waiver would have on the Fund's total the Fund's investment advisory agreement,
for the three year period (the first estimated expenses. and concluded that Invesco Aim has the
quintile being the best performing funds financial resources necessary to fulfill
and the fifth quintile being the worst After taking account of the Fund's these obligations.
performing funds). The Board noted that contractual advisory fee rate, as well as
the Fund's performance was below the the comparative advisory fee information F. Independent Written Evaluation of
performance of the Index for the one year and the expense limitation discussed the Fund's Senior Officer
period and above the Index for the three above, the Board concluded that the Fund's
year period. The Board noted that Invesco advisory fees were fair and reasonable. The Board noted that, at their direction,
Aim acknowledges the Fund's the Senior Officer of the Fund, who is
underperformance because of shorter term D. Economies of Scale and Breakpoints independent of Invesco Aim and Invesco
performance results and continues to Aim's affiliates, had prepared an
monitor the Fund. The Board also The Board considered the extent to which independent written evaluation to assist
considered the steps Invesco Aim has taken there are economies of scale in Invesco the Board in determining the
over the last several years to improve the Aim's provision of advisory services to reasonableness of the proposed management
quality and efficiency of the services the Fund. The Board also considered fees of the AIM Funds, including the Fund.
that Invesco Aim provides to the AIM whether the Fund benefits from such The Board noted that they had relied upon
Funds. The Board concluded that Invesco economies of scale through contractual the Senior Officer's written evaluation
Aim continues to be responsive to the breakpoints in the Fund's advisory fee instead of a competitive bidding process.
Board's focus on fund performance. schedule or through advisory fee waivers In determining whether to continue the
Although the independent written or expense limitations. The Board noted Fund's investment advisory agreement, the
evaluation of the Fund's Senior Officer that the Fund's contractual advisory fee Board considered the Senior Officer's
schedule includes seven breakpoints, but written evaluation.
that, due to the Fund's asset level at the
end of the past calendar year and the way
continued
23 AIM TRIMARK FUND
G. Collateral Benefits to Invesco Aim market funds with respect to the Fund's one and three calendar years to the
and its Affiliates investment of uninvested cash, but not performance of funds in the Fund's
cash collateral. The Board considered the performance universe identified by Lipper,
The Board considered various other contractual nature of this fee waiver and and against the performance of all funds
benefits received by Invesco Aim and its noted that it remains in effect until at in the Lipper Global Multi-Cap Core Funds
affiliates resulting from Invesco Aim's least June 30, 2009. The Board concluded Index. The Board also reviewed the
relationship with the Fund, including the that the Fund's investment of uninvested criteria used by Invesco Aim to identify
fees received by Invesco Aim and its cash and cash collateral from any the funds in the Fund's performance group
affiliates for their provision of securities lending arrangements in the for inclusion in the Lipper reports and
administrative, transfer agency and affiliated money market funds is in the the methodology used by Lipper to identify
distribution services to the Fund. The best interests of the Fund and its the performance universe. The Board noted
Board considered the performance of shareholders. that the Fund's performance was in the
Invesco Aim and its affiliates in fourth quintile of its Lipper performance
providing these services and the II. Sub-Advisory Agreements universe for the one year period and the
organizational structure employed by second quintile for the three year period
Invesco Aim and its affiliates to provide A. Nature, Extent and Quality of (the first quintile being the best
these services. The Board also considered Services Provided by Affiliated performing funds and the fifth quintile
that these services are provided to the Sub-Advisers being the worst performing funds). The
Fund pursuant to written contracts which Board noted that the Fund's performance
are reviewed and approved on an annual The Board reviewed the services to be was below the performance of the Index for
basis by the Board. The Board concluded provided by Invesco Trimark Ltd., Invesco the one year period and above the Index
that Invesco Aim and its affiliates were Asset Management Deutschland, GmbH, for the three year period. The Board also
providing these services in a satisfactory Invesco Asset Management Limited, Invesco considered the steps Invesco Aim has taken
manner and in accordance with the terms of Asset Management (Japan) Limited, Invesco over the last several years to improve the
their contracts, and were qualified to Australia Limited, Invesco Global Asset quality and efficiency of the services
continue to provide these services to the Management (N.A.), Inc., Invesco Hong Kong that Invesco Aim provides to the AIM
Fund. Limited, Invesco Institutional (N.A.), Funds. The Board concluded that Invesco
Inc. and Invesco Senior Secured Aim continues to be responsive to the
The Board considered the benefits Management, Inc. (collectively, the Board's focus on fund performance. The
realized by Invesco Aim as a result of "Affiliated Sub-Advisers") under the Board also reviewed more recent Fund
portfolio brokerage transactions executed sub-advisory agreements and the performance and this review did not change
through "soft dollar" arrangements. Under credentials and experience of the officers their conclusions.
these arrangements, portfolio brokerage and employees of the Affiliated
commissions paid by the Fund and/or other Sub-Advisers who will provide these C. Sub-Advisory Fees
funds advised by Invesco Aim are used to services. The Board concluded that the
pay for research and execution services. nature, extent and quality of the services The Board considered the services to be
The Board noted that soft dollar to be provided by the Affiliated provided by the Affiliated Sub-Advisers
arrangements shift the payment obligation Sub-Advisers were appropriate. The Board pursuant to the sub-advisory agreements
for the research and execution services noted that the Affiliated Sub-Advisers, and the services to be provided by Invesco
from Invesco Aim to the funds and which have offices and personnel that are Aim pursuant to the Fund's investment
therefore may reduce Invesco Aim's geographically dispersed in financial advisory agreement, as well as the
expenses. The Board also noted that centers around the world, have been formed allocation of fees between Invesco Aim and
research obtained through soft dollar in part for the purpose of researching and the Affiliated Sub-Advisers pursuant to
arrangements may be used by Invesco Aim in compiling information and making the sub-advisory agreements. The Board
making investment decisions for the Fund recommendations on the markets and noted that the sub-advisory fees have no
and may therefore benefit Fund economies of various countries and direct effect on the Fund or its
shareholders. The Board concluded that securities of companies located in such shareholders, as they are paid by Invesco
Invesco Aim's soft dollar arrangements countries or on various types of Aim to the Affiliated Sub-Advisers, and
were appropriate. The Board also concluded investments and investment techniques, and that Invesco Aim and the Affiliated
that, based on their review and providing investment advisory services. Sub-Advisers are affiliates. After taking
representations made by Invesco Aim, these The Board concluded that the sub-advisory account of the Fund's contractual
arrangements were consistent with agreements will benefit the Fund and its sub-advisory fee rate, as well as other
regulatory requirements. shareholders by permitting Invesco Aim to relevant factors, the Board concluded that
utilize the additional resources and the Fund's sub-advisory fees were fair and
The Board considered the fact that the talent of the Affiliated Sub-Advisers in reasonable.
Fund's uninvested cash and cash collateral managing the Fund.
from any securities lending arrangements D. Financial Resources of the
may be invested in money market funds B. Fund Performance Affiliated Sub-Advisers
advised by Invesco Aim pursuant to
procedures approved by the Board. The The Board did view Fund performance as a The Board considered whether each
Board noted that Invesco Aim will receive relevant factor in considering whether to Affiliated Sub-Adviser is financially
advisory fees from these affiliated money approve the sub-advisory agreements for sound and has the resources necessary to
market funds attributable to such the Fund, as one of the Affiliated perform its obligations under its
investments, although Invesco Aim has Sub-Advisers currently manages the Fund's respective sub-advisory agreement, and
contractually agreed to waive through at assets. Because there were only four funds concluded that each Affiliated Sub-Adviser
least June 30, 2009, the advisory fees identified by Invesco Aim in the Fund's has the financial resources necessary to
payable by the Fund in an amount equal to performance group for inclusion in the fulfill these obligations.
100% of the net advisory fees Invesco Aim Lipper reports, the Board compared the
receives from the affiliated money Fund's performance during the past
24 AIM TRIMARK 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 October 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $5,413,085
Qualified Dividend Income* 100%
Corporate Dividends Received Deduction* 6.99%
Foreign Tax $ 0.0360
Foreign Source Income $ 0.5600
</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 January 31, 2008, April 30, 2008, July 31, 2008 and
October 31, 2008 were 68.41%, 76.02%, 76.60%, and 70.54%, respectively.
25 AIM TRIMARK FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee
oversees 103 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 2003 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 1997 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, Policy
Trustee firm) Studies, Inc. and
Van Gilder Insurance
Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 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 2001 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 2001 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 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 TRIMARK 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 2004 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 TRIMARK FUND
Supplement to Annual Report dated 10/31/08
AIM TRIMARK FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS The total annual Fund operating
For periods ended 10/31/08 expense ratio set forth in the most
The following information has been recent Fund prospectus as of the date of
prepared to provide Institutional Class Inception 0.13% this supplement for Institutional Class
shareholders with a performance overview 1 Year -42.68 shares was 1.29%. The expense ratios
specific to their holdings. Institutional ========================================== presented above may vary from the
Class shares are offered exclusively to expense ratios presented in other
institutional investors, including defined ========================================== sections of the actual report that are
contribution plans that meet certain AVERAGE ANNUAL TOTAL RETURNS based on expenses incurred during the
criteria. For periods ended 9/30/08, most recent period covered by the report.
calendar quarter-end
A redemption fee of 2% will be
Inception 5.13% imposed on certain redemptions or
1 Year -25.81 exchanges out of the Fund within 31 days
========================================== of purchase. Exceptions to the
redemption fee are listed in the Fund's
Institutional Class shares' inception date prospectus.
is April 30, 2004. Returns since that date
are historical returns. All other returns Had the advisor not waived fees
are blended returns of historical and/or reimbursed expenses in the past,
Institutional Class share performance and performance would have been lower.
restated Class A share performance (for
periods prior to the inception date of Please note that past performance
Institutional Class shares) at net asset is not indicative of future results.
value (NAV) and reflect the Rule 12b-1 More recent returns may be more or less
fees applicable to Class A shares. Class A than those shown. All returns assume
shares' inception date is November 4, reinvestment of distributions at NAV.
2003. Investment return and principal value
will fluctuate so your shares, when
Institutional Class shares have no redeemed, may be worth more or less than
sales charge; therefore, performance is at their original cost. See full report for
NAV. Performance of Institutional Class information on comparative benchmarks.
shares will differ from performance of Please consult your Fund prospectus for
other share classes primarily due to more information. For the most current
differing sales charges and class month-end performance, please call 800
expenses. 451 4246 or visit invescoaim.com.
==========================================
NASDAQ SYMBOL ATKIX
==========================================
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]
invescoaim.com T-TRI-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
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 May 1, 2008, through October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $623.90 $6.04 $1,017.70 $7.51 1.48%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 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 TRIMARK 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:
o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will
trees used to produce paper. be sent via email as soon as they're available.
o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer
expenses and put more capital back in your fund's returns. 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 811-05426 and 033-19338.
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 January 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 [INVESCO AIM LOGO]
investment advisors for the products and services represented by Invesco Aim; they each provide -- SERVICE MARK --
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.
invescoaim.com T-TRI-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM TRIMARK SMALL COMPANIES FUND
- -- SERVICE MARK -- Annual Report to Shareholders o October 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 Approval of Investment Advisory Agreement
27 Tax Information
28 Trustees and Officers
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 recent market developments and
[TAYLOR provide some perspective and encouragement to my fellow long-term investors.
PHOTO]
MARKET OVERVIEW
At the start of the fiscal year in November 2007, we saw warning signs of
increasing economic ills -- a weakening housing market, rising inflation and
Philip Taylor slowing job growth, among others. In response, the U.S. Federal Reserve Board
(the Fed) repeatedly cut short-term interest rate targets to stimulate economic
growth and expand market liquidity.(1) Also, Congress and the president worked
together to enact an economic stimulus plan that included billions of dollars in
rebates to taxpayers.
These actions helped the economy and the U.S. stock market until the spring of
2008, when other factors came to the forefront -- triggering a severe correction that eventually
drove major stock-market indexes to multi-year lows.(2)
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.
The recent volatility in the stock, fixed-income and credit markets has driven home the
importance of three timeless investing principles.
INVESTING IN VOLATILE MARKETS
Through up markets and down, we believe history shows investors should:
o 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.
o 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.
o 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 capitalize on
this situation.
MANAGING MONEY IS OUR FOCUS
As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain
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, 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 we 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) Lipper Inc.
2 AIM TRIMARK SMALL COMPANIES FUND
Dear Fellow Shareholders:
As I write this letter, turbulent financial markets are causing considerable
investor anxiety, reminding us again that markets are cyclical and the correction
of excess is often painful, at least in the short term. Your Board of Trustees
[CROCKETT believes in the wisdom of a long-term perspective and consistent investment
PHOTO] discipline. We continue to put your interests first in the effort to improve
investment performance, contain shareholder costs and uphold the highest ethical
standards.
We remain enthusiastic about the global reach and investment expertise that
Invesco, a leading independent global investment management company, brings to
Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse
investment strategies deployed throughout the worldwide network of Invesco
investment centers has helped strengthen the management of many AIM Funds. The
rebranding of the Funds' management company as Invesco Aim was followed by the
launch of an upgraded, investor-friendly website (invescoaim.com); a new
mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and
a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in
financial publications such as Barron's and Investment News through the end of 2008.
At its June meeting, your Board reviewed and renewed the investment advisory contracts between
the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual
process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory
Agreement Renewals."
We have recently completed another active proxy voting season during which we acted on your
behalf to double the number of votes in favor of separating the roles of chairman and CEO at the
companies whose shares your Funds hold. We also continued to support the movement for shareholders
to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like
virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a
matter of policy, and I would be interested to hear your thoughts on this policy.
As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com.
The dialogue that has been established in this way has been instructive for your Board, and we want
it to continue. Although the production schedule for Fund annual reports and prospectuses allows me
to write these letters of general report and response just twice a year, please be assured that your
comments are received, welcomed and heard in the interim.
We look forward to hearing from you and to representing you.
Sincerely,
/S/ BRUCE L. CROCKETT
Bruce L. Crockett
Independent Chair
AIM Funds Board of Trustees
3 AIM TRIMARK SMALL COMPANIES FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
======================================================================================= While deliberate efforts are made to
PERFORMANCE SUMMARY manage risk through industry diversifica-
tion, our primary method of attempting to
For the fiscal year ended October 31, 2008, Class A shares of AIM Trimark Small manage risk is to purchase businesses that
Companies Fund, at net asset value, underperformed the Fund's style-specific, broad are trading below their estimated
market and peer group indexes.(triangle) intrinsic value.
Your Fund's underperformance was driven largely by below-market returns from select Holdings are considered for sale if:
investments in the consumer discretionary and information technology sectors. Primary
contributors to Fund performance were select investments in the health care sector. o A more attractive investment
opportunity exists
Your Fund's long-term performance appears later in this report.
o Full value of the investment is deemed
FUND VS. INDEXES to have been realized
Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does Holdings are also considered for sale
not include applicable contingent deferred sales charges (CDSC) or front-end sales if the original thesis for buying the
charges, which would have reduced performance. company changes due to a fundamental
negative change in management strategy or
Class A Shares -41.70% a fundamental negative change in the
Class B Shares -42.09 competitive environment.
Class C Shares -42.12
Class R Shares -41.82 MARKET CONDITIONS AND YOUR FUND
Class Y Shares* -41.70
S&P 500 Index(triangle)(Broad Market Index) -36.08 Equity markets declined sharply during the
Russell 2000 Index(triangle)(Style-Specific Index) -34.16 fiscal year as the financial crisis
Lipper Small-Cap Core Funds Index(triangle)(Peer Group Index) -36.40 intensified and global economic conditions
weakened.(1) The price volatility in the
(triangle)Lipper Inc. markets that began in July 2007
* Share class incepted during the fiscal year. See page 7 for a detailed accelerated during the fiscal year.
explanation of Fund performance. Additionally, record high crude oil
======================================================================================= prices, falling home values and the weak
U.S. dollar placed significant pressure on
HOW WE INVEST o Sustainable competitive advantages the purchasing power of the U.S. consumer.
Later in the fiscal year, consumer confi-
We view ourselves as business people o Strong growth prospects dence fell and market volatility increased
buying businesses, and we consider the even further as evidence of a global
purchase of a stock as an ownership o High barriers to entry recession emerged.
interest in a business. We strive to
develop a proprietary view of a business o Honest and capable management teams Our investment approach focuses on
through in-depth, fundamental research individual businesses rather than market
that includes careful financial statement Also central to the Trimark discipline sectors. Therefore, your Fund shares
analysis and meetings with company is our adherence to an investment horizon little in common with sector weightings of
management teams. We then seek to purchase of three to five years. We use this various market indexes. However, if we
businesses whose stock prices are below long-term approach because we believe good were to broadly categorize businesses with
what we have calculated to be the true business strategies usually take that which we had the most success during the
value of the company based on its future amount of time to implement and to produce fiscal year, our investments in select
cash flows, management performance and strong earnings growth. We also use a health care stocks contributed the most to
business fundamentals. concentrated portfolio approach, Fund performance, while select investments
constructing a portfolio of about 25 to 45 in consumer discretionary and information
In conducting a comprehensive analysis stocks. We believe this allows each technology were the
of a company, we strive to identify investment opportunity to materially
primarily U.S. stocks that have: affect the Fund's performance.
========================================== ========================================== ==========================================
PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
Consumer Discretionary 29.0% 1. Health Care Equipment 8.0% 1. NutriSystem, Inc. 6.8%
Information Technology 27.9 2. Communications Equipment 6.8 2. International Rectifier Corp. 6.3
Health Care 15.3 3. Internet Retail 6.8 3. Kinetic Concepts, Inc. 6.0
Industrials 9.2 4. Semiconductors 6.3 4. Chemtrade Logistics Income Fund 6.0
Materials 6.0 5. Commodity Chemicals 6.0 5. Tempur-Pedic International Inc. 5.8
Financials 5.8 ========================================== 6. Brightpoint, Inc. 5.7
Money Market Funds Plus 7. Endo Pharmaceuticals Holdings
Other Assets Less Liabilities 6.8 Inc. 5.6
========================================== ========================================== 8. Wiley (John) & Sons-Class A 5.1
Total Net Assets $422.6 million 9. Con-way Inc. 4.6
Total Number of Holdings* 30 10. Columbia Sportswear Co. 4.5
========================================== ==========================================
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
* Excluding money market fund holdings.
4 AIM TRIMARK SMALL COMPANIES FUND
largest detractors. Our small cash will continually strive to upgrade the TED CHISHOLM
position also helped the Fund's quality of your Fund's portfolio. Portfolio manager, is manager
performance relative to the Russell 2000 [CHISHOLM of AIM Trimark Small
Index in a falling market. As always, we thank you for your PHOTO] Companies Fund. Mr. Chisholm
investment in AIM Trimark Small Companies joined Invesco Trimark
While few Fund holdings appreciated Fund and for sharing our long-term Investments in 1991; after a brief
during the year, TERCICA posted a investment perspective. absence, he rejoined the company in 2003.
doubledigit gain and was the top He assumed his current duties in 2006. Mr.
contributor to Fund performance. Tercica, (1) Lipper Inc. Chisholm earned a B.A. from the University
a biotechnology company, benefited from a of Western Ontario.
tender offer that resulted in the company (2) Tercica, Inc; Bloomberg L.P.
being sold at a 100% premium to its price ROB MIKALACHKI
when the tender offer was announced.(2) The The views and opinions expressed in Chartered Financial Analyst,
transaction reinforced our belief that management's discussion of Fund [MIKALACHKI portfolio manager, is manager
many businesses have fallen to levels that performance are those of Invesco Aim PHOTO] of AIM Trimark Small
underestimate their fundamentals in this Advisors, Inc. These views and opinions Companies Fund. He joined
environment. We sold our position in are subject to change at any time based on Invesco Trimark Investments in 1999 as a
Tercica during the fiscal year due to its factors such as market and economic small-cap analyst. He earned an undergrad-
pending acquisition. conditions. These views and opinions may uate degree in business at Wilfrid
not be relied upon as investment advice or Laurier.
During the fiscal year, a number of our recommendations, or as an offer for a
holdings in the consumer discretionary and particular security. The information is
information technology sectors were not a complete analysis of every aspect of
particularly hard hit, including TEMPUR- any market, country, industry, security or
PEDIC INTERNATIONAL, MEGA BRANDS, SMART the Fund. Statements of fact are from
MODULAR TECHNOLOGIES and INTERNATIONAL sources considered reliable, but Invesco
RECTIFIER. The share prices of these Aim Advisors, Inc. makes no representation
companies fell despite their strong or warranty as to their completeness or
long-term fundamentals, solid balance accuracy. Although historical performance
sheets and competitive advantages. While is no guarantee of future results, these
the economic environment has been tough insights may help you understand our
and many companies have had to lower their investment management philosophy.
earnings expectations, we believe the
price declines we've seen have been out of See important Fund and index disclosures
proportion in most cases. later in this report.
In addition to Tercica, we sold our
position in HUSKY INJECTION MOLDING
SYSTEMS due to its acquisition. We also
eliminated our profitable investments in
FTI CONSULTING, LEARNING TREE
INTERNATIONAL, POLARIS INDUSTRIES and HNI
based on valuation.
Increased market volatility during the
fiscal year presented some buying
opportunities. We took advantage of this
market situation by adding to many of our
existing holdings.
During the fiscal year, we continued to
focus on finding quality businesses
trading at what we believed were
attractive values relative to their
long-term prospects. In contrast, the
market is often driven by short-term
events or outlooks in both good times and
bad. Market volatility allowed us to take
advantage of investment opportunities we
believe may benefit your Fund in the long
term.
While we can never predict future Fund
performance, we pledge to you that we will
adhere to our discipline of being business
people who buy businesses and
5 AIM TRIMARK SMALL COMPANIES FUND
YOUR FUND'S LONG-TERM PERFORMANCE
Past performance cannot guarantee Performance of an index of funds reflects shown in the chart. The vertical axis, the
comparable future results. fund expenses and management fees; one that indicates the dollar value of an
performance of a market index does not. investment, is constructed with each
The data shown in the chart include Performance shown in the chart and table segment representing a percent change in
reinvested distributions, applicable sales does not reflect deduction of taxes a the value of the investment. In this
charges and Fund expenses including shareholder would pay on Fund chart, each segment represents a doubling,
management fees. Results for Class B distributions or sale of Fund shares. or 100% change, in the value of the
shares are calculated as if a hypothetical investment. In other words, the space
shareholder had liquidated his entire This chart, which is a logarithmic between $5,000 and $10,000 is the same
investment in the Fund at the close of the chart, presents the fluctuations in the size as the space between $10,000 and
reporting period and paid the applicable value of the Fund and its indexes. We $20,000.
contingent deferred sales charges. Index believe that a logarithmic chart is more
results include reinvested dividends, but effective than other types of charts in
they do not reflect sales charges. illustrating changes in value during the
early years
6 AIM TRIMARK SMALL COMPANIES FUND
====================================================================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT -- CLASS A, B AND C SHARES (OLDEST SHARE CLASSES WITH SALES CHARGES)
Index data from 10/31/03, Fund data from 11/4/03
AIM Trimark Small AIM Trimark Small AIM Trimark Small
Companies Fund- Companies Fund- Companies Fund- Russell 2000 Lipper Small-Cap
Date Class A Shares Class B Shares Class C Shares S&P 500 Index(1) Index(1) Core Funds Index(1)
10/31/03 $10000 $10000 $10000
11/03 $ 9488 $10040 $10040 10088 10355 10360
12/03 9639 10190 10200 10617 10565 10648
1/04 9723 10279 10279 10811 11024 10986
2/04 9894 10449 10459 10962 11123 11177
3/04 10149 10718 10729 10796 11226 11298
4/04 9978 10529 10539 10627 10654 10910
5/04 10082 10638 10639 10773 10824 11005
6/04 10479 11058 11049 10982 11279 11474
7/04 10016 10549 10549 10619 10520 10870
8/04 10044 10589 10579 10661 10466 10775
9/04 10677 11248 11239 10777 10957 11311
10/04 11244 11838 11829 10941 11173 11496
11/04 11821 12427 12429 11384 12142 12404
12/04 12223 12842 12844 11771 12501 12604
1/05 12308 12923 12925 11484 11980 12239
2/05 12536 13165 13156 11726 12183 12525
3/05 12460 13085 13076 11518 11834 12209
4/05 11927 12512 12503 11300 11156 11550
5/05 12260 12853 12846 11659 11886 12169
6/05 12688 13295 13298 11676 12345 12584
7/05 13382 14009 14012 12110 13127 13332
8/05 13297 13908 13911 11999 12884 13208
9/05 13344 13958 13952 12097 12924 13334
10/05 12992 13576 13579 11895 12523 12925
11/05 13553 14149 14152 12344 13131 13516
12/05 13803 14412 14405 12349 13071 13557
1/06 14160 14769 14764 12676 14243 14590
2/06 14170 14769 14764 12710 14204 14493
3/06 14721 15332 15337 12868 14893 15132
4/06 14838 15444 15440 13041 14890 15245
5/06 14152 14728 14723 12666 14054 14509
6/06 14124 14686 14682 12683 14144 14411
7/06 13863 14410 14406 12761 13684 13921
8/06 14481 15044 15040 13064 14089 14197
9/06 14820 15381 15377 13400 14207 14263
10/06 15536 16107 16103 13837 15025 14953
11/06 15497 16067 16062 14100 15420 15389
12/06 15571 16136 16130 14297 15471 15414
1/07 16322 16886 16881 14513 15730 15689
2/07 16478 17042 17037 14230 15606 15725
3/07 17030 17606 17601 14389 15773 15898
4/07 17187 17761 17745 15026 16056 16352
5/07 17751 18334 18320 15550 16714 17057
6/07 17438 17992 17988 15292 16469 16885
7/07 17292 17837 17823 14819 15343 16000
8/07 17364 17892 17878 15040 15690 16062
9/07 17177 17694 17680 15602 15960 16405
10/07 17417 17925 17924 15850 16418 16802
11/07 16031 16489 16475 15187 15239 15676
12/07 16087 16537 16522 15082 15229 15710
====================================================================================================================================
(1) Lipper Inc.
====================================================================================================================================
[MOUNTAIN CHART]
1/08 15226 15641 15624 14178 14191 14671
2/08 13893 14268 14251 13718 13665 14390
3/08 13319 13674 13657 13658 13722 14267
4/08 14025 14384 14378 14323 14296 14956
5/08 14399 14756 14739 14509 14953 15695
6/08 13109 13430 13412 13287 13802 14605
7/08 13296 13616 13611 13175 14313 14644
8/08 13892 14210 14193 13366 14830 14981
9/08 12590 12872 12866 12176 13648 13582
10/08 10155 10206 10374 10131 10809 10686
====================================================================================================================================
========================================== ==========================================
AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/08, including maximum As of 9/30/08, the most recent calendar
applicable sales charges quarter-end, including maximum applicable
sales charges
CLASS A SHARES
Inception (11/4/03) 0.31% CLASS A SHARES
1 Year -44.89 Inception (11/4/03) 4.81%
1 Year -30.73
CLASS B SHARES
Inception (11/4/03) 0.41% CLASS B SHARES
1 Year -44.84 Inception (11/4/03) 4.95%
1 Year -30.71
CLASS C SHARES
Inception (11/4/03) 0.74% CLASS C SHARES
1 Year -42.67 Inception (11/4/03) 5.27%
1 Year -27.92
CLASS R SHARES
Inception 1.24% CLASS R SHARES
1 Year -41.82 Inception 5.80%
1 Year -26.90
CLASS Y SHARES ==========================================
Inception 1.45%
1 Year -41.70
==========================================
CLASS R SHARES' INCEPTION DATE IS APRIL HIGHER. PLEASE VISIT INVESCOAIM.COM FOR CLASS B AND CLASS C SHARE PERFORMANCE
30, 2004. RETURNS SINCE THAT DATE ARE THE MOST RECENT MONTH-END PERFORMANCE. REFLECTS THE APPLICABLE CONTINGENT
HISTORICAL RETURNS. ALL OTHER RETURNS ARE PERFORMANCE FIGURES REFLECT REINVESTED DEFERRED SALES CHARGE (CDSC) FOR THE
BLENDED RETURNS OF HISTORICAL CLASS R DISTRIBUTIONS, CHANGES IN NET ASSET VALUE PERIOD INVOLVED. THE CDSC ON CLASS B
SHARE PERFORMANCE AND RESTATED CLASS A AND THE EFFECT OF THE MAXIMUM SALES CHARGE SHARES DECLINES FROM 5% BEGINNING AT THE
SHARE PERFORMANCE (FOR PERIODS PRIOR TO UNLESS OTHERWISE STATED. INVESTMENT RETURN TIME OF PURCHASE TO 0% AT THE BEGINNING OF
THE INCEPTION DATE OF CLASS R SHARES) AT AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT THE SEVENTH YEAR. THE CDSC ON CLASS C
NET ASSET VALUE, ADJUSTED TO REFLECT THE YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES IS 1% FOR THE FIRST YEAR AFTER
HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS SHARES. PURCHASE. CLASS R SHARES DO NOT HAVE A
R SHARES. CLASS A SHARES' INCEPTION DATE FRONT-END SALES CHARGE; RETURNS SHOWN ARE
IS NOVEMBER 4, 2003. THE NET ANNUAL FUND OPERATING EXPENSE AT NET ASSET VALUE AND DO NOT REFLECT A
RATIO SET FORTH IN THE MOST RECENT FUND 0.75% CDSC THAT MAY BE IMPOSED ON A TOTAL
CLASS Y SHARES' INCEPTION DATE IS PROSPECTUS AS OF THE DATE OF THIS REPORT REDEMPTION OF RETIREMENT PLAN ASSETS
OCTOBER 3, 2008; RETURNS SINCE THAT DATE FOR CLASS A, CLASS B, CLASS C, CLASS R AND WITHIN THE FIRST YEAR. CLASS Y SHARES DO
ARE ACTUAL RETURNS. ALL OTHER RETURNS ARE CLASS Y SHARES WAS 1.30%, 2.05%, 2.05%, NOT HAVE A FRONT-END SALES CHARGE OR A
BLENDED RETURNS OF ACTUAL CLASS Y SHARE 1.55% AND 1.05%, RESPECTIVELY.(1) THE CDSC; THEREFORE, PERFORMANCE IS AT NET
PERFORMANCE AND RESTATED CLASS A SHARE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO ASSET VALUE.
PERFORMANCE (FOR PERIODS PRIOR TO THE SET FORTH IN THE MOST RECENT FUND
INCEPTION DATE OF CLASS Y SHARES) AT NET PROSPECTUS AS OF THE DATE OF THIS REPORT THE PERFORMANCE OF THE FUND'S SHARE
ASSET VALUE. THE RESTATED CLASS A SHARE FOR CLASS A, CLASS B, CLASS C, CLASS R AND CLASSES WILL DIFFER PRIMARILY DUE TO
PERFORMANCE REFLECTS THE RULE 12B-1 FEES CLASS Y SHARES WAS 1.31%, 2.06%, 2.06%, DIFFERENT SALES CHARGE STRUCTURES AND
APPLICABLE TO CLASS A SHARES AS WELL AS 1.56% AND 1.06%, RESPECTIVELY. THE EXPENSE CLASS EXPENSES.
ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RATIOS PRESENTED ABOVE MAY VARY FROM THE
RECEIVED BY CLASS A SHARES. CLASS A EXPENSE RATIOS PRESENTED IN OTHER SECTIONS (1) Total annual operating expenses less
SHARES' INCEPTION DATE IS NOVEMBER 4, OF THIS REPORT THAT ARE BASED ON EXPENSES any contractual fee waivers and/or
2003. INCURRED DURING THE PERIOD COVERED BY THIS expense reimbursements by the advisor
REPORT. in effect through at least June 30,
THE PERFORMANCE DATA QUOTED REPRESENT 2009. See current prospectus for more
PAST PERFORMANCE AND CANNOT GUARANTEE CLASS A SHARE PERFORMANCE REFLECTS THE information.
COMPARABLE FUTURE RESULTS; CURRENT MAXIMUM 5.50% SALES CHARGE, AND
PERFORMANCE MAY BE LOWER OR
7 AIM TRIMARK SMALL COMPANIES FUND
AIM TRIMARK SMALL COMPANIES FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets.
o Unless otherwise noted, all data provided by Invesco Aim.
ABOUT SHARE CLASSES o Investing in a fund that invests in o A direct investment cannot be made in
smaller companies involves risks not an index. Unless otherwise indicated,
o Effective September 30, 2003, only associated with investing in more index results include reinvested
previously established qualified plans established companies, such as business dividends, and they do not reflect
are eligible to purchase Class B shares risk, stock price fluctuations and sales charges. Performance of an index
of any AIM fund. illiquidity. of funds reflects fund expenses;
performance of a market index does not.
o Class R shares are available only to o The prices of securities held by the
certain retirement plans. Please see Fund may decline in response to market OTHER INFORMATION
the prospectus for more information. risks.
o The Chartered Financial Analyst--REGIS-
o Class Y shares are available only to ABOUT INDEXES USED IN THIS REPORT TERED TRADEMARK-- (CFA--REGISTERED
certain investors. Please see the TRADEMARK--) designation is a globally
prospectus for more information. o The S&P 500--REGISTERED TRADEMARK-- recognized standard for measuring the
INDEX is a market competence and integrity of investment
PRINCIPAL RISKS OF INVESTING IN THE FUND capitalization-weighted index covering professionals.
all major areas of the U.S. economy. It
o Since a large percentage of the Fund's is not the 500 largest companies, but o The returns shown in management's
assets may be invested in securities of rather the most widely held 500 discussion of Fund performance are
a limited number of companies, each companies chosen with respect to market based on net asset values calculated
investment has a greater effect on the size, liquidity, and their industry. for shareholder transactions. Generally
Fund's overall performance, and any accepted accounting principles require
change in the value of those securities o The RUSSELL 2000--REGISTERED adjustments to be made to the net
could significantly affect the value of TRADEMARK-- INDEX measures the assets of the Fund at period end for
your investment in the Fund. performance of the 2,000 smallest financial reporting purposes, and as
companies in the Russell such, the net asset values for
o The values of convertible securities in 3000--REGISTERED TRADEMARK-- Index, shareholder transactions and the
which the Fund invests may be affected which represents approximately 8% of returns based on those net asset values
by market interest rates, the risk that the total market capitalization of the may differ from the net asset values
the issuer may default on interest or Russell 3000 Index. The Russell 2000 and returns reported in the Financial
principal payments, and the value of Index and the Russell 3000 Index are Highlights.
the underlying common stock into which trademarks/ service marks of the Frank
these securities may be converted. Russell Company. Russell--REGISTERED o Industry classifications used in this
TRADEMARK-- is a trademark of the Frank report are generally according to the
o Prices of equity securities change in Russell Company. Global Industry Classification
response to many factors, including the Standard, which was developed by and is
historical and prospective earnings of o The LIPPER SMALL-CAP CORE FUNDS INDEX the exclusive property and a service
the issuer, the value of its assets, is an equally weighted representation mark of MSCI Inc. and Standard &
general economic conditions, interest of the largest funds in the Lipper Poor's.
rates, investor perceptions and market Small-Cap Core Funds category. These
liquidity. funds typically have an average
price-to-earnings ratio, price-to-book
o Foreign securities have additional ratio, and three-year sales-per-share
risks, including exchange rate changes, growth value, compared to the S&P
political and economic upheaval, SmallCap 600 Index.
relative lack of information,
relatively low market liquidity, and o The Fund is not managed to track the
the potential lack of strict financial performance of any particular index,
and accounting controls and standards. including the indexes defined here, and
consequently, the performance of the
Fund may deviate significantly from the
performance of the indexes.
======================================================================================= ==========================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS
WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES.
INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares ATIAX
======================================================================================= Class B Shares ATIBX
Class C Shares ATICX
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class R Shares ATIRX
Class Y Shares ATIYX
==========================================
8 AIM TRIMARK SMALL COMPANIES FUND
SCHEDULE OF INVESTMENTS(a)
October 31, 2008
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-92.96%
AIR FREIGHT & LOGISTICS-4.61%
Dynamex Inc.(b)(c) 323,988 $ 7,908,547
- ------------------------------------------------------------------------------
Pacer International, Inc. 1,023,900 11,559,831
==============================================================================
19,468,378
==============================================================================
ALUMINUM-0.04%
Cymat Technologies Ltd. (Canada)(c) 2,497,500 165,254
==============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-5.25%
Columbia Sportswear Co. 521,482 19,227,041
- ------------------------------------------------------------------------------
Hampshire Group, Ltd.(b)(c) 592,824 2,958,192
==============================================================================
22,185,233
==============================================================================
AUTOMOTIVE RETAIL-1.91%
Lithia Motors, Inc.-Class A(b) 1,966,338 8,061,986
==============================================================================
COMMODITY CHEMICALS-5.98%
Chemtrade Logistics Income Fund (Canada)(b) 2,733,468 25,276,186
==============================================================================
COMMUNICATIONS EQUIPMENT-6.84%
Avocent Corp.(c) 659,597 9,907,147
- ------------------------------------------------------------------------------
Plantronics, Inc. 348,627 5,034,174
- ------------------------------------------------------------------------------
Tekelec(c) 1,102,529 13,991,093
==============================================================================
28,932,414
==============================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.31%
Hewitt Associates, Inc.-Class A(c) 350,400 9,772,656
==============================================================================
ELECTRONIC MANUFACTURING SERVICES-3.87%
Smart Modular Technologies WWH Inc.(b)(c) 6,039,747 16,367,714
==============================================================================
HEALTH CARE EQUIPMENT-8.04%
Edwards Lifesciences Corp.(c) 162,000 8,560,080
- ------------------------------------------------------------------------------
Kinetic Concepts, Inc.(c) 1,049,500 25,408,395
==============================================================================
33,968,475
==============================================================================
HEALTH CARE SUPPLIES-1.67%
Cooper Cos., Inc. (The) 427,324 7,042,299
==============================================================================
HOME FURNISHINGS-5.76%
Tempur-Pedic International Inc.(c) 3,115,375 24,331,079
==============================================================================
INTERNET RETAIL-6.79%
NutriSystem, Inc.(b) 2,029,000 28,710,350
==============================================================================
LEISURE PRODUCTS-1.20%
MEGA Brands Inc. (Canada)(b)(c) 3,665,500 5,062,971
==============================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.00%
Brompton Corp. (Canada)(c)(d) 69,374 0
==============================================================================
PHARMACEUTICALS-5.57%
Endo Pharmaceuticals Holdings Inc.(c) 1,272,200 23,535,700
==============================================================================
PUBLISHING-5.07%
Wiley (John) & Sons-Class A 615,758 21,416,063
==============================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-3.39%
FirstService Corp. (Canada)(c) 1,179,000 14,315,140
==============================================================================
SEMICONDUCTOR EQUIPMENT-2.84%
ASM International N.V.-ADR (Netherlands)(c) 1,044,700 10,290,295
- ------------------------------------------------------------------------------
ASM International N.V. (Netherlands)(c) 180,000 1,732,381
==============================================================================
12,022,676
==============================================================================
SEMICONDUCTORS-6.32%
International Rectifier Corp.(c) 1,729,600 26,705,024
==============================================================================
SPECIALIZED CONSUMER SERVICES-2.99%
Jackson Hewitt Tax Service Inc. 916,851 12,634,207
==============================================================================
TECHNOLOGY DISTRIBUTORS-5.72%
Brightpoint, Inc.(c) 4,196,138 24,169,755
==============================================================================
THRIFTS & MORTGAGE FINANCE-2.20%
Northwest Bancorp, Inc. 351,386 9,311,729
==============================================================================
TRUCKING-4.59%
Con-way Inc. 569,462 19,384,486
==============================================================================
Total Common Stocks & Other Equity Interests
(Cost $699,052,659) 392,839,775
==============================================================================
PREFERRED STOCK-0.26%
REAL ESTATE MANAGEMENT & DEVELOPMENT-0.26%
FirstService Corp.(Canada)-Series 1, 7% Pfd. (Cost
$1,880,000) 75,200 1,090,400
==============================================================================
MONEY MARKET FUNDS-3.20%
Liquid Assets Portfolio-Institutional Class(e) 6,755,315 6,755,315
- ------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 6,755,315 6,755,315
==============================================================================
Total Money Market Funds (Cost $13,510,630) 13,510,630
==============================================================================
TOTAL INVESTMENTS-96.42% (Cost $714,443,289) 407,440,805
==============================================================================
OTHER ASSETS LESS LIABILITIES-3.58% 15,146,963
==============================================================================
NET ASSETS-100.00% $422,587,768
______________________________________________________________________________
==============================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
9 AIM TRIMARK SMALL COMPANIES FUND
Investment Abbreviations:
<Table>
Pfd. - Preferred
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Industry and/or sector classifications used in this report are generally
according to the Global Industry Classification Standard, which was
developed by and is the exclusive property and a service mark of MSCI Inc.
and Standard & Poor's.
(b) Affiliated company during the period. The Investment Company Act of 1940
defines affiliates as those companies in which a fund holds 5% or more of
the outstanding voting securities. The Fund has not owned enough of the
outstanding voting securities of the issuer to have control (as defined in
the Investment Company Act of 1940) of that issuer. The aggregate value of
these securities as of October 31, 2008 was $94,345,946, which represented
22.33% of the Fund's Net Assets. See Note 3.
(c) Non-income producing security.
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at
October 31, 2008 represented less than 0.01% of the Fund's Net Assets. See
Note 1A.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
10 AIM TRIMARK SMALL COMPANIES FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<Table>
ASSETS:
Investments, at value (Cost
$465,714,651) $ 299,584,229
- -------------------------------------------------------
Investments in affiliates, at value
(Cost $248,728,638) 107,856,576
=======================================================
Total investments (Cost
$714,443,289) 407,440,805
=======================================================
Foreign currencies, at value (Cost
$18,788,819) 16,361,525
- -------------------------------------------------------
Receivables for:
Investments sold 180,815
- -------------------------------------------------------
Fund shares sold 549,829
- -------------------------------------------------------
Dividends 300,599
- -------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 10,265
- -------------------------------------------------------
Other assets 57,769
=======================================================
Total assets 424,901,607
_______________________________________________________
=======================================================
LIABILITIES:
Payables for:
Fund shares reacquired 1,906,125
- -------------------------------------------------------
Accrued fees to affiliates 323,779
- -------------------------------------------------------
Accrued other operating expenses 52,611
- -------------------------------------------------------
Trustee deferred compensation and
retirement plans 31,324
=======================================================
Total liabilities 2,313,839
=======================================================
Net assets applicable to shares
outstanding $ 422,587,768
_______________________________________________________
=======================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 727,737,928
- -------------------------------------------------------
Undistributed net investment income 879,465
- -------------------------------------------------------
Undistributed net realized gain 3,389,117
- -------------------------------------------------------
Unrealized appreciation (depreciation) (309,418,742)
=======================================================
$ 422,587,768
_______________________________________________________
=======================================================
NET ASSETS:
Class A $ 188,481,879
_______________________________________________________
=======================================================
Class B $ 12,304,354
_______________________________________________________
=======================================================
Class C $ 59,805,895
_______________________________________________________
=======================================================
Class R $ 13,540,527
_______________________________________________________
=======================================================
Class Y $ 511,240
_______________________________________________________
=======================================================
Institutional Class $ 147,943,873
_______________________________________________________
=======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 20,458,927
_______________________________________________________
=======================================================
Class B 1,379,890
_______________________________________________________
=======================================================
Class C 6,714,037
_______________________________________________________
=======================================================
Class R 1,482,924
_______________________________________________________
=======================================================
Class Y 55,489
_______________________________________________________
=======================================================
Institutional Class 15,747,412
_______________________________________________________
=======================================================
Class A:
Net asset value per share $ 9.21
- -------------------------------------------------------
Maximum offering price per share
(Net asset value of $9.21 divided
by 94.50%) $ 9.75
_______________________________________________________
=======================================================
Class B:
Net asset value and offering price
per share $ 8.92
_______________________________________________________
=======================================================
Class C:
Net asset value and offering price
per share $ 8.91
_______________________________________________________
=======================================================
Class R:
Net asset value and offering price
per share $ 9.13
_______________________________________________________
=======================================================
Class Y:
Net asset value and offering price
per share $ 9.21
_______________________________________________________
=======================================================
Institutional Class:
Net asset value and offering price
per share $ 9.39
_______________________________________________________
=======================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
11 AIM TRIMARK SMALL COMPANIES FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $491,723) $ 4,185,515
- ------------------------------------------------------------------------------------------------
Dividends from affiliates 6,064,847
- ------------------------------------------------------------------------------------------------
Interest 494,541
================================================================================================
Total investment income 10,744,903
================================================================================================
EXPENSES:
Advisory fees 4,780,576
- ------------------------------------------------------------------------------------------------
Administrative services fees 190,872
- ------------------------------------------------------------------------------------------------
Custodian fees 23,066
- ------------------------------------------------------------------------------------------------
Distribution fees:
Class A 853,648
- ------------------------------------------------------------------------------------------------
Class B 212,906
- ------------------------------------------------------------------------------------------------
Class C 941,143
- ------------------------------------------------------------------------------------------------
Class R 78,998
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- A, B, C, R and Y 1,358,239
- ------------------------------------------------------------------------------------------------
Transfer agent fees -- Institutional 132,978
- ------------------------------------------------------------------------------------------------
Trustees' and officers' fees and benefits 33,693
- ------------------------------------------------------------------------------------------------
Other 432,906
================================================================================================
Total expenses 9,039,025
================================================================================================
Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (107,058)
================================================================================================
Net expenses 8,931,967
================================================================================================
Net investment income 1,812,936
================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM:
Net realized gain (loss) from:
Investment securities 9,597,450
- ------------------------------------------------------------------------------------------------
Foreign currencies (925,525)
================================================================================================
8,671,925
================================================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (337,175,909)
- ------------------------------------------------------------------------------------------------
Foreign currencies (2,422,721)
================================================================================================
(339,598,630)
================================================================================================
Net realized and unrealized gain (loss) (330,926,705)
================================================================================================
Net increase (decrease) in net assets resulting from operations $(329,113,769)
________________________________________________________________________________________________
================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
12 AIM TRIMARK SMALL COMPANIES FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2008 and 2007
<Table>
<Caption>
2008 2007
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,812,936 $ 4,375,517
- ----------------------------------------------------------------------------------------------------------
Net realized gain 8,671,925 34,967,286
- ----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) (339,598,630) (904,976)
==========================================================================================================
Net increase (decrease) in net assets resulting from operations (329,113,769) 38,437,827
==========================================================================================================
Distributions to shareholders from net investment income:
Class A (2,563,339) --
- ----------------------------------------------------------------------------------------------------------
Class B (24,324) --
- ----------------------------------------------------------------------------------------------------------
Class C (98,215) --
- ----------------------------------------------------------------------------------------------------------
Class R (53,416) --
- ----------------------------------------------------------------------------------------------------------
Institutional Class (1,457,340) --
==========================================================================================================
Total distributions from net investment income (4,196,634) --
==========================================================================================================
Distributions to shareholders from net realized gains:
Class A (20,339,901) (14,474,356)
- ----------------------------------------------------------------------------------------------------------
Class B (1,348,151) (1,562,553)
- ----------------------------------------------------------------------------------------------------------
Class C (5,443,521) (3,344,473)
- ----------------------------------------------------------------------------------------------------------
Class R (586,772) (207,738)
- ----------------------------------------------------------------------------------------------------------
Institutional Class (7,782,407) (2,162,202)
==========================================================================================================
Total distributions from net realized gains (35,500,752) (21,751,322)
==========================================================================================================
Share transactions-net:
Class A (77,293,805) 252,986,891
- ----------------------------------------------------------------------------------------------------------
Class B (6,227,283) 9,072,742
- ----------------------------------------------------------------------------------------------------------
Class C (2,947,156) 71,864,019
- ----------------------------------------------------------------------------------------------------------
Class R 12,154,752 7,276,826
- ----------------------------------------------------------------------------------------------------------
Class Y 587,391 --
- ----------------------------------------------------------------------------------------------------------
Institutional Class 80,096,982 138,067,723
==========================================================================================================
Net increase in net assets resulting from share transactions 6,370,881 479,268,201
==========================================================================================================
Net increase (decrease) in net assets (362,440,274) 495,954,706
==========================================================================================================
NET ASSETS:
Beginning of year 785,028,042 289,073,336
==========================================================================================================
End of year (includes undistributed net investment income of $879,465
and $4,157,869, respectively) $ 422,587,768 $785,028,042
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
13 AIM TRIMARK SMALL COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Small Companies Fund (the "Fund") is a series portfolio of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware statutory
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of nine separate series portfolios, each authorized to issue an unlimited number
of shares of beneficial interest. The 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.
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.
14 AIM TRIMARK SMALL COMPANIES 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. 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 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. 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.
J. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to
attempt to minimize the risk to the Fund from adverse changes in the
relationship between currencies. The Fund may also enter into a foreign
currency contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. dollar price of that
security. Fluctuations in the value of these contracts are recorded as
unrealized appreciation (depreciation)
15 AIM TRIMARK SMALL COMPANIES FUND
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).
Previously, under the terms of a master sub-advisory agreement between the
Advisor and Invesco Trimark Ltd. ("Invesco Trimark"), the Advisor paid Invesco
Trimark 40% of the amount of the Advisor's compensation on the sub-advised
assets. This agreement terminated on May 1, 2008.
Further, the Advisor has contractually agreed, through at least June 30, 2009,
to waive the advisory fee payable by the Fund in an amount equal to 100% of the
net advisory fees the Advisor receives from the affiliated money market funds on
investments by the Fund of uninvested cash in such affiliated money market
funds.
For the year ended October 31, 2008, the Advisor waived advisory fees of
$58,963.
At the request of the Trustees of the Trust, 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
October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of
$3,276.
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 October 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 October 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 October 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 October 31, 2008, IADI
advised the Fund that IADI retained $62,493 in front-end sales commissions from
the sale of Class A shares and $42,179, $46,702, $56,216 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.
16 AIM TRIMARK SMALL COMPANIES FUND
NOTE 3--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
October 31, 2008.
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
10/31/07 AT COST FROM SALES (DEPRECIATION) 10/31/08 INCOME GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------------------------------
Chemtrade Logistics Income
Fund $ 26,961,000 $ 433,563 $ -- $ (2,118,377) $ 25,276,186 $2,673,531 $ --
- --------------------------------------------------------------------------------------------------------------------------------
Dynamex Inc. 15,576,658 205,182 (6,238,877) (1,634,416) 7,908,547 -- 1,035,443
- --------------------------------------------------------------------------------------------------------------------------------
Hampshire Group, Ltd. 4,873,344 2,130,146 -- (4,045,298) 2,958,192 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Lithia Motors, Inc. 22,434,621 9,675,498 -- (24,048,133) 8,061,986 924,179 --
- --------------------------------------------------------------------------------------------------------------------------------
MEGA Brands Inc. 41,910,931 12,931,904 -- (49,779,864) 5,062,971 -- --
- --------------------------------------------------------------------------------------------------------------------------------
NutriSystem, Inc. 29,552,180 20,134,310 (8,100,245) (12,875,895) 28,710,350 841,330 (4,712,398)
- --------------------------------------------------------------------------------------------------------------------------------
Smart Modular Technologies WWH
Inc. 34,682,856 15,587,370 -- (33,902,512) 16,367,714 -- --
================================================================================================================================
Total Investments in
Affiliates $ 175,991,590 $ 61,097,973 $(14,339,122) $(128,404,495) $ 94,345,946 $4,439,040 $(3,676,955)
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the year
ended October 31, 2008, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $44,819.
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 October 31, 2008, the Fund paid legal fees of $4,206 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.
17 AIM TRIMARK SMALL COMPANIES FUND
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED
OCTOBER 31, 2008 AND 2007:
<Table>
<Caption>
2008 2007
- --------------------------------------------------------------------------------------------------------
Ordinary income $10,209,779 $ 5,491,356
- --------------------------------------------------------------------------------------------------------
Long-term capital gain 29,487,607 16,259,966
========================================================================================================
Total distributions $39,697,386 $21,751,322
________________________________________________________________________________________________________
========================================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
<Table>
<Caption>
2008
- ------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 914,801
- ------------------------------------------------------------------------------------------------
Undistributed long-term gain 5,534,962
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- investments (309,148,331)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) -- other investments (2,416,258)
- ------------------------------------------------------------------------------------------------
Temporary book/tax differences (35,334)
- ------------------------------------------------------------------------------------------------
Shares of beneficial interest 727,737,928
================================================================================================
Total net assets $ 422,587,768
________________________________________________________________________________________________
================================================================================================
</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 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2008 was $290,359,410 and
$204,036,758, respectively. During the same period, purchases and sales of U.S.
Treasury obligations were $0 and $38,700,000. 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 $ 6,634,640
- ------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (315,782,971)
================================================================================================
Net unrealized appreciation (depreciation) of investment securities $(309,148,331)
________________________________________________________________________________________________
================================================================================================
Cost of investments for tax purposes is $716,589,136.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency,
transactions proxy costs and distributions on, October 31, 2008, undistributed
net investment income was decreased by $894,706, undistributed net realized gain
was decreased by $4,539,990 and shares of beneficial interest increased by
$5,434,696. This reclassification had no effect on the net assets of the Fund.
18 AIM TRIMARK SMALL COMPANIES FUND
NOTE 10--SHARE INFORMATION
<Table>
<Caption>
SUMMARY OF SHARE ACTIVITY
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
2008(a) 2007
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 9,766,999 $ 131,935,709 19,878,576 $327,964,528
- -------------------------------------------------------------------------------------------------------------------------
Class B 277,316 3,578,277 997,033 15,956,779
- -------------------------------------------------------------------------------------------------------------------------
Class C 2,307,942 30,081,857 5,030,084 80,902,527
- -------------------------------------------------------------------------------------------------------------------------
Class R 1,497,440 19,778,767 617,986 10,184,932
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) 55,818 590,298 -- --
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 7,133,591 95,208,285 8,239,638 140,183,716
=========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,497,173 21,319,741 893,978 13,400,727
- -------------------------------------------------------------------------------------------------------------------------
Class B 92,245 1,279,445 99,752 1,462,363
- -------------------------------------------------------------------------------------------------------------------------
Class C 378,322 5,243,548 218,552 3,201,787
- -------------------------------------------------------------------------------------------------------------------------
Class R 45,275 640,186 13,933 207,736
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class 638,919 9,238,770 142,250 2,162,202
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 178,067 2,212,628 131,346 2,148,153
- -------------------------------------------------------------------------------------------------------------------------
Class B (183,434) (2,212,628) (134,742) (2,148,153)
=========================================================================================================================
Reacquired:
Class A(b) (18,405,587) (232,761,883) (5,502,996) (90,526,517)
- -------------------------------------------------------------------------------------------------------------------------
Class B (717,112) (8,872,377) (388,788) (6,198,247)
- -------------------------------------------------------------------------------------------------------------------------
Class C (3,164,217) (38,272,561) (765,753) (12,240,295)
- -------------------------------------------------------------------------------------------------------------------------
Class R (667,212) (8,264,201) (197,096) (3,115,842)
- -------------------------------------------------------------------------------------------------------------------------
Class Y(b) (329) (2,907) -- --
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,968,383) (24,350,073) (252,142) (4,278,195)
=========================================================================================================================
Net increase (decrease) in share activity (1,237,167) $ 6,370,881 29,021,611 $479,268,201
_________________________________________________________________________________________________________________________
=========================================================================================================================
</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 45% 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 into Class Y shares of the
Fund:
<Table>
<Caption>
CLASS SHARES AMOUNT
--------------------------------------------------------------------------------------------------
Class Y 54,735 $ 579,094
--------------------------------------------------------------------------------------------------
Class A (54,735) $(579,094)
__________________________________________________________________________________________________
==================================================================================================
</Table>
19 AIM TRIMARK SMALL COMPANIES FUND
NOTE 11--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 NET ASSET
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
Year ended 10/31/08 $16.71 $ 0.03(c) $(6.71) $(6.68) $(0.09) $(0.73) $(0.82) $ 9.21
Year ended 10/31/07 16.07 0.17(c) 1.64 1.81 -- (1.17) (1.17) 16.71
Year ended 10/31/06 13.67 (0.01)(c) 2.65 2.64 -- (0.24) (0.24) 16.07
Year ended 10/31/05 11.90 (0.06)(c) 1.90 1.84 -- (0.07) (0.07) 13.67
Year ended 10/31/04(e) 10.00 (0.04) 1.94 1.90 -- -- -- 11.90
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 16.24 (0.06)(c) (6.52) (6.58) (0.01) (0.73) (0.74) 8.92
Year ended 10/31/07 15.75 0.05(c) 1.61 1.66 -- (1.17) (1.17) 16.24
Year ended 10/31/06 13.50 (0.12)(c) 2.61 2.49 -- (0.24) (0.24) 15.75
Year ended 10/31/05 11.84 (0.15)(c) 1.88 1.73 -- (0.07) (0.07) 13.50
Year ended 10/31/04(e) 10.00 (0.08) 1.92 1.84 -- -- -- 11.84
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 16.22 (0.06)(c) (6.51) (6.57) (0.01) (0.73) (0.74) 8.91
Year ended 10/31/07 15.74 0.05(c) 1.60 1.65 -- (1.17) (1.17) 16.22
Year ended 10/31/06 13.50 (0.12)(c) 2.60 2.48 -- (0.24) (0.24) 15.74
Year ended 10/31/05 11.83 (0.15)(c) 1.89 1.74 -- (0.07) (0.07) 13.50
Year ended 10/31/04(e) 10.00 (0.07) 1.90 1.83 -- -- -- 11.83
- ------------------------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 10/31/08 16.58 0.01(c) (6.66) (6.65) (0.07) (0.73) (0.80) 9.13
Year ended 10/31/07 15.98 0.13(c) 1.64 1.77 -- (1.17) (1.17) 16.58
Year ended 10/31/06 13.64 (0.05)(c) 2.63 2.58 -- (0.24) (0.24) 15.98
Year ended 10/31/05 11.89 (0.09)(c) 1.91 1.82 -- (0.07) (0.07 13.64
Year ended 10/31/04(e) 10.56 (0.04) 1.37 1.33 -- -- -- 11.89
- ------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 10/31/08(e) 10.58 0.00 (1.37) (1.37) -- -- -- 9.21
- ------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 17.00 0.10 (6.84) (6.74) (0.14) (0.73) (0.87) 9.39
Year ended 10/31/07 16.26 0.25 1.66 1.91 -- (1.17) (1.17) 17.00
Year ended 10/31/06 13.76 0.06 2.68 2.74 -- (0.24) (0.24) 16.26
Year ended 10/31/05 11.92 (0.00) 1.91 1.91 -- (0.07) (0.07) 13.76
Year ended 10/31/04(e) 10.56 (0.02) 1.38 1.36 -- -- -- 11.92
______________________________________________________________________________________________________________________________
==============================================================================================================================
<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 10/31/08 (41.70)% $188,482 1.37%(d) 1.38%(d) 0.28%(d) 41%
Year ended 10/31/07 12.10 458,286 1.27 1.34 1.06 44
Year ended 10/31/06 19.55 193,127 1.41 1.52 (0.06) 47
Year ended 10/31/05 15.55 127,013 1.51 1.61 (0.45) 20
Year ended 10/31/04(e) 19.00 21,862 2.01(f) 3.26(f) (1.17)(f) 29
- ----------------------------------------------------------------------------------------------------------------
CLASS B
Year ended 10/31/08 (42.12) 12,304 2.12(d) 2.13(d) (0.47)(d) 41
Year ended 10/31/07 11.35 31,025 2.02 2.09 0.31 44
Year ended 10/31/06 18.67 21,066 2.16 2.27 (0.81) 47
Year ended 10/31/05 14.69 19,582 2.21 2.31 (1.15) 20
Year ended 10/31/04(e) 18.40 6,558 2.66(f) 3.91(f) (1.82)(f) 29
- ----------------------------------------------------------------------------------------------------------------
CLASS C
Year ended 10/31/08 (42.12) 59,806 2.12(d) 2.13(d) (0.47)(d) 41
Year ended 10/31/07 11.28 116,625 2.02 2.09 0.31 44
Year ended 10/31/06 18.60 42,640 2.16 2.27 (0.81) 47
Year ended 10/31/05 14.79 24,724 2.21 2.31 (1.15) 20
Year ended 10/31/04(e) 18.30 4,550 2.66(f) 3.91(f) (1.82)(f) 29
- ----------------------------------------------------------------------------------------------------------------
CLASS R
Year ended 10/31/08 (41.82) 13,541 1.62(d) 1.63(d) 0.03(d) 41
Year ended 10/31/07 11.90 10,073 1.52 1.59 0.81 44
Year ended 10/31/06 19.15 2,759 1.66 1.77 (0.31) 47
Year ended 10/31/05 15.39 1,755 1.71 1.81 (0.65) 20
Year ended 10/31/04(e) 12.59 34 2.16(f) 3.41(f) (1.32)(f) 29
- ----------------------------------------------------------------------------------------------------------------
CLASS Y
Year ended 10/31/08(e) (12.95) 511 1.17(d)(f) 1.17(d)(f) 0.48(d)(f) 41
- ----------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
Year ended 10/31/08 (41.45) 147,944 0.90(d) 0.91(d) 0.75(d) 41
Year ended 10/31/07 12.60 169,019 0.86 0.93 1.47 44
Year ended 10/31/06 20.16 29,481 0.91 1.01 0.44 47
Year ended 10/31/05 16.11 18,708 1.02 1.12 0.04 20
Year ended 10/31/04(e) 12.88 5,094 1.60(f) 2.86(f) (0.77)(f) 29
________________________________________________________________________________________________________________
================================================================================================================
</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 $341,459,
$21,291, $94,114, $15,800, $485 and $180,180 for Class A, Class B, Class C,
Class R, Class Y, and Institutional Class shares, respectively.
(e) Class A, Class B and Class C shares commenced on November 4, 2003, Class R
and Institutional Class shares commenced on April 30, 2004 and Class Y
shares commenced on October 3, 2008.
(f) Annualized.
20 AIM TRIMARK SMALL COMPANIES FUND
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State
Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and
Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05-
1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into
certain arrangements permitting market timing of the AIM Funds and failed to
disclose these arrangements in the prospectuses for such Funds, and conclusions
of law to the effect that Invesco Aim and IADI violated the West Virginia
securities laws. The WVASC orders Invesco Aim and IADI to cease any further
violations and seeks to impose monetary sanctions, including restitution to
affected investors, disgorgement of fees, reimbursement of investigatory,
administrative and legal costs and an "administrative assessment," to be
determined by the Commissioner. Initial research indicates that these damages
could be limited or capped by statute. By agreement with the Commissioner of
Securities, Invesco Aim's time to respond to that Order has been indefinitely
suspended.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, Invesco Funds Group,
Inc. ("IFG"), Invesco Aim, IADI and/or related entities and individuals,
depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in
the AIM Funds; and
- that certain AIM Funds inadequately employed fair value pricing.
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws 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. The case pending in Illinois State Court regarding fair value
pricing was dismissed with prejudice on May 6, 2008.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various Invesco Aim- and IFG-related
parties: (i) a Consolidated Amended Class Action Complaint purportedly brought
on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund
Derivative Complaint purportedly brought on behalf of the AIM Funds and fund
registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA
purportedly brought on behalf of participants in the Invesco 401(k) plan. Based
on orders issued by the MDL Court, all claims asserted against the AIM Funds
that have been transferred to the MDL Court have been dismissed, although
certain Funds remain nominal defendants in the Consolidated Amended Fund
Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco
defendants' motion to dismiss the Amended Class Action Complaint for Violations
of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June
16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and
remanded this lawsuit back to the MDL Court for further proceedings.
IFG, Invesco Aim, IADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing
full cooperation with respect to these inquiries. Regulatory actions and/or
additional civil lawsuits related to these or other issues may be filed against
the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the
future.
At the present time, management of Invesco Aim and the Fund are unable to
estimate the impact, if any, that the outcome of the Pending Litigation and
Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund.
21 AIM TRIMARK SMALL COMPANIES FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Trimark Small Companies Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Trimark Small Companies Fund
(one of the funds constituting AIM Investment Funds, hereafter referred to as
the "Fund") at October 31, 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 October 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2008
Houston, Texas
22 AIM TRIMARK SMALL COMPANIES FUND
CALCULATING YOUR ONGOING FUND EXPENSES
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments or
contingent deferred sales charges on redemptions, and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and/or service
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with ongoing costs of investing in other mutual funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period May 1, 2008, through October 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 October 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 October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO
- ---------------------------------------------------------------------------------------------------
A $1,000.00 $724.10 $6.07 $1,018.10 $ 7.10 1.40%
- ---------------------------------------------------------------------------------------------------
B 1,000.00 721.70 9.30 1,014.33 10.89 2.15
- ---------------------------------------------------------------------------------------------------
C 1,000.00 721.50 9.30 1,014.33 10.89 2.15
- ---------------------------------------------------------------------------------------------------
R 1,000.00 723.50 7.15 1,016.84 8.36 1.65
- ---------------------------------------------------------------------------------------------------
Y 1,000.00 870.50 0.87 1,019.25 5.94 1.17
- ---------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 31, 2008 (as of close of
business October 3, 2008 through October 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 29
(as of close of business October 3, 2008, through October 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 TRIMARK SMALL COMPANIES FUND
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the Board) of AIM renewal process, the Trustees receive ent weight to the various factors. The
Investment Funds is required under the comparative performance and fee data Trustees recognized that the advisory
Investment Company Act of 1940 to approve regarding the AIM Funds prepared by an arrangements and resulting advisory fees
annually the renewal of the AIM Trimark independent company, Lipper, Inc. for the Fund and the other AIM Funds are
Small Companies Fund's (the Fund) (Lipper), under the direction and the result of years of review and
investment advisory agreement with Invesco supervision of the independent Senior negotiation between the Trustees and
Aim Advisors, Inc. (Invesco Aim). During Officer who also prepares a separate Invesco Aim, that the Trustees may focus
contract renewal meetings held on June analysis of this information for the to a greater extent on certain aspects of
18-19, 2008, the Board as a whole and the Trustees. Each Sub-Committee then makes these arrangements in some years than in
disinterested or "independent" Trustees, recommendations to the Investments others, and that the Trustees'
voting separately, approved the Committee regarding the performance, fees deliberations and conclusions in a
continuance of the Fund's investment and expenses of their assigned funds. The particular year may be based in part on
advisory agreement for another year, Investments Committee considers each their deliberations and conclusions of
effective July 1, 2008. In doing so, the Sub-Committee's recommendations and makes these same arrangements throughout the
Board determined that the Fund's its own recommendations regarding the year and in prior years.
investment advisory agreement is in the performance, fees and expenses of the AIM
best interests of the Fund and its Funds to the full Board. The Investments FACTORS AND CONCLUSIONS AND SUMMARY OF
shareholders and that the compensation to Committee also considers each INDEPENDENT WRITTEN FEE EVALUATION
Invesco Aim under the Fund's investment Sub-Committee's recommendations in making
advisory agreement is fair and reasonable. its annual recommendation to the Board The discussion below serves as a summary
whether to approve the continuance of each of the Senior Officer's independent
The independent Trustees met separately AIM Fund's investment advisory agreement written evaluation with respect to the
during their evaluation of the Fund's and sub-advisory agreements for another Fund's investment advisory agreement as
investment advisory agreement with year. well as a discussion of the material
independent legal counsel from whom they factors and related conclusions that
received independent legal advice, and the The independent Trustees are assisted formed the basis for the Board's approval
independent Trustees also received in their annual evaluation of the Fund's of the Fund's advisory investment
assistance during their deliberations from investment advisory agreement by the agreement and sub-advisory agreements.
the independent Senior Officer, a independent Senior Officer. One Unless otherwise stated, information set
full-time officer of the AIM Funds who responsibility of the Senior Officer is to forth below is as of June 19, 2008 and
reports directly to the independent manage the process by which the AIM Funds' does not reflect any changes that may have
Trustees. proposed management fees are negotiated occurred since that date, including but
during the annual contract renewal process not limited to changes to the Fund's
THE BOARD'S FUND EVALUATION PROCESS to ensure that they are negotiated in a performance, advisory fees, expense
manner that is at arms' length and limitations and/or fee waivers.
The Board's Investments Committee has reasonable. Accordingly, the Senior
established three Sub-Committees that are Officer must either supervise a I. Investment Advisory Agreement
responsible for overseeing the management competitive bidding process or prepare an
of a number of the series portfolios of independent written evaluation. The Senior A. Nature, Extent and Quality of
the AIM Funds. This Sub-Committee Officer has recommended that an Services Provided by Invesco Aim
structure permits the Trustees to focus on independent written evaluation be provided
the performance of the AIM Funds that have and, at the direction of the Board, has The Board reviewed the advisory services
been assigned to them. The Sub-Committees prepared an independent written provided to the Fund by Invesco Aim under
meet throughout the year to review the evaluation. the Fund's investment advisory agreement,
performance of their assigned funds, and the performance of Invesco Aim in
the Sub-Committees review monthly and During the annual contract renewal providing these services, and the
quarterly comparative performance process, the Board considered the factors credentials and experience of the officers
information and periodic asset flow data discussed below under the heading "Factors and employees of Invesco Aim who provide
for their assigned funds. These materials and Conclusions and Summary of Independent these services. The Board's review of the
are prepared under the direction and Written Fee Evaluation" in evaluating the qualifications of Invesco Aim to provide
supervision of the independent Senior fairness and reasonableness of the Fund's these services included the Board's
Officer. Over the course of each year, the investment advisory agreement and consideration of Invesco Aim's portfolio
Sub-Committees meet with portfolio sub-advisory agreements at the contract and product review process, various back
managers for their assigned funds and renewal meetings and at their meetings office support functions provided by
other members of management and review throughout the year as part of their Invesco Aim and its affiliates, and
with these individuals the performance, ongoing oversight of the Fund. The Fund's Invesco Aim's equity and fixed income
investment objective(s), policies, investment advisory agreement and trading operations. The Board concluded
strategies and limitations of these funds. sub-advisory agreements were considered that the nature, extent and quality of the
separately, although the Board also advisory services provided to the Fund by
In addition to their meetings considered the common interests of all of Invesco Aim were appropriate and that
throughout the year, the Sub-Committees the AIM Funds in their deliberations. The Invesco Aim currently is providing
meet at designated contract renewal Board considered all of the information satisfactory advisory services in
meetings each year to conduct an in-depth provided to them and did not identify any accordance with the terms of the Fund's
review of the performance, fees and particular factor that was controlling. investment advisory agreement. In
expenses of their assigned funds. During Each Trustee may have evaluated the addition, based on their ongoing meetings
the contract information provided differently from one throughout the year with the Fund's
another and attributed differ- portfolio manager or managers, the Board
concluded that these individuals are
competent and able
continued
24 AIM TRIMARK SMALL COMPANIES FUND
to continue to carry out their C. Advisory Fees and Fee Waivers that the Fund's contractual advisory fee
responsibilities under the Fund's schedule includes seven breakpoints and
investment advisory agreement. The Board compared the Fund's contractual that the level of the Fund's advisory
advisory fee rate to the contractual fees, as a percentage of the Fund's net
In determining whether to continue the advisory fee rates of funds in the Fund's assets, has decreased as net assets
Fund's investment advisory agreement, the Lipper expense group that are not managed increased because of the breakpoint. Based
Board considered the prior relationship by Invesco Aim, at a common asset level on this information, the Board concluded
between Invesco Aim and the Fund, as well and as of the end of the past calendar that the Fund's advisory fees
as the Board's knowledge of Invesco Aim's year. The Board noted that the Fund's appropriately reflect economies of scale
operations, and concluded that it was advisory fee rate was below the median at current asset levels. The Board also
beneficial to maintain the current contractual advisory fee rate of funds in noted that the Fund shares directly in
relationship, in part, because of such its expense group. The Board also reviewed economies of scale through lower fees
knowledge. The Board also considered the the methodology used by Lipper in charged by third party service providers
steps that Invesco Aim and its affiliates determining contractual fee rates. based on the combined size of all of the
have taken over the last several years to AIM Funds and affiliates.
improve the quality and efficiency of the The Board also compared the Fund's
services they provide to the AIM Funds in effective fee rate (the advisory fee after E. Profitability and Financial
the areas of investment performance, any advisory fee waivers and before any Resources of Invesco Aim
product line diversification, expense limitations/waivers) to the
distribution, fund operations, shareholder advisory fee rates of other clients of The Board reviewed information from
services and compliance. The Board Invesco Aim and its affiliates with Invesco Aim concerning the costs of the
concluded that the quality and efficiency investment strategies comparable to those advisory and other services that Invesco
of the services Invesco Aim and its of the Fund, including two mutual funds Aim and its affiliates provide to the Fund
affiliates provide to the AIM Funds in advised by Invesco Aim. The Board noted and the profitability of Invesco Aim and
each of these areas have generally that the Fund's rate was below the rates its affiliates in providing these
improved, and support the Board's approval for two other mutual funds. services. The Board also reviewed
of the continuance of the Fund's information concerning the financial
investment advisory agreement. The Board noted that Invesco Aim has condition of Invesco Aim and its
proposed that the contractual expense affiliates. The Board also reviewed with
B. Fund Performance limitation that had been formerly Invesco Aim the methodology used to
committed to by Invesco Aim through at prepare the profitability information. The
The Board compared the Fund's performance least June 30, 2008 expire on such date Board considered the overall profitability
during the past one and three calendar and that Invesco Aim has not proposed any of Invesco Aim, as well as the
years to the performance of funds in the fee waivers or expense limitations for the profitability of Invesco Aim in connection
Fund's performance group that are not Fund. Invesco Aim advised the Board that with managing the Fund. The Board noted
managed by Invesco Aim, and against the the expense limitation had not resulted in that Invesco Aim continues to operate at a
performance of all funds in the Lipper any waivers for at least the past two net profit, although increased expenses in
Small-Cap Core Funds Index. The Board also fiscal years of the Fund. recent years have reduced the
reviewed the criteria used by Invesco Aim profitability of Invesco Aim and its
to identify the funds in the Fund's The Board noted that Invesco Aim has affiliates. The Board concluded that the
performance group for inclusion in the not proposed any advisory fee waivers for Fund's fees were fair and reasonable, and
Lipper reports. The Board noted that the the Fund. The Board concluded that it was that the level of profits realized by
Fund's performance was in the second not necessary at this time to discuss with Invesco Aim and its affiliates from
quintile of its performance group for the Invesco Aim whether to implement any fee providing services to the Fund was not
one and three year periods (the first waivers or expense limitations because the excessive in light of the nature, quality
quintile being the best performing funds Fund's total expenses for all classes were and extent of the services provided. The
and the fifth quintile being the worst at or below the median total expenses of Board considered whether Invesco Aim is
performing funds). The Board noted that the funds in the Fund's Lipper expense financially sound and has the resources
the Fund's performance was above the group that are not managed by Invesco Aim. necessary to perform its obligations under
performance of the Index for the one and the Fund's investment advisory agreement,
three year periods. The Board also After taking account of the Fund's and concluded that Invesco Aim has the
considered the steps Invesco Aim has taken contractual advisory fee rate, as well as financial resources necessary to fulfill
over the last several years to improve the the comparative advisory fee information these obligations.
quality and efficiency of the services and the expiration of the expense
that Invesco Aim provides to the AIM limitation discussed above, the Board F. Independent Written Evaluation of
Funds. The Board concluded that Invesco concluded that the Fund's advisory fees the Fund's Senior Officer
Aim continues to be responsive to the were fair and reasonable.
Board's focus on fund performance. The Board noted that, at their direction,
Although the independent written D. Economies of Scale and Breakpoints the Senior Officer of the Fund, who is
evaluation of the Fund's Senior Officer independent of Invesco Aim and Invesco
only considered Fund performance through The Board considered the extent to which Aim's affiliates, had prepared an
the most recent calendar year, the Board there are economies of scale in Invesco independent written evaluation to assist
also reviewed more recent Fund performance Aim's provision of advisory services to the Board in determining the
and this review did not change their the Fund. The Board also considered reasonableness of the proposed management
conclusions. whether the Fund benefits from such fees of the AIM Funds, including the Fund.
economies of scale through contractual The Board noted that they had relied upon
breakpoints in the Fund's advisory fee the Senior Officer's written evaluation
schedule or through advisory fee waivers instead of a competitive bidding process.
or expense limitations. The Board noted
continued
25 AIM TRIMARK SMALL COMPANIES FUND
In determining whether to continue the investments, although Invesco Aim has for the Fund, as one of the Affiliated
Fund's investment advisory agreement, the contractually agreed to waive through at Sub-Advisers currently manages the Fund's
Board considered the Senior Officer's least June 30, 2009, the advisory fees assets. The Board compared the Fund's
written evaluation. payable by the Fund in an amount equal to performance during the past one and three
100% of the net advisory fees Invesco Aim calendar years to the performance of funds
G. Collateral Benefits to Invesco Aim receives from the affiliated money market in the Fund's performance group that are
and its Affiliates funds with respect to the Fund's not managed by Invesco Aim, and against
investment of uninvested cash, but not the performance of all funds in the Lipper
The Board considered various other cash collateral. The Board considered the Small-Cap Core Funds Index. The Board also
benefits received by Invesco Aim and its contractual nature of this fee waiver and reviewed the criteria used by Invesco Aim
affiliates resulting from Invesco Aim's noted that it remains in effect until at to identify the funds in the Fund's
relationship with the Fund, including the least June 30, 2009. The Board concluded performance group for inclusion in the
fees received by Invesco Aim and its that the Fund's investment of uninvested Lipper reports. The Board noted that the
affiliates for their provision of cash and cash collateral from any Fund's performance was in the second
administrative, transfer agency and securities lending arrangements in the quintile of its performance group for the
distribution services to the Fund. The affiliated money market funds is in the one and three year periods (the first
Board considered the performance of best interests of the Fund and its quintile being the best performing funds
Invesco Aim and its affiliates in shareholders. and the fifth quintile being the worst
providing these services and the performing funds). The Board noted that
organizational structure employed by II. Sub-Advisory Agreements the Fund's performance was above the
Invesco Aim and its affiliates to provide performance of the Index for the one and
these services. The Board also considered A. Nature, Extent and Quality of three year periods. The Board also
that these services are provided to the Services Provided by Affiliated considered the steps Invesco Aim has taken
Fund pursuant to written contracts which Sub-Advisers over the last several years to improve the
are reviewed and approved on an annual quality and efficiency of the services
basis by the Board. The Board concluded The Board reviewed the services to be that Invesco Aim provides to the AIM
that Invesco Aim and its affiliates were provided by Invesco Trimark Ltd., Invesco Funds. The Board concluded that Invesco
providing these services in a satisfactory Asset Management Deutschland, GmbH, Aim continues to be responsive to the
manner and in accordance with the terms of Invesco Asset Management Limited, Invesco Board's focus on fund performance. The
their contracts, and were qualified to Asset Management (Japan) Limited, Invesco Board also reviewed more recent Fund
continue to provide these services to the Australia Limited, Invesco Global Asset performance and this review did not change
Fund. Management (N.A.), Inc., Invesco Hong Kong their conclusions.
Limited, Invesco Institutional (N.A.),
The Board considered the benefits Inc. and Invesco Senior Secured C. Sub-Advisory Fees
realized by Invesco Aim as a result of Management, Inc. (collectively, the
portfolio brokerage transactions executed "Affiliated Sub-Advisers") under the The Board considered the services to be
through "soft dollar" arrangements. Under sub-advisory agreements and the provided by the Affiliated Sub-Advisers
these arrangements, portfolio brokerage credentials and experience of the officers pursuant to the sub-advisory agreements
commissions paid by the Fund and/or other and employees of the Affiliated and the services to be provided by Invesco
funds advised by Invesco Aim are used to Sub-Advisers who will provide these Aim pursuant to the Fund's investment
pay for research and execution services. services. The Board concluded that the advisory agreement, as well as the
The Board noted that soft dollar nature, extent and quality of the services allocation of fees between Invesco Aim and
arrangements shift the payment obligation to be provided by the Affiliated the Affiliated Sub-Advisers pursuant to
for the research and execution services Sub-Advisers were appropriate. The Board the sub-advisory agreements. The Board
from Invesco Aim to the funds and noted that the Affiliated Sub-Advisers, noted that the sub-advisory fees have no
therefore may reduce Invesco Aim's which have offices and personnel that are direct effect on the Fund or its
expenses. The Board also noted that geographically dispersed in financial shareholders, as they are paid by Invesco
research obtained through soft dollar centers around the world, have been formed Aim to the Affiliated Sub-Advisers, and
arrangements may be used by Invesco Aim in in part for the purpose of researching and that Invesco Aim and the Affiliated
making investment decisions for the Fund compiling information and making Sub-Advisers are affiliates. After taking
and may therefore benefit Fund recommendations on the markets and account of the Fund's contractual
shareholders. The Board concluded that economies of various countries and sub-advisory fee rate, as well as other
Invesco Aim's soft dollar arrangements securities of companies located in such relevant factors, the Board concluded that
were appropriate. The Board also concluded countries or on various types of the Fund's sub-advisory fees were fair and
that, based on their review and investments and investment techniques, and reasonable.
representations made by Invesco Aim, these providing investment advisory services.
arrangements were consistent with The Board concluded that the sub-advisory D. Financial Resources of the
regulatory requirements. agreements will benefit the Fund and its Affiliated Sub-Advisers
shareholders by permitting Invesco Aim to
The Board considered the fact that the utilize the additional resources and The Board considered whether each
Fund's uninvested cash and cash collateral talent of the Affiliated Sub-Advisers in Affiliated Sub-Adviser is financially
from any securities lending arrangements managing the Fund. sound and has the resources necessary to
may be invested in money market funds perform its obligations under its
advised by Invesco Aim pursuant to B. Fund Performance respective sub-advisory agreement, and
procedures approved by the Board. The concluded that each Affiliated Sub-Adviser
Board noted that Invesco Aim will receive The Board did view Fund performance as a has the financial resources necessary to
advisory fees from these affiliated money relevant factor in considering whether to fulfill these obligations.
market funds attributable to such approve the sub-advisory agreements
26 AIM TRIMARK SMALL COMPANIES 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 October 31,
2008:
<Table>
<Caption>
FEDERAL AND STATE INCOME TAX
----------------------------
Long-Term Capital Gain Dividends $36,962,606
Qualified Dividend Income* 17.20%
Corporate Dividends Received Deduction* 18.73%
</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 percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008, and
October 31, 2008 were 19.13%, 17.74%, 16.18%, and 20.72%, respectively.
27 AIM TRIMARK SMALL COMPANIES FUND
TRUSTEES AND OFFICERS
The address of each trustee and officer of AIM Investment Funds (the "Trust"),
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee
oversees 103 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 2003 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 1997 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, Policy
Trustee firm) Studies, Inc. and
Van Gilder Insurance
Corporation
- --------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 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 2001 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 2001 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich &
Trustee Tang Funds) (15
portfolios)
- --------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 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.
28 AIM TRIMARK SMALL COMPANIES 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 2004 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
29 AIM TRIMARK SMALL COMPANIES FUND
Supplement to Annual Report dated 10/31/08
AIM TRIMARK SMALL COMPANIES FUND
==========================================
INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS The net annual Fund operating expense
For periods ended 10/31/08 ratio set forth in the most recent Fund
The following information has been prospectus as of the date of this
prepared to provide Institutional Class Inception 1.86% supplement for Institutional Class
shareholders with a performance overview 1 Year -41.45 shares was 0.89%.(1) The total annual
specific to their holdings. Institutional ========================================== Fund operating expense ratio set forth
Class shares are offered exclusively to in the most recent Fund prospectus as of
institutional investors, including defined ========================================== the date of this supplement for
contribution plans that meet certain AVERAGE ANNUAL TOTAL RETURNS Institutional Class shares was 0.90%.
criteria. For periods ended 9/30/08, most recent The expense ratios presented above may
calendar quarter-end vary from the expense ratios presented
in other sections of the actual report
Inception 6.45% that are based on expenses incurred
1 Year -26.38 during the period covered by the report.
==========================================
Please note that past performance is
Institutional Class shares' inception date not indicative of future results. More
is April 30, 2004. Returns since that date recent returns may be more or less than
are historical returns. All other returns those shown. All returns assume
are blended returns of historical reinvestment of distributions at NAV.
Institutional Class share performance and Investment return and principal value
restated Class A share performance (for will fluctuate so your shares, when
periods prior to the inception date of redeemed, may be worth more or less than
Institutional Class shares) at net asset their original cost. See full report for
value (NAV) and reflect the Rule 12b-1 information on comparative benchmarks.
fees applicable to Class A shares. Class A Please consult your Fund prospectus for
shares' inception date is November 4, more information. For the most current
2003. month-end performance, please call 800
451 4246 or visit invescoaim.com.
Institutional Class shares have no
sales charge; therefore, performance is at (1) Total annual operating expenses less
NAV. Performance of Institutional Class any contractual fee waivers and/or
shares will differ from performance of expense reimbursements by the advisor
other share classes primarily due to in effect through at least June 30,
differing sales charges and class 2009. See current prospectus for more
expenses. information.
==========================================
NASDAQ SYMBOL ATIIX
==========================================
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]
invescoaim.com T-SCO-INS-1 Invesco Aim Distributors, Inc. --SERVICE MARK--
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 May 1, 2008, through October 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 (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO
- -----------------------------------------------------------------------------------------------------------
Institutional $1,000.00 $725.10 $4.34 $1,020.11 $5.08 1.00%
- -----------------------------------------------------------------------------------------------------------
</Table>
(1) The actual ending account value is based on the actual total return of the
Fund for the period May 1, 2008, through October 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 TRIMARK SMALL COMPANIES 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:
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trees used to produce paper. be sent via email as soon as they're available.
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expenses and put more capital back in your fund's returns. 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 811-05426 and 033-19338.
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 January 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 [INVESCO AIM LOGO]
investment advisory services to individual and institutional clients and do not sell securities. Please -- SERVICE MARK --
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.
invescoaim.com T-SCO-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 PWC RELATED TO THE REGISTRANT
PWC billed the Registrant aggregate fees for services rendered to the
Registrant for the last two fiscal years as follows:
Percentage of Fees Percentage of Fees
Billed Applicable to Billed Applicable to
Non-Audit Services Non-Audit Services
Provided for fiscal Provided for fiscal
Fees Billed for year end 2008 Fees Billed for year end 2007
Services Rendered to Pursuant to Waiver of Services Rendered to Pursuant to Waiver of
the Registrant for Pre-Approval the Registrant for Pre-Approval
fiscal year end 2008 Requirement(1) fiscal year end 2007 Requirement(1)
-------------------- --------------------- -------------------- ---------------------
Audit Fees $ 365,875 N/A $ 347,451 N/A
Audit-Related Fees(2) $ 5,620 0% $ 0 0%
Tax Fees(3) $ 80,248 0% $ 77,633 0%
All Other Fees $ 0 0% $ 0 0%
--------- ---------
Total Fees $ 451,743 0% $ 425,084 0%
PWC billed the Registrant aggregate non-audit fees of $85,868 for the fiscal
year ended 2008, and $77,633 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 to PWC 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 October 31, 2008 includes
fees billed for completing agreed-upon procedures related to fund mergers.
(3) Tax fees for the fiscal year end October 31, 2008 includes fees billed for
reviewing tax returns and consultation services. Tax fees for fiscal year
end October 31, 2007 includes fees billed for reviewing tax returns and
consultation services.
FEES BILLED BY PWC 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 for the last two fiscal years 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 Billed Applicable to Aim and Invesco Billed Applicable to
Aim Affiliates for Non-Audit Services Aim Affiliates for Non-Audit Services
fiscal year end 2008 Provided for fiscal year fiscal year end 2007 Provided for fiscal year
That Were Required end 2008 Pursuant to That 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 to PWC 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 PWC's independence.
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
POLICIES AND PROCEDURES
As adopted by the Audit Committees of
the AIM Funds (the "Funds")
Last Amended September 18, 2006
STATEMENT OF PRINCIPLES
Under the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and
Exchange Commission ("SEC") ("Rules"), the Audit Committees of the Funds' (the
"Audit Committee") Board of Trustees (the "Board") are responsible for the
appointment, compensation and oversight of the work of independent accountants
(an "Auditor"). As part of this responsibility and to assure that the Auditor's
independence is not impaired, the Audit Committees pre-approve the audit and
non-audit services provided to the Funds by each Auditor, as well as all
non-audit services provided by the Auditor to the Funds' investment adviser and
to affiliates of the adviser that provide ongoing services to the Funds
("Service Affiliates") if the services directly impact the Funds' operations or
financial reporting. The SEC Rules also specify the types of services that an
Auditor may not provide to its audit client. The following policies and
procedures comply with the requirements for pre-approval and provide a mechanism
by which management of the Funds may request and secure pre-approval of audit
and non-audit services in an orderly manner with minimal disruption to normal
business operations.
Proposed services either may be pre-approved without consideration of specific
case-by-case services by the Audit Committees ("general pre-approval") or
require the specific pre-approval of the Audit Committees ("specific
pre-approval"). As set forth in these policies and procedures, unless a type of
service has received general pre-approval, it will require specific pre-approval
by the Audit Committees. Additionally, any fees exceeding 110% of estimated
pre-approved fee levels provided at the time the service was pre-approved will
also require specific approval by the Audit Committees before payment is made.
The Audit Committees will also consider the impact of additional fees on the
Auditor's independence when determining whether to approve any additional fees
for previously pre-approved services.
The Audit Committees will annually review and generally pre-approve the services
that may be provided by each Auditor without obtaining specific pre-approval
from the Audit Committee. The term of any general pre-approval runs from the
date of such pre-approval through September 30th of the following year, unless
the Audit Committees consider a different period and state otherwise. The Audit
Committees will add to or subtract from the list of general pre-approved
services from time to time, based on subsequent determinations.
The purpose of these policies and procedures is to set forth the guidelines to
assist the Audit Committees in fulfilling their responsibilities.
DELEGATION
The Audit Committees may from time to time delegate pre-approval authority to
one or more of its members who are Independent Trustees. All decisions to
pre-approve a service by a delegated member shall be reported to the Audit
Committee at its next quarterly meeting.
AUDIT SERVICES
The annual audit services engagement terms will be subject to specific
pre-approval of the Audit Committees. Audit services include the annual
financial statement audit and other procedures such as tax provision work that
is required to be performed by the independent auditor to be able to form an
opinion on the Funds' financial statements. The Audit Committee will obtain,
review and consider sufficient information concerning the proposed Auditor to
make a reasonable evaluation of the Auditor's qualifications and independence.
In addition to the annual Audit services engagement, the Audit Committees may
grant either general or specific pre-approval of other audit services, which are
those services that only the independent auditor reasonably can provide. Other
Audit services may include services such as issuing consents for the
inclusion of audited financial statements with SEC registration statements,
periodic reports and other documents filed with the SEC or other documents
issued in connection with securities offerings.
NON-AUDIT SERVICES
The Audit Committees may provide either general or specific pre-approval of any
non-audit services to the Funds and its Service Affiliates if the Audit
Committees believe that the provision of the service will not impair the
independence of the Auditor, is consistent with the SEC's Rules on auditor
independence, and otherwise conforms to the Audit Committee's general principles
and policies as set forth herein.
AUDIT-RELATED SERVICES
"Audit-related services" are assurance and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements or that are traditionally performed by the independent auditor.
Audit-related services include, among others, accounting consultations related
to accounting, financial reporting or disclosure matters not classified as
"Audit services"; assistance with understanding and implementing new accounting
and financial reporting guidance from rulemaking authorities; and agreed-upon
procedures related to mergers, compliance with ratings agency requirements and
interfund lending activities.
TAX SERVICES
"Tax services" include, but are not limited to, the review and signing of the
Funds' federal tax returns, the review of required distributions by the Funds
and consultations regarding tax matters such as the tax treatment of new
investments or the impact of new regulations. The Audit Committee will
scrutinize carefully the retention of the Auditor in connection with a
transaction initially recommended by the Auditor, the major business purpose of
which may be tax avoidance or the tax treatment of which may not be supported in
the Internal Revenue Code and related regulations. The Audit Committee will
consult with the Funds' Treasurer (or his or her designee) and may consult with
outside counsel or advisors as necessary to ensure the consistency of Tax
services rendered by the Auditor with the foregoing policy.
No Auditor shall represent any Fund or any Service Affiliate before a tax court,
district court or federal court of claims.
Under rules adopted by the Public Company Accounting Oversight Board and
approved by the SEC, in connection with seeking Audit Committee pre-approval of
permissible Tax services, the Auditor shall:
1. Describe in writing to the Audit Committees, which writing may be in the
form of the proposed engagement letter:
a. The scope of the service, the fee structure for the
engagement, and any side letter or amendment to the engagement
letter, or any other agreement between the Auditor and the
Fund, relating to the service; and
b. Any compensation arrangement or other agreement, such as a
referral agreement, a referral fee or fee-sharing arrangement,
between the Auditor and any person (other than the Fund) with
respect to the promoting, marketing, or recommending of a
transaction covered by the service;
2. Discuss with the Audit Committees the potential effects of the services on
the independence of the Auditor; and
3. Document the substance of its discussion with the Audit Committees.
ALL OTHER AUDITOR SERVICES
The Audit Committees may pre-approve non-audit services classified as "All other
services" that are not categorically prohibited by the SEC, as listed in Exhibit
1 to this policy.
PRE-APPROVAL FEE LEVELS OR ESTABLISHED AMOUNTS
Pre-approval of estimated fees or established amounts for services to be
provided by the Auditor under general or specific pre-approval policies will be
set periodically by the Audit Committees. Any proposed fees exceeding 110% of
the maximum estimated pre-approved fees or established amounts for pre-approved
audit and non-audit services will be reported to the Audit Committees at the
quarterly Audit Committees meeting and will require specific approval by the
Audit Committees before payment is made. The Audit Committee will always factor
in the overall relationship of fees for audit and non-audit services in
determining whether to pre-approve any such services and in determining whether
to approve any additional fees exceeding 110% of the maximum pre-approved fees
or established amounts for previously pre-approved services.
PROCEDURES
On an annual basis, A I M Advisors, Inc. ("AIM") will submit to the Audit
Committees for general pre-approval, a list of non-audit services that the Funds
or Service Affiliates of the Funds may request from the Auditor. The list will
describe the non-audit services in reasonable detail and will include an
estimated range of fees and such other information as the Audit Committee may
request.
Each request for services to be provided by the Auditor under the general
pre-approval of the Audit Committees will be submitted to the Funds' Treasurer
(or his or her designee) and must include a detailed description of the services
to be rendered. The Treasurer or his or her designee will ensure that such
services are included within the list of services that have received the general
pre-approval of the Audit Committees. The Audit Committees will be informed at
the next quarterly scheduled Audit Committees meeting of any such services for
which the Auditor rendered an invoice and whether such services and fees had
been pre-approved and if so, by what means.
Each request to provide services that require specific approval by the Audit
Committees shall be submitted to the Audit Committees jointly by the Fund's
Treasurer or his or her designee and the Auditor, and must include a joint
statement that, in their view, such request is consistent with the policies and
procedures and the SEC Rules.
Each request to provide tax services under either the general or specific
pre-approval of the Audit Committees will describe in writing: (i) the scope of
the service, the fee structure for the engagement, and any side letter or
amendment to the engagement letter, or any other agreement between the Auditor
and the audit client, relating to the service; and (ii) any compensation
arrangement or other agreement between the Auditor and any person (other than
the audit client) with respect to the promoting, marketing, or recommending of a
transaction covered by the service. The Auditor will discuss with the Audit
Committees the potential effects of the services on the Auditor's independence
and will document the substance of the discussion.
Non-audit services pursuant to the de minimis exception provided by the SEC
Rules will be promptly brought to the attention of the Audit Committees for
approval, including documentation that each of the conditions for this
exception, as set forth in the SEC Rules, has been satisfied.
On at least an annual basis, the Auditor will prepare a summary of all the
services provided to any entity in the investment company complex as defined in
section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of
the engagement and the fees associated with those services.
The Audit Committees have designated the Funds' Treasurer to monitor the
performance of all services provided by the Auditor and to ensure such services
are in compliance with these policies and procedures. The Funds' Treasurer will
report to the Audit Committee on a periodic basis as to the results of such
monitoring. Both the Funds' Treasurer and management of AIM will immediately
report to the chairman of the Audit Committee any breach of these policies and
procedures that comes to the attention of the Funds' Treasurer or senior
management of AIM.
EXHIBIT 1 TO PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICIES AND
PROCEDURES
CONDITIONALLY PROHIBITED NON-AUDIT SERVICES (NOT PROHIBITED IF THE FUND CAN
REASONABLY CONCLUDE THAT THE RESULTS OF THE SERVICE WOULD NOT BE SUBJECT TO
AUDIT PROCEDURES IN CONNECTION WITH THE AUDIT OF THE FUND'S FINANCIAL
STATEMENTS)
- Bookkeeping or other services related to the accounting records or
financial statements of the audit client
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions, or
contribution-in-kind reports
- Actuarial services
- Internal audit outsourcing services
CATEGORICALLY PROHIBITED NON-AUDIT SERVICES
- Management functions
- Human resources
- Broker-dealer, investment adviser, or investment banking services
- Legal services
- Expert services unrelated to the audit
- Any service or product provided for a contingent fee or a commission
- Services related to marketing, planning, or opining in favor of the
tax treatment of confidential transactions or aggressive tax
position transactions, a significant purpose of which is tax
avoidance
- Tax services for persons in financial reporting oversight roles at
the Fund
- Any other service that the Public Company Oversight Board determines
by regulation is impermissible.
PwC advised the Funds' Audit Committee that PwC had identified two
matters that required further consideration under the SEC's auditor
independence rules.
First, PwC was engaged to perform services to an affiliate of INVESCO
PLC, 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. SEC rules
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. It was concluded that the services
performed 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 PLC, 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 the second 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. PwC advised the Audit
Committee that it believes its independence had not been adversely
affected as it related to the audits of the Funds. In reaching this
conclusion, PwC noted that during the time of its audit, the engagement
team was not aware of the investment, as it relates to the second
matter, and that PwC did not believe either of these situations
affected PwC's
ability to act objectively and impartially and to issue a report on
financial statements as the Funds' independent auditor. Based upon PwC's
review and discussion, the audit committee 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 Investment Funds
By: -s- PHILIP A. TAYLOR
-----------------------------------
Philip A. Taylor
Principal Executive Officer
Date: January 8, 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: January 8, 2009
By: -s- SHERI MORRIS
-----------------------------------
Sheri Morris
Principal Financial Officer
Date: January 8, 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.