-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GpBdhUgEQnpfsdf3ba81FQmbEn5LYGlpY2dFQGFSNWqk05UX6xNCbSTZhBVTBGAh ULrlDZYKxbfqNyY+KeKJUQ== 0001193125-06-075482.txt : 20060407 0001193125-06-075482.hdr.sgml : 20060407 20060407105622 ACCESSION NUMBER: 0001193125-06-075482 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060131 FILED AS OF DATE: 20060407 DATE AS OF CHANGE: 20060407 EFFECTIVENESS DATE: 20060407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIM STOCK FUNDS CENTRAL INDEX KEY: 0000035692 IRS NUMBER: 840576427 STATE OF INCORPORATION: MD FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-01474 FILM NUMBER: 06746828 BUSINESS ADDRESS: STREET 1: 11 GREENWAY PLAZA STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 77046 BUSINESS PHONE: 713-626-1919 MAIL ADDRESS: STREET 1: 11 GREENWAY PLAZA STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 77046 FORMER COMPANY: FORMER CONFORMED NAME: AIM STOCK FUNDS INC DATE OF NAME CHANGE: 20031001 FORMER COMPANY: FORMER CONFORMED NAME: INVESCO STOCK FUNDS INC DATE OF NAME CHANGE: 19990330 FORMER COMPANY: FORMER CONFORMED NAME: INVESCO CAPITAL APPRECIATION FUNDS INC DATE OF NAME CHANGE: 19970709 0000035692 S000000163 AIM Dynamics Fund C000000371 Class A IDYAX C000000372 Class B IDYBX C000000373 Class C IFDCX C000000374 Class K IDYKX C000000375 Investor Class FIDYX C000023323 Institutional Class IDICX C000029741 Class R IDYRX 0000035692 S000000165 AIM Small Company Growth Fund C000000381 Class A ISGAX C000000382 Class B ISGBX C000000383 Class C ISGCX C000000384 Class K ISCKX C000000385 Investor Class FIEGX C000029742 Class R ISGRX C000029743 Institutional Class IIEGX 0000035692 S000000166 AIM S&P 500 Index Fund C000000386 Investor Class ISPIX C000023325 Institutional Class ISIIX N-CSRS 1 dncsrs.txt FORM N-CSR FOR THE AIM STOCK FUNDS --------------------------- OMB APPROVAL --------------------------- OMB Number: 3235-0570 Expires: Sept. 30, 2007 Estimated average burden hours per response: 19.4 --------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-01474 AIM Stock Funds - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 11 Greenway Plaza, Suite 100 Houston, Texas 77046 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Robert H. Graham 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: 7/31 Date of reporting period: 1/31/06 Item 1. Reports to Stockholders. AIM DYNAMICS FUND Semiannual Report to Shareholders . January 31, 2006 [COVER IMAGE] [YOUR GOALS. OUR SOLUTIONS.] - REGISTERED TRADEMARK - [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - AIM DYNAMICS FUND SEEKS LONG-TERM CAPITAL GROWTH. .. Unless otherwise stated, information presented in this report is as of January 31, 2006, and is based on total net assets. ABOUT SHARE CLASSES .. Class B shares are not available as an investment for retirement plans maintained pursuant to Section 401 of the Internal Revenue Code, including 401(k) plans, money purchase pension plans and profit sharing plans. Plans that had existing accounts prior to September 30, 2003, invested in Class B shares will continue to be allowed to make additional purchases. .. Effective October 21, 2005, Class K shares were converted to Class A shares. .. Investor Class shares are closed to most investors. For more information on who may continue to invest in the Investor Class shares, please see the prospectus. .. Class R shares are available only to certain retirement plans. Please see the prospectus for more information. PRINCIPAL RISKS OF INVESTING IN THE FUND .. Investing in mid-sized companies involves risks not associated with investing in more established companies, including business risk, significant stock price fluctuations and illiquidity. .. The Fund may invest up to 25% of its assets in the securities of non-U.S. issuers. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation. International investing presents certain risks not associated with investing solely in the United States. These include risks relating to fluctuations in the value of the U.S. dollar relative to the values of other currencies, the custody arrangements made for the Fund's foreign holdings, differences in accounting, political risks and the lesser degree of public information required to be provided by non-U.S. companies. .. At any given time, the Fund may be subject to sector risk, which means a certain sector may underperform other sectors or the market as a whole. The Fund is not limited with respect to the sectors in which it can invest. ABOUT INDEXES USED IN THIS REPORT .. The unmanaged STANDARD & POOR'S COMPOSITE INDEX OF 500 STOCKS (the S&P 500 - --REGISTERED TRADEMARK-- Index) is an index of common stocks frequently used as a general measure of U.S. stock market performance. .. RUSSELL MIDCAP INDEX, which represents the performance of the stocks of domestic mid-capitalization companies; the Growth subset measures the performance of Russell Midcap companies with higher price/book ratios and higher forecasted growth values. .. The unmanaged LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX, which represents the U.S. investment-grade fixed-rate bond market (including government and corporate securities, mortgage pass-through securities and asset-backed securities), is compiled by Lehman Brothers, a global investment bank. .. The unmanaged MSCI WORLD INDEX is a group of global securities tracked by Morgan Stanley Capital International. .. The unmanaged LIPPER MID-CAP GROWTH FUND INDEX represents an average of the performance of the 30 largest mid-capitalization growth funds tracked by Lipper, Inc., an independent mutual fund performance monitor. .. The Fund is not managed to track the performance of any particular index, including the indexes defined here, and consequently, the performance of the fund may deviate significantly from the performance of the indexes. .. A direct investment cannot be made in an index. Performance of an index of funds reflects fund expenses; performance of a market index does not. OTHER INFORMATION .. Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. and Standard & Poor's. .. The returns shown in the Management's Discussion of Fund Performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. 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 AIMinvestments.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's Web site at sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-01474 and 002-26625. 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 AIM Web site, AIMinvestments.com. On the home page, scroll down and click on AIM Funds Proxy Policy. The information is also available on the SEC Web site, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2005, is available at our Web site. Go to AIMinvestments.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC Web site, sec.gov. - -------------------------------------------------------------------------------- FUND NASDAQ SYMBOLS Class A Shares IDYAX Class B Shares IDYBX Class C Shares IFDCX Class R Shares IDYRX Investor Class Shares FIDYX - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - -------------------------------------------------------------------------------- AIMINVESTMENTS.COM AIM DYNAMICS FUND DEAR FELLOW AIM FUNDS SHAREHOLDERS: [GRAHAM PHOTO] Although many concerns weighed on investors minds during the six months covered by this report, stocks and bonds posted gains for the period. The S&P 500 Index, frequently cited as a benchmark for U.S. stock market performance, returned 4.67%. Results for international stocks were more impressive, with the MSCI World Index gaining 11.29%. Bond returns were more modest, as the Lehman Brothers U.S. Aggregate Bond Index gained 0.84%. ROBERT H. GRAHAM Within equity indexes, there was a good deal of variation in the performance of different sectors and markets. Energy outperformed other sectors of the S&P 500 Index, reflecting higher oil and gas prices. Internationally, emerging markets produced more attractive results than developed markets, partially because emerging markets tend to be more closely tied to the performance of natural resources and commodities. [WILLIAMSON PHOTO] Bond performance also varied, with short- and intermediate-term bonds generally faring better than their long-term counterparts. The difference between bond yields was relatively narrow across the maturity spectrum, making short- and intermediate-term bonds, which are generally perceived as safer, a more attractive investment option than long-term debt. High yield bonds and municipal bonds also were among the better-performing segments of the fixed-income market. MARK H. WILLIAMSON A number of key developments affected markets and the economy during the reporting period: . Hurricane Katrina, which devastated New Orleans in August, had numerous economic repercussions and dealt a short-term setback to consumer confidence. However, consumer confidence rebounded toward the end of the period, with analysts crediting the resiliency of the economy, falling gas prices and job growth for this trend. . The Federal Reserve Board (the Fed) continued its tightening policy, raising the key federal funds target rate to 4.50% by the end of the reporting period. Many analysts believed that the central bank was near the end of its tightening policy as Ben Bernanke succeeded the retiring Alan Greenspan as Fed chairman early in 2006. . Gasoline prices, which soared to a nationwide average of slightly more than $3.08 per gallon on September 5, following Hurricane Katrina, had dropped by more than 70 cents by the end of the reporting period, according to the U.S. Energy Information Administration. . In 2005, the economy created 2 million new jobs, although job growth was uneven and sometimes did not meet analysts' expectations on a monthly basis. For a discussion of the specific market conditions that affected your Fund and how your Fund was managed during the reporting period, please turn to Page 3. YOUR FUND Further information about the markets, your Fund and investing in general is always available on our comprehensive Web site, AIMinvestments.com. We invite you to visit it frequently. We at AIM remain committed to building solutions to help you meet your investment goals. We thank you for your continued participation in AIM Investments --REGISTERED TRADEMARK--. If you have any questions, please contact our award-winning Client Service representatives at 800-959-4246. We are pleased to be of help. Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, President, A I M Advisors, Inc. AIM Funds March 21, 2006 AIM INVESTMENTS IS A REGISTERED SERVICE MARK OF A I M MANAGEMENT GROUP INC. A I M ADVISORS, INC. AND A I M CAPITAL MANAGEMENT, INC. ARE THE INVESTMENT ADVISORS. A I M DISTRIBUTORS, INC. IS THE DISTRIBUTOR FOR THE RETAIL FUNDS REPRESENTED BY AIM INVESTMENTS. 1 AIM DYNAMICS FUND DEAR FELLOW AIM FUND SHAREHOLDERS: [CROCKETT PHOTO] Having completed a year of transition and change at AIM Funds--as well as my first full year as your board's independent chair--I can assure you that shareholder interests are at the forefront of every decision your board makes. While regulators and fund companies debate the value of an independent board chair, this structure is working for you. An independent chair can help lead to unbiased decisions and eliminate potential conflicts. BRUCE L. CROCKETT Some highlights of 2005 board activity: . Board approval of voluntary fee reductions, which are saving shareholders more than $20 million annually, based on asset levels of March 31, 2005. . Board approval for the merger of 14 funds into other AIM funds with similar investment objectives. Eight of these mergers were approved by shareholders of the target funds during 2005. The remaining six are being voted on by shareholders in early 2006. In each case, the goal is for the resulting merged fund to benefit from strengthened management and greater efficiency. . Board approval for portfolio management changes at 11 funds, consistent with the goal of organizing management teams around common processes and shared investment views. Again, we hope that these changes will improve fund performance and efficiency. In 2006, your board will continue to focus on reducing costs and shareholder fees and improving portfolio performance, which is not yet as strong as we expect to see it. Eight in-person board meetings and several additional telephone and committee meetings are scheduled to take place this year. I'll inform you of our progress in my next semiannual letter to shareholders. The AIM Funds board is pleased to welcome our newest independent member, Raymond Stickel, Jr., a former partner with the international auditing firm of Deloitte & Touche. We also send our thanks and best wishes to Gerald J. Lewis, who retired from your board in December 2005, and to Edward K. Dunn, Jr., who is retiring this year. Your board welcomes your views. Please mail them to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046. Sincerely, /s/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair On Behalf of the Board of Trustees AIM Funds March 21, 2006 2 AIM DYNAMICS FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY The Fund produced solid results for the six-month reporting period. Our focus on mid-cap stocks, the best-performing domestic equity category for the period, helped your Fund outperform the large-cap oriented S&P 500 Index. The Fund performed in line with the Russell Midcap Growth Index, driven by strong stock selection in the consumer discretionary and consumer staples sectors, and an overweight position in the telecommunication services sector. For long-term performance, see Page 5. - -------------------------------------------------------------------------------- FUND VS. INDEXES TOTAL RETURNS, 7/31/05-1/31/06, EXCLUDING APPLICABLE SALES CHARGES. IF SALES CHARGES WERE INCLUDED, RETURNS WOULD BE LOWER. Class A Shares 10.33% Class B Shares 9.90 Class C Shares 9.86 Class R* Shares N/A Investor Class Shares 10.33 S&P 500 Index (Broad Market Index) 4.67 Russell Midcap Growth Index (Style-specific Index) 10.38 Lipper Mid-Cap Growth Fund Index (Peer Group Index) 11.76 SOURCE: LIPPER INC. - -------------------------------------------------------------------------------- * SHARE CLASS INCEPTED DURING THE SEMIANNUAL REPORT PERIOD. SEE PAGE 5 FOR A DETAILED EXPLANATION OF FUND PERFORMANCE. - -------------------------------------------------------------------------------- HOW WE INVEST We select stocks based on an analysis of individual companies, focusing on mid-cap growth companies that are favorably priced relative to the rest of the market. Our investment process involves: .. Identifying medium-sized companies with sustainable revenue and earnings growth and that have low stock prices relative to their projected growth rates; .. Applying fundamental research, including financial statement analysis, to identify stocks of companies with large potential markets, cash-generating business models, improving balance sheets and solid management teams; .. Using a variety of valuation techniques to determine target buy prices and a stock's valuation upside and downside potential. The resulting portfolio contains "core holdings," industry leaders serving growing, noncyclical markets whose earnings growth tends to be less variable with economic conditions; and "earnings-acceleration" holdings driven by near-term catalysts such as new products or improved processes that may lead to rapid sales or earnings growth. We strive to control volatility and risk by diversifying Fund holdings across sectors. We consider selling a stock if: .. a company's fundamentals deteriorate .. a stock's price reaches our valuation target .. a company moves into the large capitalization range .. we find a more attractive investment option MARKET CONDITIONS AND YOUR FUND While higher gasoline prices, rising short-term interest rates and the ongoing concern of a housing bubble seemed to dominate the popular press, the U.S. economy continued its expansion and inflation remained low. Against this diverse backdrop, equity markets generally delivered single-digit gains for the reporting period. In this environment, the sectors that contributed the most to the Fund's absolute performance were energy, information technology, telecommunication services and financials. The fund outperformed the Russell Midcap Growth Index by the widest margin in the consumer discretionary sector, largely due to strong stock selection. However, some of this out performance was offset by underperformance by a number of the fund's health care holdings. The energy sector was the leading contributor to Fund returns during the six month reporting period. Oil services holdings (Continued) - --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION TOP 5 INDUSTRIES* TOP 10 HOLDINGS* By sector Information Technology 21.8% 1. Semiconductors 7.1% 1. American Tower Corp.-Class A 2.1% Consumer Discretionary 17.0 2. Application Software 5.0 2. Polo Ralph Lauren Corp. 1.5 Health Care 16.1 3. Wireless Telecommunication 4.3 3. CB Richard Ellis Group, Inc.- 1.5 Energy 13.2 Services Class A Financials 9.9 4. Oil & Gas Equipment & Services 3.9 4. National-Oilwell Varco Inc. 1.4 Industrials 9.1 5. Managed Health Care 3.6 5. AmeriCredit Corp. 1.3 Telecommunication Services 5.3 6. Alliance Data Systems Corp. 1.3 Consumer Staples 2.9 7. Robinson (C.H.) Worldwide, Inc. 1.3 Materials 1.7 8. Weatherford International Ltd. 1.3 Money Market Funds 9. Archer-Daniels-Midland Co. 1.2 Plus Other Assets Less 3.0 10. Legg Mason, Inc. 1.2 Liabilities TOTAL NET ASSETS $1.9 billion TOTAL NUMBER OF HOLDINGS* 108
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. - -------------------------------------------------------------------------------- 3 AIM DYNAMICS FUND GRANT PRIDECO and NATIONAL-OILWELL VARCO benefited from strong demand for their products and services as companies moved quickly to take advantage of high oil prices. Other key contributors in this sector included WEATHERFORD INTERNATIONAL and SOUTHWESTERN ENERGY. Holdings in the information technology sector also made key contributions to Fund performance. One of the Fund's top contributors in this sector was MARVELL TECHNOLOGY GROUP. The stock price of this company soared after the firm reported earnings that more than doubled from the year earlier and significantly topped market expectations. We believe the company is benefiting from increased market share in the hard disk drive market, new product momentum and the acquisition of QLOGIC CORPORATION'S hard drive controller business. The company's products are used in Apple's iPod --REGISTERED TRADEMARK--, wireless networks, digital cameras, cell phones and game consoles. RED HAT, a leading developer and services provider of open-source computer operating system software, also made a key contribution. Several telecommunication services holdings made significant contributions to performance during the period, including communications tower operator AMERICAN TOWER. The stock price of this holding appreciated during the year, as the company merged with former rival SPECTRASITE, which also was a Fund holding at the time of the merger, and benefited from strong demand from wireless communication companies that lease space on its towers. We retained most of the shares in the "new" American Tower, which explains the large position now held by the Fund. The financials sector was another area of strength for the Fund. CB RICHARD ELLIS, the world's largest commercial real estate services company, was one of the leading contributors to Fund performance in this sector. We believe the company may continue to increase cash flow and earnings through rapid international expansion. LEGG MASON and CHICAGO MERCANTILE EXCHANGE also performed well during the period. The consumer discretionary sector was the only sector to detract from the fund's absolute performance during the reporting period, as many consumers moderated their spending due to rising short-term interest rates, higher minimum monthly credit card payments and historically high gasoline prices. While some of our holdings were negatively affected by these head-winds, we focused more heavily on companies whose customers were less likely to be affected by these trends. This positioning allowed the Fund to outperform the Russell Midcap Growth Index in this sector. Examples of holdings that performed well for the Fund included NORDSTROM, ABERCROMBIE & FITCH and POLO RALPH LAUREN. In the health care sector, the Fund lost ground to the Russell Midcap Growth Index largely due to underperformance by several holdings. One example is equipment manufacturer KINETIC CONCEPTS. The stock price of this holding declined after a government agency reduced the company's reimbursement for some of its products. Other key detractors included AMERIGROUP and LIFEPOINT HOSPITALS. All three holdings were subsequently sold. While the overall performance of our health care holdings was disappointing, there was a noteworthy exception. EXPRESS SCRIPTS, a pharmacy benefits management company, was one of our best-performing stocks for the reporting period. The company benefited from increased use of generic drugs and home delivery of pharmaceutical products. IN CLOSING We are pleased to have provided positive returns for our investors for the reporting period. We remain committed to our investment process of focusing on the attractively priced stocks of mid-cap companies with growing earnings. We believe our strategy has the potential to provide investors with attractive returns over the long term, and we thank your for your commitment to AIM Dynamics Fund. THE VIEWS AND OPINIONS EXPRESSED IN MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ARE THOSE OF A I M ADVISORS, INC. THESE VIEWS AND OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE VIEWS AND OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR RECOMMENDATIONS, OR AS AN OFFER FOR A PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE, BUT A I M ADVISORS, INC. MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY. See important Fund and index disclosures inside front cover. - -------------------------------------------------------------------------------- [RASPLICKA PHOTO] PAUL J. RASPLICKA, Chartered Financial Analyst and senior portfolio manager, is lead manager of AIM Dynamics Fund. Mr. Rasplicka began his investment career in 1982. A native of Denver, Mr. Rasplicka is a magna cum laude graduate of the University of Colorado at Boulder with a B.S. in business administration. He received an M.B.A. from the University of Chicago. He is also a Chartered Investment Counselor. [FARMER PHOTO] KARL F. FARMER, Chartered Financial Analyst and portfolio manager, is portfolio manager of AIM Dynamics Fund. He spent years as a pension actuary, focusing on retirement plans and other benefit programs prior to joining AIM in 1998. He earned a B.S. in economics from Texas A&M University, graduating magna cum laude. He subsequently earned his M.B.A. in finance from The Wharton School at the University of Pennsylvania. Assisted by the Mid Cap Growth/GARP (growth-at-reasonable price) Team - -------------------------------------------------------------------------------- [RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE, PLEASE SEE PAGE 5. 4 AIM DYNAMICS FUND YOUR FUND'S LONG-TERM PERFORMANCE - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS As of 1/31/06, including applicable sales charges CLASS A SHARES Inception (3/28/02) 5.01% 1 Year 14.00 CLASS B SHARES Inception (3/28/02) 5.09% 1 Year 14.75 CLASS C SHARES Inception (2/14/00) -6.68% 5 Years -5.25 1 Year 18.76 INVESTOR CLASS SHARES 10 Years 8.61% 5 Years -4.47 1 Year 20.69 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS As of 12/31/05, most recent calendar quarter-end, including applicable sales charges CLASS A SHARES Inception (3/28/02) 3.19% 1 Year 4.29 CLASS B SHARES Inception (3/28/02) 3.23% 1 Year 4.53 CLASS C SHARES Inception (2/14/00) -7.87% 5 Years -5.93 1 Year 8.53 INVESTOR CLASS SHARES 10 Years 7.96% 5 Years -5.16 1 Year 10.36 ================================================================================ CUMULATIVE TOTAL RETURNS 10/25/05-1/31/06, excluding sales charges CLASS R SHARES Inception (10/25/05) 14.55% 10/25/05-12/31/05 excluding sales charges CLASS R SHARES Inception (10/25/05) 6.80% - -------------------------------------------------------------------------------- THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT GUARANTEE COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE VISIT AIMINVESTMENTS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE AND THE EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR SALE OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. CLASS A SHARE PERFORMANCE REFLECTS THE MAXIMUM 5.50% SALES CHARGE, AND CLASS B AND CLASS C SHARE PERFORMANCE REFLECTS THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CDSC ON CLASS B SHARES DECLINES FROM 5% BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE SEVENTH YEAR. THE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST YEAR AFTER PURCHASE. CLASS R SHARES DO NOT HAVE A FRONT-END SALES CHARGE; RETURNS SHOWN ARE AT NET ASSET VALUE AND DO NOT REFLECT A 0.75% CDSC THAT MAY BE IMPOSED ON A TOTAL REDEMPTION OF RETIREMENT PLAN ASSETS WITHIN THE FIRST YEAR. INVESTOR CLASS SHARES DO NOT HAVE A FRONT-END SALES CHARGE OR A CDSC; THEREFORE, PERFORMANCE IS AT NET ASSET VALUE. THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER DUE TO DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES. HAD THE ADVISOR NOT WAIVED FEES AND/OR REIMBURSED EXPENSES IN THE PAST, PERFORMANCE OF CLASS B AND CLASS C SHARES WOULD HAVE BEEN LOWER. 5 AIM DYNAMICS 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; 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 R shares, the example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period August 1, 2005, through January 31, 2006. The actual ending account value and expenses of the Class R shares in the below example are based on an investment of $1,000 invested on October 25, 2005 (the date the share class commenced sales) and held through January 31, 2006. 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 (October 25, 2005, through January 31, 2006 for the Class R shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class R 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 Fund's actual cumulative total returns at net asset value after expenses for the period ended January 31, 2006, appear in the table "Fund vs. Indexes" on Page 3. For Class R share performance, see Page 5. 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. - --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES ENDING ACCOUNT EXPENSES ANNUALIZED SHARE VALUE VALUE PAID DURING VALUE PAID DURING EXPENSE CLASS (8/01/05) (1/31/06)/1/ PERIOD/2/ (1/31/06) PERIOD/2,3/ RATIO A $ 1,000.00 $ 1,103.30 $ 5.41 $ 1,020.06 $ 5.19 1.02% B 1,000.00 1,099.00 9.36 1,016.28 9.00 1.77 C 1,000.00 1,098.60 9.36 1,016.28 9.00 1.77 R 1,000.00 1,145.50 3.67 1,018.85 6.41 1.26 Investor 1,000.00 1,103.30 5.41 1,020.06 5.19 1.02
/1/The actual ending account value is based on the actual total return of the Fund for the period August 1, 2005, through January 31, 2006 (October 25, 2005, through January 31, 2006 for the Class R 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. The Fund's actual cumulative total returns at net asset value after expenses for the period ended January 31, 2006, appear in the table "Fund vs. Indexes" on Page 3. /2/Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half-year. For the Class R shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 99 (October 25, 2005, through January 31, 2006)/365. Because the Class R 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 184/365 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 R shares of the Fund and other funds because such data is based on a full six month period. - -------------------------------------------------------------------------------- [ARROW BUTTON For More Information Visit IMAGE] AIMINVESTMENTS.COM 6 AIM DYNAMICS FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION The Board of Trustees of AIM Stock Funds (the "Board") oversees the management of AIM Dynamics Fund (the "Fund") and, as required by law, determines annually whether to approve the continuance of the Fund's advisory agreement with AIM Advisors, Inc. ("AIM"). Based upon the recommendation of the Investments Committee of the Board at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the advisory agreement (the "Advisory Agreement") between the Fund and AIM for another year, effective July 1, 2005. The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors. One of the responsibilities of the Senior Officer of the Fund, who is independent of AIM and AIM's affiliates, is to manage the process by which the Fund's proposed management fees are negotiated to ensure that they are negotiated in a manner which is at arm's length and reasonable. To that end, the Senior Officer must either supervise a competitive bidding process or prepare an independent written evaluation. The Senior Officer has recommended an independent written evaluation in lieu of a competitive bidding process and, upon the direction of the Board, has prepared such an independent written evaluation. Such written evaluation also considered certain of the factors discussed below. In addition, as discussed below, the Senior Officer made certain recommendations to the Board in connection with such written evaluation. The discussion below serves as a summary of the Senior Officer's independent written evaluation and recommendations to the Board in connection therewith, as well as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Advisory Agreement is in the best interests of the Fund and its shareholders and that the compensation to AIM under the Advisory Agreement is fair and reasonable and would have been obtained through arm's length negotiations. .. The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement. .. The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement. .. The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. .. The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Mid Cap Growth Index. The Board noted that the Fund's performance in such periods was below the performance of such Index. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. .. Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement. .. Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory. .. Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was lower than the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; and (ii) was higher than the sub-advisory fee rates for an unaffiliated mutual fund, and comparable to the sub-advisory fee rates for a second unaffiliated mutual fund, for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual funds were higher than the advisory fee rate for the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable. .. Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable. .. Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through July 31, 2005 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board also noted that AIM has voluntarily agreed to waive fees and/or limit expenses of the Fund in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund that is lower than the contractual agreement. The Board considered the contractual and voluntary nature of these fee waivers/expense limitations and noted that the contractual agreement remains in effect through July 31, 2005 and the voluntary agreement can be 7 AIM DYNAMICS FUND terminated at any time by AIM without further notice to investors. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable. .. Expense limitations and fee waivers. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes six breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to fully benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule. .. Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the Fund may realize certain benefits upon investing cash balances in AIM advised money market funds, including a higher net return, increased liquidity, increased diversification or decreased transaction costs. The Board also found that the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its respective shareholders. The Board therefore concluded that the investment of cash collateral received in connection with the securities lending program in the money market funds according to the procedures is in the best interests of the lending Fund and its respective shareholders. .. Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable. .. Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive. .. Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate. .. AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement. .. Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services. .. Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund. 8 SUPPLEMENT TO SEMIANNUAL REPORT DATED 1/31/06 AIM DYNAMICS FUND INSTITUTIONAL CLASS SHARES The following information has been prepared to provide Institutional Class shareholders with a performance overview specific to their holdings. Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS For periods ended 1/31/06 Inception (5/22/00) -3.28% 5 Years -4.05 1 Year 21.23 6 Months* 10.56 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS For periods ended 12/31/05, most recent calendar quarter-end Inception (5/22/00) -4.53% 5 Years -4.75 1 Year 10.89 6 Months* 9.65 * Cumulative total return that has not been annualized - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES HAVE NO SALES CHARGE; THEREFORE, PERFORMANCE IS AT NAV. PERFORMANCE OF INSTITUTIONAL CLASS SHARES WILL DIFFER FROM PERFORMANCE OF OTHER SHARE CLASSES DUE TO DIFFERING SALES CHARGES AND CLASS EXPENSES. PLEASE NOTE THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. MORE RECENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. ALL RETURNS ASSUME REINVESTMENT OF DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SEE FULL REPORT FOR INFORMATION ON COMPARATIVE BENCHMARKS. PLEASE CONSULT YOUR FUND PROSPECTUS FOR MORE INFORMATION. FOR THE MOST CURRENT MONTH-END PERFORMANCE, PLEASE CALL 800-451-4246 OR VISIT AIMINVESTMENTS.COM. - -------------------------------------------------------------------------------- NASDAQ SYMBOL IDICX - -------------------------------------------------------------------------------- Over for information on your Fund's expenses. ================================================================================ THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. ================================================================================ FOR INSTITUTIONAL INVESTOR USE ONLY This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use. [YOUR GOALS. AIMINVESTMENTS.COM I-DYN-INS-2 OUR SOLUTIONS.] [AIM INVESTMENTS LOGO] A I M Distributors, Inc. - REGISTERED TRADEMARK - - REGISTERED TRADEMARK - INFORMATION ABOUT YOUR FUND'S EXPENSES 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 August 1, 2005, through January 31, 2006. 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 Fund's actual cumulative total return after expenses for the six months ended January 31, 2006, appears in the table on the front of this supplement. 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. - --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES ENDING ACCOUNT EXPENSES ANNUALIZED SHARE VALUE VALUE PAID DURING VALUE PAID DURING EXPENSE CLASS (8/1/05) (1/31/06)/1/ PERIOD/2/ (1/31/06) PERIOD/2/ RATIO Institutional $ 1,000.00 $ 1,105.60 $ 3.45 $ 1,021.93 $ 3.31 0.65%
/1/The actual ending account value is based on the actual total return of the Fund for the period August 1, 2005, through January 31, 2006, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total return after expenses for the six months ended January 31, 2006, appears in the table on the front of this supplement. /2/Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. - -------------------------------------------------------------------------------- AIMINVESTMENTS.COM I-DYN-INS-2 A I M Distributors, Inc. AIM DYNAMICS FUND SCHEDULE OF INVESTMENTS January 31, 2006 (Unaudited)
SHARES VALUE --------------------------------------------------------------------------- COMMON STOCKS-97.03% ADVERTISING-2.47% Clear Channel Outdoor Holdings, Inc.-Class A/(a)/ 923,239 $ 18,418,618 --------------------------------------------------------------------------- Omnicom Group Inc. 114,100 9,332,239 --------------------------------------------------------------------------- R.H. Donnelley Corp./(a)/ 300,612 19,726,159 --------------------------------------------------------------------------- 47,477,016 --------------------------------------------------------------------------- AGRICULTURAL PRODUCTS-1.24% Archer-Daniels-Midland Co. 759,375 23,920,312 --------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS-1.29% Robinson (C.H.) Worldwide, Inc. 612,532 24,783,045 --------------------------------------------------------------------------- APPAREL RETAIL-1.00% Abercrombie & Fitch Co.-Class A 288,766 19,171,175 --------------------------------------------------------------------------- APPAREL, ACCESSORIES & LUXURY GOODS-2.48% Coach, Inc./(a)/ 536,982 19,304,503 --------------------------------------------------------------------------- Polo Ralph Lauren Corp. 500,691 28,359,138 --------------------------------------------------------------------------- 47,663,641 --------------------------------------------------------------------------- APPLICATION SOFTWARE-4.97% Amdocs Ltd./(a)/ 678,622 21,851,628 --------------------------------------------------------------------------- Business Objects S.A.-ADR (France)/(a)/ 263,091 10,918,277 --------------------------------------------------------------------------- Cadence Design Systems, Inc./(a)/ 518,104 9,149,717 --------------------------------------------------------------------------- Citrix Systems, Inc./(a)/ 605,051 18,659,773 --------------------------------------------------------------------------- Synopsys, Inc./(a)/ 934,209 20,655,361 --------------------------------------------------------------------------- TIBCO Software Inc./(a)/ 1,781,683 14,235,647 --------------------------------------------------------------------------- 95,470,403 --------------------------------------------------------------------------- ASSET MANAGEMENT & CUSTODY BANKS-1.23% Legg Mason, Inc. 182,535 23,674,790 --------------------------------------------------------------------------- AUTOMOTIVE RETAIL-0.91% Advance Auto Parts, Inc./(a)/ 400,560 17,452,399 --------------------------------------------------------------------------- BIOTECHNOLOGY-1.47% Celgene Corp./(a)/ 139,849 9,950,256 --------------------------------------------------------------------------- Cephalon, Inc./(a)/ 131,629 9,331,180 --------------------------------------------------------------------------- CV Therapeutics, Inc./(a)/ 367,192 9,036,595 --------------------------------------------------------------------------- 28,318,031 --------------------------------------------------------------------------- BROADCASTING & CABLE TV-1.04% Univision Communications Inc.-Class A/(a)/ 630,817 20,085,213 --------------------------------------------------------------------------- CASINOS & GAMING-2.01% Scientific Games Corp.-Class A/(a)/ 650,929 20,862,274 --------------------------------------------------------------------------- Station Casinos, Inc. 265,489 17,747,940 --------------------------------------------------------------------------- 38,610,214 ---------------------------------------------------------------------------
SHARES VALUE ------------------------------------------------------------------------------ COAL & CONSUMABLE FUELS-0.56% Aventine Renewable Energy Holdings, Inc. (Acquired 12/12/05; Cost $9,399,000)/(a)(b)(c)/ 723,000 $ 10,845,000 ------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT-1.03% Comverse Technology, Inc./(a)/ 723,352 19,812,611 ------------------------------------------------------------------------------ COMPUTER HARDWARE-0.79% Palm, Inc./(a)/ 386,713 15,267,429 ------------------------------------------------------------------------------ COMPUTER STORAGE & PERIPHERALS-1.48% Emulex Corp./(a)/ 517,641 9,498,712 ------------------------------------------------------------------------------ QLogic Corp./(a)/ 476,550 18,904,739 ------------------------------------------------------------------------------ 28,403,451 ------------------------------------------------------------------------------ CONSTRUCTION & ENGINEERING-1.62% Chicago Bridge & Iron Co. N.V.-New York Shares 748,845 23,101,868 ------------------------------------------------------------------------------ Foster Wheeler Ltd./(a)/ 165,121 8,132,209 ------------------------------------------------------------------------------ 31,234,077 ------------------------------------------------------------------------------ CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-1.35% Cummins Inc. 101,582 9,883,929 ------------------------------------------------------------------------------ Joy Global Inc. 298,589 16,135,750 ------------------------------------------------------------------------------ 26,019,679 ------------------------------------------------------------------------------ CONSUMER ELECTRONICS-1.04% Harman International Industries, Inc. 181,978 20,017,580 ------------------------------------------------------------------------------ CONSUMER FINANCE-1.31% AmeriCredit Corp./(a)/ 874,580 25,152,921 ------------------------------------------------------------------------------ DATA PROCESSING & OUTSOURCED SERVICES-1.29% Alliance Data Systems Corp./(a)/ 588,721 24,873,462 ------------------------------------------------------------------------------ DEPARTMENT STORES-1.11% Nordstrom, Inc. 511,395 21,335,399 ------------------------------------------------------------------------------ DIVERSIFIED BANKS-1.12% Centennial Bank Holdings, Inc. (Acquired 12/27/04; Cost $18,211,421)/(a)(b)(d)(e)/ 1,734,421 21,454,788 ------------------------------------------------------------------------------ DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES-2.24% ChoicePoint Inc./(a)/ 224,517 9,232,139 ------------------------------------------------------------------------------ Corrections Corp. of America/(a)/ 521,007 22,116,747 ------------------------------------------------------------------------------ Global Cash Access, Inc./(a)/ 156,635 2,421,577 ------------------------------------------------------------------------------ IHS Inc.-Class A/(a)/ 383,157 9,295,389 ------------------------------------------------------------------------------ 43,065,852 ------------------------------------------------------------------------------ DIVERSIFIED METALS & MINING-1.09% Phelps Dodge Corp. 130,126 20,885,223 ------------------------------------------------------------------------------
F-1 AIM DYNAMICS FUND
SHARES VALUE ---------------------------------------------------------------------- DRUG RETAIL-1.11% Shoppers Drug Mart Corp. (Canada) 572,900 $ 21,342,594 ---------------------------------------------------------------------- ELECTRICAL COMPONENTS & EQUIPMENT-1.12% Cooper Industries, Ltd.-Class A 264,414 21,589,403 ---------------------------------------------------------------------- ELECTRONIC EQUIPMENT MANUFACTURERS-1.09% Amphenol Corp.-Class A 414,092 21,048,296 ---------------------------------------------------------------------- ELECTRONIC MANUFACTURING SERVICES--0.68% Molex Inc. 253,167 7,658,302 ---------------------------------------------------------------------- Molex Inc.-Class A 198,913 5,495,966 ---------------------------------------------------------------------- 13,154,268 ---------------------------------------------------------------------- HEALTH CARE DISTRIBUTORS-1.03% Schein (Henry), Inc/(a)/ 425,046 19,824,145 ---------------------------------------------------------------------- HEALTH CARE EQUIPMENT-3.48% Hologic, Inc./(a)/ 117,000 6,020,820 ---------------------------------------------------------------------- Kyphon Inc./(a)/ 216,892 9,016,200 ---------------------------------------------------------------------- PerkinElmer, Inc. 810,000 18,419,400 ---------------------------------------------------------------------- Thermo Electron Corp./(a)/ 567,789 19,100,422 ---------------------------------------------------------------------- Varian Medical Systems, Inc. 238,895 14,383,868 ---------------------------------------------------------------------- 66,940,710 ---------------------------------------------------------------------- HEALTH CARE FACILITIES-1.67% Community Health Systems, Inc./(a)/ 478,294 17,405,119 ---------------------------------------------------------------------- Psychiatric Solutions, Inc./(a)/ 447,930 14,777,211 ---------------------------------------------------------------------- 32,182,330 ---------------------------------------------------------------------- HEALTH CARE SERVICES-3.30% DaVita, Inc./(a)/ 349,622 19,141,805 ---------------------------------------------------------------------- Express Scripts, Inc./(a)/ 111,332 10,163,498 ---------------------------------------------------------------------- Omnicare, Inc. 360,000 17,892,000 ---------------------------------------------------------------------- Pharmaceutical Product Development, Inc. 235,753 16,309,393 ---------------------------------------------------------------------- 63,506,696 ---------------------------------------------------------------------- HOTELS, RESORTS & CRUISE LINES-2.14% Hilton Hotels Corp. 863,295 21,521,944 ---------------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc./(f)/ 323,295 19,659,569 ---------------------------------------------------------------------- 41,181,513 ---------------------------------------------------------------------- HOUSEWARES & SPECIALTIES-0.71% Jarden Corp./(a)/ 555,250 13,681,360 ---------------------------------------------------------------------- INDUSTRIAL MACHINERY-0.94% ITT Industries, Inc. 176,893 18,131,533 ---------------------------------------------------------------------- INSURANCE BROKERS-0.66% National Financial Partners Corp. 237,828 12,726,176 ---------------------------------------------------------------------- INTEGRATED OIL & GAS-1.38% CNX Gas Corp. (Acquired 08/01/05; Cost $4,996,800)/(a)(b)/ 312,300 7,513,938 ----------------------------------------------------------------------
SHARES VALUE ------------------------------------------------------------------------------ INTEGRATED OIL & GAS-(CONTINUED) Murphy Oil Corp. 333,072 $ 18,985,104 ------------------------------------------------------------------------------ 26,499,042 ------------------------------------------------------------------------------ INTEGRATED TELECOMMUNICATION SERVICES-1.01% Qwest Communications International Inc./(a)/ 3,222,613 19,400,130 ------------------------------------------------------------------------------ INTERNET SOFTWARE & SERVICES-0.86% Websense, Inc./(a)/ 252,129 16,622,865 ------------------------------------------------------------------------------ INVESTMENT BANKING & BROKERAGE-0.91% Schwab (Charles) Corp. (The) 1,181,639 17,476,441 ------------------------------------------------------------------------------ IT CONSULTING & OTHER SERVICES-1.06% Cognizant Technology Solutions Corp.-Class A/(a)/ 388,913 20,367,374 ------------------------------------------------------------------------------ MANAGED HEALTH CARE-3.59% Aveta, Inc. (Acquired 12/21/05; Cost $17,010,000)/(a)(b)(c)(d)/ 1,260,000 17,010,000 ------------------------------------------------------------------------------ CIGNA Corp. 157,168 19,111,629 ------------------------------------------------------------------------------ Coventry Health Care, Inc./(a)/ 323,138 19,249,331 ------------------------------------------------------------------------------ Humana Inc./(a)/ 243,187 13,562,539 ------------------------------------------------------------------------------ 68,933,499 ------------------------------------------------------------------------------ OIL & GAS DRILLING-3.16% Nabors Industries Ltd./(a)/ 229,751 18,667,269 ------------------------------------------------------------------------------ Noble Corp. 269,708 21,695,312 ------------------------------------------------------------------------------ Todco-Class A 455,478 20,314,319 ------------------------------------------------------------------------------ 60,676,900 ------------------------------------------------------------------------------ OIL & GAS EQUIPMENT & SERVICES-3.87% Grant Prideco, Inc./(a)/ 443,293 22,204,546 ------------------------------------------------------------------------------ National-Oilwell Varco Inc./(a)/ 364,605 27,735,502 ------------------------------------------------------------------------------ Weatherford International Ltd./(a)/ 545,280 24,417,638 ------------------------------------------------------------------------------ 74,357,686 ------------------------------------------------------------------------------ OIL & GAS EXPLORATION & PRODUCTION-2.18% Rosetta Resources, Inc. (Acquired 06/28/05; Cost $19,782,400)/(a)(b)(c)/ 1,236,400 22,255,200 ------------------------------------------------------------------------------ Southwestern Energy Co./(a)/ 454,578 19,610,495 ------------------------------------------------------------------------------ 41,865,695 ------------------------------------------------------------------------------ OIL & GAS REFINING & MARKETING-0.81% Tesoro Corp. 214,871 15,571,701 ------------------------------------------------------------------------------ OIL & GAS STORAGE & TRANSPORTATION-1.20% Williams Cos., Inc. (The) 966,397 23,038,904 ------------------------------------------------------------------------------ PAPER PACKAGING-0.66% Smurfit-Stone Container Corp./(a)/ 993,760 12,710,190 ------------------------------------------------------------------------------ PHARMACEUTICALS-1.61% Endo Pharmaceuticals Holdings Inc./(a)/ 513,857 14,747,696 ------------------------------------------------------------------------------
F-2 AIM DYNAMICS FUND
SHARES VALUE ------------------------------------------------------------------------------ PHARMACEUTICALS-(CONTINUED) Shire PLC-ADR (United Kingdom) 331,625 $ 16,166,719 ------------------------------------------------------------------------------ 30,914,415 ------------------------------------------------------------------------------ REAL ESTATE-1.40% Friedman, Billings, Ramsey Group, Inc.-Class A/(g)/ 1,278,282 14,802,506 ------------------------------------------------------------------------------ People's Choice Financial Corp. (Acquired 12/21/04; Cost $21,918,000)/(b)(c)/ 2,191,800 12,054,900 ------------------------------------------------------------------------------ 26,857,406 ------------------------------------------------------------------------------ REAL ESTATE MANAGEMENT & DEVELOPMENT-1.44% CB Richard Ellis Group, Inc.-Class A/(a)/ 440,124 27,780,627 ------------------------------------------------------------------------------ REGIONAL BANKS-0.65% Signature Bank/(a)/ 412,964 12,574,754 ------------------------------------------------------------------------------ SEMICONDUCTOR EQUIPMENT-0.80% ASML Holding N.V.-New York Shares (Netherlands)/(a)/ 683,133 15,431,974 ------------------------------------------------------------------------------ SEMICONDUCTORS-7.09% Analog Devices, Inc. 489,570 19,470,199 ------------------------------------------------------------------------------ ATI Technologies Inc. (Canada)/(a)/ 660,045 11,781,803 ------------------------------------------------------------------------------ Integrated Device Technology, Inc./(a)/ 1,424,653 19,788,430 ------------------------------------------------------------------------------ Intersil Corp.-Class A 605,397 17,592,837 ------------------------------------------------------------------------------ Marvell Technology Group Ltd./(a)/ 223,541 15,294,675 ------------------------------------------------------------------------------ Microchip Technology Inc. 531,685 19,943,504 ------------------------------------------------------------------------------ National Semiconductor Corp. 783,280 22,096,329 ------------------------------------------------------------------------------ Spansion Inc.-Class A/(a)/ 791,344 10,287,472 ------------------------------------------------------------------------------ 136,255,249 ------------------------------------------------------------------------------ SOFT DRINKS-0.54% Hansen Natural Corp./(a)/ 118,235 10,381,033 ------------------------------------------------------------------------------ SPECIALIZED FINANCE-1.13% Chicago Mercantile Exchange Holdings Inc. 51,143 21,646,275 ------------------------------------------------------------------------------
SHARES VALUE --------------------------------------------------------------------------------- SPECIALTY STORES-2.11% Office Depot, Inc./(a)/ 631,808 $ 20,944,435 --------------------------------------------------------------------------------- Staples, Inc. 825,653 19,576,233 --------------------------------------------------------------------------------- 40,520,668 --------------------------------------------------------------------------------- SYSTEMS SOFTWARE-0.70% Red Hat, Inc./(a)/ 462,530 13,390,244 --------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS-0.52% WESCO International, Inc./(a)/ 206,739 9,909,000 --------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES-4.28% American Tower Corp.-Class A/(a)/ 1,302,424 40,296,999 --------------------------------------------------------------------------------- Leap Wireless International, Inc./(a)/ 535,695 19,820,715 --------------------------------------------------------------------------------- NII Holdings Inc./(a)/ 449,282 22,221,488 --------------------------------------------------------------------------------- 82,339,202 --------------------------------------------------------------------------------- Total Common Stocks & Other Equity Interests (Cost $1,460,097,927) 1,865,824,009 --------------------------------------------------------------------------------- MONEY MARKET FUNDS-2.24% Premier Portfolio-Institutional Class (Cost $43,132,786)/(h)/ 43,132,786 43,132,786 --------------------------------------------------------------------------------- TOTAL INVESTMENTS-99.27% (excluding investments purchased with cash collateral from securities loaned) (Cost $1,503,230,713) 1,908,956,795 --------------------------------------------------------------------------------- COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-0.25% Premier Portfolio-Institutional Class/(h)(i)/ 4,684,402 4,684,402 --------------------------------------------------------------------------------- Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $4,684,402) 4,684,402 --------------------------------------------------------------------------------- TOTAL INVESTMENTS-99.52% (Cost $1,507,915,115) 1,913,641,197 --------------------------------------------------------------------------------- OTHER ASSETS LESS LIABILITIES-0.48% 9,247,449 --------------------------------------------------------------------------------- NET ASSETS-100.00% $ 1,922,888,646 ---------------------------------------------------------------------------------
Investment Abbreviations: ADR American Depositary Receipt Notes to Schedule of Investments: (a)Non-income producing security. (b)Security not registered under the Securities Act of 1933, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The Fund has no rights to demand registration of these securities. The aggregate value of these securities at January 31, 2006 was $91,133,826, which represented 4.74% of the Fund's Net Assets unless otherwise indicated, these securities are not considered to be illiquid. (c)Security considered to be illiquid. The Fund is limited to investing 15% of net assets in illiquid securities at the time of purchase. The aggregate value of these securities considered to be illiquid at January 31, 2006 was $62,165,100, which represented 3.23% of the Fund's Net Assets. (d)Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The aggregate value of these securities at January 31, 2006 was $38,464,788, which represented 2.00% of the Fund's Net Assets. See Note 1A. (e)Affiliated company. The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The value of this securities as of January 31, 2006 represented 1.12% of the Fund's Net Assets. See Note 3. (f)Each unit represents one common share and one Class B share. (g)All or a portion of this security has been pledged as collateral for securities lending transactions at January 31, 2006. (h)The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (i)The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 8. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-3 AIM DYNAMICS FUND STATEMENT OF ASSETS AND LIABILITIES January 31, 2006 (Unaudited)
ASSETS: Investments, at value (cost $1,460,097,927) $ 1,865,824,009 - ---------------------------------------------------------------------------------- Investments in affiliates (cost $47,817,188) 47,817,188 - ---------------------------------------------------------------------------------- Total investments (cost $1,507,915,115) 1,913,641,197 - ---------------------------------------------------------------------------------- Cash 406,171 - ---------------------------------------------------------------------------------- Receivables for: Investments sold 77,213,665 - ---------------------------------------------------------------------------------- Fund shares sold 1,021,713 - ---------------------------------------------------------------------------------- Dividends 278,949 - ---------------------------------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 461,656 - ---------------------------------------------------------------------------------- Other assets 70,610 - ---------------------------------------------------------------------------------- Total assets 1,993,093,961 - ---------------------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 56,849,429 - ---------------------------------------------------------------------------------- Fund shares reacquired 6,765,632 - ---------------------------------------------------------------------------------- Trustee deferred compensation and retirement plans 606,313 - ---------------------------------------------------------------------------------- Collateral upon return of securities loaned 4,684,402 - ---------------------------------------------------------------------------------- Accrued distribution fees 370,370 - ---------------------------------------------------------------------------------- Accrued trustees' and officer's fees and benefits 3,691 - ---------------------------------------------------------------------------------- Accrued transfer agent fees 787,835 - ---------------------------------------------------------------------------------- Accrued operating expenses 137,643 - ---------------------------------------------------------------------------------- Total liabilities 70,205,315 - ---------------------------------------------------------------------------------- Net assets applicable to shares outstanding $ 1,922,888,646 - ---------------------------------------------------------------------------------- NET ASSETS CONSIST OF: Shares of beneficial interest $ 4,095,823,682 - ---------------------------------------------------------------------------------- Undistributed net investment income (loss) (787,150) - ---------------------------------------------------------------------------------- Undistributed net realized gain (loss) from investment securities and foreign currencies (2,577,874,557) - ---------------------------------------------------------------------------------- Unrealized appreciation of investment securities and foreign currencies 405,726,671 - ---------------------------------------------------------------------------------- $ 1,922,888,646 - ----------------------------------------------------------------------------------
NET ASSETS: Class A $ 37,861,760 -------------------------------------------------------------- Class B $ 4,366,019 -------------------------------------------------------------- Class C $ 9,001,022 -------------------------------------------------------------- Class R $ 13,151 -------------------------------------------------------------- Investor Class $1,820,083,851 -------------------------------------------------------------- Institutional Class $ 51,562,843 -------------------------------------------------------------- SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 1,937,170 -------------------------------------------------------------- Class B 229,987 -------------------------------------------------------------- Class C 483,443 -------------------------------------------------------------- Class R 673.5 -------------------------------------------------------------- Investor Class 93,134,170 -------------------------------------------------------------- Institutional Class 2,578,783 -------------------------------------------------------------- Class A : Net asset value per share $ 19.54 -------------------------------------------------------------- Offering price per share: (Net asset value of $19.54 / 94.50%) $ 20.68 -------------------------------------------------------------- Class B : Net asset value and offering price per share $ 18.98 -------------------------------------------------------------- Class C : Net asset value and offering price per share $ 18.62 -------------------------------------------------------------- Class R: Net asset value and offering price per share $ 19.53 -------------------------------------------------------------- Investor Class: Net asset value and offering price per share $ 19.54 -------------------------------------------------------------- Institutional Class: Net asset value and offering price per share $ 20.00 --------------------------------------------------------------
* At January 31, 2006, a security with a value of $4,428,192 was on loan to brokers. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-4 AIM DYNAMICS FUND STATEMENT OF OPERATIONS For the six months ended January 31, 2006 (Unaudited)
INVESTMENT INCOME: Dividends (net of foreign withholding tax of $26,395) $ 8,727,820 - -------------------------------------------------------------------------------------------------------- Dividends from affiliates (includes securities lending income of $51,423, after compensation to counterparties of $134,762) 960,989 - -------------------------------------------------------------------------------------------------------- Total investment income 9,688,809 - -------------------------------------------------------------------------------------------------------- EXPENSES: Advisory fees 5,071,364 - -------------------------------------------------------------------------------------------------------- Administrative services fees 225,769 - -------------------------------------------------------------------------------------------------------- Custodian fees 83,785 - -------------------------------------------------------------------------------------------------------- Distribution fees: Class A 32,421 - -------------------------------------------------------------------------------------------------------- Class B 17,723 - -------------------------------------------------------------------------------------------------------- Class C 43,113 - -------------------------------------------------------------------------------------------------------- Class K 14,593 - -------------------------------------------------------------------------------------------------------- Class R 15 - -------------------------------------------------------------------------------------------------------- Investor Class 2,293,902 - -------------------------------------------------------------------------------------------------------- Transfer agent fees-A, B, C, K, R & Investor 2,021,063 - -------------------------------------------------------------------------------------------------------- Transfer agent fees-Institutional 20,018 - -------------------------------------------------------------------------------------------------------- Trustees' and officer's fees and benefits 31,702 - -------------------------------------------------------------------------------------------------------- Other 337,227 - -------------------------------------------------------------------------------------------------------- Filing fee refund (406,172) - -------------------------------------------------------------------------------------------------------- Total expenses 9,786,523 - -------------------------------------------------------------------------------------------------------- Less:Fees waived, expenses reimbursed and expense offset arrangements (50,611) - -------------------------------------------------------------------------------------------------------- Net expenses 9,735,912 - -------------------------------------------------------------------------------------------------------- Net investment income (loss) (47,103) - -------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain (loss) from: Investment securities (includes gains from securities sold to affiliates of $4,334,374) 149,912,963 - -------------------------------------------------------------------------------------------------------- Foreign currencies (824) - -------------------------------------------------------------------------------------------------------- 149,912,139 - -------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation of: Investment securities 34,606,194 - -------------------------------------------------------------------------------------------------------- Foreign currencies 458 - -------------------------------------------------------------------------------------------------------- 34,606,652 - -------------------------------------------------------------------------------------------------------- Net gain from investment securities and foreign currencies 184,518,791 - -------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $184,471,688 - --------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-5 AIM DYNAMICS FUND STATEMENT OF CHANGES IN NET ASSETS For the six months ended January 31, 2006 and the year ended July 31, 2005 (Unaudited)
JANUARY 31, JULY 31, 2006 2005 -------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (47,103) $ (10,939,938) -------------------------------------------------------------------------- Net realized gain from investment securities and foreign currencies 149,912,139 511,029,613 -------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities and foreign currencies 34,606,652 57,118,251 -------------------------------------------------------------------------- Net increase in net assets resulting from operations 184,471,688 557,207,926 -------------------------------------------------------------------------- Share transactions-net: Class A 17,882,250 190,494 -------------------------------------------------------------------------- Class B 1,058,509 56,868 -------------------------------------------------------------------------- Class C (868,592) (4,299,521) -------------------------------------------------------------------------- Class K (14,330,493) (14,531,829) -------------------------------------------------------------------------- Class R 11,634 -- -------------------------------------------------------------------------- Investor Class (339,349,392) (1,552,723,956) -------------------------------------------------------------------------- Institutional Class 36,140,313 (5,831,140) -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from share transactions (299,455,771) (1,577,139,084) -------------------------------------------------------------------------- Net increase (decrease) in net assets (114,984,083) (1,019,931,158) -------------------------------------------------------------------------- NET ASSETS: Beginning of period 2,037,872,729 3,057,803,887 -------------------------------------------------------------------------- End of period (including undistributed net investment income (loss) of $(787,150) and $(740,047), respectively) $1,922,888,646 $ 2,037,872,729 --------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-6 AIM DYNAMICS FUND NOTES TO FINANCIAL STATEMENTS January 31, 2006 (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Dynamics Fund (the "Fund") is a series portfolio of AIM Stock Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of three separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently consists of multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is to seek long-term capital growth. 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. 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. 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 as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services, which may be considered fair valued, or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are recorded at amortized cost which approximates value. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. 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. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs and domestic and foreign index futures. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. F-7 AIM DYNAMICS FUND Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be 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 use 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, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. G. 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. H. 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. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. I. PUT OPTIONS -- The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased or sold. J. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. K. COLLATERAL -- To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund's practice to replace such collateral no later than the next business day. This practice does not apply to securities pledged as collateral for securities lending transactions. F-8 AIM DYNAMICS FUND NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------- First $350 million 0.60% ---------------------------------------------------- Next $350 million 0.55% ---------------------------------------------------- Next $1.3 billion 0.50% ---------------------------------------------------- Next $2 billion 0.45% ---------------------------------------------------- Next $2 billion 0.40% ---------------------------------------------------- Next $2 billion 0.375% ---------------------------------------------------- Over $8 billion 0.35% ----------------------------------------------------
AIM has voluntarily 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 K, Class R, Investor Class and Institutional Class shares to 1.20%, 1.95%, 1.95%, 1.40%, 1.45%, 1.20% and 0.95% of average daily net assets, respectively. Also, AIM has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses (excluding certain items discussed below) of Class A, Class B, Class C, Class K, Class R, Investor Class and Institutional Class shares to 1.90%, 2.65%, 2.65%, 2.10%, 2.15%, 1.90% and 1.65% of average daily net assets, respectively, through July 31, 2006. 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 total annual operating expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, in addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more fully below, the expense offset arrangements from which the Fund may benefit are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. To the extent that the annualized expense ratio does not exceed the expense limitation, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the six months ended January 31, 2006, AIM waived fees of $4,296. At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the six months ended January 31, 2006, AMVESCAP reimbursed expenses of the Fund in the amount of $622. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the six months ended January 31, 2006, AIM was paid $225,769. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended January 31, 2006, the Fund paid AISI $2,021,063 for Class A, Class B, Class C, Class K, Class R and Investor Class share classes and $20,018 for Institutional Class shares. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B, Class C, Class K, Class R, Investor Class and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C, Class K, Class R and Investor Class shares (collectively the "Plans"). The Fund, pursuant to the Class A, Class B, Class C, Class K and Class R Plans, pays ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.45% of the average daily net assets of Class K shares and 0.50% of the average daily net assets of Class R shares. The Fund, pursuant to the Investor Class Plan, pays ADI for its allocated share of expenses incurred pursuant to the Investor Class Plan for the period, up to a maximum annual rate of 0.25% of the average daily net assets of the Investor Class shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class K, Class R or Investor Class shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. National Association of Securities Dealers ("NASD") Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the six months ended January 31, 2006, the Class A, Class B, Class C, Class R and Investor Class shares paid $32,421, $17,723, $43,113, $15 and $2,293,902, respectively. For the period August 1, 2005 through October 21, 2005, (date of conversion), Class K shares paid $14,593. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. For the six months ended January 31, 2006 ADI advised the Fund that it retained $6,300 in front-end F-9 AIM DYNAMICS FUND sales commissions from the sale of Class A shares and $0, $1,946, $229 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. For the period August 1, 2005 through October 21, 2005, (date of conversion), ADI advised the Fund that it retained $0 from Class K shares for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI. NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended January 31, 2006. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN PROCEEDS UNREALIZED VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND REALIZED FUND 07/31/05 AT COST SALES (DEPRECIATION) 01/31/06 INCOME GAIN (LOSS) - -------------------------------------------------------------------------------------------------------------------------------- Premier Portfolio -- Institutional Class $26,495,353 $476,922,533 $(460,285,100) $-- $43,132,786 $909,567 $-- - --------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN PROCEEDS UNREALIZED VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND REALIZED FUND 07/31/05 AT COST SALES (DEPRECIATION) 01/31/06 INCOME* GAIN (LOSS) - ------------------------------------------------------------------------------------------------------------------------------ Premier Portfolio -- Institutional Class $9,532,450 $116,254,119 $(121,102,167) $-- $4,684,402 $51,423 $-- - ------------------------------------------------------------------------------------------------------------------------------
* Net of compensation to counterparties INVESTMENTS IN OTHER AFFILIATES: The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the transactions with affiliates for the six months ended January 31, 2006.
CHANGE IN PROCEEDS UNREALIZED VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND REALIZED FUND 07/31/05 AT COST SALES (DEPRECIATION) 01/31/06 INCOME GAIN (LOSS) - ---------------------------------------------------------------------------------------------------------------------- Centennial Bank Holdings, Inc. $22,371,120 $ -- $ (4,054,250) $2,621,947 $21,454,788 $ -- $515,971 - ---------------------------------------------------------------------------------------------------------------------- Total $58,398,923 $593,176,652 $(585,441,517) $2,621,947 $69,271,976 $960,990 $515,971 - ----------------------------------------------------------------------------------------------------------------------
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, during the six months ended January 31, 2006, the Fund engaged in securities sales of $32,453,173, which resulted in net realized gains of $4,334,374 and securities purchases of $5,350,406. NOTE 5--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended January 31, 2006, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $45,693. NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in F-10 AIM DYNAMICS FUND which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the six months ended January 31, 2006, the Fund paid legal fees of $5,748 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 7--BORROWINGS Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the six months ended January 31, 2006, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the rate contractually agreed upon. NOTE 8--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At January 31, 2006, a security with a value of $4,428,192 was on loan to brokers. The loan was secured by cash collateral of $4,684,402 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended January 31, 2006, the Fund received dividends on cash collateral investments of $51,423 for securities lending transactions, which are net of compensation to counterparties. NOTE 9--TAX INFORMATION The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund's fiscal year-end. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of July 31, 2005 to utilizing $2,715,789,603 of capital loss carryforward in the fiscal year ended July 31, 2006. The Fund had a capital loss carryforward as of July 31, 2005 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* ---------------------------------------------- July 31, 2010 $ 434,677,619 ---------------------------------------------- July 31, 2011 $2,290,224,850 ---------------------------------------------- Total capital loss carryforward $2,724,902,469 ----------------------------------------------
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. F-11 AIM DYNAMICS FUND NOTE 10--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended January 31, 2006 was $1,028,256,710 and $1,354,352,539, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end. At the request of the Trustees, AIM recovered third party research credits during the six months ended January 31, 2006, in the amount of $68,020. These research credits were recorded as realized gains.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS -------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $425,821,066 -------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (20,419,327) -------------------------------------------------------------------------- Net unrealized appreciation of investment securities $405,401,739 --------------------------------------------------------------------------
Cost of investments for tax purposes is $1,508,239,458. NOTE 11--SHARE INFORMATION The Fund currently consists of six different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares, Investor Class shares and Institutional Class shares. The Fund formerly offered Class K shares: however, as of the close of business October 21, 2005 the Class K shares were converted to Class A shares. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares, Investor Class shares and Institutional Class shares are sold at net asset value. Under certain circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - ------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JANUARY 31, 2006/(a)/ JULY 31, 2005 -------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------------------- Sold: Class A 524,728 $ 9,461,999 556,506 $ 8,770,684 - ------------------------------------------------------------------------------------------------------------------------- Class B 80,558 1,399,793 34,067 514,425 - ------------------------------------------------------------------------------------------------------------------------- Class C 69,218 1,191,801 36,385 551,988 - ------------------------------------------------------------------------------------------------------------------------- Class K/(b)/ 51,624 898,024 332,020 5,201,768 - ------------------------------------------------------------------------------------------------------------------------- Class R/(c)/ 674 11,634 -- -- - ------------------------------------------------------------------------------------------------------------------------- Investor Class 6,214,280 111,094,900 18,984,016 295,473,845 - ------------------------------------------------------------------------------------------------------------------------- Institutional Class 2,326,995 41,959,216 703,280 11,182,991 - ------------------------------------------------------------------------------------------------------------------------- Conversion of Class K shares to Class A shares Class A 767,465 12,931,786 - ------------------------------------------------------------------------------------------------------------------------- Class K (775,752) (12,931,786) - ------------------------------------------------------------------------------------------------------------------------- Automatic conversion of Class B shares to Class A shares:/(d)/ Class A 1,813 32,386 866 14,656 - ------------------------------------------------------------------------------------------------------------------------- Class B (1,863) (32,386) (887) (14,656) - ------------------------------------------------------------------------------------------------------------------------- Reacquired: Class A (254,327) (4,543,921) (553,184) (8,594,846) - ------------------------------------------------------------------------------------------------------------------------- Class B (17,110) (308,898) (28,466) (442,901) - ------------------------------------------------------------------------------------------------------------------------- Class C (122,036) (2,060,393) (325,607) (4,851,509) - ------------------------------------------------------------------------------------------------------------------------- Class K/(b)/ (131,411) (2,296,731) (1,322,033) (19,733,597) - ------------------------------------------------------------------------------------------------------------------------- Investor Class (25,168,058) (450,444,292) (117,767,645) (1,848,197,801) - ------------------------------------------------------------------------------------------------------------------------- Institutional Class (318,095) (5,818,903) (1,034,172) (17,014,131) - ------------------------------------------------------------------------------------------------------------------------- (16,751,297) $(299,455,771) (100,384,854) $(1,577,139,084) - -------------------------------------------------------------------------------------------------------------------------
/(a)/There are two entities that are record owners of more than 5% of the outstanding shares of the Fund and owns 16% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Aim and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities is also owned beneficially. /(b)/Class K shares activity for the period August 1, 2005 through October 21, 2005 (date of conversion). /(c)/Class R shares commenced operations on October 25, 2005. /(d)/Effective as of close of business October 21, 2005, all outstanding Class K shares were converted to Class A shares of the Fund. F-12 AIM DYNAMICS FUND NOTE 12--SIGNIFICANT EVENT The Board of Trustees of the Trust unanimously approved, on November 14, 2005, a Plan of Reorganization pursuant to which the Fund would acquire all of the assets of AIM Mid Cap Growth Fund ("Selling Fund"), a series of AIM Equity Funds ("the Reorganization"). Upon closing of the Reorganization, shareholders of Selling Fund will receive a corresponding class of shares of the Fund in exchange for their shares of Selling Fund, and Selling Fund will cease operations. The Plan of Reorganization requires approval of Selling Fund's shareholders. The Selling Fund currently intends to submit the Plan of Reorganization to the shareholders for their consideration at a meeting to be held on or around March 16, 2006. If the Plan of Reorganization is approved by the shareholders of Selling Fund and certain conditions required by the Plan of Reorganization are satisfied, the Reorganization is expected to become effective on or around April 10, 2006. NOTE 13--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A --------------------------------------------------------- SIX MONTHS ENDED JANUARY 31, YEAR ENDED JULY 31, 2006 ---------------------------------- ----------- 2005 2004 2003 - - - ----------------------------------------- Net asset value, beginning of period $ 17.71 $ 14.21 $ 12.84 $10.82 - ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.00)/(a)/ (0.08)/(a)/ (0.13)/(a)/ (0.09)/(b)/ - ----------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.83 3.58 1.50 2.11 - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.83 3.50 1.37 2.02 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 19.54 $ 17.71 $ 14.21 $12.84 - ----------------------------------------------------------------------------------------------------------------------------- Total return/(c)/ 10.33% 24.63% 10.67% 18.56% - ----------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $37,862 $15,895 $12,692 $6,108 - ----------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.02%/(d)/ 1.24% 1.30% 1.24% - ----------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.02%/(d)/ 1.25% 1.31% 1.24% - ----------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.01)%/(d)/ (0.53)% (0.89)% (0.81)% - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 55% 87% 95% 91% - -----------------------------------------------------------------------------------------------------------------------------
---------- MARCH 28, 2002 (DATE SALES COMMENCED) TO JULY 31, - - Net asset value, beginning of period $ 15.30 - ----------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.03)/(a)/ - ----------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (4.45) - ----------------------------------------------------------------------------------- Total from investment operations (4.48) - ----------------------------------------------------------------------------------- Net asset value, end of period $ 10.82 - ----------------------------------------------------------------------------------- Total return/(c)/ (29.22)% - ----------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $ 2,006 - ----------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.11%/(e)/ - ----------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.11%/(e)/ - ----------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.76)%/(e)/ - ----------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 81% - -----------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.18) for the year ended July 31, 2003. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges, and is not annualized for periods less than one year. /(d)/Ratios are annualized and based on average daily net assets of $25,725,424. /(e)/Annualized. /(f)/Not annualized for periods less than one year. F-13 AIM DYNAMICS FUND NOTE 13--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS B ------------------------------------------------------ SIX MONTHS ENDED JANUARY 31, YEAR ENDED JULY 31, 2006 -------------------------------- ----------- 2005 2004 2003 - -------------------------------------------------------------------- --------------------------------------- Net asset value, beginning of period $17.27 $13.94 $12.69 $10.78 - -------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.06)/(a)/ (0.18)/(a)/ (0.22)/(a)/ (0.08)/(b)/ - -------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.77 3.51 1.47 1.99 - -------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.71 3.33 1.25 1.91 - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $18.98 $17.27 $13.94 $12.69 - -------------------------------------------------------------------------------------------------------------------------- Total return/(c)/ 9.90% 23.89% 9.85% 17.72% - -------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $4,366 $2,908 $2,282 $1,409 - -------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.77%/(d)/ 1.90% 1.95% 1.96% - -------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.77%/(d)/ 1.91% 2.26% 2.52% - -------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.76)%/(d)/ (1.19)% (1.54)% (1.53)% - -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 55% 87% 95% 91% - --------------------------------------------------------------------------------------------------------------------------
----------- MARCH 28, 2002 (DATE SALES COMMENCED) TO JULY 31, 2002 - ------------------------------------------------------------------- Net asset value, beginning of period $ 15.30 - ------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.06)/(a)/ - ------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) (4.46) - ------------------------------------------------------------------------------------ Total from investment operations (4.52) - ------------------------------------------------------------------------------------ Net asset value, end of period $ 10.78 - ------------------------------------------------------------------------------------ Total return/(c)/ (29.54)% - ------------------------------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $ 390 - ------------------------------------------------------------------------------------ Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.09%/(e)/ - ------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 2.09%/(e)/ - ------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (1.71)%/(e)/ - ------------------------------------------------------------------------------------ Portfolio turnover rate/(f)/ 81% - ------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.17) for the year ended July 31, 2003. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges, and is not annualized for periods less than one year. /(d)/Ratios are annualized and based on average daily net assets of $3,515,749. /(e)/Annualized. /(f)/Not annualized for periods less than one year. F-14 AIM DYNAMICS FUND NOTE 13--FINANCIAL HIGHLIGHTS-(CONTINUED)
---------------------------- SIX MONTHS ENDED JANUARY 31, 2006 ------------ ----------- 2005 - -------------------------------------------------------------------- ------------- Net asset value, beginning of period $16.93 $13.67 - ------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.07)/(a)/ (0.18)/(a)/ - ------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 1.76 3.44 - ------------------------------------------------------------------------------------------------ Total from investment operations 1.69 3.26 - ------------------------------------------------------------------------------------------------ Less distributions from net realized gains -- -- - ------------------------------------------------------------------------------------------------ Net asset value, end of period $18.62 $16.93 - ------------------------------------------------------------------------------------------------ Total return/(c)/ 9.98% 23.85% - ------------------------------------------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $9,001 $9,081 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.77%/(d)/ 1.90% - ------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 1.77%/(d)/ 1.91% - ------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (0.76)%/(d)/ (1.19)% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate/(e)/ 55% 87% - ------------------------------------------------------------------------------------------------
CLASS C -------------------------------------------------- YEAR ENDED JULY 31, -------------------------------------------------- 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.44 $ 10.60 $ 17.04 $ 27.78 - -------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.22)/(a)/ (0.18)/(b)/ (0.25)/(b)/ (0.06)/(b)/ - -------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.45 2.02 (6.17) (10.60) - -------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.23 1.84 (6.42) (10.66) - -------------------------------------------------------------------------------------------------------------------------- Less distributions from net realized gains -- -- (0.02) (0.08) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 13.67 $ 12.44 $ 10.60 $ 17.04 - -------------------------------------------------------------------------------------------------------------------------- Total return/(c)/ 9.89% 17.47% (37.76)% (38.45)% - -------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $11,287 $13,537 $13,440 $28,887 - -------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.95% 1.96% 1.96% 1.86% - -------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.67% 3.05% 2.16% 1.86% - -------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (1.54)% (1.54)% (1.59)% (1.34)% - -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(e)/ 95% 91% 81% 55% - --------------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.27), $(0.38), and $(0.10) for the year ended July 31, 2003, 2002, and 2001, respectively. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges, and is not annualized for periods less than one year. /(d)/Ratios are annualized and based on average daily net assets of $8,552,271. /(e)/Not annualized for periods less than one year. F-15 AIM DYNAMICS FUND NOTE 13--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS K --------------------------------------------------------- AUGUST 1, 2005 THROUGH OCTOBER 21, YEAR ENDED JULY 31, 2005 ----------------------------------------- ----------- 2005 2004 2003 - -------------------------------------------------------------------- ------------------------------------------ Net asset value, beginning of period $17.53 $ 14.08 $ 12.74 $ 10.76 - ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.01)/(a)/ (0.10)/(a)/ (0.14)/(a)/ (0.02)/(b)/ - ----------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (0.85) 3.55 1.48 2.00 - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations (0.86) 3.45 1.34 1.98 - ----------------------------------------------------------------------------------------------------------------------------- Less distributions from net realized gains -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $16.67 $ 17.53 $ 14.08 $ 12.74 - ----------------------------------------------------------------------------------------------------------------------------- Total return/(c)/ (4.91)% 24.50% 10.52% 18.40% - ----------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) -- $14,997 $25,977 $45,258 - ----------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.28%/(d)/ 1.35% 1.40% 1.41% - ----------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.28%/(d)/ 1.36% 1.54% 1.61% - ----------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.27)%/(d)/ (0.64)% (0.99)% (0.98)% - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 55% 87% 95% 91% - -----------------------------------------------------------------------------------------------------------------------------
------------------------ NOVEMBER 30, 2000 (DATE SALES COMMENCED) -------- TO JULY 31, 2002 2001 - --------------------------------------------------------------------------------- Net asset value, beginning of period $ 17.19 $ 22.50 - ------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.15)/(a)/ (0.03) - ------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (6.26) (5.28) - ------------------------------------------------------------------------------------------------- Total from investment operations (6.41) (5.31) - ------------------------------------------------------------------------------------------------- Less distributions from net realized gains (0.02) -- - ------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.76 $ 17.19 - ------------------------------------------------------------------------------------------------- Total return/(c)/ (37.32)% (23.60)% - ------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $44,745 $ 6 - ------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.36% 1.48%/(e)/ - ------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.36% 3.06%/(e)/ - ------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (1.05)% (1.03)%/(e)/ - ------------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 81% 55% - -------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.11) for the year ended July 31, 2003. /(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. Not annualized for periods less than one year. /(d)/Ratios are annualized and based on average daily net assets of $14,252,098. /(e)/Annualized. /(f)/Not annualized for periods less than one year. F-16 AIM DYNAMICS FUND NOTE 13--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS R ------------- OCTOBER 25, 2005 (DATE SALES COMMENCED) TO JANUARY 31, 2006 ---------------------------------------------------------------------------- Net asset value, beginning of period $17.05 ---------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.01)/(a)/ ---------------------------------------------------------------------------- Net gains on securities (both realized and unrealized) 2.49 ---------------------------------------------------------------------------- Total from investment operations 2.48 ---------------------------------------------------------------------------- Net asset value, end of period $19.53 ---------------------------------------------------------------------------- Total return/(b)/ 14.55% ---------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $ 13 ---------------------------------------------------------------------------- Ratio of expenses to average net assets 1.26%/(c)/ ---------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.24)%/(c)/ ---------------------------------------------------------------------------- Portfolio turnover rate/(d)/ 55% ----------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(c)/Ratios are annualized and based on average daily net assets of $11,138. /(d)/Not annualized for periods less than one year. F-17 AIM DYNAMICS FUND NOTE 13--FINANCIAL HIGHLIGHTS-(CONTINUED)
INVESTOR CLASS ------------------------------------------------------------------------------------- SIX MONTHS ENDED JANUARY 31, YEAR ENDED JULY 31, 2006 ------------------------------------------------------------------- ----------- 2005 2004 2003 2002 - ------------------------------------------ -------------------------------------------------------------------- Net asset value, beginning of period $ 17.71 $ 14.19 $ 12.81 $ 10.81 $ 17.23 - ------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.00)/(a)/ (0.07)/(a)/ (0.11)/(a)/ (0.00)/(b)/ (0.00)/(b)/ - ------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.83 3.59 1.49 2.00 (6.40) - ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.83 3.52 1.38 2.00 (6.40) - ------------------------------------------------------------------------------------------------------------------------------- Less distributions from net realized gains -- -- -- -- (0.02) - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 19.54 $ 17.71 $ 14.19 $ 12.81 $ 10.81 - ------------------------------------------------------------------------------------------------------------------------------- Total return/(c)/ 10.33% 24.81% 10.77% 18.50% (37.17)% - ------------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $1,820,084 $1,984,687 $2,992,578 $3,863,821 $3,688,213 - ------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.02%/(d)/ 1.15% 1.19% 1.21% 1.21% - ------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.02%/(d)/ 1.16% 1.29% 1.46% 1.23% - ------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.01)%/(d)/ (0.44)% (0.78)% (0.78)% (0.86)% - ------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(e)/ 55% 87% 95% 91% 81% - -------------------------------------------------------------------------------------------------------------------------------
----------- ----------- 2001 - ------------------------------------------------------------ Net asset value, beginning of period $ 27.86 - ------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.12)/(a)(b)/ - ------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) (10.43) - ------------------------------------------------------------ Total from investment operations (10.55) - ------------------------------------------------------------ Less distributions from net realized gains (0.08) - ------------------------------------------------------------ Net asset value, end of period $ 17.23 - ------------------------------------------------------------ Total return/(c)/ (37.94)% - ------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $6,562,467 - ------------------------------------------------------------ Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.00% - ------------------------------------------------------------ Without fee waivers and/or expense reimbursements 1.00% - ------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (0.49)% - ------------------------------------------------------------ Portfolio turnover rate/(e)/ 55% - ------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.09), $(0.14), and $(0.06) for the year ended July 31, 2003, 2002 and 2001, respectively. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(d)/Ratios are annualized and based on average daily net assets of $1,820,161,162. /(e)/Not annualized for periods less than one year.
---------------------------- SIX MONTHS ENDED JANUARY 31, 2006 ------------ ----------- 2005 - -------------------------------------------------------------------- ------------- Net asset value, beginning of period $ 18.08 $ 14.42 - ------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) 0.03/(a)/ 0.01/(a)/ - ------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 1.89 3.65 - ------------------------------------------------------------------------------------------------ Total from investment operations 1.92 3.66 - ------------------------------------------------------------------------------------------------ Less distributions from net realized gains -- -- - ------------------------------------------------------------------------------------------------ Net asset value, end of period $ 20.00 $ 18.08 - ------------------------------------------------------------------------------------------------ Total return/(b)/ 10.62% 25.38% - ------------------------------------------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $51,563 $10,305 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 0.65%/(c)/ 0.63% - ------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 0.65%/(c)/ 0.64% - ------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 0.36%/(c)/ 0.08% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate/(d)/ 55% 87% - ------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS ---------------------------------------------- YEAR ENDED JULY 31, ---------------------------------------------- 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 12.96 $ 10.88 $ 17.28 $ 27.87 - ---------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.04)/(a)/ (0.04) (0.08)/(a)/ (0.07)/(a)/ - ---------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.50 2.12 (6.30) (10.44) - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.46 2.08 (6.38) (10.51) - ---------------------------------------------------------------------------------------------------------------------- Less distributions from net realized gains -- -- (0.02) (0.08) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 14.42 $ 12.96 $ 10.88 $ 17.28 - ---------------------------------------------------------------------------------------------------------------------- Total return/(b)/ 11.26% 19.12% (36.95)% (37.78)% - ---------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $12,987 $30,788 $25,133 $11,622 - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 0.71% 0.78% 0.84% 0.77% - ---------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 0.72% 0.78% 0.84% 0.77% - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.30)% (0.34)% (0.53)% (0.26)% - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(d)/ 95% 91% 81% 55% - ----------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(c)/Ratios are based on average daily net assets of $42,463,957. /(d)/Not annualized for periods less than one year. F-18 AIM DYNAMICS FUND NOTE 14--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. PENDING LITIGATION AND REGULATORY INQUIRIES On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code (S) 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP from serving as an investment advisor to any registered investment company, including the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On October 19, 2005, the WVAG lawsuit was transferred for pretrial purposes to the MDL Court (as defined below). On July 7, 2005, the Supreme Court of West Virginia ruled in an unrelated lawsuit that is similar to this action that the WVAG does not have authority to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor--Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: . that the defendants permitted improper market timing and related activity in the AIM Funds; . that certain AIM Funds inadequately employed fair value pricing; . that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; and . that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. F-19 AIM DYNAMICS FUND NOTE 14--LEGAL PROCEEDINGS-(CONTINUED) All lawsuits based on allegations of market timing, late trading and related issues have been transferred or conditionally transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. On March 1, 2006, the MDL Court entered orders on Defendants' Motions to dismiss in the derivative and class action lawsuits. The MDL Court dismissed all derivative causes of action in the derivative lawsuit but two: (i) the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"); and (ii) the "control person liability" claim under Section 48 of the 1940 Act. The MDL Court dismissed all claims asserted in the class action lawsuit but three: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934; (ii) the excessive fee claim under Section 36(b) of the 1940 Act (which survived only insofar as plaintiffs seek recovery of fees associated with the assets involved in market timing); and (iii) the "control person liability" claim under Section 48 of the 1940 Act. Based on the MDL Court's March 1, 2006 orders, all claims asserted against the Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the derivative lawsuit. On February 27, 2006, Judge Motz for the MDL Court issued a memorandum opinion on the AMVESCAP defendants' motion to dismiss the ERISA lawsuit. Judge Motz granted the motion in part and denied the motion in part, holding that: (i) plaintiff has both constitutional and statutory standing to pursue her claims under ERISA (S) 502(a)(2); (ii) plaintiff lacks standing under ERISA (S) 502(a)(3) to obtain equitable relief; (iii) the motion is granted as to the claims alleged under ERISA (S) 404 for failure to prudently and loyally manage plan assets against certain AMVESCAP defendants; (iv) the motion is denied as to the claims alleged under ERISA (S) 404 for failure to prudently and loyally manage plan assets against AMVESCAP and certain other AMVESCAP defendants. The opinion also: (i) confirmed plaintiff's abandonment of her claims that defendants engaged in prohibited transactions and/or misrepresentation; (ii) postponed consideration of the duty to monitor and co-fiduciary duty claims until after any possible amendments to the complaints; (iii) stated that plaintiff may seek leave to amend her complaint within 40 days of the date of filing of the memorandum opinion. Judge Motz requested that the parties submit proposed orders within 30 days of the opinion implementing his rulings. IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, AIM and ADI have advised the Fund that they are providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds. F-20 AIM DYNAMICS FUND TRUSTEES AND OFFICERS
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND Bob R. Baker Robert H. Graham 11 Greenway Plaza President and Principal Executive Officer Suite 100 Frank S. Bayley Houston, TX 77046-1173 Mark H. Williamson James T. Bunch Executive Vice President INVESTMENT ADVISOR Bruce L. Crockett Lisa O. Brinkley A I M Advisors, Inc. Chair Senior Vice President and Chief Compliance Officer 11 Greenway Plaza Suite 100 Albert R. Dowden Russell C. Burk Houston, TX 77046-1173 Senior Vice President and Senior Officer Edward K. Dunn, Jr. TRANSFER AGENT Kevin M. Carome Jack M. Fields Senior Vice President, Secretary and Chief Legal Officer AIM Investment Services, Inc. P.O. Box 4739 Carl Frischling Sidney M. Dilgren Houston, TX 77210-4739 Vice President, Treasurer and Principal Financial Officer Robert H. Graham CUSTODIAN Vice Chair J. Philip Ferguson Vice President State Street Bank and Trust Company Prema Mathai-Davis 225 Franklin Street Karen Dunn Kelley Boston, MA 02110-2801 Lewis F. Pennock Vice President COUNSEL TO THE FUND Ruth H. Quigley Ballard Spahr Larry Soll Andrews & Ingersoll, LLP 1735 Market Street, 51st Floor Raymond Stickel, Jr. Philadelphia, PA 19103-7599 Mark H. Williamson COUNSEL TO THE INDEPENDENT TRUSTEES Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 DISTRIBUTOR A I M Distributors, Inc. 11 Greenway Plaza Suite 100 Houston, TX 77046-1173
Domestic Equity Sector Equity AIM Aggressive Growth Fund/3/ AIM Advantage Health Sciences Fund AIM Basic Balanced Fund* AIM Energy Fund AIM Basic Value Fund AIM Financial Services Fund AIM Blue Chip Fund/3/ AIM Global Health Care Fund AIM Capital Development Fund AIM Global Real Estate Fund AIM Charter Fund AIM Gold & Precious Metals Fund AIM Constellation Fund AIM Leisure Fund AIM Diversified Dividend Fund AIM Multi-Sector Fund AIM Dynamics Fund AIM Real Estate Fund/1/ AIM Large Cap Basic Value Fund AIM Technology Fund AIM Large Cap Growth Fund AIM Utilities Fund AIM Mid Cap Basic Value Fund AIM Mid Cap Core Equity Fund/1/ Fixed Income AIM Mid Cap Growth Fund/4/ AIM Opportunities I Fund TAXABLE AIM Opportunities II Fund AIM Opportunities III Fund AIM Floating Rate Fund AIM Premier Equity Fund/4/ AIM High Yield Fund AIM S&P 500 Index Fund AIM Income Fund AIM Select Equity Fund AIM Intermediate Government Fund AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund AIM Small Cap Growth Fund/1/ AIM Money Market Fund AIM Small Company Growth Fund/4/ AIM Short Term Bond Fund AIM Summit Fund AIM Total Return Bond Fund AIM Trimark Endeavor Fund Premier Portfolio AIM Trimark Small Companies Fund Premier U.S. Government Money AIM Weingarten Fund/3/ Portfolio * Domestic equity and income fund TAX-FREE International/Global Equity AIM High Income Municipal Fund/1/ AIM Municipal Bond Fund AIM Asia Pacific Growth Fund AIM Tax-Exempt Cash Fund AIM Developing Markets Fund AIM Tax-Free Intermediate Fund AIM European Growth Fund Premier Tax-Exempt Portfolio AIM European Small Company Fund/1/ AIM Global Aggressive Growth Fund AIM Allocation Solutions AIM Global Equity Fund AIM Global Growth Fund AIM Conservative Allocation Fund AIM Global Value Fund AIM Growth Allocation Fund/2/ AIM International Core Equity Fund AIM Moderate Allocation Fund AIM International Growth Fund AIM Moderate Growth Allocation Fund AIM International Small Company Fund/1/ AIM Moderately Conservative Allocation AIM Trimark Fund Fund Diversified Portfolios AIM Income Allocation Fund AIM International Allocation Fund /1/This Fund has limited public sales of its shares to certain investors. For more information on who may continue to invest in the Fund, please see the appropriate prospectus. /2/Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM Growth Allocation Fund. /3/Shareholders approved the reorganization of the following funds to be effective on or about March 27, 2006: AIM Aggressive Growth Fund into AIM Constellation Fund, AIM Weingarten Fund into AIM Constellation Fund and AIM Blue Chip Fund into AIM Large Cap Growth Fund. /4/Shareholders approved the reorganization of the following funds to be effective on or about April 10, 2006: AIM Mid Cap Growth Fund into AIM Dynamics Fund, AIM Small Company Growth Fund into AIM Small Cap Growth Fund and AIM Premier Equity Fund into AIM Charter Fund. If used after April 20, 2006, this report must be accompanied by a Fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $128 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $386 billion in assets under management. Data as of December 31, 2005. - -------------------------------------------------------------------------------- CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AND READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- AIMinvestments.com I-DYN-SAR-1 A I M Distributors, Inc. [YOUR GOALS. OUR SOLUTIONS.] - REGISTERED TRADEMARK - Mutual Retirement Annuities College Separately Offshore Cash Funds Products Savings Managed Products Management Plans Accounts [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - AIM SMALL COMPANY GROWTH FUND Semiannual Report to Shareholders . January 31, 2006 [COVER IMAGE] [YOUR GOALS. OUR SOLUTIONS.] - REGISTERED TRADEMARK - [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - AIM SMALL COMPANY GROWTH FUND SEEKS TO PROVIDE LONG-TERM CAPITAL GROWTH. .. Unless otherwise stated, information presented in this report is as of January 31, 2006, and is based on total net assets. ABOUT SHARE CLASSES .. Class B shares are not available as an investment for retirement plans maintained pursuant to Section 401 of the Internal Revenue Code, including 401(k) plans, money purchase pension plans and profit sharing plans. Plans that had existing accounts prior to September 30, 2003, invested in Class B shares will continue to be allowed to make additional purchases. .. Effective October 21, 2005, Class K shares were converted to Class A shares. .. Investor Class shares are closed to most investors. For more information on who may continue to invest in the Investor Class shares, please see the prospectus. .. Class R shares are available only to certain retirement plans. Please see the prospectus for more information. PRINCIPAL RISKS OF INVESTING IN THE FUND .. Investing in smaller companies involves risks not associated with investing in more established companies, including business risk, significant stock price fluctuations and illiquidity. .. The Fund may invest up to 25% of its assets in the securities of non-U.S. issuers. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation. International investing presents certain risks not associated with investing solely in the United States. These include risks relating to fluctuations in the value of the U.S. dollar relative to the values of other currencies, the custody arrangements made for the Fund's foreign holdings, differences in accounting, political risks and the lesser degree of public information required to be provided by non-U.S. companies. .. At any given time, the Fund may be subject to sector risk, which means a certain sector may underperform other sectors or the market as a whole. The Fund is not limited with respect to the sectors in which it can invest. .. Portfolio turnover is greater than that of most funds, which may affect performance. .. The prices of initial public offering (IPO) securities may go up and down more than prices of equity securities of companies with longer trading histories. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories. There can be assurance that the Fund will have favorable IPO investment opportunities. ABOUT INDEXES USED IN THIS REPORT .. The unmanaged STANDARD & POOR'S COMPOSITE INDEX OF 500 STOCKS (the S&P 500 - --REGISTERED TRADEMARK-- Index) is an index of common stocks frequently used as a general measure of U.S. stock market performance. .. The unmanaged RUSSELL 2000 --REGISTERED TRADEMARK-- GROWTH INDEX is a subset of the unmanaged RUSSELL 2000 --REGISTERED TRADEMARK-- INDEX, which represents the performance of the stocks of small-capitalization companies; the Growth subset measures the performance of Russell 2000 companies with higher price/book ratios and higher forecasted growth values. .. The unmanaged LIPPER SMALL-CAP GROWTH FUND INDEX represents an average of the performance of the 30 largest small-capitalization growth funds tracked by Lipper, Inc., an independent mutual fund performance monitor. .. The unmanaged LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX, which represents the U.S. investment-grade fixed-rate bond market (including government and corporate securities, mortgage pass-through securities and asset-backed securities), is compiled by Lehman Brothers, a global investment bank. .. The unmanaged MSCI WORLD INDEX is a group of global securities tracked by Morgan Stanley Capital International. .. The Fund is not managed to track the performance of any particular index, including the indexes defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the indexes. Had the advisor not waived fees and/or reimbursed expenses for the Fund's Class A, B, C and R shares in the past, returns would have been lower. .. A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of an index of funds reflects fund expenses; performance of a market index does not. OTHER INFORMATION .. Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. and Standard & Poor's. .. The returns shown in the management's discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. After the close of the reporting period, shareholders approved the reorganization of AIM Small Company Growth Fund into AIM Small Cap Growth Fund, to be effective on or about April 10, 2006. 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 Continued on Page 5 - -------------------------------------------------------------------------------- FUND NASDAQ SYMBOLS Class A Shares ISGAX Class B Shares ISGBX Class C Shares ISGCX Class R Shares ISGRX Investor Class Shares FIEGX - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - -------------------------------------------------------------------------------- AIMINVESTMENTS.COM AIM SMALL COMPANY GROWTH FUND DEAR FELLOW AIM FUNDS SHAREHOLDERS: [GRAHAM PHOTO] Although many concerns weighed on investors minds during the six months covered by this report, stocks and bonds posted gains for the period. The S&P 500 Index, frequently cited as a benchmark for U.S. stock market performance, returned 4.67%. Results for international stocks were more impressive, with the MSCI World Index gaining 11.29%. Bond returns were more modest, as the Lehman Brothers U.S. Aggregate Bond Index gained 0.84%. ROBERT H. GRAHAM Within equity indexes, there was a good deal of variation in the performance of different sectors and markets. Energy outperformed other sectors of the S&P 500 Index, reflecting higher oil and gas prices. Internationally, emerging markets produced more attractive results than developed markets, partially because emerging markets tend to be more closely tied to the performance of natural resources and commodities. [WILLIAMSON PHOTO] Bond performance also varied, with short- and intermediate-term bonds generally faring better than their long-term counterparts. The difference between bond yields was relatively narrow across the maturity spectrum, making short- and intermediate-term bonds, which are generally perceived as safer, a more attractive investment option than long-term debt. High yield bonds and municipal bonds also were among the better-performing segments of the fixed-income market. MARK H. WILLIAMSON A number of key developments affected markets and the economy during the reporting period: . Hurricane Katrina, which devastated New Orleans in August, had numerous economic repercussions and dealt a short-term setback to consumer confidence. However, consumer confidence rebounded toward the end of the period, with analysts crediting the resiliency of the economy, falling gas prices and job growth for this trend. . The Federal Reserve Board (the Fed) continued its tightening policy, raising the key federal funds target rate to 4.50% by the end of the reporting period. Many analysts believed that the central bank was near the end of its tightening policy as Ben Bernanke succeeded the retiring Alan Greenspan as Fed chairman early in 2006. . Gasoline prices, which soared to a nationwide average of slightly more than $3.08 per gallon on September 5, following Hurricane Katrina, had dropped by more than 70 cents by the end of the reporting period, according to the U.S. Energy Information Administration. . In 2005, the economy created 2 million new jobs, although job growth was uneven and sometimes did not meet analysts' expectations on a monthly basis. For a discussion of the specific market conditions that affected your Fund and how your Fund was managed during the reporting period, please turn to Page 3. YOUR FUND Further information about the markets, your Fund and investing in general is always available on our comprehensive Web site, AIMinvestments.com. We invite you to visit it frequently. We at AIM remain committed to building solutions to help you meet your investment goals. We thank you for your continued participation in AIM Investments --REGISTERED TRADEMARK--. If you have any questions, please contact our award-winning Client Service representatives at 800-959-4246. We are pleased to be of help. Sincerely, /S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, President, A I M Advisors, Inc. AIM Funds March 21, 2006 AIM INVESTMENTS IS A REGISTERED SERVICE MARK OF A I M MANAGEMENT GROUP INC. A I M ADVISORS, INC. AND A I M CAPITAL MANAGEMENT, INC. ARE THE INVESTMENT ADVISORS. A I M DISTRIBUTORS, INC. IS THE DISTRIBUTOR FOR THE RETAIL FUNDS REPRESENTED BY AIM INVESTMENTS. 1 AIM SMALL COMPANY GROWTH FUND DEAR FELLOW AIM FUND SHAREHOLDERS: [CROCKETT PHOTO] Having completed a year of transition and change at AIM Funds--as well as my first full year as your board's independent chair--I can assure you that shareholder interests are at the forefront of every decision your board makes. While regulators and fund companies debate the value of an independent board chair, this structure is working for you. An independent chair can help lead to unbiased decisions and eliminate potential conflicts. BRUCE L. CROCKETT Some highlights of 2005 board activity: . Board approval of voluntary fee reductions, which are saving shareholders more than $20 million annually, based on asset levels of March 31, 2005. . Board approval for the merger of 14 funds into other AIM funds with similar investment objectives. Eight of these mergers were approved by shareholders of the target funds during 2005. The remaining six are being voted on by shareholders in early 2006. In each case, the goal is for the resulting merged fund to benefit from strengthened management and greater efficiency. . Board approval for portfolio management changes at 11 funds, consistent with the goal of organizing management teams around common processes and shared investment views. Again, we hope that these changes will improve fund performance and efficiency. In 2006, your board will continue to focus on reducing costs and shareholder fees and improving portfolio performance, which is not yet as strong as we expect to see it. Eight in-person board meetings and several additional telephone and committee meetings are scheduled to take place this year. I'll inform you of our progress in my next semiannual letter to shareholders. The AIM Funds board is pleased to welcome our newest independent member, Raymond Stickel, Jr., a former partner with the international auditing firm of Deloitte & Touche. We also send our thanks and best wishes to Gerald J. Lewis, who retired from your board in December 2005, and to Edward K. Dunn, Jr., who is retiring this year. Your board welcomes your views. Please mail them to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046. Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair On Behalf of the Board of Trustees AIM Funds March 21, 2006 2 AIM SMALL COMPANY GROWTH FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY On September 16, 2005, changes were made to your Fund's management team with the intention of improving long-term performance. The new team consists of Juliet Ellis (lead) and Juan Hartsfield, who are assisted by the Small Cap Growth/Core Team .Our goal is to produce consistent, strong risk-adjusted returns for long-term investors. For the period covered by this report, your Fund recorded positive returns. Our focus on small-cap stocks, which outperformed large-cap stocks during the period, helped your Fund outperform the large-cap oriented S&P 500 Index. However, the Fund underperformed the Russell 2000 Growth Index, largely due to an underweight position in the energy sector and underperformance by several of the Fund's holdings in the health care and - -------------------------------------------------------------------------------- FUND VS. INDEXES TOTAL RETURNS, 7/31/05-1/31/06, EXCLUDING APPLICABLE SALES CHARGES. IF SALES CHARGES WERE INCLUDED, RETURNS WOULD BE LOWER. Class A Shares 8.47% Class B Shares 8.11 Class C Shares 8.07 Class R Shares* N/A Standard & Poor's Composite Index of 500 Stocks (Broad Market Index) 4.67 Russell 2000 Growth Index (Style-specific Index) 10.71 Lipper Small-Cap Growth Fund Index (Peer Group Index) 8.68 SOURCE: LIPPER INC. *SHARE CLASS INCEPTED DURING THE SEMIANNUAL REPORT PERIOD. SEE PAGE 5 FOR A DETAILED EXPLANATION OF FUND PERFORMANCE. - -------------------------------------------------------------------------------- information technology sectors. For long-term performance, see Page 5. - -------------------------------------------------------------------------------- HOW WE INVEST We focus on small-cap growth companies with visible and long-term growth opportunities, as demonstrated by consistent and accelerating earnings growth. We select stocks based on analysis of individual companies. Our three-step selection process includes: .. Fundamental analysis--Building financial models and conducting in-depth interviews with company management. .. Valuation analysis--Identifying attractively valued stocks given their growth potential over a one- to two-year horizon. .. Technical analysis--Identifying the "timeliness" of a stock purchase. We review trading volume characteristics and trend analysis to make sure there are no signs of the stock deteriorating. This also serves as a risk management measure that helps us confirm our high conviction candidates. We consider selling or trimming a stock when: .. the company's fundamental business prospects deteriorate .. a stock hits its target price .. the company's technical profile deteriorates MARKET CONDITIONS AND YOUR FUND When we assumed management of the Fund, major stock market indexes had been fluctuating within a relatively narrow range for several months. Despite concerns about record-high oil prices, rising interest rates and the economic impact of two Gulf Coast hurricanes, corporate earnings were generally solid, and the Rusell 2000 Growth Index finished the reporting period with double-digit returns. During the period, we increased our weighting in industrials, the best-performing sector for your Fund on an absolute basis and relative to the Russell 2000 Growth Index during the six-month period. Within this sector, we added to our transportation industry holdings. We particularly liked trucking companies because of their increased pricing power. An industrials stock that contributed positively to portfolio performance was CERADYNE , which makes advanced technical ceramics products, including body armor for the military. The company reported record sales and earnings (continued) - --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION TOP 5 INDUSTRIES* TOP 10 HOLDINGS* By sector 1. Application Software 6.4% 1. Cytyc Corp. 1.8% Information Technology 28.0% 2. Health Care Equipment 6.1 2. Aeropostale, Inc. 1.6 Industrials 17.8 3. Electronic Equipment Manufacturers 4.0 3. Carpenter Technology Corp. 1.6 Consumer Discretionary 13.8 4. Apparel Retail 4.0 4. Henry (Jack) & Associates, Inc. 1.5 Health Care 13.8 5. Semiconductors 3.1 5. Ceradyne, Inc. 1.4 Financials 9.0 6. SBA Communications Corp.-Class A 1.4 Energy 6.3 7. Advanced Medical Optics, Inc. 1.3 Materials 4.1 8. Nara Bancorp, Inc. 1.3 Consumer Staples 2.4 9. Hydril 1.3 Telecommunication Services 2.2 10 FormFactor Inc. 1.3 Money Market Funds Plus Other Assets Less Liabilities 2.6 TOTAL NET ASSETS $421.8 MILLION TOTAL NUMBER OF HOLDINGS* 118
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. - -------------------------------------------------------------------------------- 3 AIM SMALL COMPANY GROWTH FUND for the third quarter of 2005. We continue to own the stock as we believe the company is likely to continue to grow its dominant market share position. Another stock in this sector that enhanced performance was THOMAS & BETTS CO. This company provides electrical connectors, HVAC equipment and transmission towers to the commercial, communications, industrial and utility markets. The stock price of this holding increased after the company raised earnings guidance and reported strong revenue growth in its light commercial, industrial and utility markets. We believe that the company could continue to benefit from the recovery in non-residential construction and from electric utility infrastructure investment. Higher energy prices and improved earnings prospects led to significant stock price increases in many of the Fund's investments in the energy sector. Key contributors included BILL BARRETT CORP., a Denver-based oil and gas exploration company, and UNIT Corp., an onshore natural gas drilling company. While we increased our exposure to energy stocks, adding companies such as ATWOOD OCEANICS and HYDRIL toward the end of the reporting period, the Fund lost ground to the Russell 2000 Growth Index largely due to an underweight position. Many of our holdings in the information technology sector also contributed positively to Fund performance. However, we underperformed the Russell 2000 Growth Index in this sector, as several of the Fund's holdings underperformed during the reporting period. FARO TECHNOLOGIES, a maker of electronic equipment used to measure critical dimensions on manufactured parts, declined due to higher than expected costs related to its overall company growth as well as its expansion in Asia. The holding was subsequently sold due to deteriorating fundamentals. Other detractors included software and services holdings ALLIANCE DATA SYSTEMS and ULTICOM. We sold Ulticom. The Fund's health care holdings detracted from returns, primarily due to underperformance by several biotechnology stocks such as RIGEL PHARMACEUTICALS and ORCHID CELLMARK. We sold both holdings due to weak fundamentals. Additionally, a number of the Fund's health care equipment and services holdings faltered, including KINDRED HEALTHCARE. Kindred was negatively affected when it reported a shortfall in third quarter earnings due to lower patient admissions in several acute care hospitals and higher labor costs in its nursing home business. We sold the stock. We further reduced the Fund's weight in the health care sector by selling the stocks of several health care companies we believed had weak prospects for long-term profitability. IN CLOSING We are pleased to have provided positive return for the reporting period. We remain committed to our bottom-up stock selection process of identifying attractively valued small-cap growth companies with high growth potential while endeavoring to avoid high-risk stocks. We believe our disciplined investment strategy has the potential to provide shareholders with consistent, attractive returns over a long-term investment horizon with below-market risk. We thank you for your continued participation in AIM Small Company Growth Fund. THE VIEWS AND OPINIONS EXPRESSED IN MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ARE THOSE OF A I M ADVISORS, INC. THESE VIEWS AND OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE VIEWS AND OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR RECOMMENDATIONS, OR AS AN OFFER FOR A PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE, BUT A I M ADVISORS, INC. MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY. See important Fund and index disclosures inside front cover. - -------------------------------------------------------------------------------- [ELLIS PHOTO] JULIET ELLIS, Chartered Financial Analyst and senior portfolio manager, is lead portfolio manager of AIM Small Company Growth Fund. Ms.Ellis joined AIM in 2004. She previously served as senior portfolio manager of two small-cap funds for another company and was responsible for the management of more than $2 billion in assets. Ms. Ellis began her investment career in 1981 as a financial consultant. She is a Cum Laude and Phi Beta Kappa graduate of Indiana University with a B.A. in economics and political science. [HARTFIELD PHOTO] JUAN HARTSFIELD, Chartered Financial Analyst and portfolio manager, is portfolio manager of AIM Small Company Growth Fund. Prior to joining AIM in 2004, he began his investment career in 2000 as an equity analyst and most recently served as a portfolio manager. Mr. Hartsfield earned a B.S. in petroleum engineering from the University of Texas and his M.B.A. from the University of Michigan. Assisted by the Small Cap Growth/Core Team - -------------------------------------------------------------------------------- [RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE, PLEASE SEE PAGE 5. 4 AIM SMALL COMPANY GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS As of 1/31/06, including applicable sales charges CLASS A SHARES Inception (3/28/02) 4.99% 1 Year 12.90 CLASS B SHARES Inception (3/28/02) 5.18% 1 Year 13.75 CLASS C SHARES Inception (2/14/00) -6.03% 5 Years -2.63 1 Year 17.71 INVESTOR CLASS SHARES 10 Years 8.95% 5 Years -1.49 1 Year 19.55 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS As of 12/31/05, most recent calendar quarter-end, including applicable sales charges CLASS A SHARES Inception (3/28/02) 2.88% 1 Year -0.45 CLASS B SHARES Inception (3/28/02) 3.04% 1 Year -0.30 CLASS C SHARES Inception (2/14/00) -7.38% 5 Years -4.03 1 Year 3.66 INVESTOR CLASS SHARES 10 Years 7.65% 5 Years -2.88 1 Year 5.49 ================================================================================ CUMULATIVE TOTAL RETURNS 10/25/05 - 1/31/06, excluding sales charges CLASS R SHARES Inception (10/25/05) 14.52% 10/25/05 - 12/31/05, excluding sales charges CLASS R SHARES Inception (10/25/05) 5.67% - -------------------------------------------------------------------------------- THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT GUARANTEE COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE VISIT AIMINVESTMENTS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE AND THE EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR SALE OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. CLASS A SHARE PERFORMANCE REFLECTS THE MAXIMUM 5.50% SALES CHARGE, AND CLASS B AND CLASS C SHARE PERFORMANCE REFLECTS THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CDSC ON CLASS B SHARES DECLINES FROM 5% BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE SEVENTH YEAR. THE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST YEAR AFTER PURCHASE. CLASS R SHARES DO NOT HAVE A FRONT-END SALES CHARGE; RETURNS SHOWN ARE AT NET ASSET VALUE AND DO NOT REFLECT A 0.75% CDSC THAT MAY BE IMPOSED ON A TOTAL REDEMPTION OF RETIREMENT PLAN ASSETS WITHIN THE FIRST YEAR. INVESTOR CLASS SHARES DO NOT HAVE A FRONT-END SALES CHARGE OR A CDSC; THEREFORE, PERFORMANCE IS AT NET ASSET VALUE. THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER DUE TO DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES. HAD THE ADVISOR NOT WAIVED FEES AND/OR REIMBURSED EXPENSES FOR THE FUND'S CLASS B AND C SHARES IN THE PAST, RETURNS WOULD HAVE BEEN LOWER. Continued from inside front cover and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of port folio holdings is available at AIMinvestments.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's Web site at sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-01474 and 002-26125. 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 AIM Web site, AIMinvestments.com. On the home page, scroll down and click on AIM Funds Proxy Policy. The information is also available on the SEC Web site, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2005, is available at our Web site. Go to AIMinvestments.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The inform at i on is also available on the SEC Web site, sec.gov. 5 AIM SMALL COMPANY GROWTH 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; 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 R shares, the example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period August 1, 2005, through January 31, 2006. The actual ending account value and expenses of the Class R shares in the below example are based on an investment of $1,000 invested on October 25, 2005 (the date the share class commenced sales) and held through January 31, 2006. 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 (October 25, 2005 through January 31, 2006 for the Class R shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class R 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 Fund's actual cumulative total returns at net asset value after expenses for the period ended January 31, 2006, appear in the table "Fund vs. Indexes" on page 3. Class R shares performance appears on page 5. 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. - --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (8/01/05) (1/31/06)/1/ PERIOD/2/ (1/31/06) PERIOD/2,3/ RATIO A $ 1,000.00 $ 1,084.70 $ 7.25 $ 1,018.25 $ 7.02 1.38% B 1,000.00 1,081.10 11.17 1,014.47 10.82 2.13 C 1,000.00 1,080.70 11.17 1,014.47 10.82 2.13 Investor 1,000.00 1,085.40 7.25 1,018.25 7.02 1.38 R 1,000.00 1,145.20 8.65 1,017.14 8.13 1.60
/1/The actual ending account value is based on the actual total return of the Fund for the period August 1, 2005, through January 31, 2006 (October 25, 2005, through January 31, 2006, for the Class R 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. The Fund's actual cumulative total returns at net asset value after expenses for the period ended January 31, 2006, appear in the table "Fund vs. Indexes" on page 3. For Class R share performance, see Page 5. /2/Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half-year. For the Class R shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 99 (October 25, 2005, through January 31, 2006)/365. Because the Class R 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 184/365 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 R shares of the Fund and other funds because such data is based on a full six month period. - -------------------------------------------------------------------------------- [ARROW BUTTON For More Information Visit IMAGE] AIMINVESTMENTS.COM 6 AIM SMALL COMPANY GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION The Board of Trustees of AIM Stock Funds (the "Board") oversees the management of AIM Small Company Growth Fund (the "Fund") and, as required by law, determines annually whether to approve the continuance of each Fund's advisory agreement with A I M Advisors, Inc. ("AIM"). Based upon the recommendation of the Investments Committee of the Board, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the advisory agreement (the "Advisory Agreement") between the Fund and AIM for another year, effective July 1, 2005. The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors. One of the responsibilities of the Senior Officer of the Fund, who is independent of AIM and AIM's affiliates, is to manage the process by which the Fund's proposed management fees are negotiated to ensure that they are negotiated in a manner which is at arm's length and reasonable. To that end, the Senior Officer must either supervise a competitive bidding process or prepare an independent written evaluation. The Senior Officer has recommended an independent written evaluation in lieu of a competitive bidding process and, upon the direction of the Board, has prepared such an independent written evaluation. Such written evaluation also considered certain of the factors discussed below. In addition, as discussed below, the Senior Officer made certain recommendations to the Board in connection with such written evaluation. The discussion below serves as a summary of the Senior Officer's independent written evaluation and recommendations to the Board in connection therewith, as well as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Advisory Agreement is in the best interests of the Fund and its shareholders and that the compensation to AIM under the Advisory Agreement is fair and reasonable and would have been obtained through arm's length negotiations. .. The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement. .. The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement. .. The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was above the median performance of such comparable funds for the one year period and below such median performance for the three and five year periods. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. .. The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Small-Cap Growth Index. The Board noted that the Fund's performance was above the performance of such Index for the one year period and below such Index for the three and five year periods. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. .. Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement. .. Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory. .. Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund, although there were no breakpoints in the advisory fee schedule applicable to the variable insurance fund; and (ii) was lower than the advisory fee rates for an offshore fund for which an AIM affiliate serves as advisor with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable. .. Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable. .. Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through July 31, 2005 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board also noted that AIM has voluntarily agreed to waive fees and/or limit expenses of the Fund in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund that is lower than the contractual agreement. The Board considered the contractual and voluntary nature of these fee waivers/expense limitations and noted that the contractual agreement remains in effect through July 31, 2005 and the voluntary agreement can be terminated at any time by AIM without further notice to investors. The Board considered the effect these fee (continued) 7 AIM SMALL COMPANY GROWTH FUND waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable. .. Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes six breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to fully benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule. .. Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the Fund may realize certain benefits upon investing cash balances in AIM advised money market funds, including a higher net return, increased liquidity, increased diversification or decreased transaction costs. The Board also found that the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its respective shareholders. The Board therefore concluded that the investment of cash collateral received in connection with the securities lending program in the money market funds according to the procedures is in the best interests of the lending Fund and its respective shareholders. .. Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable. .. Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive. .. Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate. .. AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement. .. Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services. .. Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund. 8 SUPPLEMENT TO SEMIANNUAL REPORT DATED 1/31/06 AIM SMALL COMPANY GROWTH FUND INSTITUTIONAL CLASS SHARES The following information has been prepared to provide Institutional Class shareholders with a performance overview specific to their holdings. Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. - -------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS For periods ended 1/31/06 Inception (7/13/05) 11.17% 6 Months 8.74 ================================================================================ CUMULATIVE TOTAL RETURNS For periods ended 12/31/05, most recent calendar quarter-end Inception (7/13/05) 2.54% - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES HAVE NO SALES CHARGE; THEREFORE, PERFORMANCE IS AT NAV. PERFORMANCE OF INSTITUTIONAL CLASS SHARES WILL DIFFER FROM PERFORMANCE OF OTHER SHARE CLASSES DUE TO DIFFERING SALES CHARGES AND CLASS EXPENSES. PLEASE NOTE THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. MORE RECENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. ALL RETURNS ASSUME REINVESTMENT OF DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SEE FULL REPORT FOR INFORMATION ON COMPARATIVE BENCHMARKS. PLEASE CONSULT YOUR FUND PROSPECTUS FOR MORE INFORMATION. FOR THE MOST CURRENT MONTH-END PERFORMANCE, PLEASE CALL 800-451-4246 OR VISIT AIMINVESTMENTS.COM. - -------------------------------------------------------------------------------- NASDAQ SYMBOL IIEGX - -------------------------------------------------------------------------------- Over for information on your Fund's expenses. - -------------------------------------------------------------------------------- THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- FOR INSTITUTIONAL INVESTOR USE ONLY This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use. [YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - - REGISTERED TRADEMARK - AIMINVESTMENTS.COM I-SCG-INS-2 A I M Distributors, Inc. INFORMATION ABOUT YOUR FUND'S EXPENSES 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 August 1, 2005, through January 31, 2006. 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 Fund's actual cumulative total return after expenses for the six months ended January 31, 2006, appears in the table on the front of this supplement. 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. - --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (8/1/05) (1/31/06)/1/ PERIOD/2/ (1/31/06) PERIOD/2/ RATIO Institutional $ 1,000.00 $ 1,087.40 $ 4.58 $ 1,020.82 $ 4.43 0.87%
/1/The actual ending account value is based on the actual total return of the Fund for the period August 1, 2005 through January 31, 2006, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total return after expenses for the six months ended January 31, 2006, appears in the table on the front of this supplement. /2/Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. - -------------------------------------------------------------------------------- AIMINVESTMENTS.COM I-SCG-INS-2 A I M Distributors, Inc. AIM SMALL COMPANY GROWTH FUND SCHEDULE OF INVESTMENTS January 31, 2006 (Unaudited)
SHARES VALUE -------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-97.42% AEROSPACE & DEFENSE-1.44% Ceradyne, Inc./(a)/ 105,936 $ 6,063,777 -------------------------------------------------------------- AGRICULTURAL PRODUCTS-0.81% Corn Products International, Inc. 125,000 3,408,750 -------------------------------------------------------------- AIR FREIGHT & LOGISTICS-1.03% Forward Air Corp. 111,619 4,353,141 -------------------------------------------------------------- APPAREL RETAIL-3.95% Aeropostale, Inc./(a)(b)/ 225,000 6,801,750 -------------------------------------------------------------- DSW Inc.-Class A/(a)/ 94,317 2,521,093 -------------------------------------------------------------- Hot Topic, Inc./(a)(b)/ 250,000 3,590,000 -------------------------------------------------------------- New York & Co., Inc./(a)(b)/ 193,100 3,742,278 -------------------------------------------------------------- 16,655,121 -------------------------------------------------------------- APPAREL, ACCESSORIES & LUXURY GOODS-0.65% Warnaco Group, Inc. (The)/(a)(b)/ 109,963 2,729,282 -------------------------------------------------------------- APPLICATION SOFTWARE-6.38% ANSYS, Inc./(a)/ 75,064 3,292,307 -------------------------------------------------------------- Blackboard Inc./(a)/ 105,000 2,703,750 -------------------------------------------------------------- FileNET Corp./(a)/ 124,972 3,506,714 -------------------------------------------------------------- Henry (Jack) & Associates, Inc. 300,000 6,141,000 -------------------------------------------------------------- Hyperion Solutions Corp./(a)/ 130,800 4,500,828 -------------------------------------------------------------- Kronos Inc./(a)/ 73,179 2,875,935 -------------------------------------------------------------- TIBCO Software Inc./(a)(b)/ 488,100 3,899,919 -------------------------------------------------------------- 26,920,453 -------------------------------------------------------------- ASSET MANAGEMENT & CUSTODY BANKS-1.47% Affiliated Managers Group, Inc./(a)(b)/ 35,000 3,248,000 -------------------------------------------------------------- Nuveen Investments, Inc.-Class A/(b)/ 65,000 2,949,050 -------------------------------------------------------------- 6,197,050 -------------------------------------------------------------- AUTO PARTS & EQUIPMENT-1.13% Keystone Automotive Industries, Inc./(a)/ 125,500 4,774,020 -------------------------------------------------------------- BIOTECHNOLOGY-2.79% CV Therapeutics, Inc./(a)(b)/ 75,000 1,845,750 -------------------------------------------------------------- Digene Corp./(a)(b)/ 115,000 3,818,000 -------------------------------------------------------------- Incyte Corp./(a)/ 290,000 1,476,100 -------------------------------------------------------------- Myriad Genetics, Inc./(a)/ 104,500 2,240,480 -------------------------------------------------------------- Nektar Therapeutics/(a)(b)/ 120,428 2,384,474 -------------------------------------------------------------- 11,764,804 --------------------------------------------------------------
SHARES VALUE ---------------------------------------------------------- BUILDING PRODUCTS-1.36% Lennox International Inc. 105,000 $ 3,354,750 ---------------------------------------------------------- Quixote Corp. 111,400 2,369,478 ---------------------------------------------------------- 5,724,228 ---------------------------------------------------------- CATALOG RETAIL-0.27% PetMed Express, Inc./(a)/ 63,971 1,129,728 ---------------------------------------------------------- COMMUNICATIONS EQUIPMENT-1.90% ADC Telecommunications, Inc./(a)(b)/ 140,000 3,550,400 ---------------------------------------------------------- F5 Networks, Inc./(a)/ 34,500 2,232,150 ---------------------------------------------------------- NICE Systems Ltd.-ADR (Israel)/(a)/ 42,551 2,243,714 ---------------------------------------------------------- 8,026,264 ---------------------------------------------------------- COMPUTER STORAGE & PERIPHERALS-1.87% Emulex Corp./(a)(b)/ 213,702 3,921,432 ---------------------------------------------------------- QLogic Corp./(a)/ 100,000 3,967,000 ---------------------------------------------------------- 7,888,432 ---------------------------------------------------------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-2.22% Astec Industries, Inc./(a)/ 120,000 4,614,000 ---------------------------------------------------------- Terex Corp./(a)/ 67,400 4,751,700 ---------------------------------------------------------- 9,365,700 ---------------------------------------------------------- DATA PROCESSING & OUTSOURCED SERVICES-2.42% Alliance Data Systems Corp./(a)(b)/ 114,000 4,816,500 ---------------------------------------------------------- Euronet Worldwide, Inc./(a)(b)/ 101,000 3,259,270 ---------------------------------------------------------- iPayment Holdings, Inc./(a)/ 51,000 2,123,640 ---------------------------------------------------------- 10,199,410 ---------------------------------------------------------- DISTRIBUTORS-0.66% Source Interlink Cos., Inc./(a)/ 250,000 2,787,500 ---------------------------------------------------------- DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES-2.53% Advisory Board Co. (The)/(a)(b)/ 63,923 3,194,872 ---------------------------------------------------------- CoStar Group Inc./(a)/ 68,836 3,441,800 ---------------------------------------------------------- Pike Electric Corp./(a)/ 225,000 4,043,250 ---------------------------------------------------------- 10,679,922 ---------------------------------------------------------- ELECTRICAL COMPONENTS & EQUIPMENT-2.12% Regal-Beloit Corp. 98,800 3,644,732 ---------------------------------------------------------- Thomas & Betts Corp./(a)/ 118,933 5,310,358 ---------------------------------------------------------- 8,955,090 ----------------------------------------------------------
F-1 AIM SMALL COMPANY GROWTH FUND
SHARES VALUE ----------------------------------------------------------------- ELECTRONIC EQUIPMENT MANUFACTURERS-4.00% Aeroflex Inc./(a)/ 400,000 $ 4,836,000 ----------------------------------------------------------------- Cogent Inc./(a)/ 80,000 1,922,400 ----------------------------------------------------------------- FLIR Systems, Inc./(a)/ 165,000 3,910,500 ----------------------------------------------------------------- Lipman (Israel)/(a)(b)/ 120,000 3,213,600 ----------------------------------------------------------------- Photon Dynamics, Inc./(a)/ 136,500 2,990,715 ----------------------------------------------------------------- 16,873,215 ----------------------------------------------------------------- ELECTRONIC MANUFACTURING SERVICES-0.99% Staktek Holdings Inc./(a)/ 600,000 4,194,000 ----------------------------------------------------------------- GENERAL MERCHANDISE STORES-0.41% Tuesday Morning Corp./(a)/ 81,200 1,727,936 ----------------------------------------------------------------- HEALTH CARE EQUIPMENT-6.10% Advanced Medical Optics, Inc./(a)(b)/ 125,000 5,572,500 ----------------------------------------------------------------- American Medical Systems Holdings, Inc./(a)/ 99,691 2,258,998 ----------------------------------------------------------------- Cytyc Corp./(a)/ 250,000 7,525,000 ----------------------------------------------------------------- Dionex Corp./(a)/ 45,000 2,386,350 ----------------------------------------------------------------- Integra LifeSciences Holdings/(a)(b)/ 57,422 2,239,458 ----------------------------------------------------------------- PerkinElmer, Inc. 87,500 1,989,750 ----------------------------------------------------------------- Varian Inc./(a)/ 52,047 1,997,043 ----------------------------------------------------------------- Wright Medical Group, Inc./(a)/ 78,000 1,740,960 ----------------------------------------------------------------- 25,710,059 ----------------------------------------------------------------- HEALTH CARE FACILITIES-0.44% AmSurg Corp./(a)(b)/ 85,000 1,843,650 ----------------------------------------------------------------- HEALTH CARE SERVICES-2.49% HealthExtras, Inc./(a)/ 109,731 3,610,150 ----------------------------------------------------------------- Merge Technologies Inc./(a)/ 112,870 2,979,768 ----------------------------------------------------------------- Phase Forward Inc./(a)/ 418,141 3,892,893 ----------------------------------------------------------------- 10,482,811 ----------------------------------------------------------------- HEALTH CARE SUPPLIES-0.48% Gen-Probe Inc./(a)/ 40,500 2,042,415 ----------------------------------------------------------------- HOME FURNISHINGS-0.62% Tempur-Pedic International Inc./(a)/ 225,000 2,623,500 ----------------------------------------------------------------- HOTELS, RESORTS & CRUISE LINES-0.68% Four Seasons Hotels, Inc. (Canada) 50,000 2,881,000 ----------------------------------------------------------------- HOUSEHOLD APPLIANCES-0.95% Blount International, Inc./(a)(b)/ 250,000 4,012,500 ----------------------------------------------------------------- HOUSEHOLD PRODUCTS-0.82% Church & Dwight Co., Inc. 93,491 3,440,469 ----------------------------------------------------------------- HUMAN RESOURCE & EMPLOYMENT SERVICES-0.81% Korn/Ferry International/(a)/ 172,382 3,406,268 ----------------------------------------------------------------- INDUSTRIAL CONGLOMERATES-0.18% Carlisle Cos., Inc. 11,157 774,407 -----------------------------------------------------------------
SHARES VALUE ------------------------------------------------------------- INDUSTRIAL MACHINERY-0.86% Kadant Inc./(a)/ 188,312 $ 3,623,123 ------------------------------------------------------------- INSURANCE BROKERS-1.93% Hub International Ltd. (Canada) 167,112 4,390,032 ------------------------------------------------------------- National Financial Partners Corp. 70,000 3,745,700 ------------------------------------------------------------- 8,135,732 ------------------------------------------------------------- INTEGRATED TELECOMMUNICATION SERVICES-0.80% NeuStar, Inc.-Class A/(a)(b)/ 115,714 3,356,863 ------------------------------------------------------------- INTERNET SOFTWARE & SERVICES-1.96% CyberSource Corp./(a)/ 596,000 5,161,360 ------------------------------------------------------------- Digitas Inc./(a)/ 238,300 3,119,347 ------------------------------------------------------------- 8,280,707 ------------------------------------------------------------- IT CONSULTING & OTHER SERVICES-0.63% Perot Systems Corp.-Class A/(a)/ 175,500 2,644,785 ------------------------------------------------------------- LEISURE PRODUCTS-0.70% RC2 Corp./(a)/ 84,281 2,938,878 ------------------------------------------------------------- METAL & GLASS CONTAINERS-1.83% Crown Holdings, Inc./(a)/ 146,000 2,731,660 ------------------------------------------------------------- Silgan Holdings Inc. 131,481 4,977,871 ------------------------------------------------------------- 7,709,531 ------------------------------------------------------------- OFFICE SERVICES & SUPPLIES-0.87% PeopleSupport, Inc./(a)/ 352,000 3,653,760 ------------------------------------------------------------- OIL & GAS DRILLING-2.13% Atwood Oceanics, Inc./(a)/ 43,704 4,244,970 ------------------------------------------------------------- Grey Wolf, Inc./(a)(b)/ 266,667 2,346,670 ------------------------------------------------------------- Unit Corp./(a)/ 39,900 2,382,030 ------------------------------------------------------------- 8,973,670 ------------------------------------------------------------- OIL & GAS EQUIPMENT & SERVICES-2.27% Gulf Island Fabrication, Inc. 148,145 4,152,504 ------------------------------------------------------------- Hydril/(a)/ 66,023 5,436,994 ------------------------------------------------------------- 9,589,498 ------------------------------------------------------------- OIL & GAS EXPLORATION & PRODUCTION-1.89% Barrett (Bill) Corp./(a)/ 100,000 3,840,000 ------------------------------------------------------------- Whiting Petroleum Corp./(a)/ 89,400 4,139,220 ------------------------------------------------------------- 7,979,220 ------------------------------------------------------------- PACKAGED FOODS & MEATS-0.74% Premium Standard Farms, Inc./(a)/ 126,854 1,805,132 ------------------------------------------------------------- TreeHouse Foods, Inc./(a)/ 68,000 1,336,200 ------------------------------------------------------------- 3,141,332 ------------------------------------------------------------- PHARMACEUTICALS-1.49% Medicis Pharmaceutical Corp.-Class A 143,100 4,423,221 ------------------------------------------------------------- MGI Pharma, Inc./(a)/ 112,544 1,876,109 ------------------------------------------------------------- 6,299,330 -------------------------------------------------------------
F-2 AIM SMALL COMPANY GROWTH FUND
SHARES VALUE ----------------------------------------------------------------- PROPERTY & CASUALTY INSURANCE-1.07% FPIC Insurance Group, Inc./(a)/ 120,912 $ 4,503,972 ----------------------------------------------------------------- REAL ESTATE-0.42% BioMed Realty Trust, Inc./(b)/ 65,377 1,754,065 ----------------------------------------------------------------- REGIONAL BANKS-3.07% East West Bancorp, Inc. 110,000 4,060,100 ----------------------------------------------------------------- Nara Bancorp, Inc. 307,000 5,495,300 ----------------------------------------------------------------- PrivateBancorp, Inc./(b)/ 20,343 769,169 ----------------------------------------------------------------- UCBH Holdings, Inc. 150,000 2,602,500 ----------------------------------------------------------------- 12,927,069 ----------------------------------------------------------------- REINSURANCE-1.06% Max Re Capital Ltd. 168,836 4,475,842 ----------------------------------------------------------------- RESTAURANTS-2.40% Applebee's International, Inc. 165,000 3,955,050 ----------------------------------------------------------------- P.F. Chang's China Bistro, Inc./(a)(b)/ 58,804 3,014,293 ----------------------------------------------------------------- RARE Hospitality International, Inc./(a)(b)/ 100,000 3,155,000 ----------------------------------------------------------------- 10,124,343 ----------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT-2.96% FormFactor Inc./(a)/ 178,300 5,316,906 ----------------------------------------------------------------- Mattson Technology, Inc./(a)/ 375,000 4,875,000 ----------------------------------------------------------------- Rudolph Technologies, Inc./(a)/ 150,000 2,293,500 ----------------------------------------------------------------- 12,485,406 ----------------------------------------------------------------- SEMICONDUCTORS-3.08% Genesis Microchip Inc./(a)(b)/ 102,000 1,876,800 ----------------------------------------------------------------- Hittite Microwave Corp./(a)/ 112,600 3,152,800 ----------------------------------------------------------------- Integrated Device Technology, Inc./(a)/ 350,000 4,861,500 ----------------------------------------------------------------- Power Integrations, Inc./(a)(b)/ 117,322 3,107,860 ----------------------------------------------------------------- 12,998,960 ----------------------------------------------------------------- SPECIALIZED CONSUMER SERVICES-0.61% Jackson Hewitt Tax Service Inc. 102,655 2,593,065 ----------------------------------------------------------------- SPECIALTY CHEMICALS-0.71% Rockwood Holdings Inc./(a)/ 142,000 3,014,660 ----------------------------------------------------------------- SPECIALTY STORES-0.78% Guitar Center, Inc./(a)(b)/ 61,000 3,274,480 ----------------------------------------------------------------- STEEL-1.57% Carpenter Technology Corp. 73,280 6,636,237 -----------------------------------------------------------------
SHARES VALUE ----------------------------------------------------------------------------- SYSTEMS SOFTWARE-1.85% MICROS Systems, Inc./(a)(b)/ 69,046 $ 3,186,473 ----------------------------------------------------------------------------- Quality Systems, Inc./(a)/ 52,000 4,602,000 ----------------------------------------------------------------------------- 7,788,473 ----------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS-1.94% United Rentals, Inc./(a)(b)/ 120,000 3,517,200 ----------------------------------------------------------------------------- WESCO International, Inc./(a)/ 97,000 4,649,210 ----------------------------------------------------------------------------- 8,166,410 ----------------------------------------------------------------------------- TRUCKING-2.46% Celadon Group, Inc./(a)/ 166,088 5,148,728 ----------------------------------------------------------------------------- Swift Transportation Co., Inc./(a)/ 221,177 5,226,413 ----------------------------------------------------------------------------- 10,375,141 ----------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES-1.37% SBA Communications Corp.-Class A/(a)/ 265,200 5,794,620 ----------------------------------------------------------------------------- Total Common Stocks & Other Equity Interests (Cost $346,340,562) 410,874,074 ----------------------------------------------------------------------------- MONEY MARKET FUNDS-3.44% Premier Portfolio-Institutional Class (Cost $14,520,042)/(c)/ 14,520,042 14,520,042 ----------------------------------------------------------------------------- TOTAL INVESTMENTS-100.86% (excluding investments purchased with cash collateral from securities loaned) (Cost $360,860,604) 425,394,116 ----------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-6.43% Premier Portfolio-Institutional Class/(c)(d)/ 27,124,484 27,124,484 ----------------------------------------------------------------------------- Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $27,124,484) 27,124,484 ----------------------------------------------------------------------------- TOTAL INVESTMENTS-107.29% (Cost $387,985,088) 452,518,600 ----------------------------------------------------------------------------- OTHER ASSETS LESS LIABILITIES-(7.29%) (30,754,642) ----------------------------------------------------------------------------- NET ASSETS-100.00% $421,763,958 -----------------------------------------------------------------------------
Investment Abbreviations: ADR- American Depositary Receipt
Notes to Schedule of Investments: /(a)/Non-income producing security. /(b)/All or a portion of this security has been pledged as collateral for securities lending transactions at January 31, 2006. /(c)/The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. /(d)/The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 8. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-3 AIM SMALL COMPANY GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES January 31, 2006 (Unaudited)
ASSETS: Investments, at value (cost $346,340,562)* $ 410,874,074 - ------------------------------------------------------------------------------------ Investments in affiliated money market funds (cost $41,644,526) 41,644,526 - ------------------------------------------------------------------------------------ Total investments (cost $387,985,088) 452,518,600 - ------------------------------------------------------------------------------------ Cash 79,135 - ------------------------------------------------------------------------------------ Receivables for: Investments sold 904,257 - ------------------------------------------------------------------------------------ Fund shares sold 461,469 - ------------------------------------------------------------------------------------ Dividends 41,649 - ------------------------------------------------------------------------------------ Investment for trustee deferred compensation and retirement plans 109,668 - ------------------------------------------------------------------------------------ Other assets 41,436 - ------------------------------------------------------------------------------------ Total assets 454,156,214 - ------------------------------------------------------------------------------------ LIABILITIES: Payables for: Investments purchased 3,067,420 - ------------------------------------------------------------------------------------ Fund shares reacquired 1,575,144 - ------------------------------------------------------------------------------------ Trustee deferred compensation and retirement plans 142,552 - ------------------------------------------------------------------------------------ Collateral upon return of securities loaned 27,124,484 - ------------------------------------------------------------------------------------ Accrued distribution fees 78,772 - ------------------------------------------------------------------------------------ Accrued trustees' and officer's fees and benefits 1,818 - ------------------------------------------------------------------------------------ Accrued transfer agent fees 250,543 - ------------------------------------------------------------------------------------ Accrued operating expenses 151,523 - ------------------------------------------------------------------------------------ Total liabilities 32,392,256 - ------------------------------------------------------------------------------------ Net assets applicable to shares outstanding $ 421,763,958 - ------------------------------------------------------------------------------------ NET ASSETS CONSIST OF: Shares of beneficial interest $ 773,710,157 - ------------------------------------------------------------------------------------ Undistributed net investment income (loss) (1,887,543) - ------------------------------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities and option contracts (414,592,168) - ------------------------------------------------------------------------------------ Unrealized appreciation of investment securities and option contracts 64,533,512 - ------------------------------------------------------------------------------------ $ 421,763,958 - ------------------------------------------------------------------------------------
NET ASSETS: Class A $ 16,480,159 ----------------------------------------------------------- Class B $ 4,316,227 ----------------------------------------------------------- Class C $ 4,105,064 ----------------------------------------------------------- Class R $ 11,407 ----------------------------------------------------------- Investor Class $369,245,769 ----------------------------------------------------------- Institutional Class $ 27,605,332 ----------------------------------------------------------- SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 1,148,127 ----------------------------------------------------------- Class B 308,149 ----------------------------------------------------------- Class C 306,534 ----------------------------------------------------------- Class R 795 ----------------------------------------------------------- Investor Class 25,694,294 ----------------------------------------------------------- Institutional Class 1,913,251 ----------------------------------------------------------- Class A: Net asset value per share $ 14.35 ----------------------------------------------------------- Offering price per share: (Net asset value of $14.35 / 94.50%) $ 15.19 ----------------------------------------------------------- Class B: Net asset value and offering price per share $ 14.01 ----------------------------------------------------------- Class C: Net asset value and offering price per share $ 13.39 ----------------------------------------------------------- Class R: Net asset value and offering price per share $ 14.35 ----------------------------------------------------------- Investor Class: Net asset value and offering price per share $ 14.37 ----------------------------------------------------------- Institutional Class: Net asset value and offering price per share $ 14.43 -----------------------------------------------------------
* At January 31, 2006, securities with an aggregate value of $26,588,492 were on loan to brokers. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-4 AIM SMALL COMPANY GROWTH FUND STATEMENT OF OPERATIONS For the six months ended January 31, 2006 (Unaudited)
INVESTMENT INCOME: Dividends (net of foreign withholding tax of $1,859) $ 741,799 ------------------------------------------------------------------------------ Dividends from affiliated money market funds (includes securities lending income of $41,379, after compensation to counterparties of $237,436) 319,095 ------------------------------------------------------------------------------ Total investment income 1,060,894 ------------------------------------------------------------------------------ EXPENSES: Advisory fees 1,523,948 ------------------------------------------------------------------------------ Administrative services fees 72,859 ------------------------------------------------------------------------------ Custodian fees 26,616 ------------------------------------------------------------------------------ Distribution fees: Class A 17,432 ------------------------------------------------------------------------------ Class B 20,412 ------------------------------------------------------------------------------ Class C 14,484 ------------------------------------------------------------------------------ Class K 3,924 ------------------------------------------------------------------------------ Class R 14 ------------------------------------------------------------------------------ Investor Class 462,493 ------------------------------------------------------------------------------ Transfer agent fees -- A, B, C, K, R & Investor 520,697 ------------------------------------------------------------------------------ Transfer agent fees -- Institutional 1,406 ------------------------------------------------------------------------------ Trustees' and officer's fees and benefits 13,521 ------------------------------------------------------------------------------ Other 147,563 ------------------------------------------------------------------------------ Total expenses 2,825,369 ------------------------------------------------------------------------------ Less:Fees waived, expenses reimbursed and expense offset arrangements (13,746) ------------------------------------------------------------------------------ Net expenses 2,811,623 ------------------------------------------------------------------------------ Net investment income (loss) (1,750,729) ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND OPTION CONTRACTS: Net realized gain from: Investment securities (includes gains from securities sold to affiliates of $365,436) 883,344 ------------------------------------------------------------------------------ Option contracts written 220,254 ------------------------------------------------------------------------------ 1,103,598 ------------------------------------------------------------------------------ Change in net unrealized appreciation of: Investment securities 33,074,887 ------------------------------------------------------------------------------ Option contracts written 142,617 ------------------------------------------------------------------------------ 33,217,504 ------------------------------------------------------------------------------ Net gain from investment securities and option contracts 34,321,102 ------------------------------------------------------------------------------ Net increase in net assets resulting from operations $32,570,373 ------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-5 AIM SMALL COMPANY GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS For the six months ended January 31, 2006 and the year ended July 31, 2005 (Unaudited)
JANUARY 31, JULY 31, 2006 2005 - ---------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (1,750,729) $ (5,560,364) - ---------------------------------------------------------------------------------------------- Net realized gain from investment securities, futures contracts and option contracts 1,103,598 110,601,810 - ---------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities and option contracts 33,217,504 8,946,620 - ---------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 32,570,373 113,988,066 - ---------------------------------------------------------------------------------------------- Share transactions-net: Class A (2,799,066) 8,749,357 - ---------------------------------------------------------------------------------------------- Class B (1,350,011) 2,794,627 - ---------------------------------------------------------------------------------------------- Class C 997,364 395,145 - ---------------------------------------------------------------------------------------------- Class K (2,747,774) (99,670,690) - ---------------------------------------------------------------------------------------------- Class R 10,000 -- - ---------------------------------------------------------------------------------------------- Investor Class (66,842,264) (191,876,676) - ---------------------------------------------------------------------------------------------- Institutional Class 6,718,720 18,196,801 - ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from share transactions (66,013,031) (261,411,436) - ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets (33,442,658) (147,423,370) - ---------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 455,206,616 602,629,986 - ---------------------------------------------------------------------------------------------- End of period (including undistributed net investment income (loss) of $(1,887,543) and $(136,814), respectively) $421,763,958 $ 455,206,616 - ----------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-6 AIM SMALL COMPANY GROWTH FUND NOTES TO FINANCIAL STATEMENTS January 31, 2006 (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Small Company Growth Fund (the "Fund") is a series portfolio of AIM Stock Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of three separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently consists of multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is to seek long-term capital growth. 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. 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. 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 as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Securities traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) are valued based on the prices furnished by independent pricing services, in which case the securities may be considered fair valued, or by market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are recorded at amortized cost which approximates value. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. 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. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs and domestic and foreign index futures. Securities for which market 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. F-7 AIM SMALL COMPANY GROWTH 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. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be 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 use 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, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. H. PUT OPTIONS -- The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased or sold. I. COLLATERAL -- To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund's practice to replace such collateral no later than the next business day. This practice does not apply to securities pledged as collateral for securities lending transactions. F-8 AIM SMALL COMPANY GROWTH FUND NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM based on the annual rate of the Fund's average net assets as follows:
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% ----------------------------------------------------
AIM has voluntarily 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 K, Class R, Investor Class and Institutional Class shares to 1.50%, 2.25%, 2.25%, 1.70%, 1.75%, 1.50% and 1.25% of average daily net assets, respectively. Also, AIM has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses (excluding certain items discussed below) of Class A, Class B, Class C, Class K, Class R, Investor Class and Institutional Class shares to 1.90%, 2.65%, 2.65%, 2.10%, 2.15%, 1.90% and 1.65% of average daily net assets, respectively, through July 31, 2006. 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 total annual operating expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, in addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more fully below, the expense offset arrangements from which the Fund may benefit are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. To the extent that the annualized expense ratio does not exceed the expense limitation, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the six months ended January 31, 2006, AIM waived fees of $1,783. At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the six months ended January 31, 2006, AMVESCAP reimbursed expenses of the Fund in the amount of $194. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the six months ended January 31, 2006, AIM was paid $72,859. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended January 31, 2006, the Fund paid AISI $520,697 for Class A, Class B, Class C, Class K, Class R and Investor Class share classes and $1,406 for Institutional Class shares. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B, Class C, Class K, Class R, Investor Class and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C, Class K, Class R and Investor Class shares (collectively the "Plans"). The Fund, pursuant to the Class A, Class B, Class C, Class K and Class R Plans, pays ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.45% of the average daily net assets of Class K shares and 0.50% of the average daily net assets of Class R shares. The Fund, pursuant to the Investor Class Plan, pays ADI for its allocated share of expenses incurred pursuant to the Investor Class Plan for the period, up to a maximum annual rate of 0.25% of the average daily net assets of the Investor Class shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class K, Class R or Investor Class shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. National Association of Securities Dealers ("NASD") Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the six months ended January 31, 2006, the Class A, Class B, Class C, Class R and Investor Class shares paid $17,432, $20,412, $14,484, $14 and $462,493, respectively. For the period August 1, 2005 through October 21, 2005 (date of conversion), Class K shares paid $3,924. F-9 AIM SMALL COMPANY GROWTH FUND Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. For the six months ended January 31, 2006 ADI advised the Fund that it retained $6,518 in front-end sales commissions from the sale of Class A shares and $0, $2,210, $100 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. For the period August 1, 2005 through October 21, 2005 (date of conversion), ADI advised the Fund that it retained $0 from Class K shares for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI. NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended January 31, 2006. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN PROCEEDS UNREALIZED REALIZED VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND GAIN FUND 07/31/05 AT COST SALES (DEPRECIATION) 01/31/06 INCOME (LOSS) - ----------------------------------------------------------------------------------------------------------------------------- Premier Portfolio -- Institutional Class $40,793,489 $145,018,940 $(171,292,387) $-- $14,520,042 $277,716 $-- - -----------------------------------------------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN PROCEEDS UNREALIZED REALIZED VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND GAIN FUND 07/31/05 AT COST SALES (DEPRECIATION) 01/31/06 INCOME* (LOSS) - ----------------------------------------------------------------------------------------------------------------------------- Premier Portfolio -- Institutional Class $18,334,224 $151,313,932 $(142,523,672) $-- $27,124,484 $ 41,379 $-- - ----------------------------------------------------------------------------------------------------------------------------- Total $59,127,713 $296,332,872 $(313,816,059) $-- $41,644,526 $319,095 $-- - -----------------------------------------------------------------------------------------------------------------------------
* Net of compensation to counterparties. NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended January 31, 2006, the Fund engaged in securities sales of $2,203,832, which resulted in net realized gains of $365,436 and securities purchases of $5,350,406. NOTE 5--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended January 31, 2006, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $11,769. NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the six months ended January 31, 2006, the Fund paid legal fees of $2,576 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. F-10 AIM SMALL COMPANY GROWTH FUND NOTE 7--BORROWINGS Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the six months ended January 31, 2006, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the rate contractually agreed upon. NOTE 8--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At January 31, 2006, securities with an aggregate value of $26,588,492 were on loan to brokers. The loans were secured by cash collateral of $27,124,484 received by the Fund and subsequently invested in an affiliated money market fund. For the six months ended January 31, 2006, the Fund received dividends on cash collateral investments of $41,379 for securities lending transactions, which are net of compensation to counterparties. NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD ----------------------------------------- CALL OPTION CONTRACTS ------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED ----------------------------------------- Beginning of period 3,921 $ 514,313 ----------------------------------------- Written 1,373 152,645 ----------------------------------------- Closed (1,100) (140,421) ----------------------------------------- Exercised (3,345) (424,504) ----------------------------------------- Expired (849) (102,033) ----------------------------------------- End of period -- $ -- -----------------------------------------
F-11 AIM SMALL COMPANY GROWTH FUND NOTE 10--TAX INFORMATION The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund's fiscal year-end. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. The Fund had a capital loss carryforward as of July 31, 2005 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* --------------------------------------------- July 31, 2010 $108,383,074 --------------------------------------------- July 31, 2011 306,907,143 --------------------------------------------- Total capital loss carryforward $415,290,217 ---------------------------------------------
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. NOTE 11--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended January 31, 2006 was $245,891,494 and $283,980,635, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end. During the six months ended January 31, 2006, the Fund received proceeds in the amount of $2,524,822 from the Global Research Analyst Settlement. The SEC, NASD, NYSE and state regulators conducted investigations into potential conflicts of interest in equity research analysis that culminated in the Global Research Analyst Settlement. These proceeds were recorded as realized gains in the Statement of Operations.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $71,362,598 ------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (7,134,176) ------------------------------------------------------------------------- Net unrealized appreciation of investment securities $64,228,422 -------------------------------------------------------------------------
Cost of investments for tax purposes is $388,290,178. F-12 AIM SMALL COMPANY GROWTH FUND NOTE 12--SHARE INFORMATION The Fund currently consists of six different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares, Investor Class shares and Institutional Class shares. The Fund formerly offered Class K shares: however, as of the close of business October 21, 2005, the Class K shares were converted to Class A shares. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares, Investor Class shares and Institutional Class shares are sold at net asset value. Under certain circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING - --------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JANUARY 31, 2006(a) JULY 31, 2005 ------------------------ -------------------------- SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------------------------------------- Sold: Class A 358,461 $ 4,678,926 1,585,421 $ 19,110,253 - --------------------------------------------------------------------------------------------------------------- Class B 67,791 867,838 556,041 6,418,657 - --------------------------------------------------------------------------------------------------------------- Class C 262,855 3,309,669 223,636 2,445,311 - --------------------------------------------------------------------------------------------------------------- Class K/(b)/ 25,373 326,790 428,614 5,100,249 - --------------------------------------------------------------------------------------------------------------- Class R/(c)/ 795 10,000 -- -- - --------------------------------------------------------------------------------------------------------------- Investor Class 1,858,451 24,312,825 7,478,089 86,925,322 - --------------------------------------------------------------------------------------------------------------- Institutional Class/(d)/ 533,208 7,041,441 1,405,160 18,204,038 - --------------------------------------------------------------------------------------------------------------- Conversion of Class K shares to Class A shares:/(e)/ Class A 284,339 2,325,426 -- -- - --------------------------------------------------------------------------------------------------------------- Class K (285,494) (2,325,426) -- -- - --------------------------------------------------------------------------------------------------------------- Automatic conversion of Class B shares to Class A shares: Class A 5,039 65,113 22,064 263,439 - --------------------------------------------------------------------------------------------------------------- Class B (5,152) (65,113) (22,476) (263,439) - --------------------------------------------------------------------------------------------------------------- Reacquired: Class A (754,002) (9,868,531) (900,158) (10,624,335) - --------------------------------------------------------------------------------------------------------------- Class B (168,819) (2,152,736) (289,813) (3,360,591) - --------------------------------------------------------------------------------------------------------------- Class C (186,602) (2,312,305) (186,295) (2,050,166) - --------------------------------------------------------------------------------------------------------------- Class K/(b)/ (58,408) (749,138) (9,261,321) (104,770,939) - --------------------------------------------------------------------------------------------------------------- Investor Class (6,933,754) (91,155,089) (24,140,390) (278,801,998) - --------------------------------------------------------------------------------------------------------------- Institutional Class/(d)/ (24,562) (322,721) (555) (7,237) - --------------------------------------------------------------------------------------------------------------- (5,020,481) $(66,013,031) (23,101,983) $(261,411,436) - ---------------------------------------------------------------------------------------------------------------
/(a)/There are four entities that are record owners of more than 5% of the outstanding shares of the Fund and owns 31% of the outstanding shares of the Fund. ADI has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities is also owned beneficially. 7% of the outstanding shares of the Fund are owned by affiliated mutual funds. Affiliated mutual funds are mutual funds advised by AIM. /(b)/Class K share activity for the period August 1, 2005 through October 21, 2005 (date of conversion). /(c)/Class R shares commenced sales on October 25, 2005. /(d)/Institutional Class shares commenced sales on July 13, 2005. /(e)/Effective as of the close of business October 21, 2005, all outstanding Class K shares were converted to Class A shares of the Fund. NOTE 13--SIGNIFICANT EVENT The Board of Trustees of the Trust unanimously approved, on November 14, 2005, a Plan of Reorganization pursuant to which the Fund would transfer all of its assets to AIM Small Cap Growth Fund ("Buying Fund"), a series of AIM Growth Series ("the Reorganization"). Upon closing of the Reorganization, shareholders of the Fund will receive a corresponding class of shares of the Buying Fund in exchange for their shares of the Fund, and the Fund will cease operations. The Plan of Reorganization required approval of the Fund's shareholders. The Fund submitted the Plan of Reorganization to the shareholders for their consideration at a meeting held on March 16, 2006 and the Plan was approved. As of the close of business on March 17, 2006, the Fund closed to new investors. The Reorganization is expected to be completed on April 10, 2006. F-13 AIM SMALL COMPANY GROWTH FUND NOTE 14--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A --------------------------------------------------------------- MARCH 28, 2002 SIX MONTHS (DATE SALES ENDED YEAR ENDED JULY 31, COMMENCED) TO JANUARY 31, --------------------------------- JULY 31, 2006 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.23 $ 10.49 $10.00 $ 8.41 $ 11.25 - ----------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.05) (0.13)/(a)/ (0.14)/(a)/ (0.01) (0.02)/(a)/ - ----------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.17/(b)/ 2.87 0.63 1.60 (2.82) - ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.12 2.74 0.49 1.59 (2.84) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 14.35 $ 13.23 $10.49 $10.00 $ 8.41 - ----------------------------------------------------------------------------------------------------------- Total return/(c)/ 8.47%/(b)/ 26.12% 4.90% 18.91% (25.24)% - ----------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $16,480 $16,594 $5,737 $6,372 $ 2,607 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.38%/(d)/ 1.54% 1.60% 1.38% 1.24%/(e)/ - ----------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.38%/(d)/ 1.55% 1.63% 1.38% 1.24%/(e)/ - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.86)%/(d)/ (1.13)% (1.32)% (0.69)% (0.74)%/(e)/ - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 61% 199% 130% 119% 99% - -----------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Net gains (losses) on securities (both realized and unrealized) per share and Total return include proceeds received from the Global Research Analyst Settlement. Net gains (losses) on securities (both realized and unrealized) per share and Total return excluding these proceeds would have been $1.08 and 7.79%, respectively. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. /(d)/Ratios are annualized and based on average daily net assets of $13,832,217. /(e)/Annualized. /(f)/Not annualized for periods less than one year. F-14 AIM SMALL COMPANY GROWTH FUND NOTE 14--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS B ------------------------------------------------------------- MARCH 28, 2002 SIX MONTHS (DATE SALES ENDED YEAR ENDED JULY 31, COMMENCED) JANUARY 31, -------------------------------- TO JULY 31, 2006 2005 2004 2003 2002 - --------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $12.96 $10.33 $ 9.91 $ 8.41 $ 11.25 - --------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.10) (0.21)/(a)/ (0.22)/(a)/ (0.07) (0.04)/(a)/ - --------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.15/(b)/ 2.84 0.64 1.57 (2.80) - --------------------------------------------------------------------------------------------------------- Total from investment operations 1.05 2.63 0.42 1.50 (2.84) - --------------------------------------------------------------------------------------------------------- Net asset value, end of period $14.01 $12.96 $10.33 $ 9.91 $ 8.41 - --------------------------------------------------------------------------------------------------------- Total return/(c)/ 8.10%/(b)/ 25.46% 4.24% 17.84% (25.24)% - --------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $4,316 $5,369 $1,762 $ 408 $ 67 - --------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.13%/(d)/ 2.20% 2.25% 2.25% 2.14%/(e)/ - --------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.13%/(d)/ 2.21% 2.89% 4.00% 2.14%/(e)/ - --------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (1.61)%/(d)/ (1.79)% (1.97)% (1.61)% (1.68)%/(e)/ - --------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 61% 199% 130% 119% 99% - ---------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Net gains (losses) on securities (both realized and unrealized) per share and Total return include proceeds received from the Global Research Analyst Settlement. Net gains (losses) on securities (both realized and unrealized) per share and Total return excluding these proceeds would have been $1.06 and 7.41%, respectively. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. /(d)/Ratios are annualized and based on average daily net assets of $4,049,047. /(e)/Annualized. /(f)/Not annualized for periods less than one year. F-15 AIM SMALL COMPANY GROWTH FUND NOTE 14--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS C ------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JULY 31, JANUARY 31, -------------------------------------------------------- 2006 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $12.39 $ 9.88 $ 9.49 $ 8.09 $ 12.54 $ 18.37 - ------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.08) (0.20)/(a)/ (0.20)/(a)/ (0.18) (0.18)/(a)/ (0.12)/(b)/ - ------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.08/(c)/ 2.71 0.59 1.58 (4.27) (4.78) - ------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.00 2.51 0.39 1.40 (4.45) (4.90) - ------------------------------------------------------------------------------------------------------------------- Less distributions from net realized gains -- -- -- -- -- (0.93) - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.39 $12.39 $ 9.88 $ 9.49 $ 8.09 $ 12.54 - ------------------------------------------------------------------------------------------------------------------- Total return/(d)/ 8.07%/(c)/ 25.41% 4.11% 17.45% (35.57)% (27.24)% - ------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $4,105 $2,853 $1,907 $1,673 $ 1,087 $ 2,034 - ------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.13%/(e)/ 2.20% 2.25% 2.25% 2.25% 2.13% - ------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.13%/(e)/ 2.21% 3.48% 3.55% 2.70% 2.13% - ------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (1.61)%/(e)/ (1.79)% (1.97)% (1.73)% (1.81)% (1.12)% - ------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 61% 199% 130% 119% 99% 112% - -------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.16) for the year ended July 31, 2001. /(c)/Net gains (losses) on securities (both realized and unrealized) per share and Total return include proceeds received from the Global Research Analyst Settlement. Net gains (losses) on securities (both realized and unrealized) per share and Total return excluding these proceeds would have been $0.99 and 7.34%, respectively. /(d)/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. /(e)/Ratios are annualized and based on average daily net assets of $2,873,220. /(f)/Not annualized for periods less than one year. F-16 AIM SMALL COMPANY GROWTH FUND NOTE 14--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS K -------------------------------------------------------- AUGUST 1, 2005 TO OCTOBER 21, 2005 YEAR ENDED JULY 31, (DATE SHARES ---------------------------------- CONVERTED) 2005 2004 2003 - -------------------------------------------------------------------- ------------------------------------- Net asset value, beginning of period $13.19 $10.46 $ 9.99 $ 8.43 - ---------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.03) (0.14)/(a)/ (0.16)/(a)/ (0.01) - ---------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (0.85) 2.87 0.63 1.57 - ---------------------------------------------------------------------------------------------------------------------------- Total from investment operations (0.88) 2.73 0.47 1.56 - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $12.31 $13.19 $ 10.46 $ 9.99 - ---------------------------------------------------------------------------------------------------------------------------- Total return/(b)/ (6.67)% 26.10% 4.70% 18.51% - ---------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) -- $4,201 $95,752 $95,105 - ---------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.57%/(c)/ 1.65% 1.70% 1.70% - ---------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.57%/(c)/ 1.66% 1.98% 3.12% - ---------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (1.05)%/(c)/ (1.24)% (1.42)% (1.12)% - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(e)/ 61% 199% 130% 119% - ----------------------------------------------------------------------------------------------------------------------------
------------- DECEMBER 14, 2001 (DATE SALES COMMENCED) TO JULY 31, - ------------------------------------------------------------------- Net asset value, beginning of period $ 11.76 - -------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.05)/(a)/ - -------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (3.28) - -------------------------------------------------------------------------------------- Total from investment operations (3.33) - -------------------------------------------------------------------------------------- Net asset value, end of period $ 8.43 - -------------------------------------------------------------------------------------- Total return/(b)/ (28.32)% - -------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $66,451 - -------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.17%/(d)/ - -------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.17%/(d)/ - -------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.80)%/(d)/ - -------------------------------------------------------------------------------------- Portfolio turnover rate/(e)/ 99% - --------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(c)/Ratios are annualized and based on average daily net assets of $3,827,163. /(d)/Annualized. /(e)/Not annualized for periods less than one year.
CLASS R ---------------- OCTOBER 25, 2005 (DATE SALES COMMENCED) TO JANUARY 31, 2006 ------------------------------------------------------------------------------ Net asset value, beginning of period $12.53 ------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.04) ------------------------------------------------------------------------------ Net gains on securities (both realized and unrealized) 1.86/(a)/ ------------------------------------------------------------------------------ Total from investment operations 1.82 ------------------------------------------------------------------------------ Net asset value, end of period $14.35 ------------------------------------------------------------------------------ Total return/(b)/ 14.52%/(a)/ ------------------------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $ 11 ------------------------------------------------------------------------------ Ratio of expenses to average net assets 1.60%/(c)/ ------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (1.10)%/(c)/ ------------------------------------------------------------------------------ Portfolio turnover rate/(d)/ 61% ------------------------------------------------------------------------------
/(a)/Net gains (losses) on securities (both realized and unrealized) per share and Total return include proceeds received from the Global Research Analyst Settlement. Net gains (losses) on securities (both realized and unrealized) per share and Total return excluding these proceeds would have been $1.77 and 13.81%, respectively. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(c)/Ratios are annualized and based on average daily net assets of $10,597. /(d)/Not annualized for periods less than one year. F-17 AIM SMALL COMPANY GROWTH FUND NOTE 14--FINANCIAL HIGHLIGHTS-(CONTINUED)
INVESTOR CLASS ----------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JULY 31, JANUARY 31, ------------------------------------------------------------------ 2006 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.25 $ 10.49 $ 9.99 $ 8.41 $ 12.76 $ 18.50 - ------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.06) (0.12)/(a)/ (0.13)/(a)/ 0.00 (0.01)/(b)/ (0.04)/(a)/ - ------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.18/(c)/ 2.88 0.63 1.58 (4.34) (4.77) - ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.12 2.76 0.50 1.58 (4.35) (4.81) - ------------------------------------------------------------------------------------------------------------------------------- Less distributions from net realized gains -- -- -- -- -- (0.93) - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 14.37 $ 13.25 $ 10.49 $ 9.99 $ 8.41 $ 12.76 - ------------------------------------------------------------------------------------------------------------------------------- Total return/(d)/ 8.45%/(c)/ 26.31% 5.00% 18.79% (34.09)% (26.53)% - ------------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $369,246 $407,557 $497,472 $890,227 $800,520 $1,395,113 - ------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.38%/(e)/ 1.45% 1.49% 1.50% 1.45% 1.29% - ------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.38%/(e)/ 1.46% 1.59% 1.67% 1.45% 1.29% - ------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.86)%/(e)/ (1.04)% (1.21)% (0.94)% (1.01)% (0.28)% - ------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 61% 199% 130% 119% 99% 112% - -------------------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.12) for the year ended July 31, 2002. /(c)/Net gains (losses) on securities (both realized and unrealized) per share and Total return include proceeds received from the Global Research Analyst Settlement. Net gains (losses) on securities (both realized and unrealized) per share and Total return excluding these proceeds would have been $1.09 and 7.77%, respectively. /(d)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(e)/Ratios are annualized and based on average daily net assets of $366,977,869. /(f)/Not annualized for periods less than one year.
INSTITUTIONAL --------------------------- JULY 13, 2005 SIX MONTHS (DATE SALES ENDED COMMENCED) TO JANUARY 31, JULY 31, 2006 2005 - ---------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.27 $ 12.98 - ---------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.02) (0.00)/(a)/ - ---------------------------------------------------------------------------------------------- Net gains on securities (both realized and unrealized) 1.18/(b)/ 0.29 - ---------------------------------------------------------------------------------------------- Total from investment operations 1.16 0.29 - ---------------------------------------------------------------------------------------------- Net asset value, end of period $ 14.43 $ 13.27 - ---------------------------------------------------------------------------------------------- Total return/(c)/ 8.74%/(b)/ 2.23% - ---------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $27,605 $18,633 - ---------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 0.87%/(d)/ 0.77%/(e)/ - ---------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 0.87%/(d)/ 0.78%/(e)/ - ---------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.36)%/(d)/ (0.36)%/(e)/ - ---------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 61% 199% - ----------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Net gains (losses) on securities (both realized and unrealized) per share and Total return include proceeds received from the Global Research Analyst Settlement. Net gains (losses) on securities (both realized and unrealized) per share and Total return excluding these proceeds would have been $1.09 and 8.06%, respectively. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(d)/Ratios are annualized and based on average daily net assets of $21,732,305. /(e)/Annualized. /(f)/Not annualized for periods less than one year. F-18 AIM SMALL COMPANY GROWTH FUND NOTE 15--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. PENDING LITIGATION AND REGULATORY INQUIRIES On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code (S) 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP from serving as an investment advisor to any registered investment company, including the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On October 19, 2005, the WVAG lawsuit was transferred for pretrial purposes to the MDL Court (as defined below). On July 7, 2005, the Supreme Court of West Virginia ruled in an unrelated lawsuit that is similar to this action that the WVAG does not have authority to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: . that the defendants permitted improper market timing and related activity in the AIM Funds; . that certain AIM Funds inadequately employed fair value pricing; . that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; and . that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. F-19 AIM SMALL COMPANY GROWTH FUND NOTE 15--LEGAL PROCEEDINGS-(CONTINUED) All lawsuits based on allegations of market timing, late trading and related issues have been transferred or conditionally transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. On March 1, 2006, the MDL Court entered orders on Defendants' Motions to dismiss in the derivative and class action lawsuits. The MDL Court dismissed all derivative causes of action in the derivative lawsuit but two: (i) the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"); and (ii) the "control person liability" claim under Section 48 of the 1940 Act. The MDL Court dismissed all claims asserted in the class action lawsuit but three: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934; (ii) the excessive fee claim under Section 36(b) of the 1940 Act (which survived only insofar as plaintiffs seek recovery of fees associated with the assets involved in market timing); and (iii) the "control person liability" claim under Section 48 of the 1940 Act. Based on the MDL Court's March 1, 2006 orders, all claims asserted against the Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the derivative lawsuit. On February 27, 2006, Judge Motz for the MDL Court issued a memorandum opinion on the AMVESCAP defendants' motion to dismiss the ERISA lawsuit. Judge Motz granted the motion in part and denied the motion in part, holding that: (i) plaintiff has both constitutional and statutory standing to pursue her claims under ERISA (S) 502(a)(2); (ii) plaintiff lacks standing under ERISA (S) 502(a)(3) to obtain equitable relief; (iii) the motion is granted as to the claims alleged under ERISA (S) 404 for failure to prudently and loyally manage plan assets against certain AMVESCAP defendants; (iv) the motion is denied as to the claims alleged under ERISA (S) 404 for failure to prudently and loyally manage plan assets against AMVESCAP and certain other AMVESCAP defendants. The opinion also: (i) confirmed plaintiff's abandonment of her claims that defendants engaged in prohibited transactions and/or misrepresentation; (ii) postponed consideration of the duty to monitor and co-fiduciary duty claims until after any possible amendments to the complaints; (iii) stated that plaintiff may seek leave to amend her complaint within 40 days of the date of filing of the memorandum opinion. Judge Motz requested that the parties submit proposed orders within 30 days of the opinion implementing his rulings. IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, AIM and ADI have advised the Fund that they are providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds. F-20 AIM SMALL COMPANY GROWTH FUND TRUSTEES AND OFFICERS
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND Bob R. Baker Robert H. Graham 11 Greenway Plaza President and Principal Executive Officer Suite 100 Frank S. Bayley Houston, TX 77046-1173 Mark H. Williamson James T. Bunch Executive Vice President INVESTMENT ADVISOR Bruce L. Crockett Lisa O. Brinkley A I M Advisors, Inc. Chair Senior Vice President and Chief Compliance Officer 11 Greenway Plaza Suite 100 Albert R. Dowden Russell C. Burk Houston, TX 77046-1173 Senior Vice President and Senior Officer Edward K. Dunn, Jr. TRANSFER AGENT Kevin M. Carome Jack M. Fields Senior Vice President, Secretary and Chief Legal Officer AIM Investment Services, Inc. P.O. Box 4739 Carl Frischling Sidney M. Dilgren Houston, TX 77210-4739 Vice President, Treasurer and Principal Financial Officer Robert H. Graham CUSTODIAN Vice Chair J. Philip Ferguson Vice President State Street Bank and Trust Company Prema Mathai-Davis 225 Franklin Street Karen Dunn Kelley Boston, MA 02110-2801 Lewis F. Pennock Vice President COUNSEL TO THE FUND Ruth H. Quigley Ballard Spahr Larry Soll Andrews & Ingersoll, LLP 1735 Market Street, 51st Floor Raymond Stickel, Jr. Philadelphia, PA 19103-7599 Mark H. Williamson COUNSEL TO THE INDEPENDENT TRUSTEES Kramer, Levin, Naftalis & Frankel LLP 1177 Avenue of the Americas New York, NY 10036-2714 DISTRIBUTOR A I M Distributors, Inc. 11 Greenway Plaza Suite 100 Houston, TX 77046-1173
DOMESTIC EQUITY SECTOR EQUITY AIM Aggressive Growth Fund/3/ AIM Advantage Health Sciences Fund AIM Basic Balanced Fund* AIM Energy Fund AIM Basic Value Fund AIM Financial Services Fund AIM Blue Chip Fund/3/ AIM Global Health Care Fund AIM Capital Development Fund AIM Global Real Estate Fund AIM Charter Fund AIM Gold & Precious Metals Fund AIM Constellation Fund AIM Leisure Fund AIM Diversified Dividend Fund AIM Multi-Sector Fund AIM Dynamics Fund AIM Real Estate Fund/1/ AIM Large Cap Basic Value Fund AIM Technology Fund AIM Large Cap Growth Fund AIM Utilities Fund AIM Mid Cap Basic Value Fund AIM Mid Cap Core Equity Fund/1/ FIXED INCOME AIM Mid Cap Growth Fund/4/ AIM Opportunities I Fund TAXABLE AIM Opportunities II Fund AIM Opportunities III Fund AIM Floating Rate Fund AIM Premier Equity Fund/4/ AIM High Yield Fund AIM S&P 500 Index Fund AIM Income Fund AIM Select Equity Fund AIM Intermediate Government Fund AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund AIM Small Cap Growth Fund/1/ AIM Money Market Fund AIM Small Company Growth Fund/4/ AIM Short Term Bond Fund AIM Summit Fund AIM Total Return Bond Fund AIM Trimark Endeavor Fund Premier Portfolio AIM Trimark Small Companies Fund Premier U.S. Government Money Portfolio AIM Weingarten Fund/3/ TAX-FREE *Domestic equity and income fund AIM High Income Municipal Fund/1/ INTERNATIONAL/GLOBAL EQUITY AIM Municipal Bond Fund AIM Tax-Exempt Cash Fund AIM Asia Pacific Growth Fund AIM Tax-Free Intermediate Fund AIM Developing Markets Fund Premier Tax-Exempt Portfolio AIM European Growth Fund AIM European Small Company Fund/1/ AIM ALLOCATION SOLUTIONS AIM Global Aggressive Growth Fund AIM Global Equity Fund AIM Conservative Allocation Fund AIM Global Growth Fund AIM Growth Allocation Fund/2/ AIM Global Value Fund AIM Moderate Allocation Fund AIM International Core Equity Fund AIM Moderate Growth Allocation Fund AIM International Growth Fund AIM Moderately Conservative Allocation AIM International Small Company Fund/1/ Fund AIM Trimark Fund DIVERSIFIED PORTFOLIOS AIM Income Allocation Fund AIM International Allocation Fund /1/This Fund has limited public sales of its shares to certain investors. For more information on who may continue to invest in the Fund, please see the appropriate prospectus. /2/Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM Growth Allocation Fund. /3/Shareholders approved the reorganization of the following funds to be effective on or about March 27, 2006: AIM Aggressive Growth Fund into AIM Constellation Fund, AIM Weingarten Fund into AIM Constellation Fund and AIM Blue Chip Fund into AIM Large Cap Growth Fund. /4/Shareholders approved the reorganization of the following funds to be effective on or about April 10, 2006: AIM Mid Cap Growth Fund into AIM Dynamics Fund, AIM Small Company Growth Fund into AIM Small Cap Growth Fund and AIM Premier Equity Fund into AIM Charter Fund. If used after April 20, 2006, this report must be accompanied by a Fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $128 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $386 billion in assets under management. Data as of December 31, 2005. - -------------------------------------------------------------------------------- CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AND READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- AIMinvestments.com I-SCG-SAR-1 A I M Distributors, Inc. [YOUR GOALS. OUR SOLUTIONS.] - REGISTERED TRADEMARK - Mutual Retirement Annuities College Separately Offshore Cash Funds Products Savings Managed Products Management Plans Accounts [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - AIM S&P 500 INDEX FUND Semiannual Report to Shareholders . January 31, 2006 [COVER IMAGE] [YOUR GOALS. OUR SOLUTIONS.] - REGISTERED TRADEMARK - [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - AIM S&P 500 INDEX FUND SEEKS TO PROVIDE BOTH PRICE PERFORMANCE AND INCOME COMPARABLE TO THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX. .. Unless otherwise stated, information presented in this report is as of January 31, 2006, and is based on total net assets. ABOUT SHARE CLASSES .. Investor Class shares are closed to most investors. For more information on who may continue to invest in the Investor Class shares, please see the prospectus. PRINCIPAL RISKS OF INVESTING IN THE FUND .. At any given time, the Fund may be subject to sector risk, which means a certain sector may underperform other sectors or the market as a whole. The Fund is not limited with respect to the sectors in which it can invest. .. The S&P 500 Index could become less diversified if some of its largest components significantly increase in value relative to the index's other components. .. The Fund is not actively managed; instead, the Fund seeks to track the performance of the S&P 500 Index. Therefore, when the S&P 500 Index drops, the value of shares of the Fund drops accordingly. The Fund makes no effort to hedge against price movements in the S&P 500 Index. Because the Fund will incur operating expenses and transaction costs, the Fund's performance will not track the performance of the S&P 500 Index exactly. ABOUT INDEXES USED IN THIS REPORT .. The unmanaged LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX (the Lehman Aggregate), which represents the U.S. investment-grade fixed-rate bond market (including government and corporate securities, mortgage pass-through securities and asset-backed securities), is compiled by Lehman Brothers, a global investment bank. .. The unmanaged LIPPER S&P 500 FUND Index represents an average of the performance of the 30 largest S&P 500 Index funds tracked by Lipper, Inc., an independent mutual fund performance monitor. .. The unmanaged MSCI WORLD INDEX is a group of global securities tracked by Morgan Stanley Capital International. .. The unmanaged STANDARD & POOR'S COMPOSITE INDEX OF 500 STOCKS (the S&P 500 - --REGISTERED TRADEMARK-- Index) is an index of common stocks frequently used as a general measure of U.S. stock market performance. .. A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of an index of funds reflects fund expenses; performance of a market index does not. OTHER INFORMATION .. The returns shown in the management's discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. .. Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. and Standard & Poor's. .. "Standard & Poor's --REGISTERED TRADEMARK--," "S&P --REGISTERED TRADEMARK--," "S&P 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by A I M Management Group, Inc. AIM S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in AIM S&P 500 Index Fund. 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 AIMinvestments.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's Web site at sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-01474 and 002-26125. 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 AIM Web site, AIMinvestments.com. On the home page, scroll down and click on AIM Funds Proxy Policy. The information is also available on the SEC Web site, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2005, is available at our Web site. Go to AIMinvestments.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC Web site, sec.gov. - -------------------------------------------------------------------------------- FUND NASDAQ SYMBOLS Investor Class Shares ISPIX - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - -------------------------------------------------------------------------------- AIMINVESTMENTS.COM AIM S&P 500 INDEX FUND DEAR FELLOW AIM FUNDS SHAREHOLDERS: [GRAHAM PHOTO] Although many concerns weighed on investors minds during the six months covered by this report, stocks and bonds posted gains for the period. The S&P 500 Index, frequently cited as a benchmark for U.S. stock market performance, returned 4.67%. Results for international stocks were more impressive, with the MSCI World Index gaining 11.29%. Bond returns were more modest, as the Lehman Brothers U.S. Aggregate Bond Index gained 0.84%. ROBERT H. GRAHAM Within equity indexes, there was a good deal of variation in the performance of different sectors and markets. Energy outperformed other sectors of the S&P 500 Index, reflecting higher oil and gas prices. Internationally, emerging markets produced more attractive results than developed markets, partially because emerging markets tend to be more closely tied to the performance of natural resources and commodities. [WILLIAMSON PHOTO] Bond performance also varied, with short- and intermediate-term bonds generally faring better than their long-term counterparts. The difference between bond yields was relatively narrow across the maturity spectrum, making short- and intermediate-term bonds, which are generally perceived as safer, a more attractive investment option than long-term debt. High yield bonds and municipal bonds also were among the better-performing segments of the fixed-income market. MARK H. WILLIAMSON A number of key developments affected markets and the economy during the reporting period: . Hurricane Katrina, which devastated New Orleans in August, had numerous economic repercussions and dealt a short-term setback to consumer confidence. However, consumer confidence rebounded toward the end of the period, with analysts crediting the resiliency of the economy, falling gas prices and job growth for this trend. . The Federal Reserve Board (the Fed) continued its tightening policy, raising the key federal funds target rate to 4.50% by the end of the reporting period. Many analysts believed that the central bank was near the end of its tightening policy as Ben Bernanke succeeded the retiring Alan Greenspan as Fed chairman early in 2006. . Gasoline prices, which soared to a nationwide average of slightly more than $3.08 per gallon on September 5, following Hurricane Katrina, had dropped by more than 70 cents by the end of the reporting period, according to the U.S. Energy Information Administration. . In 2005, the economy created 2 million new jobs, although job growth was uneven and sometimes did not meet analysts' expectations on a monthly basis. For a discussion of the specific market conditions that affected your Fund and how your Fund was managed during the reporting period, please turn to Page 3. YOUR FUND Further information about the markets, your Fund and investing in general is always available on our comprehensive Web site, AIMinvestments.com. We invite you to visit it frequently. We at AIM remain committed to building solutions to help you meet your investment goals. We thank you for your continued participation in AIM Investments --REGISTERED TRADEMARK--. If you have any questions, please contact our award-winning Client Service representatives at 800-959-4246. We are pleased to be of help. Sincerely, /S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, President, A I M Advisors, Inc. AIM Funds March 21, 2006 AIM INVESTMENTS IS A REGISTERED SERVICE MARK OF A I M MANAGEMENT GROUP INC. A I M ADVISORS, INC. AND A I M CAPITAL MANAGEMENT, INC. ARE THE INVESTMENT ADVISORS. A I M DISTRIBUTORS, INC. IS THE DISTRIBUTOR FOR THE RETAIL FUNDS REPRESENTED BY AIM INVESTMENTS. 1 AIM S&P 500 INDEX FUND [CROCKETT PHOTO] DEAR FELLOW AIM FUND SHAREHOLDERS: [CROCKETT PHOTO] Having completed a year of transition and change at AIM Funds--as well as my first full year as your board's independent chair--I can assure you that shareholder interests are at the forefront of every decision your board makes. While regulators and fund companies debate the value of an independent board chair, this structure is working for you. An independent chair can help lead to unbiased decisions and eliminate potential conflicts. BRUCE L. CROCKETT Some highlights of 2005 board activity: . Board approval of voluntary fee reductions, which are saving shareholders more than $20 million annually, based on asset levels of March 31, 2005. . Board approval for the merger of 14 funds into other AIM funds with similar investment objectives. Eight of these mergers were approved by shareholders of the target funds during 2005. The remaining six are being voted on by shareholders in early 2006. In each case, the goal is for the resulting merged fund to benefit from strengthened management and greater efficiency. . Board approval for portfolio management changes at 11 funds, consistent with the goal of organizing management teams around common processes and shared investment views. Again, we hope that these changes will improve fund performance and efficiency. In 2006, your board will continue to focus on reducing costs and shareholder fees and improving portfolio performance, which is not yet as strong as we expect to see it. Eight in-person board meetings and several additional telephone and committee meetings are scheduled to take place this year. I'll inform you of our progress in my next semiannual letter to shareholders. The AIM Funds board is pleased to welcome our newest independent member, Raymond Stickel, Jr., a former partner with the international auditing firm of Deloitte & Touche. We also send our thanks and best wishes to Gerald J. Lewis, who retired from your board in December 2005, and to Edward K. Dunn, Jr., who is retiring this year. Your board welcomes your views. Please mail them to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100, Houston TX 77046. Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair On Behalf of the Board of Trustees AIM Funds MARCH 21, 2006 2 AIM S&P 500 INDEX FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY For the six-month reporting period ended January 31, 2006, Investor Class shares of AIM S&P 500 Index Fund delivered positive returns to shareholders, as shown in the table at right. As intended by its investment strategy, the Fund performed in line with the S&P 500 Index and the Lipper S&P 500 Fund Index, which also delivered positive returns for the six-month reporting period. The Lipper S&P 500 Fund Index consists of the 30 largest S&P 500 Index funds tracked by Lipper, Inc. Those funds, like AIM S&P 500 Index Fund, incur fund expenses and transaction costs when they buy or sell securities. The S&P 500 Index - -------------------------------------------------------------------------------- FUND VS. INDEXES TOTAL RETURNS, 7/31/05-1/31/06, EXCLUDING APPLICABLE SALES CHARGES. IF SALES CHARGES WERE INCLUDED, RETURNS WOULD BE LOWER. Investor Class Shares 4.40% S&P 500 Index (Broad Market Index/ Style-specific Index) 4.67 Lipper S&P 500 Fund Index (Peer Group Index) 4.55 SOURCE: LIPPER INC. does not incur expenses or transaction costs, and therefore its returns are likely to be slightly higher than those of the Fund. Your Fund's long-term performance is shown on Page 5. - -------------------------------------------------------------------------------- HOW WE INVEST The Fund invests in the 500 stocks that compose the S&P 500 Index, and in the same proportion as the index. In selecting stocks for the Fund, we use a full replication strategy that duplicates the S&P 500 Index in holdings and weightings by sector, industry and individual stock. We make no effort to hedge against price movements in the S&P 500 Index. However, we use S&P 500 Index stock futures to fine-tune cash balances and accrued dividend income, allowing the Fund to stay virtually fully invested at all times. (Futures can be used to equitize cash until it can be invested in suitable equity investments.) This approach has limited tracking error to the S&P 500 Index to 0.54% for the period December 31, 1997 (the month-end closest to the Fund's inception date) to January 31, 2006. Tracking error is a statistic that measures the amount by which the performance of a portfolio differs from that of an index over a given time period. In managing the Fund, we: .. Rebalance the portfolio every quarter to adjust for any changes that may have occurred in the S&P 500 Index .. Make intra-quarter adjustments as necessary to keep the Fund's weighting of its holdings in line with that of the S&P 500 Index .. Add a stock to the Fund when it is added to the S&P 500 Index .. Sell a stock when it is deleted from the S&P 500 Index, or when a spin off occurs and the new company is not included in the S&P 500 Index MARKET CONDITIONS AND YOUR FUND For the six months ended January 31, 2006, the U.S. stock market, as measured by the S&P 500 Index, returned 4.67%. The market was able to post the gain despite a litany of concerns including the impact of two major hurricanes hitting the Gulf Coast, continued federal funds tightening and elevated energy and commodity prices. Gross domestic product, a broad measure of the nation's economic activity, grew at an annualized rate of 4.1% in the third quarter, but fell to 1.6% annualized growth in the fourth quarter on lower consumer and federal government spending, and lower business investment in equipment and software. In its January 2006 Beige Book report, the U.S. Federal Reserve Board (the Fed) reported that, "Economic expansion continued across the twelve Federal Reserve Districts through the last several weeks of 2005." However, the Fed noted that non-labor input-cost increases continued to worry manufacturers. (continued) - --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION TOP 5 INDUSTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. Exxon Mobil Corp. 3.3% 2. General Electric Co. 2.9 Financials 20.1% 1. Pharmaceuticals 6.2% 3. Microsoft Corp. 2.1 Information Technology 14.6 2. Integrated Oil & Gas 5.9 4. Citigroup Inc. 2.0 Health Care 12.7 3. Industrial Conglomerates 3.9 5. Bank of America Corp. 1.7 Industrials 10.6 4. Diversified Banks 3.8 6. Procter & Gamble Co. (The) 1.7 Consumer Discretionary 10.4 5. Other Diversified Financial Services 3.1 7. Pfizer Inc. 1.6 Energy 10.0 8. Johnson & Johnson 1.4 Consumer Staples 9.0 9. American International Utilities 3.2 Group, Inc. 1.4 Telecommunication Services 3.0 10. Altria Group, Inc. 1.3 Materials 2.9 U.S. Treasury Bills, Repurchase Agreements And Other Assets Less Liabilities 3.5 TOTAL NET ASSETS $232.3 MILLION TOTAL NUMBER OF HOLDINGS* 500
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. *Excluding Treasury securities and repurchase agreements. - -------------------------------------------------------------------------------- 3 AIM S&P 500 INDEX FUND In a separate release from the Fed discussing its latest increase in the federal funds target rate on January 31, it was noted that, "...the expansion in economic activity appears solid. Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures." Concerns about the future direction of interest rates and inflation, among other factors, resulted in muted returns for the S&P 500 Index. Because the Fund is an index fund, its performance is greatly affected by overall market trends, particularly by the performance of the various sectors that compose the S&P 500 Index. Of the 10 sectors that compose the index, eight posted positive returns over the period, while only two posted negative returns. The financials and energy sectors were the primary drivers of performance for the index and your Fund during the period. The financials sector saw strong performance in the fourth quarter, led by the insurance industry. In the wake of the active hurricane season experienced in the third quarter of 2005, expectations for stronger pricing and better profitability lifted share prices of many of these firms. Another group with good performance in the financials sector was investment banking and brokerage stocks. Among the Fund's holdings in this industry that contributed to performance was GOLDMAN SACHS . Increased merger and acquisition activity, along with increased trading volume and a growing asset management business, helped lift the company's stock price during the period. Most energy companies benefited from higher oil and natural gas prices stemming from supply disruptions resulting from hurricane damage and geopolitical uncertainty. These higher prices allowed some firms in the sector to post record profits despite having these prices moderate during the fourth quarter. One of the Fund's top performers was SCHLUMBERGER , an oil and gas equipment and services company. The company benefited from these higher prices through increased demand for its products and services from oil and gas exploration and production companies that needed to upgrade antiquated service and exploration equipment in order to meet global energy demand and capitalize on elevated prices. Other sectors that contributed meaningfully to performance included information technology, industrials and materials. Consumer discretionary was the weakest sector in the S&P 500 Index for the reporting period. Consumer discretionary stocks tend to underperform the broader equity market in an environment of rising interest rates and higher energy prices, which tend to hinder consumer spending. GENERAL MOTORS, a stock in the consumer discretionary sector and a detractor from Fund performance, felt the effect of these two factors over the prior six months. General Motors has had to deal with increased competition from foreign auto manufacturers and significant legacy costs related to employee benefit programs and union contracts. Additionally, the specter of higher fuel costs and higher car note payments due to higher consumer credit loan rates led to a drop in auto sales in the fourth quarter, reducing the company's revenues and stock price. The only other sector to experience negative returns for the period was telecommunication services. IN CLOSING The broad market showed strength in November after experiencing choppy returns for the preceding three months. The market then paused in December before posting a strong rally in January. Because markets can exhibit erratic periods such as this, we encourage investors to look beyond short-term market movements and maintain a long-term investment horizon. We thank you for your continued participation in AIM S&P 500 Index Fund. THE VIEWS AND OPINIONS EXPRESSED IN MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ARE THOSE OF A I M ADVISORS, INC. THESE VIEWS AND OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE VIEWS AND OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR RECOMMENDATIONS, OR AS AN OFFER FOR A PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE, BUT A I M ADVISORS, INC. MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY. See important Fund and index disclosures inside front cover. JEREMY LEFKOWITZ, portfolio manager, is lead manager of AIM S&P 500 Index Fund. He began his career in 1968 and is a former director of the research division of the Futures Industry Association and of the research division of the National Options and Futures Society. Mr. Lefkowitz earned a B.S. degree in industrial engineering in 1967 and an M.B.A. in finance in 1969, both from Columbia University. MAUREEN DONNELLAN, portfolio manager, is a manager of AIM S&P 500 Index Fund. She has worked with the advisor, its affiliates and/or predecessors since 1974 and assumed her current duties in 2003. Ms. Donnellan is registered with the National Futures Association. W. LAWSON MCWHORTER, portfolio manager, is a manager of AIM S&P 500 Index Fund. He has been associated with the advisor and/or its affiliates, and has been responsible for the Fund, since 2005. WILLIAM E. MERSON , portfolio manager, is a manager of AIM S&P 500 Index Fund. He joined the advisor in 1982 after serving as a pilot in the U.S. Air Force from 1968 to 1973. Mr. Merson received a B.B.A. from Manhattan College in 1968 and an M.B.A. from New York University in 1989. He is registered with the National Futures Association. DANIEL TSAI, portfolio manager, is manager of AIM S&P 500 Index Fund. Mr. Tsai joined the advisor in 2000. He earned a B.S. in mechanical engineering from National Taiwan University in 1985 and an M.S. in mechanical engineering from the University of Michigan in 1989. He also received an M.S. in computer science at Wayne State University in 1998. He is registered with the National Futures Association and is a CFA Level III candidate. ANNE M. UNFLAT, portfolio manager, is a manager of AIM S&P 500 Index Fund. She has been associated with the advisor and/or its affiliates since 1988 and has been responsible for the Fund since 2006. [RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE, PLEASE SEE PAGE 5. 4 AIM S&P 500 INDEX FUND YOUR FUND'S LONG-TERM PERFORMANCE - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS As of 1/31/06, including applicable sales charges INVESTOR CLASS SHARES Inception (12/23/97) 5.05% 5 Years -0.35 1 Year 9.81 - -------------------------------------------------------------------------------- THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT GUARANTEE COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE VISIT AIMINVESTMENTS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE AND THE EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR SALE OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS As of 12/31/05, most recent calendar quarter-end, including applicable sales charges INVESTOR CLASS SHARES Inception (12/23/97) 4.76% 5 Years -0.19 1 Year 4.26 - -------------------------------------------------------------------------------- INVESTOR CLASS SHARES DO NOT HAVE A FRONT-END OR A CONTINGENT DEFERRED SALES CHARGE; THEREFORE, PERFORMANCE IS AT NET ASSET VALUE. A REDEMPTION FEE OF 2% WILL BE IMPOSED ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF THE FUND WITHIN 30 DAYS OF PURCHASE. EXCEPTIONS TO THE REDEMPTION FEE ARE LISTED IN THE FUND'S PROSPECTUS. HAD THE ADVISOR NOT WAIVED FEES AND/OR REIMBURSED EXPENSES, PERFORMANCE WOULD HAVE BEEN LOWER. 5 AIM S&P 500 INDEX 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; 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. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period August 1, 2005, through January 31, 2006. 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 Fund's actual cumulative total returns at net asset value after expenses for the six months ended January 31, 2006, appear in the table "Fund vs. Indexes" on Page 3. 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. - --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (8/1/05) (1/31/06)/1/ PERIOD/2/ (1/31/06) PERIOD/2/ RATIO Investor $ 1,000.00 $ 1,044.00 $ 3.09 $ 1,022.18 $ 3.06 0.60%
/1/ The actual ending account value is based on the actual total return of the Fund for the period August 1, 2005, through January 31, 2006, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value after expenses for the six months ended January 31, 2006, appear in the table "Fund vs. Indexes" on Page 3. /2/ Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. [ARROW BUTTON For More Information Visit IMAGE] AIMINVESTMENTS.COM 6 AIM S&P 500 INDEX FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION The Board of Trustees of AIM Stock Funds (the "Board") oversees the management of AIM S&P 500 Index Fund (the "Fund") and, as required by law, determines annually whether to approve the continuance of the Fund's advisory agreement with A I M Advisors, Inc. ("AIM"). Based upon the recommendation of the Investments Committee of the Board, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the advisory agreement (the "Advisory Agreement") between the Fund and AIM for another year, effective July 1, 2005. The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors. One of the responsibilities of the Senior Officer of the Fund, who is independent of AIM and AIM's affiliates, is to manage the process by which the Fund's proposed management fees are negotiated to ensure that they are negotiated in a manner which is at arm's length and reasonable. To that end, the Senior Officer must either supervise a competitive bidding process or prepare an independent written evaluation. The Senior Officer has recommended an independent written evaluation in lieu of a competitive bidding process and, upon the direction of the Board, has prepared such an independent written evaluation. Such written evaluation also considered certain of the factors discussed below. In addition, as discussed below, the Senior Officer made certain recommendations to the Board in connection with such written evaluation. The discussion below serves as a summary of the Senior Officer's independent written evaluation and recommendations to the Board in connection therewith, as well as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Advisory Agreement is in the best interests of the Fund and its shareholders and that the compensation to AIM under the Advisory Agreement is fair and reasonable and would have been obtained through arm's length negotiations. .. The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement. .. The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement. .. The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. Based on this review and after taking account of all of the other factors that the Board considered in determining whether to continue the Advisory Agreement for the Fund, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. However, due to the Fund's under-performance, the Board also concluded that it would be appropriate for management and the Board to continue to closely monitor the performance of the Fund. .. The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper S&P 500 Fund Index. The Board noted that the Fund's performance for the one year period was comparable to the performance of such Index and for the three and five year periods was below such Index. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. Based on this review and after taking account of all of the other factors that the Board considered in determining whether to continue the Advisory Agreement for the Fund, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. However, due to the Fund's under-performance, the Board also concluded that it would be appropriate for management and the Board to continue to closely monitor the performance of the Fund. .. Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement. .. Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory. .. Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not serve as an advisor to other mutual funds or other clients with investment strategies comparable to those of the Fund. .. Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable. .. Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable. .. Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it does not include any breakpoints. The Board considered whether it would be appropriate to add advisory fee breakpoints for the Fund or whether, due to the nature of the Fund and the advisory fee structures of comparable funds, it was reasonable to structure the advisory fee without breakpoints. Based on this review, the Board concluded that it was not necessary to add advisory fee breakpoints to the Fund's advisory fee schedule. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would remain constant under the Advisory Agreement because the Advisory Agreement does not include any breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would not reflect economies of scale, although the advisory fee waiver reflects economies of scale. .. Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the Fund may realize certain benefits upon investing cash balances in AIM advised money market funds, including a higher net return, increased liquidity, increased diversification or decreased transaction costs. The Board also found that the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its respective shareholders. The Board therefore concluded that the investment of cash collateral received in connection with the securities lending program in the money market funds according to the procedures is in the best interests of the lending Fund and its respective shareholders. (continued) 7 AIM S&P 500 INDEX FUND .. Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable. .. Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive. .. Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate. .. AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement. .. Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services. .. Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund. APPROVAL OF SUB-ADVISORY AGREEMENT The Board oversees the management of the Fund and, as required by law, determines annually whether to approve the continuance of the Fund's sub-advisory agreement. Based upon the recommendation of the Investments Committee of the Board, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the sub-advisory agreement (the "Sub-Advisory Agreement") between INVESCO Institutional (N.A.), Inc. (the "Sub-Advisor") and AIM with respect to the Fund for another year, effective July 1, 2005. The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Sub-Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors. The discussion below serves as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Sub-Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Sub-Advisory Agreement is in the best interests of the Fund and its shareholders. .. The nature and extent of the advisory services to be provided by the Sub-Advisor. The Board reviewed the services to be provided by the Sub-Advisor under the Sub-Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement was appropriate and that the Sub-Advisor currently is providing services in accordance with the terms of the Sub-Advisory Agreement. .. The quality of services to be provided by the Sub-Advisor. The Board reviewed the credentials and experience of the officers and employees of the Sub-Advisor who will provide investment advisory services to the Fund. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by the Sub-Advisor was appropriate, and that the Sub-Advisor currently is providing satisfactory services in accordance with the terms of the Sub-Advisory Agreement. .. The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. Based on this review and after taking account of all of the other factors that the Board considered in determining whether to continue the Advisory Agreement for the Fund, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund 's portfolio management team at this time. However, due to the Fund's under-performance, the Board also concluded that it would be appropriate for management and the Board to continue to closely monitor the performance of the Fund. .. The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper S&P 500 Fund Index. The Board noted that the Fund's performance for the one year period was comparable to the performance of such Index and for the three and five year periods was below such Index. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. Based on this review and after taking account of all of the other factors that the Board considered in determining whether to continue the Advisory Agreement for the Fund, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. However, due to the Fund's under-performance, the Board also concluded that it would be appropriate for management and the Board to continue to closely monitor the performance of the Fund. .. Meetings with the Fund's portfolio managers and investment personnel. The Board is meeting periodically with the Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Sub-Advisory Agreement. .. Overall performance of the Sub-Advisor. The Board considered the overall performance of the Sub-Advisor in providing investment advisory services to the Fund and concluded that such performance was satisfactory. .. Advisory fees, expense limitations and fee waivers, and breakpoints and economies of scale. In reviewing these factors, the Board considered only the advisory fees charged to the Fund by AIM and did not consider the sub-advisory fees paid by AIM to the Sub-Advisor. The Board believes that this approach is appropriate because the sub-advisory fees have no effect on the Fund or its shareholders, as they are paid by AIM rather than the Fund. Furthermore, AIM and the Sub-Advisor are affiliates and the Board believes that the allocation of fees between them is a business matter, provided that the advisory fees charged to the Fund are fair and reasonable. .. Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive. .. The Sub-Advisor's financial soundness in light of the Fund's needs. The Board considered whether the Sub-Advisor is financially sound and has the resources necessary to perform its obligations under the Sub-Advisory Agreement, and concluded that the Sub-Advisor has the financial resources necessary to fulfill its obligations under the Sub-Advisory Agreement. 8 SUPPLEMENT TO SEMIANNUAL REPORT DATED 1/31/06 AIM S&P 500 INDEX FUND INSTITUTIONAL CLASS SHARES The following information has been prepared to provide Institutional Class shareholders with a performance overview specific to their holdings. Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS For periods ended 1/31/06 Inception (12/23/97) 5.05% 5 Years -0.25 1 Year 9.96 6 Months* 4.45 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS For periods ended 12/31/05, most recent calendar quarter-end Inception (12/23/97) 4.77% 5 Years -0.08 1 Year 4.51 6 Months* 5.51 *Cumulative total return that has not been annualized - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES HAVE NO SALES CHARGE; THEREFORE, PERFORMANCE IS AT NAV. PERFORMANCE OF INSTITUTIONAL CLASS SHARES WILL DIFFER FROM PERFORMANCE OF OTHER SHARE CLASSES DUE TO DIFFERING SALES CHARGES AND CLASS EXPENSES. PLEASE NOTE THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. MORE RECENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. ALL RETURNS ASSUME REINVESTMENT OF DISTRIBUTIONS AT NAV. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SEE FULL REPORT FOR INFORMATION ON COMPARATIVE BENCHMARKS. PLEASE CONSULT YOUR FUND PROSPECTUS FOR MORE INFORMATION. FOR THE MOST CURRENT MONTH-END PERFORMANCE, PLEASE CALL 800-451-4246 OR VISIT AIMINVESTMENTS.COM. HAD THE ADVISOR NOT WAIVED FEES AND/OR REIMBURSED EXPENSES, PERFORMANCE WOULD HAVE BEEN LOWER. A REDEMPTION FEE OF 2% WILL BE IMPOSED ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF THE FUND WITHIN 30 DAYS OF PURCHASE. EXCEPTIONS TO THE REDEMPTION FEE ARE LISTED IN THE FUND'S PROSPECTUS. - -------------------------------------------------------------------------------- NASDAQ SYMBOL ISIIX - -------------------------------------------------------------------------------- Over for information on your Fund's expenses. - -------------------------------------------------------------------------------- THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- FOR INSTITUTIONAL INVESTOR USE ONLY This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use. [YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - - REGISTERED TRADEMARK - AIMINVESTMENTS.COM I-SPI-INS-2 A I M Distributors, Inc. INFORMATION ABOUT YOUR FUND'S EXPENSES 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 August 1, 2005, through January 31, 2006. 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 Fund's actual cumulative total return after expenses for the six months ended January 31, 2006, appears in the table on the front of this supplement. 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. - --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (8/1/05) (1/31/06)/1/ PERIOD/2/ (1/31/06) PERIOD/2/ RATIO Institutional $ 1,000.00 $ 1,044.50 $ 1.80 $ 1,023.44 $ 1.79 0.35%
/1/The actual ending account value is based on the actual total return of the Fund for the period August 1, 2005, through January 31, 2006, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total return after expenses for the six months ended January 31, 2006, appears in the table on the front of this supplement. /2/Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. - -------------------------------------------------------------------------------- AIMINVESTMENTS.COM I-SPI-INS-2 A I M Distributors, Inc. AIM S&P 500 INDEX FUND SCHEDULE OF INVESTMENTS January 31, 2006 (Unaudited)
SHARES VALUE --------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-96.42% ADVERTISING-0.16% Interpublic Group of Cos., Inc. (The)/(a)/ 8,338 $ 84,214 --------------------------------------------------------------- Omnicom Group Inc. 3,492 285,611 --------------------------------------------------------------- 369,825 --------------------------------------------------------------- AEROSPACE & DEFENSE-2.15% Boeing Co. (The) 15,636 1,068,095 --------------------------------------------------------------- General Dynamics Corp. 3,898 453,571 --------------------------------------------------------------- Goodrich Corp. 2,380 93,701 --------------------------------------------------------------- Honeywell International Inc. 16,323 627,130 --------------------------------------------------------------- L-3 Communications Holdings, Inc. 2,326 188,453 --------------------------------------------------------------- Lockheed Martin Corp. 6,925 468,476 --------------------------------------------------------------- Northrop Grumman Corp. 6,881 427,517 --------------------------------------------------------------- Raytheon Co. 8,653 354,513 --------------------------------------------------------------- Rockwell Collins, Inc. 3,346 156,994 --------------------------------------------------------------- United Technologies Corp. 19,731 1,151,698 --------------------------------------------------------------- 4,990,148 --------------------------------------------------------------- AGRICULTURAL PRODUCTS-0.17% Archer-Daniels-Midland Co. 12,652 398,538 --------------------------------------------------------------- AIR FREIGHT & LOGISTICS-0.97% FedEx Corp. 5,869 593,649 --------------------------------------------------------------- Ryder System, Inc. 1,242 55,517 --------------------------------------------------------------- United Parcel Service, Inc.-Class B 21,376 1,601,276 --------------------------------------------------------------- 2,250,442 --------------------------------------------------------------- AIRLINES-0.10% Southwest Airlines Co. 13,512 222,408 --------------------------------------------------------------- ALUMINUM-0.23% Alcoa Inc. 16,855 530,932 --------------------------------------------------------------- APPAREL RETAIL-0.25% Gap, Inc. (The) 11,117 201,107 --------------------------------------------------------------- Limited Brands, Inc. 6,744 159,563 --------------------------------------------------------------- TJX Cos., Inc. (The) 8,923 227,804 --------------------------------------------------------------- 588,474 --------------------------------------------------------------- APPAREL, ACCESSORIES & LUXURY GOODS-0.22% Coach, Inc./(a)/ 7,361 264,628 --------------------------------------------------------------- Jones Apparel Group, Inc. 2,262 70,755 --------------------------------------------------------------- Liz Claiborne, Inc. 2,049 71,141 --------------------------------------------------------------- V. F. Corp. 1,722 95,537 --------------------------------------------------------------- 502,061 ---------------------------------------------------------------
SHARES VALUE ----------------------------------------------------------- APPLICATION SOFTWARE-0.44% Adobe Systems Inc. 11,645 $ 462,539 ----------------------------------------------------------- Autodesk, Inc. 4,470 181,437 ----------------------------------------------------------- Citrix Systems, Inc./(a)/ 3,415 105,319 ----------------------------------------------------------- Compuware Corp./(a)/ 7,504 61,833 ----------------------------------------------------------- Intuit Inc./(a)/ 3,427 179,335 ----------------------------------------------------------- Parametric Technology Corp./(a)/ 5,274 33,015 ----------------------------------------------------------- 1,023,478 ----------------------------------------------------------- ASSET MANAGEMENT & CUSTODY BANKS-0.93% Ameriprise Financial, Inc. 4,764 193,847 ----------------------------------------------------------- Bank of New York Co., Inc. (The) 14,918 474,542 ----------------------------------------------------------- Federated Investors, Inc.-Class B 1,640 63,320 ----------------------------------------------------------- Franklin Resources, Inc. 2,875 283,187 ----------------------------------------------------------- Janus Capital Group Inc. 4,177 87,258 ----------------------------------------------------------- Mellon Financial Corp. 8,098 285,616 ----------------------------------------------------------- Northern Trust Corp. 3,593 187,591 ----------------------------------------------------------- State Street Corp. 6,351 383,981 ----------------------------------------------------------- T. Rowe Price Group Inc. 2,531 193,444 ----------------------------------------------------------- 2,152,786 ----------------------------------------------------------- AUTO PARTS & EQUIPMENT-0.12% Dana Corp. 2,912 14,181 ----------------------------------------------------------- Johnson Controls, Inc. 3,737 258,750 ----------------------------------------------------------- 272,931 ----------------------------------------------------------- AUTOMOBILE MANUFACTURERS-0.25% Ford Motor Co. 35,983 308,734 ----------------------------------------------------------- General Motors Corp. 10,954 263,553 ----------------------------------------------------------- 572,287 ----------------------------------------------------------- AUTOMOTIVE RETAIL-0.08% AutoNation, Inc./(a)/ 3,506 78,149 ----------------------------------------------------------- AutoZone, Inc./(a)/ 1,069 104,495 ----------------------------------------------------------- 182,644 ----------------------------------------------------------- BIOTECHNOLOGY-1.42% Amgen Inc./(a)/ 23,908 1,742,654 ----------------------------------------------------------- Applera Corp.-Applied Biosystems Group 3,639 103,129 ----------------------------------------------------------- Biogen Idec Inc./(a)/ 6,573 294,142 ----------------------------------------------------------- Chiron Corp./(a)/ 2,113 96,353 ----------------------------------------------------------- Genzyme Corp./(a)/ 5,001 354,771 ----------------------------------------------------------- Gilead Sciences, Inc./(a)/ 8,870 539,917 ----------------------------------------------------------- MedImmune, Inc./(a)/ 4,765 162,582 ----------------------------------------------------------- 3,293,548 -----------------------------------------------------------
F-1 AIM S&P 500 INDEX FUND
SHARES VALUE ---------------------------------------------------------------- BREWERS-0.30% Anheuser-Busch Cos., Inc. 15,037 $ 623,133 ---------------------------------------------------------------- Molson Coors Brewing Co.-Class B 1,093 68,312 ---------------------------------------------------------------- 691,445 ---------------------------------------------------------------- BROADCASTING & CABLE TV-0.90% CBS Corp.-Class B 14,967 391,088 ---------------------------------------------------------------- Clear Channel Communications, Inc. 10,470 306,457 ---------------------------------------------------------------- Comcast Corp.-Class A/(a)/ 42,062 1,170,165 ---------------------------------------------------------------- Scripps Co. (E.W.) (The)-Class A 1,647 79,616 ---------------------------------------------------------------- Univision Communications Inc.-Class A/(a)/ 4,330 137,867 ---------------------------------------------------------------- 2,085,193 ---------------------------------------------------------------- BUILDING PRODUCTS-0.16% American Standard Cos. Inc. 3,540 127,440 ---------------------------------------------------------------- Masco Corp. 8,208 243,367 ---------------------------------------------------------------- 370,807 ---------------------------------------------------------------- CASINOS & GAMING-0.21% Harrah's Entertainment, Inc. 3,559 261,942 ---------------------------------------------------------------- International Game Technology 6,526 233,500 ---------------------------------------------------------------- 495,442 ---------------------------------------------------------------- COMMERCIAL PRINTING-0.06% Donnelley (R.R.) & Sons Co. 4,208 137,181 ---------------------------------------------------------------- COMMUNICATIONS EQUIPMENT-2.78% ADC Telecommunications, Inc./(a)/ 2,256 57,212 ---------------------------------------------------------------- Andrew Corp./(a)/ 3,146 40,804 ---------------------------------------------------------------- Avaya Inc./(a)/ 8,110 85,560 ---------------------------------------------------------------- Ciena Corp./(a)/ 11,195 44,780 ---------------------------------------------------------------- Cisco Systems, Inc./(a)/ 118,984 2,209,533 ---------------------------------------------------------------- Comverse Technology, Inc./(a)/ 3,912 107,150 ---------------------------------------------------------------- Corning Inc./(a)/ 29,519 718,788 ---------------------------------------------------------------- JDS Uniphase Corp./(a)/ 32,007 100,182 ---------------------------------------------------------------- Lucent Technologies Inc./(a)/ 86,099 227,301 ---------------------------------------------------------------- Motorola, Inc. 48,247 1,095,689 ---------------------------------------------------------------- QUALCOMM Inc. 31,848 1,527,430 ---------------------------------------------------------------- Scientific-Atlanta, Inc. 2,974 127,168 ---------------------------------------------------------------- Tellabs, Inc./(a)/ 8,686 111,094 ---------------------------------------------------------------- 6,452,691 ---------------------------------------------------------------- COMPUTER & ELECTRONICS RETAIL-0.23% Best Buy Co., Inc. 7,916 401,025 ---------------------------------------------------------------- Circuit City Stores, Inc. 3,033 76,462 ---------------------------------------------------------------- RadioShack Corp. 2,607 57,875 ---------------------------------------------------------------- 535,362 ---------------------------------------------------------------- COMPUTER HARDWARE-3.11% Apple Computer, Inc./(a)/ 16,324 1,232,625 ---------------------------------------------------------------- Dell Inc./(a)/ 45,589 1,336,214 ---------------------------------------------------------------- Gateway, Inc./(a)/ 5,131 13,956 ----------------------------------------------------------------
SHARES VALUE -------------------------------------------------------------------- COMPUTER HARDWARE-(CONTINUED) Hewlett-Packard Co. 55,496 $ 1,730,365 -------------------------------------------------------------------- International Business Machines Corp. 30,595 2,487,373 -------------------------------------------------------------------- NCR Corp./(a)/ 3,556 132,105 -------------------------------------------------------------------- Sun Microsystems, Inc./(a)/ 66,135 297,607 -------------------------------------------------------------------- 7,230,245 -------------------------------------------------------------------- COMPUTER STORAGE & PERIPHERALS-0.44% EMC Corp./(a)/ 46,309 620,541 -------------------------------------------------------------------- Lexmark International, Inc.-Class A/(a)/ 2,247 109,137 -------------------------------------------------------------------- Network Appliance, Inc./(a)/ 7,207 224,858 -------------------------------------------------------------------- QLogic Corp./(a)/ 1,558 61,806 -------------------------------------------------------------------- 1,016,342 -------------------------------------------------------------------- CONSTRUCTION & ENGINEERING-0.06% Fluor Corp. 1,681 147,844 -------------------------------------------------------------------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.68% Caterpillar Inc. 13,175 894,582 -------------------------------------------------------------------- Cummins Inc. 906 88,154 -------------------------------------------------------------------- Deere & Co. 4,671 335,191 -------------------------------------------------------------------- Navistar International Corp./(a)/ 1,194 32,477 -------------------------------------------------------------------- PACCAR Inc. 3,278 228,149 -------------------------------------------------------------------- 1,578,553 -------------------------------------------------------------------- CONSTRUCTION MATERIALS-0.06% Vulcan Materials Co. 1,972 141,747 -------------------------------------------------------------------- CONSUMER ELECTRONICS-0.06% Harman International Industries, Inc. 1,276 140,360 -------------------------------------------------------------------- CONSUMER FINANCE-0.95% American Express Co. 24,051 1,261,475 -------------------------------------------------------------------- Capital One Financial Corp. 5,801 483,223 -------------------------------------------------------------------- SLM Corp. 8,082 452,269 -------------------------------------------------------------------- 2,196,967 -------------------------------------------------------------------- DATA PROCESSING & OUTSOURCED SERVICES-0.97% Affiliated Computer Services, Inc.-Class A/(a)/ 2,407 150,678 -------------------------------------------------------------------- Automatic Data Processing, Inc. 11,168 490,722 -------------------------------------------------------------------- Computer Sciences Corp./(a)/ 3,583 181,658 -------------------------------------------------------------------- Convergys Corp./(a)/ 2,711 46,629 -------------------------------------------------------------------- Electronic Data Systems Corp. 10,102 254,469 -------------------------------------------------------------------- First Data Corp. 14,799 667,435 -------------------------------------------------------------------- Fiserv, Inc./(a)/ 3,573 157,141 -------------------------------------------------------------------- Paychex, Inc. 6,459 234,785 -------------------------------------------------------------------- Sabre Holdings Corp.-Class A 2,541 62,254 -------------------------------------------------------------------- 2,245,771 -------------------------------------------------------------------- DEPARTMENT STORES-0.58% Dillard's, Inc.-Class A 1,193 30,899 -------------------------------------------------------------------- Federated Department Stores, Inc. 5,272 351,273 --------------------------------------------------------------------
F-2 AIM S&P 500 INDEX FUND
SHARES VALUE ----------------------------------------------------------------- DEPARTMENT STORES-(CONTINUED) J.C. Penney Co., Inc. 4,498 $ 250,988 ----------------------------------------------------------------- Kohl's Corp./(a)/ 6,677 296,392 ----------------------------------------------------------------- Nordstrom, Inc. 4,234 176,642 ----------------------------------------------------------------- Sears Holdings Corp./(a)/ 1,933 234,744 ----------------------------------------------------------------- 1,340,938 ----------------------------------------------------------------- DISTILLERS & VINTNERS-0.09% Brown-Forman Corp.-Class B 1,608 114,039 ----------------------------------------------------------------- Constellation Brands, Inc.-Class A/(a)/ 3,810 101,689 ----------------------------------------------------------------- 215,728 ----------------------------------------------------------------- DISTRIBUTORS-0.06% Genuine Parts Co. 3,360 142,901 ----------------------------------------------------------------- DIVERSIFIED BANKS-3.82% Bank of America Corp. 89,971 3,979,417 ----------------------------------------------------------------- Comerica Inc. 3,200 177,504 ----------------------------------------------------------------- U.S. Bancorp 35,183 1,052,324 ----------------------------------------------------------------- Wachovia Corp. 30,091 1,649,890 ----------------------------------------------------------------- Wells Fargo & Co. 32,391 2,019,903 ----------------------------------------------------------------- 8,879,038 ----------------------------------------------------------------- DIVERSIFIED CHEMICALS-0.85% Ashland Inc. 1,390 91,629 ----------------------------------------------------------------- Dow Chemical Co. (The) 18,694 790,756 ----------------------------------------------------------------- E.I. du Pont de Nemours and Co. 17,808 697,183 ----------------------------------------------------------------- Eastman Chemical Co. 1,578 76,075 ----------------------------------------------------------------- Engelhard Corp. 2,322 93,577 ----------------------------------------------------------------- Hercules Inc./(a)/ 2,136 25,013 ----------------------------------------------------------------- PPG Industries, Inc. 3,235 192,483 ----------------------------------------------------------------- 1,966,716 ----------------------------------------------------------------- DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES-0.23% Cendant Corp. 19,842 332,155 ----------------------------------------------------------------- Cintas Corp. 2,667 113,614 ----------------------------------------------------------------- Equifax Inc. 2,515 96,375 ----------------------------------------------------------------- 542,144 ----------------------------------------------------------------- DIVERSIFIED METALS & MINING-0.23% Freeport-McMoRan Copper & Gold, Inc.-Class B 3,564 228,987 ----------------------------------------------------------------- Phelps Dodge Corp. 1,966 315,543 ----------------------------------------------------------------- 544,530 ----------------------------------------------------------------- DRUG RETAIL-0.55% CVS Corp. 15,770 437,775 ----------------------------------------------------------------- Walgreen Co. 19,604 848,461 ----------------------------------------------------------------- 1,286,236 ----------------------------------------------------------------- EDUCATION SERVICES-0.07% Apollo Group, Inc.-Class A/(a)/ 2,818 156,878 -----------------------------------------------------------------
SHARES VALUE --------------------------------------------------------------- ELECTRIC UTILITIES-1.51% Allegheny Energy, Inc./(a)/ 3,154 $ 109,728 --------------------------------------------------------------- American Electric Power Co., Inc. 7,625 284,565 --------------------------------------------------------------- Cinergy Corp. 3,862 167,804 --------------------------------------------------------------- Edison International 6,310 276,504 --------------------------------------------------------------- Entergy Corp. 4,018 279,291 --------------------------------------------------------------- Exelon Corp. 12,924 742,096 --------------------------------------------------------------- FirstEnergy Corp. 6,388 320,039 --------------------------------------------------------------- FPL Group, Inc. 7,647 319,568 --------------------------------------------------------------- Pinnacle West Capital Corp. 1,917 81,683 --------------------------------------------------------------- PPL Corp. 7,362 221,817 --------------------------------------------------------------- Progress Energy, Inc. 4,874 212,604 --------------------------------------------------------------- Southern Co. (The) 14,362 499,798 --------------------------------------------------------------- 3,515,497 --------------------------------------------------------------- ELECTRICAL COMPONENTS & EQUIPMENT-0.46% American Power Conversion Corp. 3,328 78,874 --------------------------------------------------------------- Cooper Industries, Ltd.-Class A 1,774 144,847 --------------------------------------------------------------- Emerson Electric Co. 7,956 616,192 --------------------------------------------------------------- Rockwell Automation, Inc. 3,469 229,197 --------------------------------------------------------------- 1,069,110 --------------------------------------------------------------- ELECTRONIC EQUIPMENT MANUFACTURERS-0.16% Agilent Technologies, Inc./(a)/ 7,962 269,991 --------------------------------------------------------------- Symbol Technologies, Inc. 4,860 60,021 --------------------------------------------------------------- Tektronix, Inc. 1,602 47,259 --------------------------------------------------------------- 377,271 --------------------------------------------------------------- ELECTRONIC MANUFACTURING SERVICES-0.14% Jabil Circuit, Inc./(a)/ 3,369 136,108 --------------------------------------------------------------- Molex Inc. 2,780 84,095 --------------------------------------------------------------- Sanmina-SCI Corp./(a)/ 10,181 42,862 --------------------------------------------------------------- Solectron Corp./(a)/ 17,697 67,603 --------------------------------------------------------------- 330,668 --------------------------------------------------------------- ENVIRONMENTAL & FACILITIES SERVICES-0.16% Allied Waste Industries, Inc./(a)/ 4,227 38,423 --------------------------------------------------------------- Waste Management, Inc. 10,689 337,559 --------------------------------------------------------------- 375,982 --------------------------------------------------------------- FERTILIZERS & AGRICULTURAL CHEMICALS-0.19% Monsanto Co. 5,200 439,972 --------------------------------------------------------------- FOOD DISTRIBUTORS-0.16% Sysco Corp. 12,015 368,620 --------------------------------------------------------------- FOOD RETAIL-0.40% Albertson's, Inc. 7,142 179,621 --------------------------------------------------------------- Kroger Co. (The)/(a)/ 14,040 258,336 ---------------------------------------------------------------
F-3 AIM S&P 500 INDEX FUND
SHARES VALUE -------------------------------------------------------------- FOOD RETAIL-(CONTINUED) Safeway Inc. 8,703 $ 203,998 -------------------------------------------------------------- SUPERVALU Inc. 2,637 84,199 -------------------------------------------------------------- Whole Foods Market, Inc. 2,666 196,937 -------------------------------------------------------------- 923,091 -------------------------------------------------------------- FOOTWEAR-0.13% NIKE, Inc.-Class B 3,681 297,977 -------------------------------------------------------------- FOREST PRODUCTS-0.17% Louisiana-Pacific Corp. 2,041 60,107 -------------------------------------------------------------- Weyerhaeuser Co. 4,711 328,639 -------------------------------------------------------------- 388,746 -------------------------------------------------------------- GAS UTILITIES-0.03% Nicor Inc. 855 34,970 -------------------------------------------------------------- Peoples Energy Corp. 738 27,468 -------------------------------------------------------------- 62,438 -------------------------------------------------------------- GENERAL MERCHANDISE STORES-0.49% Big Lots, Inc./(a)/ 2,206 29,494 -------------------------------------------------------------- Dollar General Corp. 6,132 103,631 -------------------------------------------------------------- Family Dollar Stores, Inc. 3,007 72,018 -------------------------------------------------------------- Target Corp. 17,029 932,338 -------------------------------------------------------------- 1,137,481 -------------------------------------------------------------- GOLD-0.23% Newmont Mining Corp. 8,654 534,817 -------------------------------------------------------------- HEALTH CARE DISTRIBUTORS-0.51% AmerisourceBergen Corp. 4,038 176,218 -------------------------------------------------------------- Cardinal Health, Inc. 8,294 597,500 -------------------------------------------------------------- McKesson Corp. 5,959 315,827 -------------------------------------------------------------- Patterson Cos. Inc./(a)/ 2,678 92,471 -------------------------------------------------------------- 1,182,016 -------------------------------------------------------------- HEALTH CARE EQUIPMENT-1.99% Bard (C.R.), Inc. 2,031 128,806 -------------------------------------------------------------- Baxter International Inc. 12,079 445,111 -------------------------------------------------------------- Becton, Dickinson and Co. 4,881 316,289 -------------------------------------------------------------- Biomet, Inc. 4,824 182,395 -------------------------------------------------------------- Boston Scientific Corp./(a)/ 11,428 249,930 -------------------------------------------------------------- Fisher Scientific International Inc./(a)/ 2,375 158,816 -------------------------------------------------------------- Guidant Corp. 6,426 472,954 -------------------------------------------------------------- Hospira, Inc./(a)/ 3,115 139,396 -------------------------------------------------------------- Medtronic, Inc. 23,430 1,323,092 -------------------------------------------------------------- PerkinElmer, Inc. 2,533 57,600 -------------------------------------------------------------- St. Jude Medical, Inc./(a)/ 7,100 348,823 -------------------------------------------------------------- Stryker Corp. 5,647 281,785 -------------------------------------------------------------- Thermo Electron Corp./(a)/ 3,141 105,663 -------------------------------------------------------------- Waters Corp./(a)/ 2,140 89,773 -------------------------------------------------------------- Zimmer Holdings, Inc./(a)/ 4,798 330,822 -------------------------------------------------------------- 4,631,255 --------------------------------------------------------------
SHARES VALUE ------------------------------------------------------------------- HEALTH CARE FACILITIES-0.27% HCA Inc. 8,210 $ 402,947 ------------------------------------------------------------------- Health Management Associates, Inc.-Class A 4,787 100,623 ------------------------------------------------------------------- Manor Care, Inc. 1,532 59,901 ------------------------------------------------------------------- Tenet Healthcare Corp./(a)/ 9,092 66,099 ------------------------------------------------------------------- 629,570 ------------------------------------------------------------------- HEALTH CARE SERVICES-0.61% Caremark Rx, Inc./(a)/ 8,712 429,502 ------------------------------------------------------------------- Express Scripts, Inc./(a)/ 2,820 257,438 ------------------------------------------------------------------- IMS Health Inc. 4,487 110,380 ------------------------------------------------------------------- Laboratory Corp. of America Holdings/(a)/ 2,574 150,965 ------------------------------------------------------------------- Medco Health Solutions, Inc./(a)/ 5,956 322,220 ------------------------------------------------------------------- Quest Diagnostics Inc. 3,209 158,621 ------------------------------------------------------------------- 1,429,126 ------------------------------------------------------------------- HEALTH CARE SUPPLIES-0.06% Bausch & Lomb Inc. 1,041 70,320 ------------------------------------------------------------------- Millipore Corp./(a)/ 1,008 69,330 ------------------------------------------------------------------- 139,650 ------------------------------------------------------------------- HOME ENTERTAINMENT SOFTWARE-0.14% Electronic Arts Inc./(a)/ 5,821 317,710 ------------------------------------------------------------------- HOME FURNISHINGS-0.04% Leggett & Platt, Inc. 3,563 87,721 ------------------------------------------------------------------- HOME IMPROVEMENT RETAIL-1.18% Home Depot, Inc. (The) 41,148 1,668,551 ------------------------------------------------------------------- Lowe's Cos., Inc. 15,145 962,465 ------------------------------------------------------------------- Sherwin-Williams Co. (The) 2,172 114,899 ------------------------------------------------------------------- 2,745,915 ------------------------------------------------------------------- HOMEBUILDING-0.35% Centex Corp. 2,474 176,619 ------------------------------------------------------------------- D.R. Horton, Inc. 5,272 196,751 ------------------------------------------------------------------- KB HOME 1,516 115,519 ------------------------------------------------------------------- Lennar Corp.-Class A 2,660 166,410 ------------------------------------------------------------------- Pulte Homes, Inc. 4,155 165,785 ------------------------------------------------------------------- 821,084 ------------------------------------------------------------------- HOMEFURNISHING RETAIL-0.09% Bed Bath & Beyond Inc./(a)/ 5,749 215,070 ------------------------------------------------------------------- HOTELS, RESORTS & CRUISE LINES-0.46% Carnival Corp./(b)/ 8,391 434,318 ------------------------------------------------------------------- Hilton Hotels Corp. 6,353 158,380 ------------------------------------------------------------------- Marriott International, Inc.-Class A 3,188 212,448 ------------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc./(c)/ 4,246 258,199 ------------------------------------------------------------------- 1,063,345 ------------------------------------------------------------------- HOUSEHOLD APPLIANCES-0.16% Black & Decker Corp. (The) 1,518 131,003 ------------------------------------------------------------------- Maytag Corp. 1,522 26,209 ------------------------------------------------------------------- Snap-on Inc. 1,122 45,026 -------------------------------------------------------------------
F-4 AIM S&P 500 INDEX FUND
SHARES VALUE ---------------------------------------------------------- HOUSEHOLD APPLIANCES-(CONTINUED) Stanley Works (The) 1,408 $ 69,048 ---------------------------------------------------------- Whirlpool Corp. 1,306 105,368 ---------------------------------------------------------- 376,654 ---------------------------------------------------------- HOUSEHOLD PRODUCTS-2.19% Clorox Co. (The) 2,918 174,642 ---------------------------------------------------------- Colgate-Palmolive Co. 10,034 550,766 ---------------------------------------------------------- Kimberly-Clark Corp. 9,049 516,879 ---------------------------------------------------------- Procter & Gamble Co. (The) 64,925 3,845,508 ---------------------------------------------------------- 5,087,795 ---------------------------------------------------------- HOUSEWARES & SPECIALTIES-0.15% Fortune Brands, Inc. 2,829 212,062 ---------------------------------------------------------- Newell Rubbermaid Inc. 5,336 126,143 ---------------------------------------------------------- 338,205 ---------------------------------------------------------- HUMAN RESOURCE & EMPLOYMENT SERVICES-0.10% Monster Worldwide Inc./(a)/ 2,384 101,701 ---------------------------------------------------------- Robert Half International Inc. 3,298 120,476 ---------------------------------------------------------- 222,177 ---------------------------------------------------------- HYPERMARKETS & SUPER CENTERS-1.16% Costco Wholesale Corp. 9,144 456,194 ---------------------------------------------------------- Wal-Mart Stores, Inc. 48,389 2,231,217 ---------------------------------------------------------- 2,687,411 ---------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS-0.62% AES Corp. (The)/(a)/ 12,652 215,590 ---------------------------------------------------------- Constellation Energy Group 3,456 201,381 ---------------------------------------------------------- Duke Energy Corp. 17,967 509,364 ---------------------------------------------------------- Dynegy Inc.-Class A/(a)/ 5,835 32,093 ---------------------------------------------------------- TXU Corp. 9,352 473,585 ---------------------------------------------------------- 1,432,013 ---------------------------------------------------------- INDUSTRIAL CONGLOMERATES-3.88% 3M Co. 14,719 1,070,807 ---------------------------------------------------------- General Electric Co. 204,674 6,703,074 ---------------------------------------------------------- Textron Inc. 2,563 216,471 ---------------------------------------------------------- Tyco International Ltd. 38,993 1,015,768 ---------------------------------------------------------- 9,006,120 ---------------------------------------------------------- INDUSTRIAL GASES-0.26% Air Products and Chemicals, Inc. 4,297 265,082 ---------------------------------------------------------- Praxair, Inc. 6,242 328,829 ---------------------------------------------------------- 593,911 ---------------------------------------------------------- INDUSTRIAL MACHINERY-0.71% Danaher Corp. 4,594 260,204 ---------------------------------------------------------- Dover Corp. 3,925 180,275 ---------------------------------------------------------- Eaton Corp. 2,866 189,729 ---------------------------------------------------------- Illinois Tool Works Inc. 3,966 334,294 ---------------------------------------------------------- Ingersoll-Rand Co. Ltd.-Class A 6,407 251,603 ----------------------------------------------------------
SHARES VALUE ------------------------------------------------------------------ INDUSTRIAL MACHINERY-(CONTINUED) ITT Industries, Inc. 1,788 $ 183,270 ------------------------------------------------------------------ Pall Corp. 2,406 69,293 ------------------------------------------------------------------ Parker Hannifin Corp. 2,319 175,711 ------------------------------------------------------------------ 1,644,379 ------------------------------------------------------------------ INSURANCE BROKERS-0.23% Aon Corp. 6,198 212,096 ------------------------------------------------------------------ Marsh & McLennan Cos., Inc. 10,551 320,645 ------------------------------------------------------------------ 532,741 ------------------------------------------------------------------ INTEGRATED OIL & GAS-5.88% Amerada Hess Corp. 1,549 239,785 ------------------------------------------------------------------ Chevron Corp. 43,486 2,582,199 ------------------------------------------------------------------ ConocoPhillips 26,878 1,739,007 ------------------------------------------------------------------ Exxon Mobil Corp. 120,532 7,563,383 ------------------------------------------------------------------ Marathon Oil Corp. 7,098 545,623 ------------------------------------------------------------------ Murphy Oil Corp. 3,198 182,286 ------------------------------------------------------------------ Occidental Petroleum Corp. 8,333 814,217 ------------------------------------------------------------------ 13,666,500 ------------------------------------------------------------------ INTEGRATED TELECOMMUNICATION SERVICES-2.20% AT&T Inc. 75,668 1,963,585 ------------------------------------------------------------------ BellSouth Corp. 35,421 1,019,062 ------------------------------------------------------------------ CenturyTel, Inc. 2,537 84,482 ------------------------------------------------------------------ Citizens Communications Co. 6,467 79,350 ------------------------------------------------------------------ Qwest Communications International Inc./(a)/ 29,903 180,016 ------------------------------------------------------------------ Verizon Communications Inc. 56,607 1,792,178 ------------------------------------------------------------------ 5,118,673 ------------------------------------------------------------------ INTERNET RETAIL-0.53% Amazon.com, Inc./(a)/ 5,940 266,231 ------------------------------------------------------------------ eBay Inc./(a)/ 22,138 954,148 ------------------------------------------------------------------ 1,220,379 ------------------------------------------------------------------ INTERNET SOFTWARE & SERVICES-0.41% VeriSign, Inc./(a)/ 4,964 117,895 ------------------------------------------------------------------ Yahoo! Inc./(a)/ 24,458 839,888 ------------------------------------------------------------------ 957,783 ------------------------------------------------------------------ INVESTMENT BANKING & BROKERAGE-2.30% Bear Stearns Cos. Inc. (The) 2,193 277,327 ------------------------------------------------------------------ E*TRADE Financial Corp./(a)/ 7,923 188,488 ------------------------------------------------------------------ Goldman Sachs Group, Inc. (The) 8,732 1,233,395 ------------------------------------------------------------------ Lehman Brothers Holdings Inc. 5,188 728,655 ------------------------------------------------------------------ Merrill Lynch & Co., Inc. 17,800 1,336,246 ------------------------------------------------------------------ Morgan Stanley 20,879 1,283,015 ------------------------------------------------------------------ Schwab (Charles) Corp. (The) 19,981 295,519 ------------------------------------------------------------------ 5,342,645 ------------------------------------------------------------------ IT CONSULTING & OTHER SERVICES-0.02% Unisys Corp./(a)/ 6,609 44,214 ------------------------------------------------------------------
F-5 AIM S&P 500 INDEX FUND
SHARES VALUE ------------------------------------------------------------------ LEISURE PRODUCTS-0.12% Brunswick Corp. 1,860 $ 69,917 ------------------------------------------------------------------ Hasbro, Inc. 3,454 73,225 ------------------------------------------------------------------ Mattel, Inc. 7,821 129,047 ------------------------------------------------------------------ 272,189 ------------------------------------------------------------------ LIFE & HEALTH INSURANCE-1.18% AFLAC Inc. 9,692 455,039 ------------------------------------------------------------------ Jefferson-Pilot Corp. 2,595 151,366 ------------------------------------------------------------------ Lincoln National Corp. 3,355 182,948 ------------------------------------------------------------------ MetLife, Inc. 14,668 735,747 ------------------------------------------------------------------ Principal Financial Group, Inc. 5,426 255,890 ------------------------------------------------------------------ Prudential Financial, Inc. 9,782 736,976 ------------------------------------------------------------------ Torchmark Corp. 2,002 112,312 ------------------------------------------------------------------ UnumProvident Corp. 5,772 117,345 ------------------------------------------------------------------ 2,747,623 ------------------------------------------------------------------ MANAGED HEALTH CARE-1.61% Aetna Inc. 5,539 536,175 ------------------------------------------------------------------ CIGNA Corp. 2,436 296,218 ------------------------------------------------------------------ Coventry Health Care, Inc./(a)/ 3,146 187,407 ------------------------------------------------------------------ Humana Inc./(a)/ 3,152 175,787 ------------------------------------------------------------------ UnitedHealth Group Inc. 26,417 1,569,698 ------------------------------------------------------------------ WellPoint, Inc./(a)/ 12,783 981,734 ------------------------------------------------------------------ 3,747,019 ------------------------------------------------------------------ METAL & GLASS CONTAINERS-0.06% Ball Corp. 2,015 81,608 ------------------------------------------------------------------ Pactiv Corp./(a)/ 2,775 61,716 ------------------------------------------------------------------ 143,324 ------------------------------------------------------------------ MOTORCYCLE MANUFACTURERS-0.12% Harley-Davidson, Inc. 5,318 284,673 ------------------------------------------------------------------ MOVIES & ENTERTAINMENT-1.67% News Corp.-Class A 47,134 742,832 ------------------------------------------------------------------ Time Warner Inc. 90,317 1,583,257 ------------------------------------------------------------------ Viacom Inc.-Class B/(a)/ 14,967 620,831 ------------------------------------------------------------------ Walt Disney Co. (The) 37,261 943,076 ------------------------------------------------------------------ 3,889,996 ------------------------------------------------------------------ MULTI-LINE INSURANCE-1.84% American International Group, Inc. 50,277 3,291,132 ------------------------------------------------------------------ Genworth Financial Inc.-Class A 7,294 238,951 ------------------------------------------------------------------ Hartford Financial Services Group, Inc. (The) 5,817 478,332 ------------------------------------------------------------------ Loews Corp. 2,626 259,160 ------------------------------------------------------------------ 4,267,575 ------------------------------------------------------------------ MULTI-UTILITIES-1.07% Ameren Corp. 3,956 200,807 ------------------------------------------------------------------ CenterPoint Energy, Inc. 6,006 76,757 ------------------------------------------------------------------ CMS Energy Corp./(a)/ 4,262 61,671 ------------------------------------------------------------------
SHARES VALUE ------------------------------------------------------------ MULTI-UTILITIES-(CONTINUED) Consolidated Edison, Inc. 4,744 $ 223,015 ------------------------------------------------------------ Dominion Resources, Inc. 6,726 508,015 ------------------------------------------------------------ DTE Energy Co. 3,444 145,337 ------------------------------------------------------------ KeySpan Corp. 3,377 121,302 ------------------------------------------------------------ NiSource Inc. 5,280 108,398 ------------------------------------------------------------ PG&E Corp. 6,645 247,925 ------------------------------------------------------------ Public Service Enterprise Group Inc. 4,855 338,005 ------------------------------------------------------------ Sempra Energy 4,979 239,241 ------------------------------------------------------------ TECO Energy, Inc. 4,030 68,832 ------------------------------------------------------------ Xcel Energy, Inc. 7,803 151,534 ------------------------------------------------------------ 2,490,839 ------------------------------------------------------------ OFFICE ELECTRONICS-0.11% Xerox Corp./(a)/ 18,603 266,209 ------------------------------------------------------------ OFFICE SERVICES & SUPPLIES-0.14% Avery Dennison Corp. 2,139 127,784 ------------------------------------------------------------ Pitney Bowes Inc. 4,418 188,825 ------------------------------------------------------------ 316,609 ------------------------------------------------------------ OIL & GAS DRILLING-0.46% Nabors Industries Ltd./(a)/ 3,060 248,625 ------------------------------------------------------------ Noble Corp. 2,651 213,246 ------------------------------------------------------------ Rowan Cos., Inc. 2,112 94,681 ------------------------------------------------------------ Transocean Inc./(a)/ 6,393 518,792 ------------------------------------------------------------ 1,075,344 ------------------------------------------------------------ OIL & GAS EQUIPMENT & SERVICES-1.54% Baker Hughes Inc. 6,620 512,653 ------------------------------------------------------------ BJ Services Co. 6,243 252,779 ------------------------------------------------------------ Halliburton Co. 9,933 790,170 ------------------------------------------------------------ National-Oilwell Varco Inc./(a)/ 3,375 256,736 ------------------------------------------------------------ Schlumberger Ltd. 11,410 1,454,205 ------------------------------------------------------------ Weatherford International Ltd./(a)/ 6,733 301,504 ------------------------------------------------------------ 3,568,047 ------------------------------------------------------------ OIL & GAS EXPLORATION & PRODUCTION-1.39% Anadarko Petroleum Corp. 4,594 495,325 ------------------------------------------------------------ Apache Corp. 6,377 481,655 ------------------------------------------------------------ Burlington Resources Inc. 7,322 668,206 ------------------------------------------------------------ Devon Energy Corp. 8,606 587,015 ------------------------------------------------------------ EOG Resources, Inc. 4,679 395,563 ------------------------------------------------------------ Kerr-McGee Corp. 2,246 247,936 ------------------------------------------------------------ XTO Energy, Inc. 7,034 345,229 ------------------------------------------------------------ 3,220,929 ------------------------------------------------------------ OIL & GAS REFINING & MARKETING-0.43% Sunoco, Inc. 2,636 250,947 ------------------------------------------------------------ Valero Energy Corp. 11,944 745,664 ------------------------------------------------------------ 996,611 ------------------------------------------------------------
F-6 AIM S&P 500 INDEX FUND
SHARES VALUE --------------------------------------------------------- OIL & GAS STORAGE & TRANSPORTATION-0.27% El Paso Corp. 12,771 $ 171,898 --------------------------------------------------------- Kinder Morgan, Inc. 2,038 196,158 --------------------------------------------------------- Williams Cos., Inc. (The) 11,099 264,600 --------------------------------------------------------- 632,656 --------------------------------------------------------- OTHER DIVERSIFIED FINANCIAL SERVICES-3.12% Citigroup Inc. 97,995 4,564,607 --------------------------------------------------------- JPMorgan Chase & Co. 67,778 2,694,176 --------------------------------------------------------- 7,258,783 --------------------------------------------------------- PACKAGED FOODS & MEATS-0.82% Campbell Soup Co. 3,604 107,868 --------------------------------------------------------- ConAgra Foods, Inc. 10,051 208,357 --------------------------------------------------------- General Mills, Inc. 6,881 334,485 --------------------------------------------------------- Heinz (H.J.) Co. 6,482 219,999 --------------------------------------------------------- Hershey Co. (The) 3,507 179,558 --------------------------------------------------------- Kellogg Co. 4,974 213,385 --------------------------------------------------------- McCormick & Co., Inc. 2,592 78,304 --------------------------------------------------------- Sara Lee Corp. 14,712 268,935 --------------------------------------------------------- Tyson Foods, Inc.-Class A 4,874 69,844 --------------------------------------------------------- Wrigley Jr. (Wm.) Co. 3,475 222,261 --------------------------------------------------------- 1,902,996 --------------------------------------------------------- PAPER PACKAGING-0.11% Bemis Co., Inc. 2,031 61,986 --------------------------------------------------------- Sealed Air Corp./(a)/ 1,576 87,106 --------------------------------------------------------- Temple-Inland Inc. 2,173 101,914 --------------------------------------------------------- 251,006 --------------------------------------------------------- PAPER PRODUCTS-0.17% International Paper Co. 9,501 310,018 --------------------------------------------------------- MeadWestvaco Corp. 3,514 93,789 --------------------------------------------------------- 403,807 --------------------------------------------------------- PERSONAL PRODUCTS-0.17% Alberto-Culver Co. 1,462 64,767 --------------------------------------------------------- Avon Products, Inc. 8,879 251,453 --------------------------------------------------------- Estee Lauder Cos. Inc. (The)-Class A 2,340 85,340 --------------------------------------------------------- 401,560 --------------------------------------------------------- PHARMACEUTICALS-6.21% Abbott Laboratories 30,047 1,296,528 --------------------------------------------------------- Allergan, Inc. 2,549 296,704 --------------------------------------------------------- Bristol-Myers Squibb Co. 37,898 863,695 --------------------------------------------------------- Forest Laboratories, Inc./(a)/ 6,542 302,764 --------------------------------------------------------- Johnson & Johnson 57,625 3,315,743 --------------------------------------------------------- King Pharmaceuticals, Inc./(a)/ 4,683 87,806 --------------------------------------------------------- Lilly (Eli) and Co. 22,016 1,246,546 --------------------------------------------------------- Merck & Co. Inc. 42,355 1,461,248 --------------------------------------------------------- Mylan Laboratories Inc. 4,233 83,390 ---------------------------------------------------------
SHARES VALUE ------------------------------------------------------------------- PHARMACEUTICALS-(CONTINUED) Pfizer Inc. 142,788 $ 3,666,796 ------------------------------------------------------------------- Schering-Plough Corp. 28,627 548,207 ------------------------------------------------------------------- Watson Pharmaceuticals, Inc./(a)/ 1,952 64,592 ------------------------------------------------------------------- Wyeth 26,000 1,202,500 ------------------------------------------------------------------- 14,436,519 ------------------------------------------------------------------- PHOTOGRAPHIC PRODUCTS-0.06% Eastman Kodak Co. 5,562 139,606 ------------------------------------------------------------------- PROPERTY & CASUALTY INSURANCE-1.38% ACE Ltd. 6,243 341,804 ------------------------------------------------------------------- Allstate Corp. (The) 12,564 653,956 ------------------------------------------------------------------- Ambac Financial Group, Inc. 2,037 156,462 ------------------------------------------------------------------- Chubb Corp. (The) 3,871 365,229 ------------------------------------------------------------------- Cincinnati Financial Corp. 3,383 154,062 ------------------------------------------------------------------- MBIA Inc. 2,596 159,810 ------------------------------------------------------------------- Progressive Corp. (The) 3,820 401,253 ------------------------------------------------------------------- Safeco Corp. 2,392 124,982 ------------------------------------------------------------------- St. Paul Travelers Cos., Inc. (The) 13,412 608,637 ------------------------------------------------------------------- XL Capital Ltd.-Class A 3,377 228,488 ------------------------------------------------------------------- 3,194,683 ------------------------------------------------------------------- PUBLISHING-0.45% Dow Jones & Co., Inc. 1,142 43,407 ------------------------------------------------------------------- Gannett Co., Inc. 4,646 287,123 ------------------------------------------------------------------- Knight-Ridder, Inc. 1,344 83,664 ------------------------------------------------------------------- McGraw-Hill Cos., Inc. (The) 7,261 370,601 ------------------------------------------------------------------- Meredith Corp. 811 44,410 ------------------------------------------------------------------- New York Times Co. (The)-Class A 2,810 79,523 ------------------------------------------------------------------- Tribune Co. 5,071 147,110 ------------------------------------------------------------------- 1,055,838 ------------------------------------------------------------------- RAILROADS-0.71% Burlington Northern Santa Fe Corp. 7,232 579,428 ------------------------------------------------------------------- CSX Corp. 4,207 225,201 ------------------------------------------------------------------- Norfolk Southern Corp. 7,871 392,291 ------------------------------------------------------------------- Union Pacific Corp. 5,131 453,888 ------------------------------------------------------------------- 1,650,808 ------------------------------------------------------------------- REAL ESTATE-0.75% Apartment Investment & Management Co.-Class A 1,853 78,790 ------------------------------------------------------------------- Archstone-Smith Trust 4,105 192,360 ------------------------------------------------------------------- Equity Office Properties Trust 7,866 250,296 ------------------------------------------------------------------- Equity Residential 5,581 236,690 ------------------------------------------------------------------- Plum Creek Timber Co., Inc. 3,564 131,654 ------------------------------------------------------------------- ProLogis 4,716 241,554 ------------------------------------------------------------------- Public Storage, Inc. 1,601 116,185 ------------------------------------------------------------------- Simon Property Group, Inc. 3,611 299,135 ------------------------------------------------------------------- Vornado Realty Trust 2,286 201,945 ------------------------------------------------------------------- 1,748,609 -------------------------------------------------------------------
F-7 AIM S&P 500 INDEX FUND
SHARES VALUE ---------------------------------------------------------------- REGIONAL BANKS-1.73% AmSouth Bancorp. 6,751 $ 186,395 ---------------------------------------------------------------- BB&T Corp. 10,504 410,076 ---------------------------------------------------------------- Compass Bancshares, Inc. 2,412 117,513 ---------------------------------------------------------------- Fifth Third Bancorp 10,747 403,765 ---------------------------------------------------------------- First Horizon National Corp. 2,440 92,403 ---------------------------------------------------------------- Huntington Bancshares Inc. 4,419 102,521 ---------------------------------------------------------------- KeyCorp 7,898 279,510 ---------------------------------------------------------------- M&T Bank Corp. 1,545 167,324 ---------------------------------------------------------------- Marshall & Ilsley Corp. 4,051 169,899 ---------------------------------------------------------------- National City Corp. 10,675 364,872 ---------------------------------------------------------------- North Fork Bancorp., Inc. 9,214 236,984 ---------------------------------------------------------------- PNC Financial Services Group, Inc. 5,660 367,108 ---------------------------------------------------------------- Regions Financial Corp. 8,870 294,307 ---------------------------------------------------------------- SunTrust Banks, Inc. 6,999 500,079 ---------------------------------------------------------------- Synovus Financial Corp. 6,048 167,348 ---------------------------------------------------------------- Zions Bancorp. 2,022 159,880 ---------------------------------------------------------------- 4,019,984 ---------------------------------------------------------------- RESTAURANTS-0.79% Darden Restaurants, Inc. 2,536 103,114 ---------------------------------------------------------------- McDonald's Corp. 24,378 853,474 ---------------------------------------------------------------- Starbucks Corp./(a)/ 14,885 471,855 ---------------------------------------------------------------- Wendy's International, Inc. 2,251 132,696 ---------------------------------------------------------------- YUM! Brands, Inc. 5,482 271,195 ---------------------------------------------------------------- 1,832,334 ---------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT-0.40% Applied Materials, Inc. 31,428 598,703 ---------------------------------------------------------------- KLA-Tencor Corp. 3,823 198,720 ---------------------------------------------------------------- Novellus Systems, Inc./(a)/ 2,583 73,228 ---------------------------------------------------------------- Teradyne, Inc./(a)/ 3,813 66,422 ---------------------------------------------------------------- 937,073 ---------------------------------------------------------------- SEMICONDUCTORS-2.60% Advanced Micro Devices, Inc./(a)/ 7,826 327,596 ---------------------------------------------------------------- Altera Corp./(a)/ 7,020 135,556 ---------------------------------------------------------------- Analog Devices, Inc. 7,104 282,526 ---------------------------------------------------------------- Applied Micro Circuits Corp./(a)/ 5,786 19,036 ---------------------------------------------------------------- Broadcom Corp.-Class A/(a)/ 5,601 381,988 ---------------------------------------------------------------- Freescale Semiconductor, Inc.-Class B/(a)/ 7,948 200,687 ---------------------------------------------------------------- Intel Corp. 116,785 2,484,017 ---------------------------------------------------------------- Linear Technology Corp. 5,902 219,613 ---------------------------------------------------------------- LSI Logic Corp./(a)/ 7,586 69,412 ---------------------------------------------------------------- Maxim Integrated Products, Inc. 6,349 260,563 ---------------------------------------------------------------- Micron Technology, Inc./(a)/ 11,970 175,720 ---------------------------------------------------------------- National Semiconductor Corp. 6,656 187,766 ---------------------------------------------------------------- NVIDIA Corp./(a)/ 3,315 149,042 ---------------------------------------------------------------- PMC-Sierra, Inc./(a)/ 3,549 33,574 ----------------------------------------------------------------
SHARES VALUE ------------------------------------------------------------- SEMICONDUCTORS-(CONTINUED) Texas Instruments Inc. 31,342 $ 916,127 ------------------------------------------------------------- Xilinx, Inc. 6,750 190,080 ------------------------------------------------------------- 6,033,303 ------------------------------------------------------------- SOFT DRINKS-1.59% Coca-Cola Co. (The) 40,094 1,659,090 ------------------------------------------------------------- Coca-Cola Enterprises Inc. 5,869 115,854 ------------------------------------------------------------- Pepsi Bottling Group, Inc. (The) 2,655 76,995 ------------------------------------------------------------- PepsiCo, Inc. 32,139 1,837,708 ------------------------------------------------------------- 3,689,647 ------------------------------------------------------------- SPECIALIZED CONSUMER SERVICES-0.07% H&R Block, Inc. 6,345 155,199 ------------------------------------------------------------- SPECIALIZED FINANCE-0.22% CIT Group Inc. 3,869 206,372 ------------------------------------------------------------- Moody's Corp. 4,806 304,316 ------------------------------------------------------------- 510,688 ------------------------------------------------------------- SPECIALTY CHEMICALS-0.17% Ecolab Inc. 3,570 127,842 ------------------------------------------------------------- International Flavors & Fragrances Inc. 1,565 51,582 ------------------------------------------------------------- Rohm and Haas Co. 2,789 141,960 ------------------------------------------------------------- Sigma-Aldrich Corp. 1,302 84,474 ------------------------------------------------------------- 405,858 ------------------------------------------------------------- SPECIALTY STORES-0.29% Office Depot, Inc./(a)/ 5,982 198,303 ------------------------------------------------------------- OfficeMax Inc. 1,371 39,169 ------------------------------------------------------------- Staples, Inc. 14,166 335,876 ------------------------------------------------------------- Tiffany & Co. 2,755 103,864 ------------------------------------------------------------- 677,212 ------------------------------------------------------------- STEEL-0.20% Allegheny Technologies, Inc. 1,647 85,397 ------------------------------------------------------------- Nucor Corp. 3,014 253,869 ------------------------------------------------------------- United States Steel Corp. 2,196 131,211 ------------------------------------------------------------- 470,477 ------------------------------------------------------------- SYSTEMS SOFTWARE-2.88% BMC Software, Inc./(a)/ 4,189 92,577 ------------------------------------------------------------- Computer Associates International, Inc. 8,888 242,642 ------------------------------------------------------------- Microsoft Corp. 177,327 4,991,755 ------------------------------------------------------------- Novell, Inc./(a)/ 7,398 72,057 ------------------------------------------------------------- Oracle Corp./(a)/ 72,849 915,712 ------------------------------------------------------------- Symantec Corp./(a)/ 20,948 385,024 ------------------------------------------------------------- 6,699,767 ------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE-1.64% Countrywide Financial Corp. 11,567 386,800 ------------------------------------------------------------- Fannie Mae 18,748 1,086,259 ------------------------------------------------------------- Freddie Mac 13,384 908,238 -------------------------------------------------------------
F-8 AIM S&P 500 INDEX FUND
SHARES VALUE ------------------------------------------------------------------------ THRIFTS & MORTGAGE FINANCE-(CONTINUED) Golden West Financial Corp. 4,935 $ 348,510 ------------------------------------------------------------------------ MGIC Investment Corp. 1,757 115,980 ------------------------------------------------------------------------ Sovereign Bancorp, Inc. 6,917 150,791 ------------------------------------------------------------------------ Washington Mutual, Inc. 19,113 808,862 ------------------------------------------------------------------------ 3,805,440 ------------------------------------------------------------------------ TIRES & RUBBER-0.03% Cooper Tire & Rubber Co. 1,187 17,793 ------------------------------------------------------------------------ Goodyear Tire & Rubber Co. (The)/(a)/ 3,416 53,426 ------------------------------------------------------------------------ 71,219 ------------------------------------------------------------------------ TOBACCO-1.38% Altria Group, Inc. 40,336 2,917,906 ------------------------------------------------------------------------ Reynolds American Inc. 1,655 167,370 ------------------------------------------------------------------------ UST Inc. 3,168 123,362 ------------------------------------------------------------------------ 3,208,638 ------------------------------------------------------------------------ TRADING COMPANIES & DISTRIBUTORS-0.04% W.W. Grainger, Inc. 1,472 104,409 ------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES-0.76% ALLTEL Corp. 7,416 445,182 ------------------------------------------------------------------------ Sprint Nextel Corp. 57,229 1,309,972 ------------------------------------------------------------------------ 1,755,154 ------------------------------------------------------------------------ Total Common Stocks & Other Equity Interests (Cost $186,757,025) 223,987,553 ------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE --------------------------------------------------------------------------- U.S. TREASURY BILLS-0.30% 3.83%, 03/16/06/(d)/ $ 500,000/(e)/ $ 497,681 --------------------------------------------------------------------------- 4.03%, 03/16/06/(d)/ 200,000/(e)/ 199,072 --------------------------------------------------------------------------- Total U.S. Treasury Bills (Cost $696,753) 696,753 --------------------------------------------------------------------------- REPURCHASE AGREEMENTS-3.51% State Street Bank & Trust, 4.12%, 02/01/06 (Cost $8,145,765)/(f)/ 8,145,765 8,145,765 --------------------------------------------------------------------------- TOTAL INVESTMENTS-100.23% (Cost $195,599,543) 232,830,071 --------------------------------------------------------------------------- OTHER ASSETS LESS LIABILITIES-(0.23)% (540,687) --------------------------------------------------------------------------- NET ASSETS-100.00% $232,289,384 ---------------------------------------------------------------------------
Notes to Schedule of Investments: /(a)/Non-income producing security. /(b)/Each unit represents one common share and one trust share. /(c)/Each unit represents one common share and one Class B share. /(d)/Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. /(e)/Principal balance was pledged as collateral to cover margin requirements for open futures contracts. See Note 1I and Note 6. /(f)/Repurchase agreement entered into 01/31/06 with a maturing value of $8,146,697. Collateralized by a $8,325,000 U.S. Government obligation, 4.38% due 09/17/10 with a value at 01/31/06 of $8,311,372. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-9 AIM S&P 500 INDEX FUND STATEMENT OF ASSETS AND LIABILITIES January 31, 2006 (Unaudited) ASSETS: Investments, at value (cost $195,599,543) $232,830,071 - ------------------------------------------------------------------------------------ Receivables for: Investments sold 169,353 - ------------------------------------------------------------------------------------ Fund shares sold 191,847 - ------------------------------------------------------------------------------------ Dividends and interest 193,729 - ------------------------------------------------------------------------------------ Investment for trustee deferred compensation and retirement plans 20,493 - ------------------------------------------------------------------------------------ Other assets 30,891 - ------------------------------------------------------------------------------------ Total assets 233,436,384 - ------------------------------------------------------------------------------------ LIABILITIES: Payables for: Investments purchased 309,820 - ------------------------------------------------------------------------------------ Fund shares reacquired 597,286 - ------------------------------------------------------------------------------------ Trustee deferred compensation and retirement plans 28,726 - ------------------------------------------------------------------------------------ Variation margin 34,463 - ------------------------------------------------------------------------------------ Accrued distribution fees 46,431 - ------------------------------------------------------------------------------------ Accrued trustees' and officer's fees and benefits 1,704 - ------------------------------------------------------------------------------------ Accrued transfer agent fees 88,345 - ------------------------------------------------------------------------------------ Accrued operating expenses 40,225 - ------------------------------------------------------------------------------------ Total liabilities 1,147,000 - ------------------------------------------------------------------------------------ Net assets applicable to shares outstanding $232,289,384 - ------------------------------------------------------------------------------------ NET ASSETS CONSIST OF: Shares of beneficial interest $204,057,110 - ------------------------------------------------------------------------------------ Undistributed net investment income 270,149 - ------------------------------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities and futures contracts (9,155,369) - ------------------------------------------------------------------------------------ Unrealized appreciation of investment securities and futures contracts 37,117,494 - ------------------------------------------------------------------------------------ $232,289,384 - ------------------------------------------------------------------------------------
NET ASSETS: Investor Class $225,264,273 ------------------------------------------------------------ Institutional Class $ 7,025,111 ------------------------------------------------------------ SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Investor Class 16,754,122 ------------------------------------------------------------ Institutional Class 545,706 ------------------------------------------------------------ Investor Class: Net asset value and offering price per share $ 13.45 ------------------------------------------------------------ Institutional Class: Net asset value and offering price per share $ 12.87 ------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-10 AIM S&P 500 INDEX FUND STATEMENT OF OPERATIONS For the six months ended January 31, 2006 (Unaudited)
INVESTMENT INCOME: Dividends $2,116,154 - ------------------------------------------------------------------------------------------------- Interest 119,980 - ------------------------------------------------------------------------------------------------- Total investment income 2,236,134 - ------------------------------------------------------------------------------------------------- EXPENSES: Advisory fees 292,783 - ------------------------------------------------------------------------------------------------- Administrative services fees 31,977 - ------------------------------------------------------------------------------------------------- Custodian fees 22,922 - ------------------------------------------------------------------------------------------------- Distribution fees-Investor 284,332 - ------------------------------------------------------------------------------------------------- Transfer agent fees-Investor 191,342 - ------------------------------------------------------------------------------------------------- Transfer agent fees-Institutional 3,340 - ------------------------------------------------------------------------------------------------- Trustees' and officer's fees and benefits 10,974 - ------------------------------------------------------------------------------------------------- Other 93,129 - ------------------------------------------------------------------------------------------------- Total expenses 930,799 - ------------------------------------------------------------------------------------------------- Less:Fees waived, expenses reimbursed and expense offset arrangements (235,936) - ------------------------------------------------------------------------------------------------- Net expenses 694,863 - ------------------------------------------------------------------------------------------------- Net investment income 1,541,271 - ------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FUTURES CONTRACTS: Net realized gain from: Investment securities 2,196,455 - ------------------------------------------------------------------------------------------------- Futures contracts 171,865 - ------------------------------------------------------------------------------------------------- 2,368,320 - ------------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of: Investment securities 6,174,603 - ------------------------------------------------------------------------------------------------- Futures contracts (130,819) - ------------------------------------------------------------------------------------------------- 6,043,784 - ------------------------------------------------------------------------------------------------- Net gain from investment securities and futures contracts 8,412,104 - ------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $9,953,375 - -------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-11 AIM S&P 500 INDEX FUND STATEMENT OF CHANGES IN NET ASSETS For the six months ended January 31, 2006 and the year ended July 31, 2005 (Unaudited)
JANUARY 31, 2006 - ---------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 1,541,271 - ---------------------------------------------------------------------------------------------------------------------- Net realized gain from investment securities and futures contracts 2,368,320 - ---------------------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities and futures contracts 6,043,784 - ---------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 9,953,375 - ---------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from net investment income: Investor Class (1,524,248) - ---------------------------------------------------------------------------------------------------------------------- Institutional Class (52,687) - ---------------------------------------------------------------------------------------------------------------------- Decrease in net assets resulting from distributions (1,576,935) - ---------------------------------------------------------------------------------------------------------------------- Share transactions-net: Investor Class (12,953,242) - ---------------------------------------------------------------------------------------------------------------------- Institutional Class (116,959) - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from share transactions (13,070,201) - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets (4,693,761) - ---------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 236,983,145 - ---------------------------------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $270,149 and $305,813, respectively) $232,289,384 - ----------------------------------------------------------------------------------------------------------------------
JULY 31, 2005 - --------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 3,410,584 - --------------------------------------------------------------------------------------------------------------------- Net realized gain from investment securities and futures contracts 3,015,507 - --------------------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities and futures contracts 22,658,790 - --------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 29,084,881 - --------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from net investment income: Investor Class (3,187,004) - --------------------------------------------------------------------------------------------------------------------- Institutional Class (104,063) - --------------------------------------------------------------------------------------------------------------------- Decrease in net assets resulting from distributions (3,291,067) - --------------------------------------------------------------------------------------------------------------------- Share transactions-net: Investor Class (29,115,766) - --------------------------------------------------------------------------------------------------------------------- Institutional Class 889,650 - --------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from share transactions (28,226,116) - --------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets (2,432,302) - --------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 239,415,447 - --------------------------------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $270,149 and $305,813, respectively) $236,983,145 - ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-12 AIM S&P 500 INDEX FUND NOTES TO FINANCIAL STATEMENTS January 31, 2006 (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM S&P 500 Index Fund, (the "Fund") is a series portfolio of AIM Stock Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of three separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently consists of multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is to seek price performance and income comparable to the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"). 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. 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. 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 as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services, which may be considered fair valued, or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are recorded at amortized cost which approximates value. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. 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. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not ordinarily be reflected in the computation of the Fund's net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs and domestic and foreign index futures. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. F-13 AIM S&P 500 INDEX FUND Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be 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 use 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, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. G. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements. Collateral on repurchase agreements, including the Fund's pro-rata interest in joint repurchase agreements, is taken into possession by the Fund upon entering into the repurchase agreement. Eligible securities for collateral are U.S. Government Securities, U.S. Government Agency Securities and/or Investment Grade Debt Securities. Collateral consisting of U.S. Government Securities and U.S. Government Agency Securities is marked to market daily to ensure its market value is at least 102% of the sales price of the repurchase agreement. Collateral consisting of Investment Grade Debt Securities is marked to market daily to ensure its market value is at least 105% of the sales price of the repurchase agreement. The investments in some repurchase agreements, pursuant to procedures approved by the Board of Trustees, are through participation with other mutual funds, private accounts and certain non-registered investment companies managed by the investment advisor or its affiliates ("Joint repurchase agreements"). If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, the Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying security and loss of income. H. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. I. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. J. COLLATERAL -- To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund's practice to replace such collateral no later than the next business day. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.25% of the Fund's average daily net assets. AIM has entered into a sub-advisory agreement with INVESCO Institutional (N.A.), Inc. ("INVESCO") whereby AIM pays INVESCO 40% of the fee paid by the Fund to AIM. AIM has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses (excluding certain items discussed below) of Investor Class and Institutional Class shares to 0.60% and 0.35% of average daily net assets, respectively, through July 31, 2006. 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 total annual operating expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; F-14 AIM S&P 500 INDEX FUND (v) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, in addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more fully below, the expense offset arrangements from which the Fund may benefit are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. To the extent that the annualized expense ratio does not exceed the expense limitation, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. For the six months ended January 31, 2006, AIM waived fees of $40,891 and reimbursed $187,053 and $3,340 of class level expenses of Investor Class and Institutional Class shares, respectively. At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the six months ended January 31, 2006, AMVESCAP reimbursed expenses of the Fund in the amount of $199. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the six months ended January 31, 2006, AIM was paid $31,977. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended January 31, 2006, the Fund paid AISI $191,342 for Investor Class shares and $3,340 for Institutional Class shares. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Investor Class and Institutional Class shares of the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Investor Class shares (the "Plan"). The Fund, pursuant to the Plan, pays ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Investor Class shares. Any amounts not paid as a service fee under the Plan would constitute an asset-based sales charge. National Association of Securities Dealers ("NASD") Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plan, for the six months ended January 31, 2006, the Investor Class shares paid $284,332. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI. NOTE 3--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended January 31, 2006, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $4,453. NOTE 4--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the six months ended January 31, 2006, the Fund paid legal fees of $2,256 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--BORROWINGS Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the six months ended January 31, 2006, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. F-15 AIM S&P 500 INDEX FUND Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the rate contractually agreed upon. NOTE 6--FUTURES CONTRACTS On January 31, 2006, $700,000 principal amount of U.S. Treasury obligations were pledged as collateral to cover margin requirements for open futures contracts.
OPEN FUTURES CONTRACTS AT PERIOD END ----------------------------------------------------------- CHANGE IN NO. OF MONTH/ VALUE UNREALIZED CONTRACT CONTRACTS COMMITMENT 01/31/06 APPRECIATION ----------------------------------------------------------- S&P 500 Index 27 Mar-06/Long $8,664,300 $39,437 -----------------------------------------------------------
NOTE 7--TAX INFORMATION The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Fund's fiscal year-end. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. The Fund had a capital loss carryforward as of July 31, 2005 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* --------------------------------------------- July 31, 2010 $3,073,399 --------------------------------------------- July 31, 2011 1,578,151 --------------------------------------------- Total capital loss carryforward $4,651,550 ---------------------------------------------
* 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 and money market funds) purchased and sold by the Fund during the six months ended January 31, 2006 was $9,089,146 and $25,170,137, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 49,373,006 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (18,992,981) ------------------------------------------------------------------------------ Net unrealized appreciation of investment securities $ 30,380,025 ------------------------------------------------------------------------------
Cost of investments for tax purposes is $202,558,777. F-16 AIM S&P 500 INDEX FUND NOTE 9--SHARE INFORMATION The Fund currently consists of two different classes of shares: Investor Class shares and Institutional Class shares. Investor Class shares and Institutional Class shares are sold at net asset value. Investor Class shares of the Fund are offered only to certain grandfathered investors.
CHANGES IN SHARES OUTSTANDING - ---------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JANUARY 31, JULY 31, 2006 2005 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT - ---------------------------------------------------------------------------------------- Sold: Investor Class 1,767,106 $ 22,979,632 4,536,570 $ 55,848,517 - ---------------------------------------------------------------------------------------- Institutional Class 46,793 587,676 139,962 1,640,099 - ---------------------------------------------------------------------------------------- Issued as reinvestment of dividends: Investor Class 114,088 1,497,797 252,892 3,136,907 - ---------------------------------------------------------------------------------------- Institutional Class 4,193 52,687 8,746 104,063 - ---------------------------------------------------------------------------------------- Reacquired:/(a)/ Investor Class (2,867,433) (37,430,671) (7,225,743) (88,101,190) - ---------------------------------------------------------------------------------------- Institutional Class (60,884) (757,322) (72,446) (854,512) - ---------------------------------------------------------------------------------------- (996,137) $(13,070,201) (2,360,019) $(28,226,116) - ----------------------------------------------------------------------------------------
/(a)/Amount is net of redemption fees of $9,852 and $299 for Investor Class and Institutional Class shares, respectively, for the six months ended January 31, 2006 and $4,356 and $121 for Investor Class and Institutional Class shares, respectively, for the year ended July 31, 2005. NOTE 10--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
INVESTOR CLASS -------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JULY 31, JANUARY 31, ---------------------------------------- 2006 2005 2004 2003 2002 - -------------------------------------------------------------------- ----------------------------------------- Net asset value, beginning of period $ 12.97 $ 11.60 $ 10.41 $ 9.59 $ 12.78 - ---------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.09 0.18 0.11 0.10 0.09 - ---------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 0.48 1.36 1.18 0.82 (3.19) - ---------------------------------------------------------------------------------------------------------------------------- Total from investment operations 0.57 1.54 1.29 0.92 (3.10) - ---------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.09) (0.17) (0.10) (0.10) (0.09) - ---------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Total distributions (0.09) (0.17) (0.10) (0.10) (0.09) - ---------------------------------------------------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 13.45 $ 12.97 $ 11.60 $ 10.41 $ 9.59 - ---------------------------------------------------------------------------------------------------------------------------- Total return/(a)/ 4.40% 13.38% 12.43% 9.73% (24.33)% - ---------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $225,264 $230,084 $234,090 $195,668 $135,578 - ---------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 0.60%/(b)/ 0.65% 0.65% 0.65% 0.65% - ---------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 0.80%/(b)/ 0.83% 1.00% 1.05% 1.01% - ---------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 1.31%/(b)/ 1.46% 0.99% 1.15% 0.84% - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(c)/ 4% 4% 2% 1% 3% - ----------------------------------------------------------------------------------------------------------------------------
----------- --------- 2001 - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 15.36 - ----------------------------------------------------------------------------- Income from investment operations: Net investment income 0.10 - ----------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (2.39) - ----------------------------------------------------------------------------- Total from investment operations (2.29) - ----------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.10) - ----------------------------------------------------------------------------- Distributions from net realized gains (0.19) - ----------------------------------------------------------------------------- Total distributions (0.29) - ----------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 - ----------------------------------------------------------------------------- Net asset value, end of period $ 12.78 - ----------------------------------------------------------------------------- Total return/(a)/ (15.07)% - ----------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $116,309 - ----------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 0.63% - ----------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 0.99% - ----------------------------------------------------------------------------- Ratio of net investment income to average net assets 0.75% - ----------------------------------------------------------------------------- Portfolio turnover rate/(c)/ 43% - -----------------------------------------------------------------------------
/(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. Not annualized for periods less than one year. /(b)/Ratios are annualized and based on average daily net assets of $225,610,979. /(c)/Not annualized for periods less than one year. F-17 AIM S&P 500 INDEX FUND NOTE 10--FINANCIAL HIGHLIGHTS-(CONTINUED)
INSTITUTIONAL CLASS ---------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JULY 31, JANUARY 31, ------------------------------------- 2006 2005 2004 2003 2002 - -------------------------------------------------------------------- -------------------------------------- Net asset value, beginning of period $12.42 $11.11 $ 9.97 $ 9.23 $ 12.45 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income 0.10 0.21 0.13 0.13/(a)/ 0.08 - ------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 0.45 1.30 1.14 0.78 (3.11) - ------------------------------------------------------------------------------------------------------------------------ Total from investment operations 0.55 1.51 1.27 0.91 (3.03) - ------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.10) (0.20) (0.13) (0.17) (0.19) - ------------------------------------------------------------------------------------------------------------------------ Distributions from net realized gains -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ Total distributions (0.10) (0.20) (0.13) (0.17) (0.19) - ------------------------------------------------------------------------------------------------------------------------ Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $12.87 $12.42 $11.11 $ 9.97 $ 9.23 - ------------------------------------------------------------------------------------------------------------------------ Total return/(b)/ 4.45% 13.70% 12.77% 9.98% (24.50)% - ------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $7,025 $6,899 $5,325 $4,239 $ 338 - ------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 0.35%/(c)/ 0.35% 0.35% 0.35% 0.35% - ------------------------------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 0.48%/(c)/ 0.46% 0.67% 2.18% 7.36% - ------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets 1.56%/(c)/ 1.76% 1.29% 1.35% 1.15% - ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate/(d)/ 4% 4% 2% 1% 3% - ------------------------------------------------------------------------------------------------------------------------
------------- -------- 2001 - ------------------------------------------------------------------------------- Net asset value, beginning of period $ 15.07 - ------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.19/(a)/ - ------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (2.44) - ------------------------------------------------------------------------------- Total from investment operations (2.25) - ------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.18) - ------------------------------------------------------------------------------- Distributions from net realized gains (0.19) - ------------------------------------------------------------------------------- Total distributions (0.37) - ------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 - ------------------------------------------------------------------------------- Net asset value, end of period $ 12.45 - ------------------------------------------------------------------------------- Total return/(b)/ (15.09)% - ------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $ 544 - ------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 0.35% - ------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.84% - ------------------------------------------------------------------------------- Ratio of net investment income to average net assets 1.03% - ------------------------------------------------------------------------------- Portfolio turnover rate/(d)/ 43% - -------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(c)/Ratios are annualized and based on average daily net assets of $6,706,207. /(d)/Not annualized for periods less than one year. NOTE 11--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. F-18 AIM S&P 500 INDEX FUND NOTE 11--LEGAL PROCEEDINGS-(CONTINUED) PENDING LITIGATION AND REGULATORY INQUIRIES On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code (S) 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP from serving as an investment advisor to any registered investment company, including the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On October 19, 2005, the WVAG lawsuit was transferred for pretrial purposes to the MDL Court (as defined below). On July 7, 2005, the Supreme Court of West Virginia ruled in an unrelated lawsuit that is similar to this action that the WVAG does not have authority to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor--Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: . that the defendants permitted improper market timing and related activity in the AIM Funds; . that certain AIM Funds inadequately employed fair value pricing; . that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; and . that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. All lawsuits based on allegations of market timing, late trading and related issues have been transferred or conditionally transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. On March 1, 2006, the MDL Court entered orders on Defendants' Motions to dismiss in the derivative and class action lawsuits. The MDL Court dismissed all derivative causes of action in the derivative lawsuit but two: (i) the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"); and (ii) the "control person liability" claim under Section 48 of the 1940 Act. The MDL Court dismissed all claims asserted in the class action lawsuit but three: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934; (ii) the excessive fee claim under Section 36(b) of the 1940 Act (which survived only insofar as plaintiffs seek recovery of fees associated with the assets involved in market timing); and (iii) the "control person liability" claim under Section 48 of the 1940 Act. Based on the MDL Court's March 1, 2006 orders, all claims asserted against the Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the derivative lawsuit. On February 27, 2006, Judge Motz for the MDL Court issued a memorandum opinion on the AMVESCAP defendants' motion to dismiss the ERISA lawsuit. Judge Motz granted the motion in part and denied the motion in part, holding that: (i) plaintiff has both constitutional and statutory standing to pursue her claims under ERISA (S) 502(a)(2); (ii) plaintiff lacks standing under ERISA (S) 502(a)(3) to obtain equitable relief; (iii) the motion is granted as to the claims alleged under ERISA (S) 404 for failure to prudently and loyally manage plan assets against certain AMVESCAP defendants; (iv) the motion is denied as to the claims alleged under ERISA (S) 404 for failure to prudently and loyally manage plan assets against AMVESCAP and certain other AMVESCAP defendants. The opinion also: (i) confirmed plaintiff's abandonment of her claims that defendants engaged in prohibited transactions and/or misrepresentation; (ii) postponed consideration of the duty to monitor and co-fiduciary duty claims until after any possible amendments to the complaints; (iii) stated that plaintiff may seek leave to amend her complaint within 40 days of the date of filing of the memorandum opinion. Judge Motz requested that the parties submit proposed orders within 30 days of the opinion implementing his rulings. F-19 AIM S&P 500 INDEX FUND NOTE 11--LEGAL PROCEEDINGS-(CONTINUED) IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, AIM and ADI have advised the Fund that they are providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds. F-20 AIM S&P 500 FUND TRUSTEES AND OFFICERS
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND Bob R. Baker Robert H. Graham 11 Greenway Plaza President and Principal Executive Officer Suite 100 Frank S. Bayley Houston, TX 77046-1173 Mark H. Williamson James T. Bunch Executive Vice President INVESTMENT ADVISOR A I M Advisors, Inc. Bruce L. Crockett Lisa O. Brinkley 11 Greenway Plaza Chair Senior Vice President and Chief Compliance Officer Suite 100 Houston, TX 77046-1173 Albert R. Dowden Russell C. Burk Senior Vice President and Senior Officer TRANSFER AGENT Edward K. Dunn, Jr. AIM Investment Services, Inc. Kevin M. Carome P.O. Box 4739 Jack M. Fields Senior Vice President, Secretary and Chief Legal Officer Houston, TX 77210-4739 Carl Frischling Sidney M. Dilgren CUSTODIAN Vice President, Treasurer and Principal Financial Officer State Street Bank and Trust Company Robert H. Graham 225 Franklin Street Vice Chair J. Philip Ferguson Boston, MA 02110-2801 Vice President Prema Mathai-Davis COUNSEL TO THE FUND Karen Dunn Kelley Ballard Spahr Lewis F. Pennock Vice President Andrews & Ingersoll, LLP 1735 Market Street, 51st Floor Ruth H. Quigley Philadelphia, PA 19103-7599 Larry Soll COUNSEL TO THE INDEPENDENT TRUSTEES Kramer, Levin, Naftalis & Frankel LLP Raymond Stickel, Jr. 1177 Avenue of the Americas New York, NY 10036-2714 Mark H. Williamson DISTRIBUTOR A I M Distributors, Inc. 11 Greenway Plaza Suite 100 Houston, TX 77046-1173 SUB-ADVISOR INVESCO Institutional (NA), Inc. Structured Products Group 1166 Avenue of the Americas, 27th Floor New York City, NY 10036
DOMESTIC EQUITY SECTOR EQUITY AIM Aggressive Growth Fund/3/ AIM Advantage Health Sciences Fund AIM Basic Balanced Fund* AIM Energy Fund AIM Basic Value Fund AIM Financial Services Fund AIM Blue Chip Fund/3/ AIM Global Health Care Fund AIM Capital Development Fund AIM Global Real Estate Fund AIM Charter Fund AIM Gold & Precious Metals Fund AIM Constellation Fund AIM Leisure Fund AIM Diversified Dividend Fund AIM Multi-Sector Fund AIM Dynamics Fund AIM Real Estate Fund/1/ AIM Large Cap Basic Value Fund AIM Technology Fund AIM Large Cap Growth Fund AIM Utilities Fund AIM Mid Cap Basic Value Fund AIM Mid Cap Core Equity Fund/1/ FIXED INCOME AIM Mid Cap Growth Fund/4/ AIM Opportunities I Fund TAXABLE AIM Opportunities II Fund AIM Opportunities III Fund AIM Floating Rate Fund AIM Premier Equity Fund/4/ AIM High Yield Fund AIM S&P 500 Index Fund AIM Income Fund AIM Select Equity Fund AIM Intermediate Government Fund AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund AIM Small Cap Growth Fund/1/ AIM Money Market Fund AIM Small Company Growth Fund/4/ AIM Short Term Bond Fund AIM Summit Fund AIM Total Return Bond Fund AIM Trimark Endeavor Fund Premier Portfolio AIM Trimark Small Companies Fund Premier U.S. Government Money Portfolio AIM Weingarten Fund/3/ TAX-FREE *Domestic equity and income fund AIM High Income Municipal Fund/1/ AIM Municipal Bond Fund INTERNATIONAL/GLOBAL EQUITY AIM Tax-Exempt Cash Fund AIM Tax-Free Intermediate Fund AIM Asia Pacific Growth Fund Premier Tax-Exempt Portfolio AIM Developing Markets Fund AIM European Growth Fund AIM ALLOCATION SOLUTIONS AIM European Small Company Fund/1/ AIM Global Aggressive Growth Fund AIM Conservative Allocation Fund AIM Global Equity Fund AIM Growth Allocation Fund/2/ AIM Global Growth Fund AIM Moderate Allocation Fund AIM Global Value Fund AIM Moderate Growth Allocation Fund AIM International Core Equity Fund AIM Moderately Conservative Allocation AIM International Growth Fund Fund AIM International Small Company Fund/1/ DIVERSIFIED PORTFOLIOS AIM Trimark Fund AIM Income Allocation Fund AIM International Allocation Fund /1/This Fund has limited public sales of its shares to certain investors. For more information on who may continue to invest in the Fund, please see the appropriate prospectus. /2/Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM Growth Allocation Fund. /3/Shareholders approved the reorganization of the following funds to be effective on or about March 27, 2006: AIM Aggressive Growth Fund into AIM Constellation Fund, AIM Weingarten Fund into AIM Constellation Fund and AIM Blue Chip Fund into AIM Large Cap Growth Fund. /4/Shareholders approved the reorganization of the following funds to be effective on or about April 10, 2006: AIM Mid Cap Growth Fund into AIM Dynamics Fund, AIM Small Company Growth Fund into AIM Small Cap Growth Fund and AIM Premier Equity Fund into AIM Charter Fund. If used after April 20, 2006, this report must be accompanied by a Fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $128 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $386 billion in assets under management. Data as of December 31, 2005. - -------------------------------------------------------------------------------- CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AND READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- AIMinvestments.com I-SPI-SAR-1 A I M Distributors, Inc. [YOUR GOALS. OUR SOLUTIONS.] - REGISTERED TRADEMARK - Mutual Retirement Annuities College Separately Offshore Cash Funds Products Savings Managed Products Management Plans Accounts [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - ITEM 2. CODE OF ETHICS. There were no amendments to the Code of Ethics (the "Code") that applies to the Registrant's Principal Executive Officer ("PEO") and Principal Financial Officer ("PFO") during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Investments in securities of unaffiliated issuers is included as part of the reports to stockholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 11. CONTROLS AND PROCEDURES. (a) As of March 21, 2006, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the Principal Executive Officer ("PEO") and Principal Financial Officer ("PFO"), to assess the effectiveness of the Registrant's disclosure controls and procedures, as that term is defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "Act"). Based on that evaluation, the Registrant's officers, including the PEO and PFO, concluded that, as of March 21, 2006, the Registrant's disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that material information relating to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. (b) There have been no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. 12(a)(1) Not applicable. 12(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. 12(a)(3) Not applicable. 12(b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: AIM Stock Funds By: /s/ Robert H. Graham ------------------------------------ Robert H. Graham Principal Executive Officer Date: April 7, 2006 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/ Robert H. Graham ------------------------------------ Robert H. Graham Principal Executive Officer Date: April 7, 2006 By: /s/ Sidney M. Dilgren ------------------------------------ Sidney M. Dilgren Principal Financial Officer Date: April 7, 2006 EXHIBIT INDEX 12(a)(1) Not applicable. 12(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. 12(a)(3) Not applicable. 12(b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. EX-99.12 (A) (2) 2 dex9912a2.txt 302 CERTIFICATIONS I, Robert H. Graham, Principal Executive Officer, certify that: 1. I have reviewed this report on Form N-CSR of AIM Stock Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidating subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in this registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 7, 2006 /s/ Robert H. Graham --------------------------------------------- Robert H. Graham, Principal Executive Officer I, Sidney M. Dilgren, Principal Financial Officer, certify that: 1. I have reviewed this report on Form N-CSR of AIM Stock Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidating subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in this registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 7, 2006 /s/ Sidney M. Dilgren ---------------------------------------------- Sidney M. Dilgren, Principal Financial Officer EX-99. (12) (B) 3 dex9912b.txt 906 CERTIFICATIONS CERTIFICATION OF SHAREHOLDER REPORT In connection with the Certified Shareholder Report of AIM Stock Funds (the "Company") on Form N-CSR for the period ended January 31, 2006, as filed with the Securities and Exchange Commission (the "Report"), I, Robert H. Graham, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 7, 2006 /s/ Robert H. Graham --------------------------------------------- Robert H. Graham, Principal Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION OF SHAREHOLDER REPORT In connection with the Certified Shareholder Report of AIM Stock Funds (the "Company") on Form N-CSR for the period ended January 31, 2006, as filed with the Securities and Exchange Commission (the "Report"), I, Sidney M. Dilgren, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 7, 2006 /s/ Sidney M. Dilgren ---------------------------------------------- Sidney M. Dilgren, Principal Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----