-----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, EnyTrEsUXpJR+k7L1Ei96+o7ErYWsAT3C9G4rmYqc/SeYDCTN56I2HnIxFLgReY8 2qWq4JUpksSGGZW/YkMZnQ== 0000950129-06-005090.txt : 20060508 0000950129-06-005090.hdr.sgml : 20060508 20060508124314 ACCESSION NUMBER: 0000950129-06-005090 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060228 FILED AS OF DATE: 20060508 DATE AS OF CHANGE: 20060508 EFFECTIVENESS DATE: 20060508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIM Core Allocation Portfolio Series CENTRAL INDEX KEY: 0001335263 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-21792 FILM NUMBER: 06815704 BUSINESS ADDRESS: STREET 1: 11 GREENWAY PLAZA, SUITE 100 CITY: HOUSTON STATE: TX ZIP: 77046 BUSINESS PHONE: 713-629-1919 MAIL ADDRESS: STREET 1: 11 GREENWAY PLAZA, SUITE 100 CITY: HOUSTON STATE: TX ZIP: 77046 0001335263 S000008060 Series C C000021872 Series C 0001335263 S000008061 Series M C000021873 Series M N-CSRS 1 h35375nvcsrs.txt AIM CORE ALLOCATION PORTFOLIO SERIES ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: September 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 811-21792 --------- AIM Core Allocation Portfolio Series ------------------------------------ (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: 8/31 ---- Date of reporting period: 02/28/06 -------- Item 1. Reports to Stockholders. AIM CORE ALLOCATION PORTFOLIO SERIES C AND SERIES M Semiannual Report to Shareholders o February 28, 2006 ================================================================================ THE FUNDS ARE USED EXCLUSIVELY FOR SEPARATELY MANAGED ACCOUNTS (E.G. WRAP FEE OR CERTAIN OTHER PROGRAMS) ADVISED OR SUB-ADVISED BY A I M ADVISORS, INC. (THE ADVISOR OR AIM) OR ITS AFFILIATES FOR WHOM AIM OR ITS AFFILIATES HAS A CORE FIXED INCOME MANDATE. THE FUNDS ARE DESIGNED TO BE A PORTION (ALTHOUGH NOT THE WHOLE) OF A CORE FIXED INCOME PORTFOLIO. AIM HAS ENGAGED THE SERVICES OF INVESCO INSTITUTIONAL (N.A.), INC. (THE SUB-ADVISOR OR INVESCO) TO PROVIDE SUB-ADVISORY SERVICES TO THE FUNDS. ================================================================================ ============================================================ INSIDE THIS REPORT General Information 1 Letter to Shareholders 2 Letter from Independent Chairman of Board of Trustees 3 Management's Discussion of Performance - Series C 4 Management's Discussion of Performance - Series M 6 Fund Performance 8 Calculating Your Ongoing Fund Expenses 9 Approval of Investment Advisory Agreement 10 Financial Pages: Series C 12 Series M 21 ============================================================ [YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE] -- Registered Trademark -- -- Registered Trademark -- SERIES C AND SERIES M SEEK TO ACHIEVE HIGH TOTAL RETURN CONSISTENT WITH PRESERVATION OF CAPITAL. o Unless otherwise stated, information presented in this report is as of February 28, 2006, and is based on total net assets. ABOUT INDEXES USED IN THIS REPORT o The unmanaged LEHMAN BROTHERS U.S. level only and do not include separately PORTFOLIO MANAGEMENT TEAM FOR AGGREGATE BOND INDEX (the Lehman managed account charges. If such charges SERIES C AND SERIES M Aggregate Index), which represents the were included, the total returns would U.S. investment-grade fixed-rate bond be lower. STEPHEN M. JOHNSON, market (including government and [JOHNSON Chartered Financial Analyst, corporate securities, mortgage The Fund provides a complete list of its PHOTO] Portfolio Manager and Chief pass-through securities and asset-backed holdings four times in each fiscal year, Investment Officer, INVESCO securities), is compiled by Lehman at the quarter-ends. For the second and Worldwide Fixed Income, has Brothers, a global investment bank. fourth quarters, the lists appear in the been responsible for the Funds since Fund's semiannual and annual reports to December 2005. Mr. Johnson joined o The unmanaged STANDARD & POOR'S shareholders. For the first and third INVESCO in 1991. He earned a Bachelor of COMPOSITE INDEX OF 500 STOCKS (the S&P quarters, the Fund files the lists with Science degree in Petroleum Engineering 500--Registered Trademark-- Index) is the Securities and Exchange Commission from the University of Kansas in 1983 an index of common stocks frequently (SEC) on Form N-Q. The Fund's Form N-Q and a Master of Business Administration used as a general measure of U.S. stock filings are available on the SEC's Web from Rice University in 1986. market performance. site, sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at KENNETH R. BOWLING, o The unmanaged MSCI WORLD INDEX is a the SEC's Public Reference Room at 450 [BOWLING Chartered Financial Analyst, group of global securities tracked by Fifth Street, N.W., Washington, D.C. PHOTO] Portfolio Manager and Morgan Stanley Capital International. 20549-0102. You can obtain information Director, U.S Fixed Income on the operation of the Public Reference of INVESCO Worldwide Fixed o The Fund is not managed to track the Room, including information about Income, has been responsible for the performance of any particular index, duplicating fee charges, by calling Funds since December 2005. Mr. Bowling including the indexes defined here, and 202-942-8090 or 800-732-0330,or by joined INVESCO in 1993. He earned a consequently, the performance of the electronic request at the following Bachelor of Science degree in 1988 in Fund may deviate significantly from the E-mail address: publicinfo@sec.gov. The Mechanical Engineering and a Masters performance of the indexes. SEC file numbers for the Fund are degree in Engineering in 1989 from the 811-21792 and 333-127335. University of Louisville. o A direct investment cannot be made in an index. Unless otherwise indicated, A description of the policies and JAMES F. GUENTHER, index results include reinvested procedures that the Fund uses to [GUENTHER Chartered Financial Analyst, dividends, and they do not reflect sales determine how to vote proxies relating PHOTO] Portfolio Manager and charges. Performance of an index of to portfolio securities is available Director, Worldwide Credit funds reflects fund expenses; without charge, upon request, from our Research, INVESCO Worldwide performance of a market index does not. Client Services department at Fixed Income, has been responsible for 800-410-4246 or on the AIM Web site, the Funds since December 2005. Mr. OTHER INFORMATION AIMinvestments.com. On the home page, Guenther joined INVESCO in 1992. He scroll down and click on AIM Funds earned a Bachelor of Science degree in o The returns shown in management's Proxy Policy. The information is also Business Administration from Western discussion of Fund performance are based available on the SEC Web site, sec.gov. Michigan University in 1981 and attended on net asset values calculated for the DePaul University School of Law. shareholder transactions. Generally Information regarding how the accepted accounting principles require Fund voted proxies related to its J. RICHARD ROBBEN, adjustments to be made to the net assets portfolio securities during the 12 [ROBBEN Chartered Financial Analyst, of the Fund at period end for financial months ended June 30,2006, will be PHOTO] Senior Portfolio Manager, reporting purposes, and as such, the net available at our Web site. Go to INVESCO Worldwide Fixed asset values for shareholder AIMinvestments.com, access the About Us Income, has been responsible transactions and the returns based on tab, click on Required Notices and then for the Funds since December 2005. Mr. those net asset values may differ from click on Proxy Voting Activity. Next, Robben joined INVESCO in 1996. He earned the net asset values and returns select the Fund from the drop-down menu. a Bachelor of Science degree in Business reported in the Financial Highlights. The information is also available on the Administration from Bellarmine SEC Web site, sec.gov. University in 1987. Additionally, the returns and net asset values shown throughout this report are Assisted by INVESCO Worldwide Fixed at the fund Income Team
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 1 AIM CORE ALLOCATION PORTFOLIO DEAR SHAREHOLDERS: Financial markets fared relatively well over the period covered by this report. The S&P 500 Index, frequently cited [GRAHAM as a benchmark for U.S. stock market performance, returned PHOTO] 2.93%. Results for international stocks were more impressive, with the MSCI World Index gaining 4.31%. Bond performance was more modest as the Lehman Aggregate Index returned 0.34%. Bond performance was varied. High yield bonds and emerging market debt were among the better-performing segments of the fixed-income market. The difference between ROBERT H. GRAHAM bond yields was relatively narrow across the maturity spectrum, as bond yields continued to converge over the period. A number of key developments affected markets and the economy during the reporting period: o Consumer confidence, dealt a setback by Hurricane Katrina which devastated New Orleans in August 2005, rebounded at the beginning of the reporting period, with analysts crediting the resiliency of the economy, falling gas prices and job growth for this trend. o The Federal Reserve Board (the Fed) continued its tightening policy, raising the key federal funds [WILLIAMSON target rate to 4.50% by the end of the reporting PHOTO] 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. o Gasoline prices, which soared to a nationwide average of slightly more than $3.08 per gallon on September 5, 2005, following Hurricane Katrina, had dropped by more MARK H. WILLIAMSON than 80 cents by the end of the reporting period, according to the U.S. Energy Information Administration. o For the first two months of 2006, the economy created 400,000 new jobs, according to the U.S. Department of Labor. YOUR FUND For a discussion of the specific market conditions that affected Series C and Series M and how your Funds were managed during the reporting period, please turn to pages 4-8. Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, President, A I M Advisors, AIM Funds Inc. April 12, 2006 2 AIM CORE ALLOCATION PORTFOLIO DEAR SHAREHOLDERS: Having completed a year of transition and change at AIM Funds--as well as my first full year as your board's [CROCKETT independent chair--I can assure you that shareholder PHOTO] 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. Some highlights of 2005 board activity: o Board approval of voluntary fee reductions, which are BRUCE L. CROCKETT saving shareholders more than $20 million annually, based on asset levels as of March 31, 2005. o 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. o 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--Registered Trademark--, 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 April 12, 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. 3 AIM CORE ALLOCATION PORTFOLIO - SERIES C MANAGEMENT'S DISCUSSION We may sell or reduce our position in OF PERFORMANCE a security when: ===================================================================================== o It reaches our valuation target PERFORMANCE SUMMARY o A more attractive investment becomes We are pleased to send you this first The portfolio is a component of available report for the Series C portfolio. The INVESCO Full Discretion Core product, portfolio began operations on December and therefore, has no benchmark o We want to reduce our exposure to a 30, 2005, and posted a cumulative total index. The benchmark index for INVESCO certain segment of the market return of 0.25% at net asset value for Full Discretion Core product is the the period ended February 28, 2006.The Lehman Brothers U.S. Aggregate Bond o The fundamentals of a particular portfolio's U.S. Treasury holdings Index, which returned 0.34% over the security deteriorate helped it record slightly positive reporting period. returns for the reporting period. MARKET CONDITIONS AND YOUR FUND ===================================================================================== The U.S. Federal Reserve (the Fed) continued its monetary tightening policy HOW WE INVEST tom up analysis involves an evaluation over the period--a trend that had a of securities on an individual basis. We significant impact on bond market The Series C portfolio is a component of also seek to own securities that are performance. The Fed raised the key INVESCO Full Discretion Core product, attractively valued relative to the rest federal funds target rate to 4.50% to which seeks to provide exposure to the of the market. slow economic growth and contain bond market in general and is held in inflation. Rising interest rates separately managed accounts. The Our investment team consists of restrained bond performance. Most portfolio consists of securities that we specialists in three main areas: domestic bond market indexes posted believe can be more efficiently held investment decision-making, portfolio modest gains or losses over the period. through a mutual fund for certain size construction and risk management. Domestically, high yield bonds, which accounts. tend to be less affected by interest In managing the portfolio, we can also rate changes, posted the best return. Our objective is to achieve high use derivatives, such as options, Internationally, emerging market debt total return, consistent with futures contracts and other investment was one of the better performing market preservation of capital. The portfolio instruments, and leveraging, which segments. can invest in a variety of fixed-income involves the borrowing of assets to instruments, including U.S. and foreign potentially increase returns. We may The portfolio received its initial corporate bonds, U.S. and foreign also buy or sell currencies other than seed money at the end of December 2005, government and agency bonds, high yield the U.S. dollar in an attempt to take and we began purchasing securities to securities, emerging market debt; and advantage of anticipated changes in implement our investment strategy. Among mortgage and asset-backed securities. exchange rates. the securities that we purchased were U.S. Treasury and U.S. government agency In selecting securities for the The Fund may have a higher rate of bonds. We believed that the yield curve portfolio, we use both "top-down" and turnover than other funds. In an effort would continue to flatten, which means, "bottom-up" analysis. Top-down analysis to mitigate some of the effects of we believed the difference in the yields takes into account general market and transactions on investors in the Full of shorter- and longer-maturity Treasury economic trends and their impact on the Discretion Core Product, we expect much securities would continue to converge. various asset classes while bot- of the trading to occur within the Fund. (continued) ======================================== ======================================== ======================================== PORTFOLIO COMPOSITION TOP 10 FIXED-INCOME ISSUERS TOTAL NET ASSETS $1.3 MILLION By investment type Bonds & Notes 59.4% 1. Federal National TOTAL NUMBER OF HOLDINGS 30 U.S. Mortgaged-Backed Securities 22.6 Mortgage Association (FNMA) 23.8% U.S. Government Agency Securities 9.9 2. Federal Home U.S. Treasury Securities 3.1 Mortgage Corp. (FHLMC) 8.7 The Fund's holdings are subject to Other Assets Less Liabilities 5.0 3. HSBC Finance Corp. 5.5 change, and there is no assurance that 4. Pacific Gas and Electric Co. 4.3 the Fund will continue to hold any 5. British Telecommunications PLC 4.2 particular security. 6. Telecom Italia Capital 3.9 7. Johnson Controls,Inc. 3.7 Industry classifications used in this 8. Sprint Capital Corp. 3.4 report are generally according to the 9. BellSouth Corp. 3.3 Global Industry Classification Standard, 10. AT&T Corp. 3.3 which was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. and Standard & Poor's. ======================================== ======================================== ========================================
4 AIM CORE ALLOCATION PORTFOLIO - SERIES C Consequently, our focus was on longer both to a particular currency and IN CLOSING term Treasuries. We accomplished this interest rates. During the reporting positioning mainly by buying and selling period, the Fund benefited from We consider the Series C portfolio to be U.S. Treasury futures contracts. This investing in Australian interest rates an important component of the INVESCO strategy proved beneficial as yields in through exchange-traded futures Full Discretion Core product, as it can the five- and 10-year maturity segment contracts, as interest rates generally potentially enhance diversification by of the Treasury yield curve rose while rose worldwide. investing in a relatively wide range of they remained relatively constant in the domestic and foreign securities that we 30-year range. Please keep in mind that We were slightly bearish on corporate believe can be more efficiently held bond prices and yields move in opposite bonds, as we believed rising interest through a mutual fund. We thank you for directions. rates could slow economic growth and your investment in the Series C adversely affect company profitability. portfolio. The use of exchange-traded futures We were also concerned that increased contracts is a significant part of our leveraged buyout activity could further THE VIEWS AND OPINIONS EXPRESSED IN strategy for managing U.S. interest rate detract from corporate earnings. We MANAGEMENT'S DISCUSSION OF FUND risk. We believe futures contracts are bought corporate bonds that we believed PERFORMANCE ARE THOSE OF A I M ADVISORS, an efficient method of managing the were sufficiently liquid and were INC. THESE VIEWS AND OPINIONS ARE Fund's exposure to U.S. interest rate available in small lot sizes. Our focus SUBJECT TO CHANGE AT ANY TIME BASED ON markets. Futures contracts on U. S. was on corporate bonds that we believed FACTORS SUCH AS MARKET AND ECONOMIC Treasury bonds, for example, have the had solid return potential, and our CONDITIONS. THESE VIEWS AND OPINIONS MAY potential to mitigate interest rate holdings in this market segment NOT BE RELIED UPON AS INVESTMENT ADVICE exposure in the portfolio. Moreover, generally had a positive impact on our OR RECOMMENDATIONS, OR AS AN OFFER FOR A these contracts are generally less performance. PARTICULAR SECURITY. THE INFORMATION IS expensive to trade than Treasury bonds. NOT A COMPLETE ANALYSIS OF EVERY ASPECT We were also bearish on OF ANY MARKET, COUNTRY, INDUSTRY, To a lesser extent, we also use mortgage-backed securities because we SECURITY OR THE FUND. STATEMENTS OF FACT exchange-traded futures contracts to believed they were relatively expensive ARE FROM SOURCES CONSIDERED RELIABLE, gain exposure to both foreign currencies compared to the rest of the bond market. BUT A I M ADVISORS, INC. MAKES NO and non-U.S. interest rates. By using Moreover, this asset class has REPRESENTATION OR WARRANTY AS TO THEIR futures contracts, we are able to historically performed better in a COMPLETENESS OR ACCURACY. ALTHOUGH specifically target either interest stable interest rate environment. With HISTORICAL PERFORMANCE IS NO GUARANTEE rates or currencies. With actual interest rates rising, our holdings in OF FUTURE RESULTS, THESE INSIGHTS MAY securities, there would be exposure this market segment generally detracted HELP YOU UNDERSTAND OUR INVESTMENT from performance. MANAGEMENT PHILOSOPHY. ==================================================================================================================================== PRINCIPAL RISKS OF INVESTING IN SERIES C fluctuation and loss of principal and fluctuations in the value of the U.S. income than do U.S. government dollars relative to the values of other o The value of your investment in the securities such as U.S. Treasury bills, currencies, the custody arrangements Fund will go up and down with prices of notes and bonds, for which principal and made for the Fund's foreign holdings, the securities in which the Fund any applicable interest are guaranteed differences in accounting, political invests. The prices of securities change by the government if held to maturity. risks and the lesser degree of public in response to many factors, including information required to be provided by the historical and prospective earnings o A change in interest rates will affect non-U.S. companies. of the issuer, the value of its assets, the performance of the Funds' general economic conditions, interest investments in debt securities. o Investing in emerging markets involves rates, investor perceptions and market greater risk and potential reward than liquidity. o The Fund is nondiversified, which investing in more established markets. increases risks as well as potential o Interest rate increases may cause the rewards. o The Fund may buy or sell currencies price of a debt security to decrease. other than the U.S. dollar to capitalize The longer a debt security's duration, o The Fund may invest a portion of its on anticipated changes in exchange the more sensitive it is to interest assets in mortgage-backed securities, rates, but there is no guarantee that rate risk. High yield bonds (junk bonds) which may lose value if mortgages are such investments will achieve the are less sensitive to interest rate risk prepaid in response to falling interest intended results. than are higher quality bonds. rates. o Portfolio turnover is greater than o U.S. Treasury securities such as o The Fund may invest in derivatives, that of most funds, which may affect bills, notes and bonds offer a high which may rise or fall in value more performance. degree of safety, and they guarantee the rapidly than other investments. payment of principal and any applicable o There is no guarantee that the interest if held to maturity. Fund o Leveraging presents higher risks, but investment techniques and risk analyses shares are not insured, and their value also offers greater potential rewards. used by the Fund's portfolio will and yield will vary with market Leveraging may cause the Fund to be more produce the intended results. conditions. volatile. o The Fund invests in higher-yielding, o International investing presents lower-rated corporate bonds, commonly certain risks not associated with known as junk bonds, which have a investing solely in the United States. greater risk of price These include risks relating to ====================================================================================================================================
5 AIM CORE ALLOCATION PORTFOLIO - SERIES M MANAGEMENT'S DISCUSSION and other investment instruments, and OF PERFORMANCE leveraging, which involves the borrowing of assets to potentially ====================================================================================== increase returns. PERFORMANCE SUMMARY The Fund may have a higher rate of We are pleased to send you this first The portfolio is a component of turnover than other funds. In an report for the Series M portfolio. The INVESCO Full Discretion Core product, effort to mitigate some of the effects portfolio began operations on December and therefore, has no benchmark index. of transactions on investors in the Full 30, 2005, and posted a cumulative total The benchmark index for INVESCO Full Discretion Core Product, we expect much return of -0.60% at net asset value for Discretion Core product is the Lehman of the trading to occur within the Fund. the period ended February 28, 2006. The Brothers U.S. Aggregate Bond Index, portfolio's mortgage holdings detracted which returned 0.34% over the reporting We may sell or reduce our position in from performance for the reporting period. a security when: period. o It reaches our valuation target ====================================================================================== o A more attractive investment becomes HOW WE INVEST and state and local government bonds. available The Series M portfolio is a component of In selecting securities for the Fund, o We want to reduce our exposure to a INVESCO Full Discretion Core product, we use both "top-down" and "bottom-up" certain segment of the market which seeks to provide exposure to the analysis. Top-down analysis takes into bond market in general and is held in account general market and economic o The fundamentals of a particular separately managed accounts. The trends and their impact on the various security deteriorate portfolio consists of securities that we asset classes, while bottom-up analysis believe can be more efficiently held involves an evaluation of securities on MARKET CONDITIONS AND YOUR FUND through a mutual fund for certain size an individual basis. We also seek to own accounts. securities that are attractively valued The U.S. Federal Reserve (the Fed) relative to the rest of the market. continued its monetary tightening policy Our objective is to achieve high over the period--a trend that had a total return, consistent with Our investment team consists of significant impact on the bond market preservation of capital. The portfolio specialists in three main areas: performance. The Fed raised the key can invest in a variety of fixed-income investment decision-making, portfolio federal funds target rate to 4.50% to instruments, including mortgage and construction and risk management. slow economic growth and contain asset-backed securities; bank inflation. Rising interest rates certificates of deposit; U.S. government In managing the Fund, we can also use restrained bond performance. Most and agency bonds; derivatives, such as options, futures domestic bond market indexes posted contracts modest gains or losses over the period. Domestically, high yield bonds, which tend to be less affected by interest rate changes, posted (continued) ======================================== ======================================== ======================================== PORTFOLIO COMPOSITION TOP FIXED-INCOME ISSUERS TOTAL NET ASSETS $1.3 MILLION By investment type 1. U.S. Treasury Notes 43.5% TOTAL NUMBER OF HOLDINGS 8 U.S. Treasury Securities 50.6% 2. Federal National U.S. Government Agency Securities 24.6 Mortgage Association, U.S. Mortgage-Backed Securities 22.8 Pass Through Certificates 22.8 Asset-Backed Securities 9.5 3. Federal National Other Assets Less Liabilities -7.5 Mortgage Association, Unsec. Global Notes 10.6 4. Banc of America Commercial Mortgage Inc. 9.5 5. Federal Home Loan Mortgage Corp. 7.0 6. Federal National The Fund's holdings are subject to Mortgage Association 7.0 change, and there is no assurance that 7. U.S. Treasury Bonds 6.6 the Fund will continue to hold any 8. U.S. Treasury Bills 0.5 particular security. ======================================== ======================================== ========================================
6 AIM CORE ALLOCATION PORTFOLIO - SERIES M the best return. Internationally, expensive compared to the rest of the PRINCIPAL RISKS OF INVESTING IN SERIES M emerging market debt was one of the bond market. Moreover, this asset class better performing market segments. has historically performed better in a o The value of your investment in the stable interest rate environment. Fund will go up and down with prices of The Fund received its initial seed Because the portfolio's asset base was the securities in which the Fund money at the end of December 2005, and relatively small, we were also somewhat invests. The prices of securities change we began purchasing securities to constrained in our ability to purchase in response to many factors, including implement our investment strategy. Among mortgage securities, as they are the historical and prospective earnings the securities that we purchased were generally not as readily available in of the issuer, the value of its assets, U.S. Treasury and U.S. government agency smaller lot sizes. With interest rates general economic conditions, interest bonds. We believed that the yield curve rising, our holdings in this market rates, investor perceptions and market would continue to flatten, which means, segment generally detracted from liquidity. we believed the difference in the yields performance. of shorter- and longer-maturity Treasury o Interest rate increases may cause the securities would continue to converge. IN CLOSING price of a debt security to decrease. The longer a debt security's duration, We consider the Series M portfolio to be the more sensitive it is to interest an important component of the INVESCO rate risk. High yield bonds (junk bonds) ... WE WERE BEARISH Full Discretion Core product, as it can are less sensitive to interest rate risk ON MORTGAGE-BACKED potentially enhance diversification by than are higher quality bonds. SECURITIES BECAUSE WE investing in a relatively wide range of BELIEVED THEY WERE domestic securities that we believe can o U.S. Treasury securities such as RELATIVELY EXPENSIVE be more efficiently held through a bills, notes and bonds offer a high COMPARED TO THE REST mutual fund. We thank you for your degree of safety, and they guarantee the OF THE BOND MARKET. INVESTMENT IN the Series M portfolio. payment of principal and any applicable interest if held to maturity. Fund THE VIEWS AND OPINIONS EXPRESSED IN shares are not insured, and their value MANAGEMENT'S DISCUSSION OF FUND and yield will vary with market Consequently, our focus was on longer PERFORMANCE ARE THOSE OF A I M ADVISORS, conditions. term Treasuries. We accomplished this INC. THESE VIEWS AND OPINIONS ARE positioning mainly by buying and selling SUBJECT TO CHANGE AT ANY TIME BASED ON o The Fund invests in higher-yielding, U.S. Treasury futures contracts. This FACTORS SUCH AS MARKET AND ECONOMIC lower-rated corporate bonds, commonly strategy proved beneficial as yields in CONDITIONS. THESE VIEWS AND OPINIONS MAY known as junk bonds, which have a the five-year and 10-year maturity NOT BE RELIED UPON AS INVESTMENT ADVICE greater risk of price fluctuation and segment of the Treasury yield curve rose OR RECOMMENDATIONS, OR AS AN OFFER FOR A loss of principal and income than do while they remained relatively constant PARTICULAR SECURITY. THE INFORMATION IS U.S. government securities such as U.S. in the 30-year range. Please keep in NOT A COMPLETE ANALYSIS OF EVERY ASPECT Treasury bills, notes and bonds, for mind that bond prices and yields move in OF ANY MARKET, COUNTRY, INDUSTRY, which principal and any applicable opposite directions. SECURITY OR THE FUND. STATEMENTS OF FACT interest are guaranteed by the ARE FROM SOURCES CONSIDERED RELIABLE, government if held to maturity. The use of exchange-traded futures BUT A I M ADVISORS, INC. MAKES NO contracts is a significant part of our REPRESENTATION OR WARRANTY AS TO THEIR o A change in interest rates will affect strategy for managing U.S. interest rate COMPLETENESS OR ACCURACY. ALTHOUGH the performance of the Funds' risk. We believe futures contracts are HISTORICAL PERFORMANCE IS NO GUARANTEE investments in debt securities. an efficient method of managing the OF FUTURE RESULTS, THESE INSIGHTS MAY Fund's exposure to U.S. interest rate HELP YOU UNDERSTAND OUR INVESTMENT o The Fund is nondiversified, which markets. Futures contracts on U.S. MANAGEMENT PHILOSOPHY. increases risks as well as potential Treasury bonds, for example, have the rewards. potential to mitigate interest rate exposure in the portfolio. Moreover, o The Fund may invest a portion of its these contracts are generally less assets in mortgage-backed securities, expensive to trade than Treasury bonds. which may lose value if mortgages are prepaid in response to falling interest We were bearish on mortgage-backed rates. securities because we believed they were relatively o The Fund may invest in derivatives, which may rise or fall in value more rapidly than other investments. o Leveraging presents higher risks, but also offers greater potential rewards. Leveraging may cause the Fund to be more volatile. o Portfolio turnover is greater than that of most funds, which may affect performance. o There is no guarantee that the investment techniques and risk analyses used by the Fund's portfolio will produce the intended results.
7 AIM CORE ALLOCATION PORTFOLIO PORTFOLIO PERFORMANCE ======================================== CUMULATIVE TOTAL RETURNS As of 2/28/06 Inception (12/30/05) SERIES C 0.25% Inception (12/30/05) SERIES M -0.60% ======================================== THE PERFORMANCE DATA QUOTED REPRESENT THE FUNDS ARE USED EXCLUSIVELY FOR PERFORMANCE FIGURES GIVEN REPRESENT PAST PERFORMANCE AND CANNOT GUARANTEE SEPARATELY MANAGED ACCOUNTS ADVISED OR THE FUNDS AND ARE NOT INTENDED TO COMPARABLE FUTURE RESULTS; CURRENT SUB-ADVISED BY A I M ADVISORS, INC. OR REFLECT ACTUAL SEPARATELY MANAGED PERFORMANCE MAY BE LOWER OR HIGHER. ITS AFFILIATES FOR WHOM AIM OR ITS ACCOUNT VALUES. THEY DO NOT REFLECT THERE ARE NO FUND EXPENSES INCLUDED AFFILIATES HAS A CORE FIXED INCOME CHARGES ASSESSED IN CONNECTION WITH A BECAUSE THE FUNDS DO NOT PAY ANY MANDATE. THE FUNDS ARE DESIGNED TO BE A SEPARATELY MANAGED ACCOUNT. CHARGES, EXPENSES DIRECTLY. INVESTMENT RETURN AND PORTION OF A CORE FIXED INCOME EXPENSES AND FEES, WHICH ARE DETERMINED NET ASSET VALUE WILL FLUCTUATE SO THAT PORTFOLIO. YOU CANNOT PURCHASE SHARES OF BY THE SEPARATELY MANAGED ACCOUNT YOU MAY HAVE A GAIN OR LOSS WHEN YOU THE FUNDS DIRECTLY. ISSUER, WILL VARY AND WILL LOWER THE SELL SHARES. TOTAL RETURN.
8 AIM CORE ALLOCATION PORTFOLIO CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of a Fund, you incur ACTUAL EXPENSES based on each Fund's actual expense ratio ongoing costs, including management and an assumed rate of return of 5% per fees; and other Fund expenses, if any. The table below provides information year before expenses, which is not a A I M Advisors, Inc. ("AIM"), the Fund's about actual account values and actual Fund's actual return. Each Fund's actual advisor, has agreed to irrevocably waive expenses. You may use the information in cumulative total returns at net asset all fees and pay all operating expenses, this table, together with the amount you value after expenses for the period except extraordinary expenses, incurred invested, to estimate the expenses that ended February 28, 2006, appear in the by the Funds. This example is intended you paid over the period. Simply divide table on page 8. to help you understand your ongoing your account value by $1,000 (for costs (in dollars) of investing in the example, an $8,600 account value divided The hypothetical account values and Funds and to compare these costs with by $1,000 = 8.6), then multiply the expenses may not be used to estimate the ongoing costs of investing in other result by the number in the table under actual ending account balance or mutual funds. The actual ending account the heading entitled "Actual Expenses expenses you paid for the period. You value and expenses of the Funds in the Paid During Period" to estimate the may use this information to compare the below example are based on an investment expenses you paid on your account during ongoing costs of investing in a Fund and of $1,000 invested on December 30, 2005 this period (December 30, 2005, through other funds. To do so, compare this 5% (the date the Funds commenced February 28, 2006 for the Funds). hypothetical example with the 5% operations) and held through February Because the actual ending account value hypothetical examples that appear in the 28, 2006. The Funds are used only for and expense information in the example shareholder reports of the other funds. investors who are clients of a wrap fee is not based upon a six month period for or certain other programs advised or the Funds, the ending account value and Please note that the expenses shown sub-advised by AIM or its affiliates. expense information may not provide a in the table are meant to highlight your Clients pay a wrap fee or similar fee to meaningful comparison to mutual funds ongoing costs only and do not reflect participate in such programs, and such that provide such information for a full any wrap program fees. Therefore, the fees are not reflected in the table six month period. hypothetical information is useful in below. comparing ongoing costs only, and will HYPOTHETICAL EXAMPLE FOR COMPARISON not help you determine the relative PURPOSES total costs of owning different funds. In addition, if these wrap program fees The table below also provides were included, your costs would have information about hypothetical account been higher. values and hypothetical expenses ==================================================================================================================================== ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE SERIES (12/30/05) (2/28/06)(1) PERIOD(2) (2/28/06) PERIOD(3) RATIO C $1,000.00 $1,002.50 $0.00 $1,024.79 $0.00 0.00% M 1,000.00 994.00 0.00 1,024.79 0.00 0.00 (1)The actual ending account value is based on the actual total return of the Fund for the period December 30, 2005, through February 28, 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 period ended February 28, 2006, appear in the table on page 8. (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 61 (December 30, 2005, through February 28, 2006)/365. Because the Funds 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 funds 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. AIM has agreed to irrevocably waive all fees and pay all operating expenses, except extraordinary expenses, incurred by the Fund. (3)Hypothetical expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 181/365 to reflect a one-half year period. The hypothetical ending account value and expenses may be used to compare ongoing costs of investing in the Funds and other funds because such data is based on a full six month period. AIM has agreed to irrevocably waive all fees and pay all operating expenses, except extraordinary expenses, incurred by the Fund. ====================================================================================================================================
9 AIM CORE ALLOCATION PORTFOLIO APPROVAL OF INVESTMENT ADVISORY AGREEMENT The Board of Trustees (the "Board") of o The performance of each Fund relative breakpoints for each Fund or whether, the AIM Core Allocation Portfolio Series to indices. Not applicable because these due to the nature of each Fund and the (the "Trust") oversees the management of are new Funds. advisory fee structures of comparable each Fund of the Trust and, as required funds, it was reasonable to structure by law, determines annually whether to o Meeting with each Fund's portfolio the advisory fee without breakpoints. approve the continuance of each Fund's managers and investment personnel. The Based on this review, the Board advisory agreement with A I M Advisors, Board intends to periodically meet with concluded that it was not necessary to Inc. ("AIM"). Based upon the each Fund's portfolio managers and/or add advisory fee breakpoints to each recommendation of the Investments other investment personnel and believes Fund's advisory fee schedule. The Board Committee of the Board at a meeting held that such individuals are competent and reviewed the level of each Fund's on June 30, 2005, the Board, including able to carry out their responsibilities advisory fees, and noted that such fees, all of the independent trustees, under the Advisory Agreement. as a percentage of each Fund's net approved the initial advisory agreement assets, would remain constant under the (the "Advisory Agreement") between each o Overall performance of AIM. Not Advisory Agreement because the Advisory Fund and AIM for an initial period applicable because these are new Funds. Agreement does not include any beginning December 30, 2005 and ending However, the Board considered the breakpoints. The Board concluded that June 30, 2007. overall performance of AIM in providing each Fund's fee levels under the investment advisory and portfolio Advisory Agreement therefore would not The Board considered the factors administrative services to other mutual reflect economies of scale. However, the discussed below in evaluating the funds advised by AIM and concluded that Board also concluded that the "all-in" fairness and reasonableness of each such performance was satisfactory. nature of each Fund's advisory fee under Fund's Advisory Agreement at the meeting the Advisory Agreement and the fact that on June 30, 2005 and as part of the o Fees relative to those of clients of AIM pays for each Fund's ordinary Board's ongoing oversight of each Fund. AIM with comparable investment operating expenses was beneficial to In their deliberations, the Board and strategies. The Board reviewed the shareholders. the independent trustees did not advisory fee rate for each Fund under identify any particular factor that was the Advisory Agreement. The Board noted o Investments in affiliated money market controlling, and each trustee attributed that this rate was comparable to the funds. The Board also took into account different weights to the various advisory fee rate for one separately the fact that uninvested cash and cash factors. managed wrap account managed by an AIM collateral from securities lending affiliate with investment strategies arrangements (collectively, "cash The discussion below serves as a comparable to those of each Fund. The balances") of each Fund may be invested summary of the discussion of the Board noted the "all-in" nature of the in money market funds advised by AIM material factors and the conclusions advisory fee under the Advisory pursuant to the terms of an SEC with respect thereto that formed the Agreement, whereby AIM pays all of each exemptive order. The Board found that basis for the Board's approval of the Fund's ordinary operating expenses. The each Fund may realize certain benefits Advisory Agreement. After consideration Board also noted that AIM has agreed to upon investing cash balances in AIM of all of the factors below and based on waive advisory fees of each Fund, as advised money market funds, including a its informed business judgment, the discussed below. Based on this review, higher net return, increased liquidity, Board determined that the Advisory the Board concluded that the advisory increased diversification or decreased Agreement is in the best interests of fee rate for each Fund under the transaction costs. The Board also found each Fund and its shareholders and that Advisory Agreement was fair and that each Fund will not receive reduced the compensation to AIM under the reasonable. services if it invests its cash balances Advisory Agreement is fair and in such money market funds. The Board reasonable and would have been obtained o Fees relative to those of comparable further determined that the proposed through arm's length negotiations. funds with other advisors. The Board securities lending program and related reviewed the advisory fee rate for each procedures with respect to each lending SERIES C AND SERIES M Fund under the Advisory Agreement. The Fund is in the best interests of each Board compared contractual advisory fee lending Fund and its respective o The nature and extent of the advisory rates and noted that each Fund's rate shareholders. The Board therefore services to be provided by AIM. The was comparable to the median rate of the concluded that the investment of cash Board reviewed the services to be funds advised by other advisors with collateral received in connection with provided by AIM under the Advisory investment strategies comparable to the securities lending program in the Agreement. Based on this review, the those of each Fund that the Board money market funds according to the Board concluded that the range of reviewed. The Board also noted the procedures is in the best interests of services to be provided by AIM under the "all-in" nature of the advisory fee each lending Fund and its respective Advisory Agreement was appropriate. under the Advisory Agreement, whereby shareholders. AIM pays all of each Fund's ordinary o The quality of services to be provided operating expenses. The Board noted that o Profitability of AIM and its by AIM. The Board reviewed the AIM has agreed to waive advisory fees of affiliates. The Board reviewed credentials and experience of the each Fund, as discussed below. Based on information concerning the profitability officers and employees of AIM who will this review, the Board concluded that of AIM's (and its affiliates') provide investment advisory services to the advisory fee rate for each Fund investment advisory and other activities each Fund. In reviewing the under the Advisory Agreement was fair and its financial condition. The Board qualifications of AIM to provide and reasonable. considered the overall profitability of investment advisory services, the Board AIM, as well as the profitability of AIM reviewed the qualifications of AIM's o Expense limitations and fee waivers. in connection with managing each Fund. investment personnel and considered such The Board noted that AIM has irrevocably The Board noted that AIM's operations issues as AIM's portfolio and product agreed to waive all advisory fees of remain profitable, although increased review process, various back office each Fund. The Board considered the expenses in recent years have reduced support functions by AIM and AIM's irrevocable nature of this fee waiver AIM's profitability. Based on the review equity and fixed income trading and noted that it cannot be terminated of the profitability of AIM's and its operations. Based on the review of these without shareholder approval. The Board affiliates' investment advisory and and other factors, the Board concluded considered the effect this fee waiver other activities and its financial that the quality of services to be would have on each Fund's estimated condition, the Board concluded that the provided by AIM was appropriate. expenses and concluded that the levels compensation to be paid by each Fund to of fee waivers/expense limitations for AIM under the Advisory Agreement was not o The performance of each Fund relative each Fund were fair and reasonable. excessive. to comparable funds. Not applicable because these are new Funds. However, o Breakpoints and economies of scale. o Benefits of soft dollars to AIM. The the Board reviewed the performance of a The Board reviewed the structure of each Board considered the benefits realized mutual fund and a variable insurance Fund's advisory fee under the Advisory by AIM as a result of brokerage fund formerly managed by the portfolio Agreement, noting that it does not transactions executed through "soft managers who will manage each Fund and include any breakpoints. The Board dollar" arrangements. Under these concluded that these portfolio managers considered whether it would be arrangements, brokerage commissions paid were qualified to provide satisfactory appropriate to add advisory fee by each Fund and/or other funds services in accordance with the terms of the Advisory Agreement. (continued)
10 AIM CORE ALLOCATION PORTFOLIO advised by AIM are used to pay for agreement (the "Sub-Advisory Agreement") o Advisory fees, expense limitations and research and execution services. This between INVESCO Institutional (N.A.), fee waivers, and breakpoints and research is used by AIM in making Inc. (the "Sub-Advisor") and AIM with economies of scale. In reviewing these investment decisions for each Fund. The respect to each Fund beginning on factors, the Board considered only the Board concluded that such arrangements December 30, 2005. advisory fees charged to each Fund by were appropriate. AIM and did not consider the The Board considered the factors sub-advisory fees paid by AIM to the o AIM's financial soundness in light of discussed below in evaluating the Sub-Advisor. The Board believes that each Fund's needs. The Board considered fairness and reasonableness of the this approach is appropriate because the whether AIM is financially sound and has Sub-Advisory Agreement at the meeting on sub-advisory fees have no effect on the resources necessary to perform its June 30, 2005 and as part of the Board's either Fund or its shareholders, as they obligations under the Advisory ongoing oversight of each Fund. In their are paid by AIM rather than each Fund. Agreement, and concluded that AIM has deliberations, the Board and the Furthermore, AIM and the Sub-Advisor are the financial resources necessary to independent trustees did not identify affiliates and the Board believes that fulfill its obligations under the any particular factor that was the allocation of fees between them is a Advisory Agreement. controlling, and each trustee attributed business matter, provided that the different weights to the various advisory fees charged to each Fund are o Historical relationship between each factors. fair and reasonable. Fund and AIM. In determining whether to approve the Advisory Agreement for each The discussion below serves as a o Profitability of AIM and its Fund, the Board also considered the discussion of the material factors and affiliates. The Board reviewed Board's knowledge of AIM's operations, the conclusions with respect thereto information concerning the profitability and concluded that it was beneficial to that formed the basis for the Board's of AIM's (and its affiliates') maintain the current relationship, in approval of the Sub-Advisory Agreement. investment advisory and other activities part, because of such knowledge. The After consideration of all of the and its financial condition. The Board Board also reviewed the general nature factors below and based on its informed considered the overall profitability of of the non-investment advisory services business judgment, the Board determined AIM, as well as the profitability of AIM currently performed by AIM and its that the Sub-Advisory Agreement is in in connection with managing each Fund. affiliates for other mutual funds, such the best interests of each Fund and its The Board noted that AIM's operations as administrative, transfer agency and shareholders. remain profitable although increased distribution services, and the fees expenses in recent years have reduced received by AIM and its affiliates for SERIES C AND SERIES M AIM's profitability. Based on the review performing such services. In addition to of the profitability of AIM's and its reviewing such services, the trustees o The nature and extent of the advisory affiliates' investment advisory and also considered the organizational services to be provided by the other activities and its financial structure employed by AIM and its Sub-Advisor. The Board reviewed the condition, the Board concluded that the affiliates to provide those services. services to be provided by the compensation to be paid by each Fund to Based on the review of these and other Sub-Advisor under the Sub-Advisory AIM under the Advisory Agreement was not factors, the Board concluded that AIM Agreement. Based on this review, the excessive. and its affiliates are providing Board concluded that the range of satisfactory non-investment advisory services to be provided by the o The Sub-Advisor's financial soundness services to other mutual funds advised Sub-Advisor under the Sub-Advisory in light of each Fund's needs. The Board by AIM and that AIM and its affiliates Agreement was appropriate. considered whether the Sub-Advisor is were qualified to provide non-investment financially sound and has the resources advisory services to each Fund, o The quality of services to be provided necessary to perform its obligations including administrative, transfer by the Sub-Advisor. The Board reviewed under the Sub-Advisory Agreement, and agency and distribution services. the credentials and experience of the concluded that the Sub-Advisor has the officers and employees of the financial resources necessary to fulfill o Other factors and current trends. In Sub-Advisor who will provide investment its obligations under the Sub-Advisory determining whether to approve the advisory services to each Fund. Based on Agreement. Advisory Agreement for each Fund, the the review of these and other factors, Board considered the fact that AIM, the Board concluded that the quality of along with the rest of the mutual fund services to be provided by the industry, is subject to regulatory Sub-Advisory was appropriate. inquiries and litigation related to a wide range of issues. The Board also o The performance of each Fund relative considered the governance and compliance to comparable funds. Not applicable reforms being undertaken by AIM and its because these are new Funds. However, affiliates, including maintaining an the Board reviewed the performance of a internal controls committee and mutual fund and a variable insurance retaining an independent compliance fund formerly managed by the portfolio consultant, and the fact that AIM has managers who will manage each Fund and undertaken to cause each Fund to operate concluded that these portfolio managers in accordance with certain governance were qualified to provide satisfactory policies and practices. The Board services in accordance with the terms of concluded that these actions indicated a the Sub-Advisory Agreement. good faith effort on the part of AIM to adhere to the highest ethical standards, o The performance of each Fund relative and determined that the current to indices. Not applicable because these regulatory and litigation environment to are new Funds. which AIM is subject should not prevent the Board from approving the Advisory o Meeting with each Fund's portfolio Agreement for each Fund. managers and investment personnel. The Board intends to meet periodically with APPROVAL OF SUB-ADVISORY AGREEMENT each Fund's portfolio managers and/or other investment personnel and believes The Board oversees the management of that such individuals are competent and each Fund and, as required by law, able to carry out their responsibilities determines annually whether to approve under the Sub-Advisory Agreement. the continuation of each Fund's sub-advisory agreement. Based upon the o Overall performance of the recommendation of the Investments Sub-Advisor. Not applicable because Committee of the Board at a meeting held these are new Funds. However, the Board on June 30, 2005, the Board, including considered the overall performance of all of the independent trustees, the Sub-Advisor in providing approved the initial sub-advisory sub-advisory services to other mutual funds and concluded that such performance was satisfactory.
11 AIM CORE ALLOCATION PORTFOLIO SERIES C SCHEDULE OF INVESTMENTS February 28, 2006 (Unaudited)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------- BONDS & NOTES-59.39% AUTO PARTS & EQUIPMENT-3.70% Johnson Controls, Inc., Sr. Notes, 6.00%, 01/15/36(a) $ 50,000 $ 49,592 ===================================================================== BROADCASTING & CABLE TV-1.14% Comcast Corp., Unsec. Gtd. Notes, 6.45%, 03/15/37 15,000 15,236 ===================================================================== COMMODITY CHEMICALS-1.68% BCP Crystal US Holdings Corp., Sr. Sub. Global Notes, 9.63%, 06/15/14(a) 20,000 22,550 ===================================================================== CONSUMER FINANCE-8.69% Capital One Bank, Sub. Notes, 6.50%, 06/13/13(a) 40,000 42,290 - --------------------------------------------------------------------- HSBC Finance Corp., Global Notes, 4.75%, 05/15/09(a) 75,000 74,026 ===================================================================== 116,316 ===================================================================== DEPARTMENT STORES-1.45% Dillard's, Inc., Notes, 7.13%, 08/01/18(a) 20,000 19,400 ===================================================================== HOMEBUILDING-0.75% Hovnanian Enterprises Inc., Sr. Unsec. Gtd. Notes, 7.50%, 05/15/16(a) 10,000 10,000 ===================================================================== HOUSEWARES & SPECIALTIES-0.37% Fortune Brands, Inc., Notes, 5.38%, 01/15/16(a) 5,000 4,922 ===================================================================== INDEPENDENT POWER PRODUCERS & ENERGY TRADERS-2.87% Duke Energy Field Services Corp., Sr. Unsec. Notes, 7.88%, 08/16/10(a) 35,000 38,484 ===================================================================== INTEGRATED TELECOMMUNICATION SERVICES-16.56% AT&T Corp., Sr. Unsec. Gtd. Global Notes, 9.75%, 11/15/31(a) 35,000 43,950 - --------------------------------------------------------------------- BellSouth Corp., Global Bonds, 5.20%, 09/15/14(a) 45,000 44,475 - --------------------------------------------------------------------- British Telecommunications PLC, Global Notes, 8.38%, 12/15/10(a) 50,000 56,339 - --------------------------------------------------------------------- Citizens Communications Co., Sr. Unsec. Notes, 6.25%, 01/15/13(a) 20,000 19,600 - --------------------------------------------------------------------- Telecom Italia Capital, Global Notes, 5.25%, 10/01/15(a) 45,000 43,069 - --------------------------------------------------------------------- Unsec. Gtd. Unsub. Global Notes, 6.00%, 09/30/34(a) 10,000 9,503 - --------------------------------------------------------------------- Verizon Global Funding Corp., Global Bonds, 5.85%, 09/15/35(a) 5,000 4,779 ===================================================================== 221,715 ===================================================================== MANAGED HEALTH CARE-1.88% UnitedHealth Group Inc., Sr. Unsec. Notes, 5.80%, 03/15/36(a) 25,000 25,159 =====================================================================
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------
MULTI-UTILITIES-4.26% Pacific Gas and Electric Co., Unsec. Bonds, 6.05%, 03/01/34(a) $ 55,000 $ 57,042 ===================================================================== OIL & GAS REFINING & MARKETING-2.28% Kaneb Pipe Line Operating Partnership, L.P., Sr. Unsec. Notes, 5.88%, 06/01/13(a) 30,000 30,552 ===================================================================== OIL & GAS STORAGE & TRANSPORTATION-2.90% Kinder Morgan Energy Partners, L.P., Notes, 5.13%, 11/15/14(a) 40,000 38,804 ===================================================================== OTHER DIVERSIFIED FINANCIAL SERVICES-1.49% Residential Capital Corp., Gtd. Notes, 6.00%, 02/22/11(a) 20,000 19,887 ===================================================================== PHARMACEUTICALS-3.01% Wyeth, Unsec. Global Notes, 5.50%, 02/15/16(a) 40,000 40,295 ===================================================================== REAL ESTATE-2.91% ERP Operating L.P., Unsec. Unsub. Notes, 5.13%, 03/15/16(a) 40,000 38,911 ===================================================================== WIRELESS TELECOMMUNICATION SERVICES-3.45% Sprint Capital Corp., Sr. Unsec. Gtd. Global Notes, 8.38%, 03/15/12(a) 40,000 46,117 ===================================================================== Total Bonds & Notes (Cost $799,821) 794,982 ===================================================================== U.S. MORTGAGE-BACKED SECURITIES-22.62% FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-22.62% Pass Through Ctfs., TBA, 6.00%, 03/01/36(a)(b) 300,000 302,812 ===================================================================== Total U.S. Mortgage-Backed Securities (Cost $302,063) 302,812 ===================================================================== U.S. GOVERNMENT AGENCY SECURITIES-9.89% FEDERAL HOME LOAN MORTGAGE CORP (FHLMC)-8.74% Global Notes, 4.13%, 07/12/10(a) 50,000 48,473 - --------------------------------------------------------------------- Unsec. Global Notes, 3.88%, 06/15/08(a) 70,000 68,487 ===================================================================== 116,960 ===================================================================== FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-1.15% Global Notes, 5.38%, 11/15/11(a) 15,000 15,318 ===================================================================== Total U.S. Government Agency Securities (Cost $132,766) 132,278 =====================================================================
12 AIM CORE ALLOCATION PORTFOLIO SERIES C
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------- U.S. TREASURY SECURITIES-3.09% U.S. TREASURY BILLS-0.44% 4.39%, 06/29/06(a)(d) $ 6,000(c) $ 5,910 ===================================================================== U.S. TREASURY NOTES-2.65% 4.88%, 02/15/12(a) 35,000 35,476 ===================================================================== Total U.S. Treasury Securities (Cost $41,335) 41,386 ===================================================================== TOTAL INVESTMENTS-94.99% (Cost $1,275,985) 1,271,458 ===================================================================== OTHER ASSETS LESS LIABILITIES-5.01% 67,120 ===================================================================== NET ASSETS-100.00% $1,338,578 _____________________________________________________________________ =====================================================================
Investment Abbreviations: Ctfs. - Certificates Gtd. - Guaranteed Sr. - Senior Sub. - Subordinated TBA - To Be Announced Unsec. - Unsecured Unsub. - Unsubordinated
Notes to Schedule of Investments: (a) In accordance with the procedures established by the Board of Trustees, security fair valued based on an evaluated quote provided by an independent pricing service. The aggregate value of these securities at February 28, 2006 was $1,256,222, which represented 93.85% of the Fund's Net Assets. See Note 1A. (b) Security purchased on forward commitment basis. (c) A portion of the principal balance was pledged as collateral to cover margin requirements for open futures contracts. See Note 1F and Note 4. (d) Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. See accompanying Notes to Financial Statements which are an integral part of the financial statements. 13 AIM CORE ALLOCATION PORTFOLIO SERIES C STATEMENT OF ASSETS AND LIABILITIES February 28, 2006 (Unaudited) ASSETS: Investments, at value (cost $1,275,985) $1,271,458 - ----------------------------------------------------------- Cash 115,434 - ----------------------------------------------------------- Receivables for: Investments sold 63,277 - ----------------------------------------------------------- Fund shares sold 285,700 - ----------------------------------------------------------- Interest 14,206 =========================================================== Total assets 1,750,075 ___________________________________________________________ =========================================================== LIABILITIES: Payables for: Investments purchased 410,887 - ----------------------------------------------------------- Variation margin 610 =========================================================== Total liabilities 411,497 =========================================================== Net assets applicable to shares outstanding $1,338,578 ___________________________________________________________ =========================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $1,344,622 - ----------------------------------------------------------- Undistributed net investment income 566 - ----------------------------------------------------------- Undistributed net realized gain (loss) from investment securities and futures contracts (1,748) - ----------------------------------------------------------- Unrealized appreciation (depreciation) from investment securities and futures contracts (4,862) =========================================================== $1,338,578 ___________________________________________________________ =========================================================== SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Outstanding 134,702 ___________________________________________________________ =========================================================== Net asset value and offering price per share $ 9.94 ___________________________________________________________ ===========================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 14 AIM CORE ALLOCATION PORTFOLIO SERIES C STATEMENT OF OPERATIONS For the period December 30, 2005 (Date operations commenced) through February 28, 2006 (Unaudited) INVESTMENT INCOME: Interest $ 9,488 ===================================================================== EXPENSES: Advisory fees 404 ===================================================================== Less: Fees waived (404) ===================================================================== Net investment income 9,488 ===================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FUTURES CONTRACTS: Net realized gain (loss) from: Investment securities (4,807) - --------------------------------------------------------------------- Futures contracts 3,059 ===================================================================== (1,748) ===================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities (4,527) - --------------------------------------------------------------------- Futures contracts (335) ===================================================================== (4,862) ===================================================================== Net gain (loss) from investment securities, and futures contracts (6,610) ===================================================================== Net increase in net assets resulting from operations $ 2,878 _____________________________________________________________________ =====================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 15 AIM CORE ALLOCATION PORTFOLIO SERIES C STATEMENT OF CHANGES IN NET ASSETS For the period December 30, 2005 (Date operations commenced) through February 28, 2006 (Unaudited)
FEBRUARY 28, 2006 - ---------------------------------------------------------------------------- OPERATIONS: Net investment income $ 9,488 - ---------------------------------------------------------------------------- Net realized gain (loss) on investment securities and futures contracts (1,748) - ---------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities and futures contracts (4,862) ============================================================================ Net increase in net assets resulting from operations 2,878 ============================================================================ Distributions to shareholders from net investment income (8,922) ============================================================================ Share transactions-net 1,344,622 ============================================================================ Net increase in net assets 1,338,578 ============================================================================ NET ASSETS: Beginning of period -- ============================================================================ End of period (including undistributed net investment income of $566) $1,338,578 ____________________________________________________________________________ ============================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 16 AIM CORE ALLOCATION PORTFOLIO SERIES C NOTES TO FINANCIALS STATEMENTS February 28, 2006 (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Series C (the "Fund") is a series portfolio of AIM Core Allocation Portfolio Series (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 two separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. 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 is used exclusively for separately managed accounts (e.g. wrap fee or certain other programs advised or sub-advised by A I M Advisors, Inc. ("AIM") or its affiliates for whom AIM or its affiliates have a fixed income mandate). Clients pay a wrap fee or similar fee to participate in such programs. The Fund's investment objective is to achieve high total return consistent with preservation of capital. 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) is valued based on the basis of 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. 17 AIM CORE ALLOCATION PORTFOLIO SERIES C 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. 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. 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 daily and paid monthly. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to 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. 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. G. 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 management agreement with AIM pursuant to which AIM provides all management and advisory services necessary for the operation of the Fund. AIM benefits from the Fund being an investment option in wrap fee and certain other programs advised or sub-advised by AIM or its affiliates. AIM and/or its affiliates receive fees for advising or sub-advising such wrap programs. Under the terms of the investment management agreement, the Fund has agreed to pay an advisory fee to AIM based on the annual rate equal to 0.23% of the Fund's average daily net assets. However, AIM has agreed irrevocably to waive all fees and pay all expenses incurred by the Fund in connection with its operations, except for (i) all brokers' commissions, issue and transfer taxes, foreign taxes and other costs chargeable to the Trust or the Fund in connection with securities transactions to which the Trust or the Fund is a party or in connection with securities owned by the Trust or the Fund; (ii) costs, including interest expense, of borrowing money; and (iii) extraordinary items such as litigation costs authorized by the Board of Trustees. Under the terms of a master sub-advisory agreement between AIM and INVESCO Institutional (N.A.), Inc. ("INVESCO"), AIM pays INVESCO 0.11% of the Fund's average daily net assets. For the period December 30, 2005 (date operations commenced) through February 28, 2006, AIM waived fees of $404. The Trust has entered into a master administrative services agreement with AIM whereby AIM provides accounting, shareholder and other administrative services to the Fund. AIM does not charge the Fund any fees under the administrative services agreement. The Trust has also entered into a transfer 18 AIM CORE ALLOCATION PORTFOLIO SERIES C agency and service agreement with AIM and AIM Investment Services, Inc. ("AISI") whereby AISI provides transfer agency and shareholder services to the Fund. The Fund is not charged any fees pursuant to such agreement. The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Fund's shares. The Fund is not charged any fees pursuant to the distribution agreement with ADI. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI. NOTE 3--BORROWINGS The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian 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 4--FUTURES CONTRACTS On February 28, 2006, $300,000 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 - --------------------------------------------------------------------------------------------------------------------- UNREALIZED NUMBER OF MONTH/ APPRECIATION CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION) - --------------------------------------------------------------------------------------------------------------------- U.S. Treasury 5 Year Notes 3 Mar-06/Short $315,703 $(335) _____________________________________________________________________________________________________________________ =====================================================================================================================
NOTE 5--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. NOTE 6--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 period December 30, 2005 (date operations commenced) through February 28, 2006 was $1,718,764 and $746,380, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $ 2,029 - ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (6,556) =============================================================================== Net unrealized appreciation of investment securities $(4,527) _______________________________________________________________________________ =============================================================================== Cost of investments is the same for tax and financial statement purposes.
19 AIM CORE ALLOCATION PORTFOLIO SERIES C NOTE 7--SHARE INFORMATION The Fund currently offers one class of shares.
CHANGES IN SHARES OUTSTANDING - ------------------------------------------------------------------------------------ DECEMBER 30, 2005 (DATE OPERATIONS COMMENCED) TO FEBRUARY 28, 2006(A) ---------------------- SHARES AMOUNT - ------------------------------------------------------------------------------------ Sold 133,803 $1,335,700 - ------------------------------------------------------------------------------------ Issued as reinvestment of dividends 899 8,922 ==================================================================================== 134,702 $1,344,622 ____________________________________________________________________________________ ====================================================================================
(a) There is one entity that is a record owner of more than 5% outstanding shares of the Fund and it owns 15% of the outstanding shares of the Fund. ADI has an agreement with this entity to sell Fund shares. The Fund, AIM, and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM, and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this entity are also owned beneficially. In addition, 79% of the outstanding shares of the Fund are owned by AIM. NOTE 8--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding for the period indicated.
DECEMBER 30, 2005 (DATE OPERATIONS COMMENCED) TO FEBRUARY 28, 2006 - --------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 - --------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.09 - --------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (0.07) ================================================================================= Total from investment operations 0.02 ================================================================================= Less dividends from net investment income (0.08) ================================================================================= Net asset value, end of period $ 9.94 _________________________________________________________________________________ ================================================================================= Total return(a) 0.25% _________________________________________________________________________________ ================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,339 _________________________________________________________________________________ ================================================================================= Ratio of expenses to average net assets: With fee waivers 0.00%(b) - --------------------------------------------------------------------------------- Without fee waivers 0.23%(b) ================================================================================= Ratio of net investment income to average net assets 5.41%(b) _________________________________________________________________________________ ================================================================================= Portfolio turnover rate(c) 80% _________________________________________________________________________________ =================================================================================
(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 $1,050,170. (c)Not annualized for periods less than one year. 20 AIM CORE ALLOCATION PORTFOLIO SERIES M SCHEDULE OF INVESTMENTS February 28, 2006 (Unaudited)
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------- U.S. TREASURY SECURITIES-50.64%(a) U.S. TREASURY BILLS-0.52%(b) 4.39%, 06/29/06 $ 7,000 $ 6,895 ===================================================================== U.S. TREASURY NOTES-43.52% 4.88%, 02/15/12 570,000 577,746 ===================================================================== U.S. TREASURY BONDS-6.60% 6.00%, 02/15/26 75,000 87,656 ===================================================================== Total U.S. Treasury Securities (Cost $673,564) 672,297 ===================================================================== U.S. GOVERNMENT AGENCY SECURITIES-24.63%(a) FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-7.00% Unsec. Global Notes, 3.88%, 06/15/08 95,000 92,946 ===================================================================== FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-17.63% Unsec. Global Notes, 3.88%, 07/15/08 95,000 92,917 ===================================================================== 5.25%, 04/15/07 140,000 141,141 ===================================================================== 234,058 ===================================================================== Total U.S. Government Agency Securities (Cost $327,295) 327,004 =====================================================================
PRINCIPAL AMOUNT VALUE - ---------------------------------------------------------------------
U.S. MORTGAGE-BACKED SECURITIES-22.81% FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-22.81% Pass Through Ctfs., TBA,(a)(c) 6.00% (Cost $302,063), 03/01/36 $300,000 $ 302,813 ===================================================================== ASSET-BACKED SECURITIES-9.46% COLLATERALIZED MORTGAGE OBLIGATIONS-9.46% Banc of America Commercial Mortgage Inc.(d) Series 2006-1, Class A4 Pass Through Ctfs. 5.37%, 09/10/45 (Cost $125,629) 125,000 125,629 ===================================================================== TOTAL INVESTMENTS-107.54% (Cost $1,428,551) 1,427,743 ===================================================================== OTHER ASSETS LESS LIABILITIES-(7.54)% (100,130) ===================================================================== NET ASSETS-100.00% $1,327,613 _____________________________________________________________________ =====================================================================
Investment Abbreviations: Ctfs. - Certificates TBA - To Be Announced Unsec. - Unsecured
Notes to Schedule of Investments: (a) In accordance with the procedures established by the Board of Trustees, security fair valued based on an evaluated quote provided by an independent pricing service. The aggregate value of these securities at February 28, 2006 was $1,302,114, which represented 98.08% of the Fund's Net Assets. See Note 1A. (b) Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. (c) Security purchased on forward commitment basis. (d) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The value of this security at February 28, 2006 represented 9.46% of the Fund's Net Assets. See Note 1A. See accompanying Notes to Financial Statements which are an integral part of the financial statements. 21 AIM CORE ALLOCATION PORTFOLIO SERIES M STATEMENT OF ASSETS AND LIABILITIES February 28, 2006 (Unaudited) ASSETS: Investments, at value (cost $1,428,551) $1,427,743 - ----------------------------------------------------------- Cash 86,555 - ----------------------------------------------------------- Receivables for: Investments sold 182,792 - ----------------------------------------------------------- Fund shares sold 283,851 - ----------------------------------------------------------- Interest 6,067 =========================================================== Total assets 1,987,008 ___________________________________________________________ =========================================================== LIABILITIES: Payables for investments purchased 659,395 =========================================================== Total liabilities 659,395 =========================================================== Net assets applicable to shares outstanding $1,327,613 ___________________________________________________________ =========================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $1,342,246 - ----------------------------------------------------------- Undistributed net investment income (327) - ----------------------------------------------------------- Undistributed net realized gain (loss) from investment securities and futures contracts (13,498) - ----------------------------------------------------------- Unrealized appreciation (depreciation) from investment securities (808) =========================================================== $1,327,613 ___________________________________________________________ =========================================================== SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Outstanding 134,680 ___________________________________________________________ =========================================================== Net asset value and offering price per share $ 9.86 ___________________________________________________________ ===========================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 22 AIM CORE ALLOCATION PORTFOLIO SERIES M STATEMENT OF OPERATIONS For the period December 30, 2005 (Date operations commenced) through February 28, 2006 (Unaudited) INVESTMENT INCOME: Interest $ 8,068 ====================================================================== EXPENSES: Advisory fees 403 - ---------------------------------------------------------------------- Less: Fees waived (403) ====================================================================== Net expenses -- ====================================================================== Net investment income 8,068 ====================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FUTURE CONTRACTS: Net realized gain (loss) from: Investment securities (14,787) - ---------------------------------------------------------------------- Futures contracts 1,289 ====================================================================== (13,498) ====================================================================== Change in net unrealized appreciation (depreciation) of investment securities (808) ====================================================================== Net gain (loss) from investment securities and futures contracts (14,306) ====================================================================== Net increase (decrease) in net assets resulting from operations $ (6,238) ______________________________________________________________________ ======================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 23 AIM CORE ALLOCATION PORTFOLIO SERIES M STATEMENT OF CHANGES IN NET ASSETS For the period December 30, 2005 (Date operations commenced) through February 28, 2006 (Unaudited)
FEBRUARY 28, 2006 - -------------------------------------------------------------------------- OPERATIONS: Net investment income $ 8,068 - -------------------------------------------------------------------------- Net realized gain (loss) on investment securities and futures contracts (13,498) - -------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities (808) ========================================================================== Net increase (decrease) in net assets resulting from operations (6,238) ========================================================================== Distributions to shareholders from net investment income (8,395) ========================================================================== Share transactions-net: 1,342,246 ========================================================================== Net increase in net assets 1,327,613 ========================================================================== NET ASSETS: Beginning of period -- ========================================================================== End of period (including undistributed net investment income of $(327)) $1,327,613 __________________________________________________________________________ ==========================================================================
NOTES TO FINANCIALS STATEMENTS February 28, 2006 (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Series M (the "Fund") is a series portfolio of AIM Core Allocation Portfolio Series (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 two separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. 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 is used exclusively for separately managed accounts (e.g. wrap fee or certain other programs advised or sub-advised by A I M Advisors, Inc. ("AIM") or its affiliates for whom AIM or its affiliates have a fixed income mandate). Clients pay a wrap fee or similar fee to participate in such programs. The Fund's investment objective is to achieve high total return consistent with preservation of capital. 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 basis of 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"). 24 AIM CORE ALLOCATION PORTFOLIO SERIES M 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. 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. 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. 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 daily and paid monthly. Distributions from net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to 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. 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. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment management agreement with AIM pursuant to which AIM provides all management and advisory services necessary for the operation of the Fund. AIM benefits from the Fund being an investment option in wrap fee and certain other programs advised or sub-advised by AIM or its affiliates. AIM and/or its affiliates receive fees for advising or sub-advising such wrap programs. Under the terms of the investment management agreement, the Fund has agreed to pay an advisory fee to AIM based on the annual rate equal to 0.23% of the Fund's average daily net assets. However, AIM has agreed irrevocably to waive all fees and pay all expenses incurred by the Fund in connection with its operations, except for 25 AIM CORE ALLOCATION PORTFOLIO SERIES M (i) all brokers' commissions, issue and transfer taxes, foreign taxes and other costs chargeable to the Trust or the Fund in connection with securities transactions to which the Trust or the Fund is a party or in connection with securities owned by the Trust or the Fund; (ii) costs, including interest expense, of borrowing money; and (iii) extraordinary items such as litigation costs authorized by the Board of Trustees. Under the terms of a master sub-advisory agreement between AIM and INVESCO Institutional (N.A.), Inc. ("INVESCO"), AIM pays INVESCO 0.11% of the Fund's average daily net assets. For the period December 30, 2005 (date operations commenced) through February 28, 2006, AIM waived fees of $403. The Trust has entered into a master administrative services agreement with AIM whereby AIM provides accounting, shareholder and other administrative services to the Fund. AIM does not charge the Fund any fees under the administrative services agreement. The Trust has also entered into a transfer agency and service agreement with AIM and AIM Investment Services, Inc. ("AISI") whereby AISI provides transfer agency and shareholder services to the Fund. The Fund is not charged any fees pursuant to such agreement. The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Fund's shares. The Fund is not charged any fees pursuant to the distribution agreement with ADI. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI. NOTE 3--BORROWINGS The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian 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 4--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. NOTE 5--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 period December 30, 2005 (date operations commenced) through February 28, 2006 was $2,643,008 and $1,509,086, 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 $ 1,637 - ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (2,445) =============================================================================== Net unrealized appreciation of investment securities $ (808) _______________________________________________________________________________ =============================================================================== Cost of investments is the same for tax and financial statement purposes.
26 AIM CORE ALLOCATION PORTFOLIO SERIES M NOTE 6--SHARE INFORMATION The Fund currently offers one class of shares.
CHANGES IN SHARES OUTSTANDING - ------------------------------------------------------------------------------------- DECEMBER 30, 2005 (DATE OPERATIONS COMMENCED) THROUGH FEBRUARY 28, 2006(a) ----------------------- SHARES AMOUNT - ------------------------------------------------------------------------------------- Sold 133,829 $1,333,851 - ------------------------------------------------------------------------------------- Issued as reinvestment of dividends 851 8,395 ===================================================================================== 134,680 $1,342,246 _____________________________________________________________________________________ =====================================================================================
(a) There is one entity that is a record owner of more than 5% outstanding shares of the Fund and it owns 15% of the outstanding shares of the Fund. ADI has an agreement with this entity to sell Fund shares. The Fund, AIM, and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM, and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this entity are also owned beneficially. In addition, 79% of the outstanding shares of the Fund are owned by AIM. NOTE 7--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
DECEMBER 30, 2005 (DATE OPERATIONS COMMENCED) TO FEBRUARY 28, 2006 - --------------------------------------------------------------------------- Net asset value, beginning of period $10.00 - --------------------------------------------------------------------------- Income from investment operations: Net investment income 0.08 - --------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (0.14) =========================================================================== Total from investment operations (0.06) =========================================================================== Less dividends from net investment income (0.08) =========================================================================== Net asset value, end of period $ 9.86 ___________________________________________________________________________ =========================================================================== Total return(a) (0.60)% ___________________________________________________________________________ =========================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $1,328 ___________________________________________________________________________ =========================================================================== Ratio of expenses to average net assets: With fee waivers 0.00%(b) - --------------------------------------------------------------------------- Without fee waivers 0.23%(b) =========================================================================== Ratio of net investment income to average net assets 4.60%(b) ___________________________________________________________________________ =========================================================================== Portfolio turnover rate(c) 161% ___________________________________________________________________________ ===========================================================================
(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 $1,048,841. (c) Not annualized for periods less than one year. 27 AIM CORE ALLOCATION PORTFOLIO SERIES M LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. PENDING LITIGATION On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against A I M Advisors, Inc. ("AIM"), INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds) and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds), 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 sec. 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 PLC, the parent company of IFG and AIM, 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 Securities and Exchange Commission 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. 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 described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * As a result of the matter 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. 28 AIM CORE ALLOCATION PORTFOLIO SERIES TRUSTEES AND OFFICERS BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND Bob R. Baker Robert H. Graham 11 Greenway Plaza President and Principal Suite 100 Frank S. Bayley Executive Officer Houston, TX 77046-1173 James T. Bunch Mark H. Williamson INVESTMENT ADVISOR Executive Vice President A I M Advisors, Inc. Bruce L. Crockett 11 Greenway Plaza Chair Todd L. Spillane Suite 100 Chief Compliance Officer Houston, TX 77046-1173 Albert R. Dowden Russell C. Burk TRANSFER AGENT Edward K. Dunn Jr. Senior Vice President and Senior Officer AIM Investment Services, Inc. P.O. Box 4739 Jack M. Fields John M. Zerr Houston, TX 77210-4739 Senior Vice President, Secretary and Chief Carl Frischling Legal Officer CUSTODIAN State Street Bank and Trust Company Robert H. Graham Sidney M. Dilgren 225 Franklin Street Vice Chair Vice President, Treasurer Boston, MA 02110-2801 and Principal Financial Officer Prema Mathai-Davis COUNSEL TO THE FUND Lisa O. Brinkley Ballard Spahr Lewis F. Pennock Vice President Andrews & Ingersoll, LLP 1735 Market Street, 51st Floor Ruth H. Quigley Kevin M. Carome Philadelphia, PA 19103-7599 Vice President Larry Soll COUNSEL TO THE INDEPENDENT TRUSTEES J. Philip Ferguson Kramer, Levin, Naftalis & Frankel LLP Raymond Stickel, Jr. Vice President 1177 Avenue of the Americas New York, NY 10036-2714 Mark H. Williamson Karen Dunn Kelley Vice President DISTRIBUTOR A I M Distributors, Inc. 11 Greenway Plaza Suite 100 Houston, TX 77046-1173 SUB-ADVISOR INVESCO Institutional (N.A.), Inc. Fixed Income Division The Aegon Center 400 West Market Street Louisville, KY 40402-3346
================================================== 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 PAMCAPS-SAR-1 [YOUR GOALS. OUR SOLUTIONS.] --Registered Trademark-- Mutual Retirement Annuities College Separately Offshore Cash Funds Products Savings Managed Products Management Plans Accounts
[AIM INVESTMENTS LOGO APPEARS HERE] --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 Core Allocation Portfolio Series By: /s/ Robert H. Graham --------------------------- Robert H. Graham Principal Executive Officer Date: May 8, 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: May 8, 2006 By: /s/ Sidney M. Dilgren -------------------------- Sidney M. Dilgren Principal Financial Officer Date: May 8, 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.CERT 2 h35375exv99wcert.txt CERTIFICATIONS OF PEO AND PFO I, Robert H. Graham, Principal Executive Officer, certify that: 1. I have reviewed this report on Form N-CSR of AIM Core Allocation Portfolio Series; 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: May 8, 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 Core Allocation Portfolio Series; 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: May 8, 2006 /s/ Sidney M. Dilgren --------------------------------- Sidney M. Dilgren, Principal Financial Officer EX-99.906CERT 3 h35375exv99w906cert.txt CERTIFICATIONS OF PEO AND PFO CERTIFICATION OF SHAREHOLDER REPORT In connection with the Certified Shareholder Report of AIM Core Allocation Portfolio Series (the "Company") on Form N-CSR for the period ended February 28, 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: May 8, 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 Core Allocation Portfolio Series (the "Company") on Form N-CSR for the period ended February 28, 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: May 8, 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-----