N-CSR 1 h20296nvcsr.txt AIM INTERNATIONAL MUTUAL FUNDS - DATED 10/31/2004 . . . ------------------------- OMB APPROVAL ------------------------- OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 -------------------------
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 811-6463 --------------------------------------------- AIM International Mutual Funds -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 11 Greenway Plaza, Suite 100 Houston, Texas 77046 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Robert H. Graham 11 Greenway Plaza, Suite 100 Houston, Texas 77046 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (713) 626-1919 ----------------------------- Date of fiscal year end: 10/31 ------------------ Date of reporting period: 10/31/04 ------------------ AIM ASIA PACIFIC GROWTH FUND Annual Report to Shareholders o October 31, 2004 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Registered Trademark-- --Registered Trademark-- ==================================================================================================================================== AIM ASIA PACIFIC GROWTH FUND SEEKS TO PROVIDE LONG-TERM CAPITAL GROWTH. o Unless otherwise stated, information presented in this report is as of 10/31/04 and is based on total net assets. ==================================================================================================================================== ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT the net assets of the fund at period end for financial reporting purposes, and as o Effective 9/30/03, Class B shares are o The unmanaged MSCI Europe, Australasia such, the net asset values for not available as an investment for and the Far East Index (the MSCI EAFE shareholder transactions and the returns retirement plans maintained pursuant to --Registered Trademark--) is a group of based on those net asset values may Section 401 of the Internal Revenue foreign securities tracked by Morgan differ from the net asset values and Code, including 401(k) plans, money Stanley Capital International. returns reported in the Financial purchase pension plans and profit Highlights. sharing plans. Plans that have existing o The MSCI All Country (AC) Asia Pacific accounts invested in Class B shares will Free ex-Japan Index is a group of o Industry classifications used in this continue to be allowed to make developed and emerging Asian and report are generally according to the additional purchases. Asia-Pacific markets (except Japan) Global Industry Classification Standard, covered by Morgan Stanley Capital which was developed by and is the PRINCIPAL RISKS OF INVESTING IN THE FUND International. A "free" index represents exclusive property and a service mark of investable opportunities for global Morgan Stanley Capital International o International investing presents investors, taking into account the local Inc. and Standard & Poor's. certain risks not associated with market restrictions on share ownership investing solely in the United States. by foreign investors. The fund files its complete schedule of These include risks relating to portfolio holdings with the Securities fluctuations in the value of the U.S. o The unmanaged Lipper Pacific ex-Japan and Exchange Commission ("SEC") for the dollar relative to the values of other Fund Index represents an average of the 1st and 3rd quarters of each fiscal year currencies, the custody arrangements largest Pacific ex-Japan funds tracked on Form N-Q. The fund's Form N-Q filings made for the fund's foreign holdings, by Lipper, Inc., an independent mutual are available on the SEC's Web site at differences in accounting, political fund performance monitor, and is http://www.sec.gov. Copies of the fund's risks and the lesser degree of public considered representative of Pacific Forms N-Q may be reviewed and copied at information required to be provided by ex-Japan stocks. the SEC's Public Reference Room at 450 non-U.S. companies. Fifth Street, N.W., Washington, D.C. o The unmanaged Standard & Poor's 20549-0102. You can obtain information o Investing in emerging markets involves Composite Index of 500 Stocks (the S&P on the operation of the Public Reference greater risk and potential reward than 500--Registered Trademark-- Index) is an Room, including information about investing in more established markets. index of common stocks frequently used duplicating fee charges, by calling as a general measure of U.S. stock 1-202-942-8090 or by electronic request o Investing in a single-sector or market performance. at the following e-mail address: single-region mutual fund involves publicinfo@sec.gov. The SEC file numbers greater risk and potential reward than o The unmanaged MSCI World Index is a for the fund are 811-6463 and 33-44611. investing in a more diversified fund. group of global securities tracked by The fund's most recent portfolio Morgan Stanley Capital International. holdings, as filed on Form N-Q, are also o Investing in small and mid-size available at AIMinvestments.com. companies involves risks not associated o A direct investment cannot be made in with investing in more established an index. Unless otherwise indicated, A description of the policies and companies, including business risk, index results include reinvested procedures that the fund uses to significant stock price fluctuations and dividends, and they do not reflect sales determine how to vote proxies relating illiquidity. charges. Performance of an index of to portfolio securities is available funds reflects fund expenses; without charge, upon request, from our o The fund may participate in the performance of a market index does not. Client Services department at initial public offering (IPO) market in 800-959-4246 or on the AIM Web site, some market cycles. A significant o The fund is not managed to track the AIMinvestments.com. On the home page, portion of the fund's returns during performance of any particular index, scroll down and click on AIM Funds Proxy certain periods was attributable to its including the indexes defined here, and Policy. The information is also investments in IPOs. These investments consequently, the performance of the available on the Securities and Exchange have a magnified impact when the fund's fund may deviate significantly from the Commission's Web site, sec.gov. asset base is relatively small. As the performance of the indexes. fund's assets grow, the impact of IPO Information regarding how the fund voted investments will decline, which may OTHER INFORMATION proxies related to its portfolio reduce the effect of IPO investments on securities during the 12 months ended the fund's total return. For additional o The returns shown in the Management's 6/30/04 is available at our Web site. Go information regarding the impact of IPO Discussion of Fund Performance are based to AIMinvestments.com, access the About investments on the fund's performance, on net asset values calculated for Us tab, click on Required Notices and please see the fund's prospectus. shareholder transactions. Generally then click on Proxy Voting Activity. accepted accounting principles require Next, select your fund from the adjustments to be made to drop-down menu.
============================================================================= 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 TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER OF THE AIM FAMILY OF FUNDS--Registered Trademark-- : NEW BOARD CHAIRMAN [PHOTO OF It is our pleasure to introduce you to Bruce Crockett, the ROBERT H. new Chairman of the Board of Trustees of the AIM Funds. Bob GRAHAM] Graham has served as Chairman of the Board of Trustees of the AIM Funds ever since Ted Bauer retired from that ROBERT H. GRAHAM position in 2000. However, as you may be aware, the U.S. Securities and Exchange Commission recently adopted a rule [PHOTO OF requiring that an independent fund trustee, meaning a MARK H. trustee who is not an officer of the fund's investment WILLIAMSON] advisor, serve as chairman of the funds' Board. In addition, a similar provision was included in the terms of MARK H. WILLIAMSON AIM Advisors' recent settlements with certain regulators. Accordingly, the AIM Funds' Board recently elected Mr. [PHOTO OF Crockett, one of the fourteen independent trustees on the BRUCE L. AIM Funds' Board, as Chairman. His appointment became CROCKETT] effective on October 4, 2004. Mr. Graham will remain on the funds' Board, as will Mark Williamson, President and Chief BRUCE L. CROCKETT Executive Officer of AIM. Mr. Graham will also remain Chairman of AIM Investments--Registered Trademark--. Mr. Crockett has been a member of the AIM Funds' board since 1992, when AIM acquired certain funds that had been advised by CIGNA. He had been a member of the board of those funds since 1978. Mr. Crockett has more than 30 years of experience in finance and general management and has been Chairman of Crockett Technologies Associates since 1996. He is the first independent chairman of the funds' board in AIM's history, as he is not affiliated with AIM or AMVESCAP in any way. He is committed to ensuring that the AIM Funds adhere to the highest standards of corporate governance for the benefit of fund shareholders, and we at AIM share that commitment. MARKET CONDITIONS DURING THE FISCAL YEAR Virtually every equity index, domestic and foreign, produced positive returns for the fiscal year ended October 31, 2004. Domestically, the S&P 500 Index was up 9.41% for the year. Globally, the MSCI World Index advanced more than 13%. However, a goodly portion of this positive performance was achieved during 2003. Year to date as of October 31, the S&P 500 Index was up just over 3%, the MSCI World Index just about 5%. In the pages that follow, you will find a more detailed discussion of the market conditions that affected your fund during the fiscal year. While it is agreeable to report positive market performance for the year covered by this report, as ever, we encourage our shareholders to look past short-term performance and focus on their long-term investment goals. Over the short term, the one sure thing about the investment markets is their unpredictability. Over the long term, equities have produced very attractive returns. For the 25-year period ended October 31, 2004, the S&P 500 Index averaged 13.50% growth per year and the MSCI World Index averaged 11.16%. While past performance cannot guarantee future results, we believe staying invested for the long term offers the best opportunity for capital growth. YOUR FUND The following pages of this report provide an explanation of how your fund was managed during the fiscal year, how it performed in comparison to various benchmarks, and a presentation of its long-term performance. We hope you find this information helpful. Current information about your fund and about the markets in general is always available on our Web site, AIMinvestments.com. As always, AIM remains committed to building solutions for your investment goals, and we thank you for your continued participation in AIM Investments. If you have any questions, please contact our Client Service representatives at 800-959-4246. Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON ------------------------------------ -------------------------------- Robert H. Graham Mark H. Williamson Chairman, AIM Investments CEO & President, AIM Investments President & Vice Chairman, AIM Funds Trustee, AIM Funds December 16, 2004 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, and A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments. MANAGEMENT'S DISCUSSION OF FUND CONSUMER/FINANCIAL STOCKS BOOST FUND Chinese yuan and Malaysian ringgits are PERFORMANCE pegged to the US dollar; most Pacific Rim currencies are not. During the For the fiscal year ended October 31, to slow its economy and a significant fiscal year, the Australian dollar, the 2004, AIM Asia Pacific Growth Fund Class decline in the tech sector, however, South Korean won and the Singapore A shares returned 13.58% at net asset pushed many Asian markets lower during dollar appreciated significantly against value. PERFORMANCE SHOWN AT NAV DOES NOT the summer. the US dollar. INCLUDE FRONT-END SALES CHARGES, WHICH WOULD HAVE REDUCED THE PERFORMANCE. China--the world's growth YOUR FUND Returns for other share classes are shown engine--raised its lending rate by 27 in the table on page 3. For the same basis points (0.27%) in late October in During much of 2003, distressed or period, the fund outperformed its peer yet another effort to slow down an highly leveraged companies were in group, the Lipper Pacific ex-Japan Fund overheating economy. Earlier measures favor. That sentiment reversed in 2004 Index, which returned 11.94%. We included raising banks' required with stocks which can continue to grow attribute the fund's higher return to reserves and banning new investment in and report strong earnings being strong stock selection. some sectors. rewarded by the market. The fund's investment strategy worked well in this The fund underperformed, however, its Hong Kong also witnessed strong environment as we focus on companies broad market index, the MSCI EAFE Index, economic growth amid an easing in with high returns on invested capital, which returned 18.84%, and its deflation and accelerating domestic accelerating earnings and which are style-specific index, the MSCI AC Asia demand. In Korea, however, domestic reasonably priced. Pacific Free ex-Japan Index, which consumption remained weak due to heavily returned 15.14%. The MSCI EAFE Index is indebted households. Despite election During the year, we increased our comprised of stocks from many regions unrest in May and unfavorable weather exposure to the consumer discretionary and countries. During the fiscal year, conditions, India's economy grew amid sector as many stocks there fit our other regions such as Europe posted global economic recovery. investment criteria. Since our last higher returns than those in Asia. The report, we added Shanda Interactive fund's lower return compared to its Of the 13 countries included in the Entertainment--an operator of online style-specific index was due to the MSCI AC Asia Pacific Free ex-Japan games in China. Shanda proved to be the fund's underweight position in the Index, all nations but Taiwan produced fund's highest returning stock during outperforming materials sector and in positive returns on both a local the fiscal year as it nearly tripled in the strong Australian market. currency and dollar-denominated basis. price after listing on the NASDAQ in Taiwan markets are heavily weighted in May. MARKET CONDITIONS technology companies, therefore Taiwanese markets fell as the tech Financial stocks were also strong Despite higher oil prices and rising sector declined in the summer. contributors. Our largest sector global interest rates, Pacific Rim increase was in the financial sector as stocks generally posted positive returns Australian stocks reached record banks are more sensitive to domestic for the fiscal year. Late last year and highs in October, driven by strong spending and less to global impacts such into early 2004, Asian ex-Japan markets export growth as well as domestic as the tech sector decline. Hana Bank were among the best performers. China's demand. During the fiscal year, continued to be a steady story for the efforts Australian consumer confidence was at fund. Despite a prolonged slump in South one of its highest levels in a decade. Korea's economy which has depressed lending, Hana Bank continues to post On the currency front, the US dollar strong earnings and strengthen its remained weak compared to many foreign credit risk management. currencies. While the Hong Kong dollar, Rising commodity prices drove up prices for
==================================================================================================================================== PORTFOLIO COMPOSITION TOP 10 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. Australia 15.8% 1. Hana Bank (South Korea) 3.8% [PIE CHART] 2. South Korea 15.5 2. Esprit Holdings Ltd. Industrials 8.2% (Bermuda) 3.1 3. Hong Kong 10.5 Consumer Staples 8.9% 3. Philippine Long Distance 4. India 9.1 Telephone Co. (Philippines) 2.7 Healthcare 6.6% 5. Singapore 8.8 4. Infosys Technology Ltd. Materials 5.1% (India) 2.6 6. Taiwan 8.0 Telecommunication Services 5.1% 5. Samsung Electronics Co., Ltd. 7. Cayman Islands 6.5 (South Korea) 2.5 Money Market Funds Plus Other 8. Bermuda 6.0 6. BHP Billiton Ltd. (Australia) 2.4 Assets Less Liabilities 5.0% 9. China 4.5 7. CJ Corp. (South Korea) 2.1 Energy 1.8% 10. Thailand 3.3 8. Coca-Cola Amatil Ltd. Financials 28.2% (Australia) 2.0 Consumer Discretionary 19.3% 9. CSL Ltd. (Australia) 2.0 Information Technology 11.8% 10. DBS Group Holdings Ltd. (Singapore) 1.9 *Excluding money market fund holdings. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. ====================================================================================================================================
2 stocks in the energy and material that value back into the fund in US SHUXIN CAO sectors. Despite double-digit returns in dollars. Therefore, the appreciation of Mr. Cao, Chartered our energy and materials holdings, we Pacific Rim currencies (compared with [CAO Financial Analyst, is had less exposure to these sectors than the US dollar) contributed significantly PHOTO] manager of AIM Asia our style-specific index and therefore to fund performance. Pacific Growth Fund. the fund suffered on a comparative He joined AIM in basis. We reduced our exposure to the IN CLOSING 1997. Mr. Cao graduated from Tianjin materials sector during the fiscal year Foreign Language Institute with a B.A. as we believed the earnings cycle had Despite China's slowing efforts, Pacific in English. He also received an M.B.A. peaked and valuations were too high. Rim economies continued to post some of from Texas A&M University and is a the world's highest growth rates. We are Certified Public Accountant. Amid a downturn in the tech sector, pleased to provide shareholders with semiconductor stocks were hard hit by double-digit returns and remain BARRETT K. SIDES weak demand and overproduction. Amid a committed to our fund objective of Mr. Sides is lead spate of disappointing earnings, we sold long-term growth of capital by investing [SIDES manager of AIM Asia some of our Taiwanese semiconductor in Asia-Pacific ex-Japan companies that PHOTO] Pacific Growth Fund. holdings, including MediaTek and show accelerated earnings growth. He joined AIM in Siliconware Precision, as they no longer 1990. Mr. Sides fit our investment criteria. During the THE VIEWS AND OPINIONS EXPRESSED IN graduated with a B.S. in economics from fiscal year, we significantly reduced MANAGEMENT'S DISCUSSION OF FUND Bucknell University. He also received a our tech exposure in lieu of more PERFORMANCE ARE THOSE OF A I M ADVISORS, master's in international business from defensive areas. INC. THESE VIEWS AND OPINIONS ARE the University of St. Thomas. SUBJECT TO CHANGE AT ANY TIME BASED ON On a country level, Australian stocks FACTORS SUCH AS MARKET AND ECONOMIC Assisted by Asia/Latin America Team contributed the most to absolute fund CONDITIONS. THESE VIEWS AND OPINIONS MAY performance. We remain significantly NOT BE RELIED UPON AS INVESTMENT ADVICE underweight our benchmark, however, due OR RECOMMENDATIONS, OR AS AN OFFER FOR A to the nature of the Australian market. PARTICULAR SECURITY. THE INFORMATION IS Many companies, particularly Australian NOT A COMPLETE ANALYSIS OF EVERY ASPECT banks, are relatively slow growers and OF ANY MARKET, COUNTRY, INDUSTRY, therefore do not fit the strong growth SECURITY OR THE FUND. STATEMENTS OF FACT strategy of our fund. ARE FROM SOURCES CONSIDERED RELIABLE, BUT A I M ADVISORS, INC. MAKES NO One of our largest weightings was in REPRESENTATION OR WARRANTY AS TO THEIR Hong Kong stocks as we are finding many COMPLETENESS OR ACCURACY. ALTHOUGH opportunities given increasing domestic HISTORICAL PERFORMANCE IS NO GUARANTEE demand in the country. Conversely, we OF FUTURE RESULTS, THESE INSIGHTS MAY significantly reduced our Taiwan HELP YOU UNDERSTAND OUR INVESTMENT exposure given the earnings MANAGEMENT PHILOSOPHY. disappointments in the technology sector there. See important fund and index disclosures inside front cover. Another key aspect of our investment strategy is that we do not hedge currencies. We purchase stocks in their local currency and then translate
====================================================================================================== TOP 10 INDUSTRIES* FUND VS. INDEXES 1. Diversified Banks 18.1% TOTAL RETURNS, 10/31/03-10/31/04, EXCLUDING APPLICABLE SALES CHARGES. IF SALES CHARGES 2. Real Estate Management & WERE INCLUDED, RETURNS WOULD BE LOWER. Development 4.2 Class A Shares 13.58% 3. Apparel Retail 4.0 Class B Shares 12.89 4. Integrated Telecommunication Services 3.7 Class C Shares 12.84 5. Packaged Foods & Meats 3.1 MSCI EAFE Index (Broad Market Index) 18.84 6. Industrial Conglomerates 3.0 MSCI All Country (AC) Asia Pacific Free ex-Japan Index (Style-specific index) 15.14 7. Property & Casualty Insurance 2.9 Lipper Pacific ex-Japan Fund Index 8. Biotechnology 2.7 (Peer Group Index) 11.94 9. IT Consulting & Other Services 2.6 Source: Lipper, Inc. 10. Electronic Equipment Manufacturers 2.5 TOTAL NET ASSETS $146.5 MILLION TOTAL NUMBER OF HOLDINGS* 89 ====================================================================================================== [RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE RECORD, PLEASE TURN TO PAGE 5.
3 INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE together with the amount you invested, costs of investing in the fund and other to estimate the expenses that you paid funds. To do so, compare this 5% As a shareholder of the fund, you incur over the period. Simply divide your hypothetical example with the 5% two types of costs: (1) transaction account value by $1,000 (for example, an hypothetical examples that appear in the costs, which may include sales charges $8,600 account value divided by $1,000 = shareholder reports of the other funds. (loads) on purchase payments; contingent 8.6), then multiply the result by the deferred sales charges on redemptions; number in the table under the heading Please note that the expenses shown and redemption fees, if any; and (2) entitled "Actual Expenses Paid During in the table are meant to highlight your ongoing costs, including management Period" to estimate the expenses you ongoing costs only and do not reflect fees; distribution and/or service fees paid on your account during this period. any transactional costs, such as sales (12b-1); and other fund expenses. This charges (loads) on purchase payments, example is intended to help you HYPOTHETICAL EXAMPLE FOR COMPARISON contingent deferred sales charges on understand your ongoing costs (in PURPOSES redemptions, and redemption fees, if dollars) of investing in the fund and to any. Therefore, the hypothetical compare these costs with ongoing costs The table below also provides information is useful in comparing of investing in other mutual funds. The information about hypothetical account ongoing costs only, and will not help example is based on an investment of values and hypothetical expenses based you determine the relative total costs $1,000 invested at the beginning of the on the fund's actual expense ratio and of owning different funds. In addition, period and held for the entire period, an assumed rate of return of 5% per year if these transactional costs were May 1, 2004 - October 31, 2004. before expenses, which is not the fund's included, your costs would have been actual return. The hypothetical account higher. ACTUAL EXPENSES values and expenses may not be used to estimate the actual ending account The table below provides information balance or expenses you paid for the about actual account values and actual period. You may use this information to expenses. You may use the information in compare the ongoing this table,
================================================================================================================================= ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING VALUE PAID DURING (5/1/04) (10/31/04)(1) PERIOD(2) (10/31/04) PERIOD(2) Class A $1,000.00 $1,068.50 $11.70 $1,013.83 $11.39 Class B 1,000.00 1,064.80 15.05 1,010.56 14.66 Class C 1,000.00 1,064.20 15.05 1,010.56 14.66 (1) The actual ending account value is based on the actual total return of the fund for the period May 1, 2004, to October 31, 2004, 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 actual cumulative return at net asset value for the period May 1, 2004, to October 31, 2004, was 6.85%, 6.48% and 6.42% for Class A, B and C shares, respectively. (2) Expenses are equal to the fund's annualized expense ratio (2.25%, 2.90% and 2.90% for Class A, B and C shares, respectively) multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). [ARROW BUTTON For More Information Visit IMAGE] AIMinvestments.com =================================================================================================================================
4 LONG TERM PERFORMANCE YOUR FUND'S LONG-TERM PERFORMANCE ==================================================================================================================================== Past performance cannot guarantee RESULTS OF A $10,000 INVESTMENT comparable future results. 11/3/97-10/31/04 Index data from 10/31/97 Your fund's total return includes [MOUNTAIN CHART] reinvested distributions, applicable sales charges, fund expenses and AIM AIM AIM management fees. Results for Class B DATE ASIA PACIFIC ASIA PACIFIC ASIA PACIFIC LIPPER PACIFIC MSCI EAFE shares are calculated as if a GROWTH FUND GROWTH FUND GROWTH FUND EX-JAPAN FUND INDEX hypothetical shareholder had liquidated CLASS A SHARES CLASS B SHARES CLASS C SHARES INDEX HIS entire investment in the fund at the close of the reporting period and paid 11/3/1997 $9450 $10000 $10000 $10000 $10000 the applicable contingent deferred sales 01/98 7834 8280 8290 8511 10441 charges. Index results include 04/98 8713 9199 9200 9170 11544 reinvested dividends, but they do not 07/98 6682 7039 7030 7014 11692 reflect sales charges. Performance of 10/98 7267 7629 7610 7760 10965 an index of funds reflects fund expenses 01/99 7305 7668 7640 7981 11946 and management fees; performance of a 04/99 9138 9580 9553 9786 12640 market index does not. Performance shown 07/99 10459 10932 10914 11082 12827 in the chart does not reflect deduction 10/99 10232 10662 10642 11026 13490 of taxes a shareholder would pay on fund 01/00 12085 12574 12544 14151 14245 distributions or sale of fund shares. 04/00 13502 14016 14007 13032 14396 Performance of the indexes does not 07/00 12456 12915 12906 12397 13982 reflect the effects of taxes. 10/00 10167 10511 10502 10169 13099 01/01 10810 11160 11160 10806 13050 In evaluating this chart, please note 04/01 9685 9985 9985 9401 12050 that the chart uses a logarithmic scale 07/01 9285 9554 9554 8850 10946 along the vertical axis (the value 10/01 8188 8419 8409 7669 9834 scale). This means that each scale 01/02 9407 9653 9645 9537 9712 increment always represents the same 04/02 9969 10225 10208 10359 10377 percent change in price; in a linear 07/02 9092 9311 9294 9352 9094 chart each scale increment always 10/02 8130 8307 8289 8344 8534 represents the same absolute change in 01/03 8339 8508 8490 8437 8262 price. In this example, the scale 04/03 8063 8216 8199 8117 8689 increment between $5,000 and $10,000 is 07/03 9712 9883 9847 10064 9667 the same as that between $10,000 and 10/03 11513 11692 11656 11793 10842 $20,000. In a linear chart, the latter 01/04 12627 12808 12761 13080 12118 scale increment would be twice as large. 04/04 12236 12396 12358 12622 12185 The benefit of using a logarithmic scale 07/04 11655 11784 11745 12003 12088 is that it better illustrates 10/04 $13079 $13201 $13150 $13201 $12884 performance during the fund's early Source: Lipper, Inc. years depicted in the chart before reinvested distributions and compounding CLASS C SHARES applicable contingent deferred sales create the potential for the original Inception (11/3/97) 3.99% charge (CDSC) for the period involved. investment to grow to very large 5 Years 4.32 The CDSC on Class B shares declines from numbers. Had the chart used a linear 1 Year 11.84 5% beginning at the time of purchase to scale along its vertical axis, you would 0% at the beginning of the seventh year. not be able to see as clearly the In addition to returns as of the close The CDSC on Class C shares is 1% for the movements in the value of the fund and of the fiscal year, industry regulations first year after purchase. the indexes during the early years require us to provide average annual depicted. We use a logarithmic scale in total returns as of 9/30/04, the most The performance of the fund's share financial reports of funds that have recent calendar quarter-end. classes will differ due to different more than five years of performance sales charge structures and class history. AVERAGE ANNUAL TOTAL RETURNS expenses. As of 9/30/04, most recent calendar AVERAGE ANNUAL TOTAL RETURNS quarter-end, including applicable sales A redemption fee of 2% will be As of 10/31/04, including applicable charges imposed on certain redemptions or sales charges exchanges out of the fund within 30 days CLASS A SHARES of purchase. Exceptions to the CLASS A SHARES Inception (11/3/97) 3.56% redemption fee are listed in the fund's Inception (11/3/97) 3.91% 5 Years 3.88 prospectus. 5 Years 3.84 1 Year 13.03 1 Year 7.35 Had the advisor not waived fees CLASS B SHARES and/or reimbursed expenses, performance CLASS B SHARES Inception (11/3/97) 3.71% would have been lower. Inception (11/3/97) 4.05% 5 Years 4.05 5 Years 4.02 1 Year 13.74 1 Year 7.89 CLASS C SHARES Inception (11/3/97) 3.65% 5 Years 4.35 1 Year 17.72 The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit AIMinvestments.com for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares. Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the ====================================================================================================================================
5 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2004
MARKET SHARES VALUE ----------------------------------------------------------------------- FOREIGN STOCKS & OTHER EQUITY INTERESTS-94.96% AUSTRALIA-15.82% BHP Billiton Ltd. (Diversified Metals & Mining)(a) 338,700 $ 3,511,108 ----------------------------------------------------------------------- BlueScope Steel Ltd. (Steel)(a) 189,440 1,099,764 ----------------------------------------------------------------------- Coca-Cola Amatil Ltd. (Soft Drinks)(a)(b) 523,000 2,885,303 ----------------------------------------------------------------------- Computershare Ltd. (Data Processing & Outsourced Services)(a) 488,600 1,913,207 ----------------------------------------------------------------------- CSL Ltd. (Biotechnology)(a)(b) 133,000 2,870,269 ----------------------------------------------------------------------- Promina Group Ltd. (Property & Casualty Insurance) (Acquired 05/12/03-08/19/04; Cost $1,236,724)(a)(b)(c) 510,800 1,738,572 ----------------------------------------------------------------------- QBE Insurance Group Ltd. (Property & Casualty Insurance)(a) 175,000 1,801,502 ----------------------------------------------------------------------- Ramsay Health Care Ltd. (Health Care Facilities)(a)(b) 439,700 2,051,446 ----------------------------------------------------------------------- St. George Bank Ltd. (Diversified Banks)(a)(b) 72,100 1,263,830 ----------------------------------------------------------------------- Toll Holdings Ltd. (Trucking)(a) 302,300 2,677,074 ----------------------------------------------------------------------- Woolworths Ltd. (Food Retail)(a) 136,000 1,363,665 ======================================================================= 23,175,740 ======================================================================= BERMUDA-6.01% COFCO International Ltd. (Packaged Foods & Meats)(a) 1,135,000 445,529 ----------------------------------------------------------------------- Esprit Holdings Ltd. (Apparel Retail)(a) 840,000 4,490,042 ----------------------------------------------------------------------- Giordano International Ltd. (Apparel Retail)(a) 2,348,000 1,312,627 ----------------------------------------------------------------------- Li & Fung Ltd. (Distributors)(a) 878,000 1,299,150 ----------------------------------------------------------------------- Texwinca Holdings Ltd. (Textiles)(a) 1,390,000 1,260,152 ======================================================================= 8,807,500 ======================================================================= CAYMAN ISLANDS-6.50% ASM Pacific Technology Ltd. (Semiconductor Equipment)(a) 207,000 672,417 ----------------------------------------------------------------------- China Mengniu Dairy Co. Ltd. (Packaged Foods & Meats)(d) 1,284,000 1,064,020 ----------------------------------------------------------------------- Chitaly Holdings Ltd. (Home Furnishings)(a) 1,220,000 861,156 ----------------------------------------------------------------------- Global Bio-chem Technology Group Co. Ltd. (Biotechnology)(a) 1,302,000 1,023,164 ----------------------------------------------------------------------- Global Bio-chem Technology Group Co. Ltd.-Wts., expiring 05/31/07 (Biotechnology)(e) 131,250 9,106 ----------------------------------------------------------------------- Golden Meditech Co. Ltd. (Health Care Equipment) 1,137,200 274,675 ----------------------------------------------------------------------- Hengan International Group Co. Ltd. (Personal Products)(a) 1,054,000 562,276 ----------------------------------------------------------------------- Luen Thai Holdings Ltd. (Distributors) (Acquired 07/09/04-10/07/04; Cost $1,100,393)(c)(d) 2,432,000 1,249,823 ----------------------------------------------------------------------- Sa Sa International Holdings Ltd. (Specialty Stores)(a) 1,652,000 690,263 ----------------------------------------------------------------------- Shanda Interactive Entertainment Ltd.-ADR (Leisure Products)(b)(d) 69,800 2,121,152 -----------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------------------------- CAYMAN ISLANDS-(CONTINUED) Solomon Systech International Ltd. (Semiconductors) 3,934,000 $ 995,693 ======================================================================= 9,523,745 ======================================================================= CHINA-4.48% China Petroleum and Chemical Corp. (Sinopec)- Class H (Integrated Oil & Gas)(a) 3,140,000 1,198,871 ----------------------------------------------------------------------- China Shipping Development Co. Ltd.-Class H (Marine)(a) 1,158,000 969,727 ----------------------------------------------------------------------- PICC Property & Casualty Co. Ltd.-Class H (Property & Casualty Insurance)(a)(d) 1,916,000 691,584 ----------------------------------------------------------------------- Ping An Insurance Co. of China Ltd.-Class H (Life & Health Insurance)(d) 983,000 1,547,087 ----------------------------------------------------------------------- Tong Ren Tang Technologies Co. Ltd.-Class H (Pharmaceuticals) 300,000 659,087 ----------------------------------------------------------------------- Weiqiao Textile Co. Ltd.-Class H (Textiles) (Acquired 09/19/03-08/31/04; Cost $1,351,931)(a)(c) 1,023,000 1,494,022 ======================================================================= 6,560,378 ======================================================================= HONG KONG-10.52% Cheung Kong (Holdings) Ltd. (Real Estate Management & Development)(a) 303,000 2,509,578 ----------------------------------------------------------------------- CNOOC Ltd. (Oil & Gas Exploration & Production)(a) 860,000 443,043 ----------------------------------------------------------------------- CNOOC Ltd.-ADR (Oil & Gas Exploration & Production)(b) 20,600 1,067,080 ----------------------------------------------------------------------- Dah Sing Banking Group Ltd. (Regional Banks) 467,920 943,836 ----------------------------------------------------------------------- Dah Sing Financial Group (Diversified Banks)(a) 269,600 1,942,529 ----------------------------------------------------------------------- Hutchison Whampoa Ltd. (Industrial Conglomerates)(a) 252,000 1,935,371 ----------------------------------------------------------------------- Sun Hung Kai Properties Ltd. (Real Estate Management & Development)(a) 215,000 1,990,033 ----------------------------------------------------------------------- Techtronic Industries Co. Ltd. (Household Appliances)(a) 1,069,500 2,133,852 ----------------------------------------------------------------------- Wing Hang Bank Ltd. (Diversified Banks)(a) 358,000 2,448,236 ======================================================================= 15,413,558 ======================================================================= INDIA-9.11% Bharat Forge Ltd. (Auto Parts & Equipment) 74,025 1,422,861 ----------------------------------------------------------------------- Bharat Forge Ltd.-Wts., expiring 09/30/06 (Auto Parts & Equipment) (Acquired 07/20/04; Cost $0)(c)(e)(f)(g) 1,763 0 ----------------------------------------------------------------------- HDFC Bank Ltd. (Diversified Banks)(a) 196,400 1,802,836 ----------------------------------------------------------------------- HDFC Bank Ltd.-ADR (Diversified Banks) 17,500 615,475 ----------------------------------------------------------------------- Housing Development Finance Corp. Ltd. (Thrifts & Mortgage Finance)(a) 140,300 1,984,385 -----------------------------------------------------------------------
F-1
MARKET SHARES VALUE ----------------------------------------------------------------------- INDIA-(CONTINUED) Infosys Technologies Ltd. (IT Consulting & Other Services)(a) 90,728 $ 3,804,663 ----------------------------------------------------------------------- Ranbaxy Laboratories Ltd. (Pharmaceuticals)(a) 67,560 1,634,949 ----------------------------------------------------------------------- Tata Motors Ltd. (Automobile Manufacturers)(a) 99,000 909,581 ----------------------------------------------------------------------- Wockhardt Ltd. (Pharmaceuticals)(a) 161,700 1,175,479 ======================================================================= 13,350,229 ======================================================================= INDONESIA-0.99% PT Lippo Bank TBK (Diversified Banks)(a)(d) 1,181,296 74,754 ----------------------------------------------------------------------- PT Telekomunikasi Indonesia (Integrated Telecommunication Services)(a) 2,874,000 1,377,100 ======================================================================= 1,451,854 ======================================================================= MALAYSIA-2.58% IOI Corp. Berhad (Agricultural Products)(a) 237,000 593,076 ----------------------------------------------------------------------- Maxis Communications Berhad (Wireless Telecommunications Services)(a) 928,000 2,098,662 ----------------------------------------------------------------------- Public Bank Berhad (Diversified Banks)(a) 598,000 1,093,982 ======================================================================= 3,785,720 ======================================================================= PHILIPPINES-3.29% Philippine Long Distance Telephone Co. (Integrated Telecommunication Services)(a)(d) 161,000 4,011,838 ----------------------------------------------------------------------- SM Prime Holdings (Real Estate Management & Development) 6,078,900 810,088 ======================================================================= 4,821,926 ======================================================================= SINGAPORE-8.82% DBS Group Holdings Ltd. (Diversified Banks)(a) 294,000 2,761,494 ----------------------------------------------------------------------- Keppel Corp. Ltd. (Industrial Conglomerates)(a) 510,000 2,456,034 ----------------------------------------------------------------------- Keppel Land Ltd. (Real Estate Management & Development)(a) 736,000 802,346 ----------------------------------------------------------------------- SembCorp Logistics Ltd. (Marine Ports & Services)(a) 1,294,000 1,800,482 ----------------------------------------------------------------------- Singapore Airlines Ltd. (Airlines)(a) 234,000 1,507,631 ----------------------------------------------------------------------- Sunningdale Precision Industries Ltd. (Industrial Machinery)(a) 1,448,000 727,752 ----------------------------------------------------------------------- United Overseas Bank Ltd. (Diversified Banks)(a) 273,000 2,218,455 ----------------------------------------------------------------------- Venture Corp. Ltd. (Electronic Manufacturing Services)(a) 68,000 645,973 ======================================================================= 12,920,167 ======================================================================= SOUTH KOREA-15.51% Cheil Communications Inc. (Advertising)(a) 13,440 1,779,491 ----------------------------------------------------------------------- CJ Corp. (Packaged Foods & Meats)(a) 54,590 3,038,563 ----------------------------------------------------------------------- Hana Bank (Diversified Banks)(a) 220,300 5,508,607 ----------------------------------------------------------------------- Hankook Tire Co. Ltd. (Tires & Rubber)(a) 118,700 1,100,835 ----------------------------------------------------------------------- Hyundai Department Store Co., Ltd. (Department Stores)(a) 74,400 2,164,211 ----------------------------------------------------------------------- Hyundai Motor Co. (Automobile Manufacturers)(a) 12,000 583,623 -----------------------------------------------------------------------
MARKET SHARES VALUE ----------------------------------------------------------------------- SOUTH KOREA-(CONTINUED) POSCO-ADR (Steel) 42,600 $ 1,592,814 ----------------------------------------------------------------------- Samsung Electronics Co., Ltd. (Electronic Equipment Manufacturers)(a) 9,220 3,625,332 ----------------------------------------------------------------------- Shinhan Financial Group Co., Ltd. (Diversified Banks)(a) 61,800 1,221,627 ----------------------------------------------------------------------- Shinsegae Co., Ltd. (Hypermarkets & Super Centers)(a) 7,500 2,111,635 ======================================================================= 22,726,738 ======================================================================= TAIWAN-7.99% Asia Optical Co., Inc. (Photographic Products)(a) 350,631 1,662,588 ----------------------------------------------------------------------- Catcher Technology Co., Ltd. (Computer Storage & Peripherals)(a) 529,600 1,624,179 ----------------------------------------------------------------------- Chinatrust Financial Holding Co. Ltd. (Diversified Banks)(a) 1,629,667 1,860,936 ----------------------------------------------------------------------- Hon Hai Precision Industry Co., Ltd. (Electronic Manufacturing Services)(a) 404,625 1,487,876 ----------------------------------------------------------------------- Ichia Technologies, Inc. (Computer Storage & Peripherals)(a) 593,337 904,660 ----------------------------------------------------------------------- Merry Electronics Co., Ltd. (Consumer Electronics)(a) 748,810 1,693,758 ----------------------------------------------------------------------- Novatek Microelectronics Corp., Ltd. (Semiconductors)(a) 43,410 105,676 ----------------------------------------------------------------------- President Chain Store Corp. (Food Retail)(a) 616,148 920,666 ----------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd. (Semiconductors)(a) 1,094,613 1,452,592 ======================================================================= 11,712,931 ======================================================================= THAILAND-3.34% Kasikornbank PCL (Diversified Banks)(a)(d) 1,180,000 1,352,733 ----------------------------------------------------------------------- Siam Cement PCL (The) (Construction Materials)(a) 201,000 1,256,356 ----------------------------------------------------------------------- Siam Commercial Bank PCL (Diversified Banks)(a) 2,177,000 2,285,428 ======================================================================= 4,894,517 ======================================================================= Total Foreign Stocks & Other Equity Interests (Cost $96,519,102) 139,145,003 ======================================================================= PRINCIPAL AMOUNT BONDS & NOTES-0.00% INDIA-0.00% Hindustan Lever Ltd. (Household Products), Sec. Deb., 9.00%, 01/01/05 (Cost $0)(h)(i) INR 512,800 690 ======================================================================= SHARES MONEY MARKET FUNDS-2.39% Liquid Assets Portfolio-Institutional Class(j) 1,749,008 1,749,008 ----------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class(j) 1,749,008 1,749,008 ======================================================================= Total Money Market Funds (Cost $3,498,016) 3,498,016 ======================================================================= TOTAL INVESTMENTS-97.35% (excluding investments purchased with cash collateral from securities loaned) (Cost $100,017,118) 142,643,709 =======================================================================
F-2
MARKET SHARES VALUE ----------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-3.64% Liquid Assets Portfolio-Institutional Class(j)(k) 2,664,115 $ 2,664,115 ----------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class(j)(k) 2,664,115 2,664,115 ======================================================================= Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $5,328,230) 5,328,230 ======================================================================= TOTAL INVESTMENTS-100.99% (Cost $105,345,348) 147,971,939 ======================================================================= OTHER ASSETS LESS LIABILITIES-(0.99%) (1,448,794) ======================================================================= NET ASSETS-100.00% $146,523,145 _______________________________________________________________________ =======================================================================
Investment Abbreviations: ADR - American Depositary Receipt Deb. - Debentures INR - Indian Rupee Sec. - Secured Wts. - Warrants
Notes to Schedule of Investments: (a) In accordance with procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The aggregate market value of these securities at October 31, 2004 was $124,772,206, which represented 84.32% of the Fund's Total Investments. See Note 1A. (b) All or a portion of this security has been pledged as collateral for security lending transactions at October 31, 2004. (c) Security not registered under the Securities Act of 1933, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The Fund has no rights to demand registration of these securities. The aggregate market value of these securities at October 31, 2004 was $4,482,417, which represented 3.06% of the Fund's net assets. Unless otherwise indicated, these securities are not considered to be illiquid. (d) Non-income producing security. (e) Non-income producing security acquired through a corporate action. (f) Security considered to be illiquid. The market value of this security considered illiquid at October 31, 2004 represented 0% of the Fund's net assets. (g) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The market value of this security at October 31, 2004 represented 0% of the Fund's Total Investments. See Note 1A. (h) Foreign denominated security. Par value is denominated in currency indicated. (i) Acquired through a corporate action. (j) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (k) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 7. See accompanying notes which are an integral part of the financial statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2004 ASSETS: Investments, at market value (cost $96,519,102)* $139,145,693 ----------------------------------------------------------- Investments in affiliated money market funds (cost $8,826,246) 8,826,246 =========================================================== Total investments (cost $105,345,348) 147,971,939 =========================================================== Foreign currencies, at value (cost $3,678,977) 3,736,092 ----------------------------------------------------------- Receivables for: Investments sold 261,942 ----------------------------------------------------------- Fund shares sold 129,210 ----------------------------------------------------------- Dividends and interest 116,919 ----------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 33,431 ----------------------------------------------------------- Other assets 17,968 =========================================================== Total assets 152,267,501 ___________________________________________________________ =========================================================== LIABILITIES: Payables for: Fund shares reacquired 60,521 ----------------------------------------------------------- Trustee deferred compensation and retirement plans 36,673 ----------------------------------------------------------- Collateral upon return of securities loaned 5,328,230 ----------------------------------------------------------- Accrued distribution fees 62,035 ----------------------------------------------------------- Accrued trustees' fees 1,178 ----------------------------------------------------------- Accrued transfer agent fees 75,197 ----------------------------------------------------------- Accrued operating expenses 180,522 =========================================================== Total liabilities 5,744,356 =========================================================== Net assets applicable to shares outstanding $146,523,145 ___________________________________________________________ =========================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $164,843,350 ----------------------------------------------------------- Undistributed net investment income (loss) (35,257) ----------------------------------------------------------- Undistributed net realized gain (loss) from investment securities and foreign currencies (60,972,969) ----------------------------------------------------------- Unrealized appreciation of investment securities and foreign currencies 42,688,021 =========================================================== $146,523,145 ___________________________________________________________ =========================================================== NET ASSETS: Class A $106,129,296 ___________________________________________________________ =========================================================== Class B $ 29,174,228 ___________________________________________________________ =========================================================== Class C $ 11,219,621 ___________________________________________________________ =========================================================== SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 7,737,464 ___________________________________________________________ =========================================================== Class B 2,220,880 ___________________________________________________________ =========================================================== Class C 857,156 ___________________________________________________________ =========================================================== Class A: Net asset value per share $ 13.72 ----------------------------------------------------------- Offering price per share: (Net asset value of $13.72 divided by 94.50%) $ 14.52 ___________________________________________________________ =========================================================== Class B: Net asset value and offering price per share $ 13.14 ___________________________________________________________ =========================================================== Class C: Net asset value and offering price per share $ 13.09 ___________________________________________________________ ===========================================================
* At October 31, 2004, securities with an aggregate market value of $5,159,075 were on loan to brokers. See accompanying notes which are an integral part of the financial statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2004 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $308,896) $ 2,959,466 ------------------------------------------------------------------------- Dividends from affiliated money market funds (including security lending income of $13,968)* 60,664 ------------------------------------------------------------------------- Interest 11,763 ========================================================================= Total investment income 3,031,893 ========================================================================= EXPENSES: Advisory fees 1,345,262 ------------------------------------------------------------------------- Administrative services fees 50,000 ------------------------------------------------------------------------- Custodian fees 341,977 ------------------------------------------------------------------------- Distribution fees: Class A 355,981 ------------------------------------------------------------------------- Class B 283,667 ------------------------------------------------------------------------- Class C 115,311 ------------------------------------------------------------------------- Transfer agent fees 689,405 ------------------------------------------------------------------------- Trustees' fees and retirement benefits 14,694 ------------------------------------------------------------------------- Other 256,223 ========================================================================= Total expenses 3,452,520 ========================================================================= Less: Fees waived, expenses reimbursed and expense offset arrangements (30,886) ========================================================================= Net expenses 3,421,634 ========================================================================= Net investment income (loss) (389,741) ========================================================================= REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain (loss) from: Investment securities (net of tax on the sale of foreign investments of $145,651 -- Note 1G) 11,462,937 ------------------------------------------------------------------------- Foreign currencies (125,462) ========================================================================= 11,337,475 ========================================================================= Change in net unrealized appreciation of: Investment securities (net of change in estimated tax on foreign investments held of $9,940 -- Note 1G) 5,405,904 ------------------------------------------------------------------------- Foreign currencies 47,707 ========================================================================= 5,453,611 ========================================================================= Net gain from investment securities and foreign currencies 16,791,086 ========================================================================= Net increase in net assets resulting from operations $16,401,345 _________________________________________________________________________ =========================================================================
* Dividends from affiliated money market funds are net of income rebate paid to securities lending counterparties. See accompanying notes which are an integral part of the financial statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2004 and 2003
2004 2003 ------------------------------------------------------------------------------------------ OPERATIONS: Net investment income (loss) $ (389,741) $ (284,919) ------------------------------------------------------------------------------------------ Net realized gain from investment securities, foreign currencies and futures contracts 11,337,475 12,548,468 ------------------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities and foreign currencies 5,453,611 31,360,962 ========================================================================================== Net increase in net assets resulting from operations 16,401,345 43,624,511 ========================================================================================== Share transactions-net: Class A (3,558,053) 549,387 ------------------------------------------------------------------------------------------ Class B 1,546,688 (2,436,802) ------------------------------------------------------------------------------------------ Class C 1,579,175 75,797 ========================================================================================== Net increase (decrease) in net assets resulting from share transactions (432,190) (1,811,618) ========================================================================================== Net increase in net assets 15,969,155 41,812,893 ========================================================================================== NET ASSETS: Beginning of year 130,553,990 88,741,097 ========================================================================================== End of year (including undistributed net investment income (loss) of $(35,257) and $(31,403), respectively) $146,523,145 $130,553,990 __________________________________________________________________________________________ ==========================================================================================
See accompanying notes which are an integral part of the financial statements. F-6 NOTES TO FINANCIAL STATEMENTS October 31, 2004 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Asia Pacific Growth Fund (the "Fund") is a series portfolio of AIM International Mutual Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. On November 25, 2003, the Fund was restructured from a separate series of AIM International Funds, Inc. to a new series portfolio of the Trust. The Fund's investment objective is long-term growth of capital. Companies are listed in the Schedule of Investments based on the country in which they are organized. Under the Trust's organizational documents, the Fund's officers, trustees, employees and agents are 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. However, the Fund has not had prior claims or losses pursuant to these contracts. 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. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally will be 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 valued at amortized cost which approximates market 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 market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market 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, domestic and foreign index futures and exchange-traded funds. F-7 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. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. 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. E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. F. REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on certain share classes that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is accounted for as an addition to shares of beneficial interest by the Fund and is allocated among the share classes based on the relative net assets of each class. G. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. H. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. I. 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 made or received 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. F-8 NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.95% of the first $500 million of the Fund's average daily net assets, plus 0.90% of the Fund's average daily net assets in excess of $500 million. AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Operating Expenses (excluding certain items discussed below) of Class A, Class B and Class C shares to 2.25%, 2.90% and 2.90% of average daily net assets, respectively. In determining the advisor's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the caps stated above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to-day operations), or items designated as such by the Fund's Board of Trustees; (v) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the only expense offset arrangements from which the Fund benefits are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $905. For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $27,507 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2004, AIM was paid $50,000 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the year ended October 31, 2004, the Fund paid AISI $689,405. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2004, the Class A, Class B and Class C shares paid $355,981, $283,667 and $115,311, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2004, AIM Distributors advised the Fund that it retained $67,295 in front-end sales commissions from the sale of Class A shares and $4,208, $11,770 and $13,538 from Class A, Class B shares and Class C shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. F-9 NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2004. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME GAIN (LOSS) ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $2,018,963 $32,036,915 $(32,306,870) $ -- $1,749,008 $23,437 $ -- ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 2,018,963 32,036,915 (32,306,870) -- 1,749,008 23,259 -- ================================================================================================================================== Subtotal $4,037,926 $64,073,830 $(64,613,740) $ -- $3,498,016 $46,696 $ -- ==================================================================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME* GAIN (LOSS) ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ 3,479,857 $17,534,997 $ (18,350,739) $ -- $2,664,115 $ 7,028 $ -- ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 3,479,856 17,534,998 (18,350,739) -- 2,664,115 6,940 -- ================================================================================================================================== Subtotal $ 6,959,713 $35,069,995 $ (36,701,478) $ -- $5,328,230 $13,968 $ -- ================================================================================================================================== Total $10,997,639 $99,143,825 $(101,315,218) $ -- $8,826,246 $60,664 $ -- __________________________________________________________________________________________________________________________________ ==================================================================================================================================
* Dividend income is net of income rebate paid to security lending counterparties. NOTE 4--EXPENSE OFFSET ARRANGEMENT The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $2,474 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $2,474. NOTE 5--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2004, the Fund paid legal fees of $4,742 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 6--BORROWINGS Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. F-10 During the year ended October 31, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated at an amount equal to the Federal Funds rate plus 100 basis points. NOTE 7--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At October 31, 2004, securities with an aggregate value of $5,159,075 were on loan to brokers. The loans were secured by cash collateral of $5,328,230 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $13,968 for securities lending transactions. NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS DISTRIBUTIONS TO SHAREHOLDERS: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2004 and 2003. TAX COMPONENTS OF NET ASSETS: As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004 ---------------------------------------------------------------------------- Unrealized appreciation -- investments $ 41,989,554 ---------------------------------------------------------------------------- Temporary book/tax differences (35,257) ---------------------------------------------------------------------------- Capital loss carryforward (60,274,502) ---------------------------------------------------------------------------- Shares of beneficial interest 164,843,350 ============================================================================ Total net assets $146,523,145 ____________________________________________________________________________ ============================================================================
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable to losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $61,430. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan expenses. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. The Fund utilized $11,286,888 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* ----------------------------------------------------------------------------- October 31, 2005 $31,339,013 ----------------------------------------------------------------------------- October 31, 2009 27,317,937 ----------------------------------------------------------------------------- October 31, 2010 1,617,552 ============================================================================= Total capital loss carryforward $60,274,502 _____________________________________________________________________________ =============================================================================
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. F-11 NOTE 9--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 year ended October 31, 2004 was $91,023,045 and $90,300,370, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $42,823,380 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (895,256) =============================================================================== Net unrealized appreciation of investment securities $41,928,124 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $106,043,815.
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of net operating losses and foreign currency transactions, on October 31, 2004, undistributed net investment income (loss) was increased by $385,887, undistributed net realized gain (loss) was increased by $271,147 and shares of beneficial interest decreased by $657,034. This reclassification had no effect on the net assets of the Fund. NOTE 11--SHARE INFORMATION The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under certain circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING(a) ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ---------------------------------------------------------- 2004 2003 -------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------ Sold: Class A 3,833,128 $ 49,414,797 52,026,302 $ 482,251,871 ------------------------------------------------------------------------------------------------------------------------ Class B 980,158 12,296,597 1,753,073 15,942,378 ------------------------------------------------------------------------------------------------------------------------ Class C 1,722,011 21,531,254 8,347,302 74,077,447 ======================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 184,570 2,390,898 191,930 1,805,340 ------------------------------------------------------------------------------------------------------------------------ Class B (192,392) (2,390,898) (198,534) (1,805,340) ======================================================================================================================== Reacquired:(b) Class A (4,329,566) (55,363,748) (51,529,825) (483,507,824) ------------------------------------------------------------------------------------------------------------------------ Class B (680,316) (8,359,011) (1,848,491) (16,573,840) ------------------------------------------------------------------------------------------------------------------------ Class C (1,620,319) (19,952,079) (8,321,179) (74,001,650) ======================================================================================================================== (102,726) $ (432,190) 420,578 $ (1,811,618) ________________________________________________________________________________________________________________________ ========================================================================================================================
(a) There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and owns 7% of the outstanding shares of the Fund. AIM Distributors 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 shareholder is also owned beneficially. (b) Amount is net of redemption fees of $7,403, $2,065 and $805 for Class A, Class B and Class C shares for 2004, respectively. F-12 ASIA PACIFIC GROWTH FUND NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A ---------------------------------------------------------------- YEAR ENDED OCTOBER 31, ---------------------------------------------------------------- 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 12.07 $ 8.53 $ 8.59 $ 10.70 $ 10.76 ------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.01)(a) (0.01)(a) (0.04)(a) (0.01)(a) (0.07)(a) ------------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 1.66 3.55 (0.02) (2.06) 0.01 ============================================================================================================================== Total from investment operations 1.65 3.54 (0.06) (2.07) (0.06) ============================================================================================================================== Less distributions from net realized gains -- -- -- (0.04) -- ============================================================================================================================== Redemption fees added to shares of beneficial interest 0.00 -- -- -- -- ============================================================================================================================== Net asset value, end of period $ 13.72 $ 12.07 $ 8.53 $ 8.59 $ 10.70 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Total return(b) 13.67% 41.50% (0.70)% (19.46)% (0.56)% ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $106,129 $97,192 $62,806 $61,729 $93,755 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.23%(c) 2.26% 2.25% 2.02% 1.92% ------------------------------------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 2.25%(c) 2.41% 2.49% 2.37% 2.06% ============================================================================================================================== Ratio of net investment income (loss) to average net assets (0.09)%(c) (0.11)% (0.41)% (0.06)% (0.57)% ______________________________________________________________________________________________________________________________ ============================================================================================================================== Portfolio turnover rate 68% 100% 114% 73% 64% ______________________________________________________________________________________________________________________________ ==============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and the returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $101,708,724.
CLASS B --------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.64 $ 8.27 $ 8.38 $ 10.50 $ 10.65 ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.09)(a) (0.07)(a) (0.10)(a) (0.07)(a) (0.17)(a) ----------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.59 3.44 (0.01) (2.01) 0.02 ============================================================================================================================= Total from investment operations 1.50 3.37 (0.11) (2.08) (0.15) ============================================================================================================================= Less distributions from net realized gains -- -- -- (0.04) -- ============================================================================================================================= Redemption fees added to shares of beneficial interest 0.00 -- -- -- -- ============================================================================================================================= Net asset value, end of period $ 13.14 $ 11.64 $ 8.27 $ 8.38 $ 10.50 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Total return(b) 12.89% 40.75% (1.31)% (19.92)% (1.41)% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $29,174 $24,599 $19,916 $25,479 $39,852 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.88%(c) 2.91% 2.90% 2.67% 2.67% ----------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.90%(c) 3.06% 3.14% 3.02% 2.76% ============================================================================================================================= Ratio of net investment income (loss) to average net assets (0.74)%(c) (0.76)% (1.06)% (0.72)% (1.32)% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Portfolio turnover rate 68% 100% 114% 73% 64% _____________________________________________________________________________________________________________________________ =============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and the returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $28,366,748. F-13 NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C ----------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.60 $ 8.25 $ 8.37 $10.49 $10.63 ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.09)(a) (0.07)(a) (0.10)(a) (0.07)(a) (0.17)(a) ------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.58 3.42 (0.02) (2.01) 0.03 ========================================================================================================================= Total from investment operations 1.49 3.35 (0.12) (2.08) (0.14) ========================================================================================================================= Less distributions from net realized gains -- -- -- (0.04) -- ========================================================================================================================= Redemption fees added to shares of beneficial interest 0.00 -- -- -- -- ========================================================================================================================= Net asset value, end of period $ 13.09 $11.60 $ 8.25 $ 8.37 $10.49 _________________________________________________________________________________________________________________________ ========================================================================================================================= Total return(b) 12.84% 40.61% (1.43)% (19.94)% (1.32)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $11,220 $8,763 $6,019 $4,692 $6,797 _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.88%(c) 2.91% 2.90% 2.67% 2.67% ------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.90%(c) 3.06% 3.14% 3.02% 2.76% ========================================================================================================================= Ratio of net investment income (loss) to average net assets (0.74)%(c) (0.76)% (1.06)% (0.72)% (1.32)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Portfolio turnover rate 68% 100% 114% 73% 64% _________________________________________________________________________________________________________________________ =========================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and the returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $11,531,089. NOTE 13--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. The mutual fund industry as a whole is currently subject to regulatory inquiries and litigation related to a wide range of issues. These issues include, among others, market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. In addition, as described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. Additional regulatory inquiries related to the above or other issues also may be received by the AIM Funds, IFG, AIM and/or related entities and individuals in the future. As a result of the matters discussed below, investors in the AIM Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. Settled Enforcement Actions and Investigations Related to Market Timing On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the F-14 NOTE 13--LEGAL PROCEEDINGS (CONTINUED) settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing. Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid. The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs. None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders. Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected. On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years. On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year. As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds. At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM. The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund. Ongoing Regulatory Inquiries Concerning IFG and AIM IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more such Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, and investments in securities of other registered investment companies. These regulators include the SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, the Attorney F-15 NOTE 13--LEGAL PROCEEDINGS (CONTINUED) General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. IFG and certain of these other parties also have received more limited inquiries from the United States Department of Labor ("DOL") and the United States Attorney's Office for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries. AIM, certain related entities, certain of their current and former officers and/or certain of the AIM Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the SEC, the NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, the United States Attorney's Office for the Southern District of New York, the United States Attorney's Office for the Central District of California, the United States Attorney's Office for the District of Massachusetts, the Massachusetts Securities Division and the U.S. Postal Inspection Service, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries. Private Civil Actions Alleging Market Timing Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal and state securities laws; (ii) violation of various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. Private Civil Actions Alleging Improper Use of Fair Value Pricing Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM) alleging that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) alleging that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees. F-16 NOTE 13--LEGAL PROCEEDINGS (CONTINUED) Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. F-17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of AIM Asia Pacific Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM Asia Pacific Growth Fund (the "Fund") at October 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /S/ PRICEWATERHOUSECOOPERS LLP December 20, 2004 Houston, Texas F-18 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Asia Pacific Growth Fund, ("Fund"), a portfolio of AIM International Mutual Funds, a Delaware statutory trust (formerly AIM International Funds, Inc., a Maryland corporation), ("Company"), was held on October 21, 2003. The meeting was adjourned and reconvened on October 28, 2003, November 4, 2003, November 11, 2003, November 17, 2003 and reconvened on November 21, 2003. The meeting was held for the following purposes: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: Bob R. Baker, Frank S. Bayley, James T. Bunch, Bruce L. Crockett, Albert R. Dowden, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling, Robert H. Graham, Gerald J. Lewis, Prema Mathai-Davis, Lewis F. Pennock, Ruth H. Quigley, Louis S. Sklar, Larry Soll, Ph.D. and Mark H. Williamson. (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation. The results of the voting on the above matters were as follows:
WITHHELD/ TRUSTEES/MATTER VOTES FOR ABSTENTIONS --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 162,211,196 3,444,279 Frank S. Bayley.............................. 162,236,962 3,418,513 James T. Bunch............................... 162,287,588 3,367,887 Bruce L. Crockett............................ 162,276,496 3,378,979 Albert R. Dowden............................. 162,251,386 3,404,089 Edward K. Dunn, Jr. ......................... 162,221,226 3,434,249 Jack M. Fields............................... 162,278,318 3,377,157 Carl Frischling.............................. 162,182,906 3,472,569 Robert H. Graham............................. 162,243,892 3,411,583 Gerald J. Lewis.............................. 162,147,868 3,507,607 Prema Mathai-Davis........................... 162,219,866 3,435,609 Lewis F. Pennock............................. 162,263,207 3,392,268 Ruth H. Quigley.............................. 162,163,064 3,492,411 Louis S. Sklar............................... 162,243,759 3,411,716 Larry Soll, Ph.D. ........................... 162,236,226 3,419,249 Mark H. Williamson........................... 162,238,962 3,416,513
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------ (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 76,302,938 2,822,366 86,530,171**
The Special Meeting of Shareholders of the Company was reconvened on October 28, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------ (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 84,066,011 2,989,031 83,338,957**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-19 The Special Meeting of Shareholders of the Company was reconvened on November 4, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------ (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 95,512,525 3,144,748 78,504,573**
The Special Meeting of Shareholders of the Company was reconvened on November 11, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 109,217,698 3,531,752 71,913,039**
The Special Meeting of Shareholders of the Company was reconvened on November 17, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 116,710,545 3,761,148 69,451,190**
The Special Meeting of Shareholders of the Company was reconvened on November 21, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------- (2)* Approval of an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 137,239,949 4,617,039 51,798,672**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-20 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
TRUSTEE AND/ NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE --------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS --------------------------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management None Trustee and President Group Inc. (financial services holding company); Director and Vice Chairman, AMVESCAP PLC and Chairman, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: President and Chief Executive Officer, A I M Management Group Inc.; Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products --------------------------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive None Trustee and Executive Vice Officer, A I M Management Group Inc. President (financial services holding company); Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent), Fund Management Company (registered broker dealer) and INVESCO Distributors, Inc. (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc.; President and Chief Executive Officer, INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. --------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES --------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett(3) -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance company); Trustee and Chair (technology consulting company) and Captaris, Inc. (unified messaging provider) --------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation --------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered Trustee investment company) Formerly: Partner, law firm of Baker & McKenzie --------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning None Trustee & Bunch Ltd., (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation --------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and Cortland Trust, Inc. (Chairman) Trustee private business corporations, including (registered investment company); the Boss Group Ltd. (private investment Annuity and Life Re (Holdings), and management) and Magellan Insurance Ltd. (insurance company) Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo companies --------------------------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Retired None Trustee Formerly: Chairman, Mercantile Mortgage Corp.; President and Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. --------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff, and Discovery Global Trustee Century Group, Inc. (government affairs Education Fund (non-profit) company) and Texana Timber LP (sustainable forestry company) ---------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to October 4, 2004, Mr. Graham served as Chairman of the Board of Trustees of the Trust. (2) Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. (3) Mr. Crockett was elected Chair of the Board of Trustees of the Trust effective October 4, 2004. TRUSTEES AND OFFICERS (continued) As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Trustee and/ Principal Occupation(s) Other Directorship(s) Position(s) Held with the Trust or Officer Since During Past 5 Years Held by Trustee ----------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered Trustee Naftalis and Frankel LLP investment company) ----------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc. Trustee (California) Formerly: Associate Justice of the California Court of Appeals ----------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None Trustee of the USA ----------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee ----------------------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee ----------------------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1991 Executive Vice President, Development None Trustee and Operations, Hines Interests Limited Partnership (real estate development company) ----------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee ----------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS ----------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley(4) -- 1959 2004 Senior Vice President, A I M Management N/A Senior Vice President and Group Inc. (financial services holding Chief Compliance Officer company); Senior Vice President and Chief Compliance Officer, A I M Advisors, Inc.; Vice President and Chief Compliance Officer, A I M Capital Management, Inc. and A I M Distributors, Inc.; and Vice President, AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds ----------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A Senior Vice President, Secretary and General Counsel, A I M Secretary and Chief Legal Management Group Inc. (financial Officer services holding company) and A I M Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., and AIM Investment Services, Inc.; Director, Vice President and General Counsel, Fund Management Company and Senior Vice President, A I M Distributors, Inc. Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC and Vice President, A I M Distributors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income N/A Vice President Officer and Senior Investment Officer, A I M Capital Management, Inc. and Vice President, A I M Advisors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Director of Money N/A Vice President Market Research and Special Projects, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A Vice President and Treasurer Advisors, Inc. Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A Vice President Director and Chief Cash Management Officer, A I M Capital Management, Inc; Director and President, Fund Management Company; and Vice President, A I M Advisors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen -- 1940 1999 Executive Vice President, A I M N/A Vice President Management Group, Inc.; Senior Vice President, A I M Advisors, Inc., and President, Director of Investments, Chief Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. Formerly: Director of A I M Advisors, Inc. and A I M Management Group Inc., A I M Advisors, Inc.; and Director and Chairman, A I M Capital Management, Inc. -----------------------------------------------------------------------------------------------------------------------------------
(4) Ms. Brinkley was elected Senior Vice President and Chief Compliance Officer of the Trust effective September 20, 2004. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers Suite 100 11 Greenway Plaza Inc. LLP Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Street Houston, TX 77046-1173 Suite 100 Suite 2900 Houston, TX 77046-1173 Houston, Texas 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis AIM Investment State Street Bank and Andrews & Ingersoll, LLP & Frankel LLP Services, Inc. Trust Company 1735 Market Street 919 Third Avenue P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103-7599 New York, NY 10022-3852 Houston, TX 77210-4739 Boston, MA 02110-2801
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund(5) AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Equity Fund(6) AIM Intermediate Government Fund AIM Charter Fund AIM Global Growth Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund AIM Money Market Fund AIM Core Stock Fund(1) AIM International Core Equity Fund(1) AIM Short Term Bond Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund(7) AIM Total Return Bond Fund AIM Diversified Dividend Fund AIM International Growth Fund Premier U.S. Government Money Portfolio(1) AIM Dynamics Fund(1) AIM Trimark Fund AIM Emerging Growth Fund TAX-FREE AIM Large Cap Basic Value Fund SECTOR EQUITY AIM Large Cap Growth Fund AIM High Income Municipal Fund AIM Libra Fund AIM Advantage Health Sciences Fund(1) AIM Municipal Bond Fund AIM Mid Cap Basic Value Fund AIM Energy Fund(1) AIM Tax-Exempt Cash Fund AIM Mid Cap Core Equity Fund(2) AIM Financial Services Fund(1) AIM Mid Cap Growth Fund AIM Global Health Care Fund AIM ALLOCATION SOLUTIONS AIM Mid Cap Stock Fund(1) AIM Gold & Precious Metals Fund(1) AIM Opportunities I Fund AIM Health Sciences Fund(1) AIM Aggressive Allocation Fund AIM Opportunities II Fund AIM Leisure Fund(1) AIM Conservative Allocation Fund AIM Opportunities III Fund AIM Multi-Sector Fund(1) AIM Moderate Allocation Fund AIM Premier Equity Fund AIM Real Estate Fund AIM S&P 500 Index Fund(1) AIM Technology Fund(1) AIM Select Equity Fund AIM Utilities Fund(1) AIM Small Cap Equity Fund(3) AIM Small Cap Growth Fund(4) ======================================================================================= AIM Small Company Growth Fund(1) CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AIM Total Return Fund*(1) AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AIM Trimark Endeavor Fund AND READ IT THOROUGHLY BEFORE INVESTING. AIM Trimark Small Companies Fund ======================================================================================= AIM Weingarten Fund
* Domestic equity and income fund (1) The following name changes became effective October 15, 2004: INVESCO Advantage Health Sciences Fund to AIM Advantage Health Sciences Fund, INVESCO Core Equity Fund to AIM Core Stock Fund, INVESCO Dynamics Fund to AIM Dynamics Fund, INVESCO Energy Fund to AIM Energy Fund, INVESCO Financial Services Fund to AIM Financial Services Fund, INVESCO Gold & Precious Metals Fund to AIM Gold & Precious Metals Fund, INVESCO Health Sciences Fund to AIM Health Sciences Fund, INVESCO International Core Equity Fund to AIM International Core Equity Fund, INVESCO Leisure Fund to AIM Leisure Fund, INVESCO Mid-Cap Growth Fund to AIM Mid Cap Stock Fund, INVESCO Multi-Sector Fund to AIM Multi-Sector Fund, INVESCO S&P 500 Index Fund to AIM S&P 500 Index Fund, INVESCO Small Company Growth Fund to AIM Small Company Growth Fund, INVESCO Technology Fund to AIM Technology Fund, INVESCO Total Return Fund to AIM Total Return Fund, INVESCO U.S. Government Money Fund to Premier U.S. Government Money Portfolio, INVESCO Utilities Fund to AIM Utilities Fund. (2) As of the close of business on February 27, 2004, AIM Mid Cap Core Equity Fund is available to new investors on a limited basis. For information on who may continue to invest in AIM Mid Cap Core Equity Fund, please contact your financial advisor. (3) Effective December 13, 2004, AIM Small Cap Equity Fund is open to all investors. (4) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (5) AIM European Small Company Fund will close to new investors when net assets reach $500 million. (6) Effective March 31, 2004, AIM Global Trends Fund was renamed AIM Global Equity Fund. (7) AIM International Emerging Growth Fund will close to new investors when net assets reach $500 million. If used after January 20, 2005, this report must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $132 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $363 billion in assets under management. Data as of September 30, 2004. AIMinvestments.com APG-AR-1 A I M Distributors, Inc. YOUR GOALS. OUR SOLUTIONS. --Registered Trademark-- ------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Registered Trademark-- Plans Accounts -------------------------------------------------------------------------------------
AIM EUROPEAN GROWTH FUND Annual Report to Shareholders o October 31, 2004 [COVER IMAGE] [YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE] --Registered Trademark-- --Registered Trademark-- =================================================================================================================================== AIM EUROPEAN GROWTH FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of 10/31/04 and is based on total net assets. =================================================================================================================================== ABOUT SHARE CLASSES performance of companies with higher may differ from the net asset values and price/earnings ratios and higher returns reported in the Financial o Effective 9/30/03, Class B shares are forecasted growth values. Highlights. not available as an investment for retirement plans maintained pursuant to o The unmanaged MSCI Europe Value Index o Industry classifications used in this Section 401 of the Internal Revenue is a subset of the unmanaged MSCI Europe report are generally according to the Code, including 401(k) plans, money Index, which represents a group of Global Industry Classification Standard, purchase pension plans and profit European securities tracked by Morgan which was developed by and is the sharing plans. Plans that have existing Stanley Capital International. The value exclusive property and a service mark of accounts invested in Class B shares will portion measures performance of Morgan Stanley Capital International continue to be allowed to make companies with lower price/earnings Inc. and Standard & Poor's. additional purchases. ratios and lower forecasted growth values. The fund files its complete schedule of o Investor Class shares are closed to portfolio holdings with the Securities most investors. For more information on o The unmanaged Lipper European Fund and Exchange Commission ("SEC") for the who may continue to invest in the Index represents an average of the 30 1st and 3rd quarters of each fiscal year Investor Class shares, please see the largest global income funds tracked by on Form N-Q. The fund's Form N-Q filings prospectus. Lipper, Inc., an independent mutual fund are available on the SEC's Web site at performance monitor. http://www.sec.gov. Copies of the fund's o Class R shares are available only to Forms N-Q may be reviewed and copied at certain retirement plans. Please see the o The unmanaged Standard & Poor's the SEC's Public Reference Room at 450 prospectus for more information. Composite Index of 500 Stocks (the S&P Fifth Street, N.W., Washington, D.C. 500--Registered Trademark-- Index) is an 20549-0102. You can obtain information PRINCIPAL RISKS OF INVESTING IN THE FUND index of common stocks frequently used on the operation of the Public Reference as a general measure of U.S. stock Room, including information about o International investing presents market performance. duplicating fee charges, by calling certain risks not associated with 1-202-942-8090 or by electronic request investing solely in the United States. o The unmanaged MSCI World Index is a at the following E-mail address: These include risks relating to group of global securities tracked by publicinfo@sec.gov. The SEC file numbers fluctuations in the value of the U.S. Morgan Stanley Capital International. for the fund are 811-6463 and 33-44611. dollar relative to the values of other The fund's most recent portfolio currencies, the custody arrangements o A direct investment cannot be made in holdings, as filed on Form N-Q, are also made for the fund's foreign holdings, an index. Unless otherwise indicated, available at AIMinvestments.com. differences in accounting, political index results include reinvested risks and the lesser degree of public dividends, and they do not reflect sales A description of the policies and information required to be provided by charges. Performance of an index of procedures that the fund uses to non-U.S. companies. funds reflects fund expenses; determine how to vote proxies relating performance of a market index does not. to portfolio securities is available o Investing in a single-sector or without charge, upon request, from our single-region mutual fund involves o The fund is not managed to track the Client Services department at greater risk and potential reward than performance of any particular index, 800-959-4246 or on the AIM Web site, investing in a more diversified fund. including the indexes defined here, and AIMinvestments.com. On the home page, consequently, the performance of the scroll down and click on AIM Funds Proxy ABOUT INDEXES USED IN THIS REPORT fund may deviate significantly from the Policy. The information is also performance of the indexes. available on the Securities and Exchange o The unmanaged MSCI Europe, Australasia Commission's Web site, sec.gov. and the Far East Index (the MSCI OTHER INFORMATION EAFE--Registered Trademark-- Index) is a Information regarding how the fund voted group of foreign securities tracked by o The returns shown in the Management's proxies related to its portfolio Morgan Stanley Capital International. Discussion of Fund Performance are based securities during the 12 months ended on net asset values calculated for 6/30/04 is available at our Web site. Go o The unmanaged MSCI Europe Index is a shareholder transactions. Generally to AIMinvestments.com, access the About group of European securities tracked by accepted accounting principles require Us tab, click on Required Notices and Morgan Stanley Capital International. adjustments to be made to the net assets then click on Proxy Voting Activity. of the fund at period end for financial Next, select your fund from the o The unmanaged MSCI Europe Growth Index reporting purposes, and as such, the net drop-down menu. is a subset of the unmanaged MSCI Europe asset values for shareholder Index, which represents a group of transactions and the returns based on European securities tracked by Morgan those net asset values Stanley Capital International. The growth portion measures
============================================================================= 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 TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER OF THE AIM FAMILY OF FUNDS--Registered Trademark--: NEW BOARD CHAIRMAN [PHOTO OF It is our pleasure to introduce you to Bruce Crockett, the ROBERT H. new Chairman of the Board of Trustees of the AIM Funds. Bob GRAHAM] Graham has served as Chairman of the Board of Trustees of the AIM Funds ever since Ted Bauer retired from that ROBERT H. GRAHAM position in 2000. However, as you may be aware, the U.S. Securities and Exchange Commission recently adopted a rule [PHOTO OF requiring that an independent fund trustee, meaning a MARK H. trustee who is not an officer of the fund's investment WILLIAMSON] advisor, serve as chairman of the funds' Board. In addition, a similar provision was included in the terms of AIM MARK H. WILLIAMSON Advisors' recent settlements with certain regulators. Accordingly, the AIM Funds' Board recently elected Mr. [PHOTO OF Crockett, one of the fourteen independent trustees on the BRUCE L. AIM Funds' Board, as Chairman. His appointment became CROCKETT] effective on October 4, 2004. Mr. Graham will remain on the funds' Board, as will Mark Williamson, President and Chief BRUCE L. CROCKETT Executive Officer of AIM. Mr. Graham will also remain Chairman of AIM Investments--Registered Trademark--. Mr. Crockett has been a member of the AIM Funds' board since 1992, when AIM acquired certain funds that had been advised by CIGNA. He had been a member of the board of those funds since 1978. Mr. Crockett has more than 30 years of experience in finance and general management and has been Chairman of Crockett Technologies Associates since 1996. He is the first independent chairman of the funds' board in AIM's history, as he is not affiliated with AIM or AMVESCAP in any way. He is committed to ensuring that the AIM Funds adhere to the highest standards of corporate governance for the benefit of fund shareholders, and we at AIM share that commitment. MARKET CONDITIONS DURING THE FISCAL YEAR Virtually every equity index, domestic and foreign, produced positive returns for the fiscal year ended October 31, 2004. Domestically, the S&P 500 Index was up 9.41% for the year. Globally, the MSCI World Index advanced more than 13%. However, a goodly portion of this positive performance was achieved during 2003. Year to date as of October 31, the S&P 500 Index was up just over 3%, the MSCI World Index just about 5%. In the pages that follow, you will find a more detailed discussion of the market conditions that affected your fund during the fiscal year. While it is agreeable to report positive market performance for the year covered by this report, as ever, we encourage our shareholders to look past short-term performance and focus on their long-term investment goals. Over the short term, the one sure thing about the investment markets is their unpredictability. Over the long term, equities have produced very attractive returns. For the 25-year period ended October 31, 2004, the S&P 500 Index averaged 13.50% growth per year and the MSCI World Index averaged 11.16%. While past performance cannot guarantee future results, we believe staying invested for the long term offers the best opportunity for capital growth. YOUR FUND The following pages of this report provide an explanation of how your fund was managed during the fiscal year, how it performed in comparison to various benchmarks, and a presentation of its long-term performance. We hope you find this information helpful. Current information about your fund and about the markets in general is always available on our Web site, AIMinvestments.com. As always, AIM remains committed to building solutions for your investment goals, and we thank you for your continued participation in AIM Investments. If you have any questions, please contact our Client Service representatives at 800-959-4246. Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON -------------------------- ---------------------- Robert H. Graham Mark H. Williamson Chairman, AIM Investments CEO & President, President & Vice Chairman, AIM Investments AIM Funds Trustee, AIM Funds December 16, 2004 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, and A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE STOCK SELECTION/CURRENCY Not surprisingly, the energy and APPRECIATION BOOST FUND RETURNS utility sectors posted the highest returns, meanwhile the information For the fiscal year ended October 31, geopolitical concerns, however, weighed technology sector--which declined 2004, AIM European Growth Fund Class A on world markets during much of 2004. significantly in the summer--was the shares returned 31.00% at net asset worst performer. European value stocks value. PERFORMANCE SHOWN AT NAV DOES NOT All countries and sectors included in generally outperformed European growth INCLUDE FRONT-END SALES CHARGES, WHICH the MSCI Europe Index posted positive stocks and small-cap stocks continued to WOULD HAVE REDUCED THE PERFORMANCE. returns for the fiscal year on a post higher returns than large-cap Returns for other share classes are dollar-denominated basis. In the euro stocks. shown in the table on page 3. For the zone--twelve countries that have adopted same period, the fund outperformed all the euro as their currency-- economic YOUR FUND its benchmarks including the MSCI EAFE recovery appeared to be ongoing, Index, MSCI Europe Growth Index and primarily driven by external demand. During the fiscal year, the investment Lipper European Fund Index which climate in Europe once again rewarded returned 18.84%, 18.00%, and 21.71%, Domestic demand, however, was companies with strong corporate respectively. divergent across countries--stronger in earnings. Our strategy of investing in France and weaker in Germany. Amid companies with strong fundamentals and We attribute the fund's higher return higher oil prices, inflation rose above accelerating earnings growth but which to several factors: European markets the European Central Bank's (ECB) target are reasonably priced worked well in outperformed other regions for the of 2%. this environment. Indeed, a testament to fiscal year (the MSCI EAFE Index is the fund's investment strategy was comprised of stocks from many different However, with wage increases still evident by the fund's higher return than regions and countries). Strong stock moderate, the ECB remained accommodative the MSCI Europe Value Index in an selection and our focus on companies and kept short-term rates at 2%. The environment where value stocks decidedly with quality earnings also helped build euro appreciated more than 9% against outperformed growth stocks. a strong portfolio. the U.S. dollar during the fiscal year, putting pressure on European exporters. Other aspects of the fund's strategy MARKET CONDITIONS also proved instrumental to fund In the United Kingdom, private performance including our flexible European markets (represented by the consumption remained strong, buoyed by market cap and nonhedging philosophy. MSCI Europe Index) posted double-digit sustained income growth and rising Over the last few years, European gains for the fiscal year, outperforming housing wealth. With demand already high small-cap stocks have outperformed their the S&P 500 Index--often considered a relative to the supply capacity of the large cap peers. The fund's flexible barometer for the U.S. stock market--by economy, continued strong growth was market cap has allowed us to capitalize more than a two-to-one margin. A review likely to lead to rising inflationary on this trend of higher returns of of the fiscal year illustrates that much pressures. Therefore, the Bank of small-cap stocks. Additionally, the fact of the performance gain came in the England raised short-term interest rates that we do not hedge currencies--we buy fourth quarter with European stocks up five times during the fiscal year. stocks in local currency and then more than 20%. Rising commodity prices Meanwhile, the British pound appreciated translate that value back into the fund and more than 8% against the U.S. dollar in U.S. dollars--also proved favorable. during the fiscal year. Strong appreciation of European currencies helped boost fund returns.
=================================================================================================================================== PORTFOLIO COMPOSITION TOP 10 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. United Kingdom 22.3% 1. Anglo Irish Bank Corp. PLC (Ireland) 4.5% [PIE CHART] 2. France 11.9 2. Puma A.G. Rudolf Dassler Consumer Staples 8.7% 3. Ireland 10.8 Sport (Germany) 4.5 Materials 3.9% 4. Germany 5.8 3. Grafton Group PLC (Ireland) 2.6 Telecommunication Services 6.0% 5. Italy 5.2 4. OTP Bank Rt. (Hungary) 2.2 Energy 4.6% 6. Switzerland 5.0 5. Enterprise Inns PLC (United Kingdom) 1.9 Health Care 3.8% 7. Greece 4.4 6. Total S.A. (France) 1.7 Money Market Funds Plus Other 8. Spain 4.3 Assets Less Liabilities 8.9% 7. Vodafone Group PLC 9. Netherlands 4.2 (United Kingdom) 1.7 Utilities 2.0% 10. Belgium 4.0 8. Eni S.p.A. (Italy) 1.7 Information Technology 0.9% 9. Mobistar S.A. (Belgium) 1.6 Consumer Discretionary 27.5% 10. Imperial Tobacco Group PLC Financials 20.1% (United Kingdom) 1.6 Industrials 13.6% The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. *Excluding money market fund holdings. ===================================================================================================================================
2 Our investment philosophy is based on dollar. A decline in the dollar affects JASON T. HOLZER Mr. bottom-up investing. In other words, we ICAP's earnings as the firm generates a Holzer, Chartered invest in individual companies; not great deal of its revenue in dollars, [HOLZER Financial Analyst, is countries or sectors. If we find a stock which is then translated back into PHOTO] co-manager of AIM attractive, we will consider it for the pounds for its results. While we have European Growth Fund. fund, despite country economics. For reduced our position in the stock, we Mr. Holzer joined AIM example, Germany's economy is one of the continued to own it based on the in 1996. He received a B.A. in most troubled in Europe; however, two of strength of its electronic brokering quantitative economics and an M.S. in the fund's top performers during the services and a pick-up in market engineering-economic systems from fiscal year were Continental, a tire activity. Stanford University. manufacturer, and sporting good provider Puma--both German stocks. CLAS G. OLSSON Mr. IN CLOSING Olsson is co-manager [OLSSON of AIM European Growth On a sector basis, we increased our Despite outperforming U.S. stocks for PHOTO] Fund. Mr. Olsson exposure to consumer discretionary the fiscal year, European stocks joined AIM in 1994. stocks, particularly in France where continued to trade at a discount to Mr. Olsson became a consumer demand is accelerating. In the their U.S. counterparts. We are pleased commissioned naval officer at the Royal financials sector, strong stock to provide shareholders with Swedish Naval Academy in 1988. He also selection coupled with sizeable exposure double-digit returns for the fiscal year received a B.B.A. from The University of contributed to fund returns. One of our and remain committed to our investment Texas at Austin. best performing financial stocks was OTP objective of long-term growth of capital Bank, a Hungarian commercial bank which by investing in European-based companies Assisted by Europe/Canada Team is benefiting from Hungary's admittance with accelerating earnings growth. into the European Union during the fiscal year. The bank's attractive The views and opinions expressed in valuation and continued strong Management's Discussion of Fund fundamentals--good earnings amid strong Performance are those of A I M Advisors, loan growth--fit the fund's investment Inc. These views and opinions are criteria. subject to change at any time based on factors such as market and economic While all sectors in the fund posted conditions. These views and opinions may positive returns for the fiscal year, not be relied upon as investment advice the health care sector proved or recommendations, or as an offer for a disappointing. We remained underweight particular security. The information is in the health care sector for much of not a complete analysis of every aspect the fiscal year as we believed many of any market, country, industry, medical/tech companies and large security or the Fund. Statements of fact pharmaceutical companies were overvalued are from sources considered reliable, and therefore did not fit our investment but A I M Advisors, Inc. makes no criteria. representation or warranty as to their completeness or accuracy. Although The largest single stock detractor historical performance is no guarantee for the fund was ICAP, one of the of future results, these insights may world's largest interdealer brokers. A help you understand our investment U.K.-based firm, the company was hard management philosophy. hit by slow market conditions in the summer and by a weak U.S. See important fund and index disclosures inside front cover.
==================================================================================== TOP 10 INDUSTRIES* FUND VS. INDEXES 1. Diversified Banks 14.4% TOTAL RETURNS, 10/31/03-10/31/04, EXCLUDING APPLICABLE SALES CHARGES. IF 2. Wireless Telecommunication SALES CHARGES WERE INCLUDED, RETURNS Services 5.2 WOULD BE LOWER. 3. Footwear 4.5 CLASS A SHARES 31.00% 4. Construction & Engineering 4.5 CLASS B SHARES 30.21 5. Restaurants 3.6 CLASS C SHARES 30.13 6. Integrated Oil & Gas 3.4 CLASS R SHARES 30.78 7. Publishing 3.4 INVESTOR CLASS SHARES 31.14 8. Pharmaceuticals 3.3 MSCI EAFE INDEX (BROAD MARKET INDEX) 18.84 9. Casinos & Gaming 2.9 MSCI EUROPE GROWTH INDEX 10. Food Retail 2.6 (STYLE-SPECIFIC INDEX) 18.00 TOTAL NET ASSETS $770.6 MILLION LIPPER EUROPEAN FUND INDEX TOTAL NUMBER OF HOLDINGS* 92 (PEER GROUP INDEX) 21.71 SOURCE: LIPPER, INC. ==================================================================================== [RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S PERFORMANCE RECORD, PLEASE TURN TO PAGE 5.
3 INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE estimate the expenses that you paid over costs of investing in the fund and other the period. Simply divide your account funds. To do so, compare this 5% As a shareholder of the fund, you incur value by $1,000 (for example, an $8,600 hypothetical example with the 5% two types of costs: (1) transaction account value divided by $1,000 = 8.6), hypothetical examples that appear in the costs, which may include sales charges then multiply the result by the number shareholder reports of the other funds. (loads) on purchase payments; contingent in the table under the heading entitled deferred sales charges on redemptions; "Actual Expenses Paid During Period" to Please note that the expenses shown and redemption fees, if any; and (2) estimate the expenses you paid on your in the table are meant to highlight your ongoing costs, including management account during this period. ongoing costs only and do not reflect fees; distribution and/or service fees any transactional costs, such as sales (12b-1); and other fund expenses. This HYPOTHETICAL EXAMPLE FOR charges (loads) on purchase payments, example is intended to help you COMPARISON PURPOSES contingent deferred sales charges on understand your ongoing costs (in redemptions, and redemption fees, if dollars) of investing in the fund and to The table below also provides any. Therefore, the hypothetical compare these costs with ongoing costs information about hypothetical account information is useful in comparing of investing in other mutual funds. The values and hypothetical expenses based ongoing costs only, and will not help example is based on an investment of on the fund's actual expense ratio and you determine the relative total costs $1,000 invested at the beginning of the an assumed rate of return of 5% per year of owning different funds. In addition, period and held for the entire period, before expenses, which is not the fund's if these transactional costs were May 1, 2004 - October 31, 2004. actual return. The hypothetical account included, your costs would have been values and expenses may not be used to higher. ACTUAL EXPENSES estimate the actual ending account balance or expenses you paid for the The table below provides information period. You may use this information to about actual account values and actual compare the ongoing expenses. You may use the information in this table,
=================================================================================================================================== ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING VALUE PAID DURING (5/1/04) (10/31/04)(1) PERIOD(2) (10/31/04) PERIOD(2) Class A $1,000.00 $1,104.00 $ 9.63 $1,015.99 $ 9.22 Class B 1,000.00 1,100.70 13.04 1,012.72 12.50 Class C 1,000.00 1,100.60 13.04 1,012.72 12.50 Class R 1,000.00 1,103.00 10.41 1,015.23 9.98 Investor Class 1,000.00 1,104.90 8.78 1,016.79 8.42 (1) The actual ending account value is based on the actual total return of the fund for the period May 1, 2004, to October 31, 2004, 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 actual cumulative return at net asset value for the period May 1, 2004, to October 31, 2004, was 10.40%, 10.07%, 10.06%, 10.30% and 10.49% for Class A, B, C, R shares and Investor Class shares, respectively. (2) Expenses are equal to the fund's annualized expense ratio (1.82%, 2.47%, 2.47%, 1.97% and 1.66% for Class A, B, C, R shares and Investor Class shares, respectively) multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). =================================================================================================================================== [ARROW BUTTON For More Information Visit IMAGE] AIMinvestments.com
4 LONG-TERM PERFORMANCE YOUR FUND'S LONG-TERM PERFORMANCE =================================================================================================================================== Past performance cannot guarantee RESULTS OF A $10,000 INVESTMENT comparable future results. 11/3/97-10/31/04 Index data from 10/31/97 Your fund's total return includes [MOUNTAIN CHART] reinvested distributions, applicable sales charges, fund expenses and AIM EUROPEAN AIM EUROPEAN AIM EUROPEAN LIPPER management fees. Results for Class B GROWTH FUND GROWTH FUND GROWTH FUND EUROPEAN shares are calculated as if a CLASS A CLASS B CLASS C FUND MSCI EAFE MSCI EUROPE hypothetical shareholder had liquidated DATE SHARES SHARES SHARES INDEX INDEX GROWTH INDEX his entire investment in the fund at the close of the reporting period and paid 11/3/1997 $ 9450 $10000 $10000 $10000 $10000 $10000 the applicable contingent deferred sales 1/98 10026 10600 10600 10694 10441 10964 charges. Index results include 4/98 12910 13609 13609 12738 11544 12652 reinvested dividends, but they do not 7/98 14535 15298 15308 13346 11692 13270 reflect sales charges. Performance of an 10/98 12248 12867 12878 11533 10965 12436 index of funds reflects fund expenses 1/99 14322 15025 15038 12985 11946 14004 and management fees; performance of a 4/99 13195 13815 13818 13002 12640 13029 market index does not. Performance shown 7/99 13904 14526 14538 13065 12827 12607 in the chart does not reflect deduction 10/9 15530 16196 16209 13468 13490 13456 of taxes a shareholder would pay on fund 1/00 23676 24644 24669 15741 14245 15279 distributions or sale of fund shares. 4/00 24130 25064 25088 16952 14396 15939 Performance of the indexes does not 7/00 24375 25284 25308 16872 13982 14788 reflect the effects of taxes. 10/00 22323 23115 23140 15574 13099 13389 1/01 21528 22246 22270 15799 13050 13230 In evaluating this chart, please note 4/01 18001 18577 18600 14070 12050 11602 that the chart uses a logarithmic scale 7/01 16970 17487 17508 12845 10946 10416 along the vertical axis (the value 10/01 15627 16068 16089 11501 9834 9453 scale). This means that each scale 1/02 15958 16377 16400 11717 9712 9665 increment always represents the same 4/02 17028 17446 17471 12279 10377 9962 percent change in price; in a linear 7/02 15401 15767 15780 10708 9094 8467 chart each scale increment always 10/02 14759 15076 15091 10032 8534 8263 represents the same absolute change in 1/03 14211 14486 14500 9677 8262 7833 price. In this example, the scale 4/03 15459 15734 15739 10350 8689 8457 increment between $5,000 and $10,000 is 7/03 16842 17115 17129 11415 9667 8938 the same as that between $10,000 and 10/03 18952 19223 19248 12502 10842 9681 $20,000. In a linear chart, the latter 1/04 22062 22352 22367 14387 12118 11049 scale increment would be twice as large. 4/04 22489 22742 22759 14128 12185 10820 The benefit of using a logarithmic scale 7/04 22508 22722 22748 14040 12088 10689 is that it better illustrates 10/04 $24823 $25040 $25050 $15216 $12884 $11424 performance during the fund's early Source: Lipper, Inc. years depicted in the chart before reinvested distributions and compounding INVESTOR CLASS SHARES inception date is 11/3/97. Class R create the potential for the original Inception 14.82% shares' inception date is 6/3/02. investment to grow to very large 5 Years 9.84 Returns since that date are historical numbers. Had the chart used a linear 1 Year 31.14 returns. All other returns are blended scale along its vertical axis, you would returns of historical Class R share not be able to see as clearly the In addition to returns as of the close performance and restated Class A share movements in the value of the fund and of the fiscal year, industry regulations performance (for periods prior to the the indexes during the early years require us to provide average annual inception date of Class R shares) at net depicted. We use a logarithmic scale in total returns as of 9/30/04, the most asset value, adjusted to reflect the financial reports of funds that have recent calendar quarter-end. higher Rule 12b-1 fees applicable to more than five years of performance Class R shares. Class A shares' history. AVERAGE ANNUAL TOTAL RETURNS inception date is 11/3/97. As of 9/30/04, most recent calendar AVERAGE ANNUAL TOTAL RETURNS quarter-end, including applicable sales As of 10/31/04, including applicable sales charges The performance data quoted represent charges past performance and cannot guarantee CLASS A SHARES comparable future results; current CLASS A SHARES Inception (11/3/97) 13.57% performance may be lower or higher. Inception (11/3/97) 13.89% 5 Years 9.39 Please visit AIMinvestments.com for the 5 Years 8.59 1 Year 27.62 most recent month-end performance. 1 Year 23.77 Performance figures reflect reinvested CLASS B SHARES distributions, changes in net asset CLASS B SHARES Inception (11/3/97) 13.72% value and the effect of the maximum Inception (11/3/97) 14.03% 5 Years 9.61 sales charge unless otherwise stated. 5 Years 8.82 1 Year 29.26 Investment return and principal value 1 Year 25.21 will fluctuate so that you may have a CLASS C SHARES gain or loss when you sell shares. CLASS C SHARES Inception (11/3/97) 13.72% Inception (11/3/97) 14.04% 5 Years 9.89 Class A share performance reflects 5 Years 9.09 1 Year 33.23 the maximum 5.50% sales charge, and 1 Year 29.13 Class B and Class C share performance CLASS R SHARES reflects the applicable contingent CLASS R SHARES Inception 14.33% deferred sales charge (CDSC) for the Inception 14.63% 5 Years 10.46 period involved. The CDSC on Class B 5 Years 9.65 1 Year 34.89 shares declines from 5% beginning at the 1 Year 30.78 time of purchase to 0% at the beginning INVESTOR CLASS SHARES of the seventh year. The CDSC on Class C Inception 14.51% shares is 1% for the first year after 5 Years 10.64 purchase. Investor Class shares do not 1 Year 35.16 have a front-end sales charge or a CDSC; therefore, performance is at net asset Investor Class shares' inception date is value. Class R shares do not have a 9/30/03. Returns since that date are front-end sales charge; returns shown historical returns. All other returns are at net asset value and do not are blended returns of historical reflect a 0.75% CDSC that may be imposed Investor Class share performance and on a total redemption of retirement plan restated Class A share performance (for assets within the first year. periods prior to the inception date of Investor Class shares) at net asset The performance of the fund's share value and reflect the higher Rule 12b-1 classes will differ due to different fees applicable to Class A shares. Class sales charge structures and class A shares' expenses. A redemption fee of 2% will be imposed on certain redemptions or exchanges out of the fund within 30 days of purchase. Exceptions to the redemption fee are listed in the fund's prospectus. ===================================================================================================================================
5 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2004
MARKET SHARES VALUE -------------------------------------------------------------------------- STOCKS & OTHER EQUITY INTERESTS-91.16% AUSTRIA-0.77% Erste Bank der oesterreichischen Sparkassen A.G. (Diversified Banks)(a) 132,960 $ 5,947,033 ========================================================================== BELGIUM-4.01% Algemene Maatschappij voor Nijverheidskredit N.V. (Diversified Banks)(a) 55,000 4,150,550 -------------------------------------------------------------------------- Colruyt S.A. (Food Retail)(a) 68,300 9,952,543 -------------------------------------------------------------------------- KBC Bankverzekeringsholding (Diversified Banks)(a) 56,000 4,129,062 -------------------------------------------------------------------------- Mobistar S.A. (Wireless Telecommunication Services)(a)(b) 167,834 12,662,845 ========================================================================== 30,895,000 ========================================================================== DENMARK-0.89% Topdanmark A.S. (Multi-Line Insurance)(a)(b) 97,200 6,883,295 ========================================================================== FRANCE-11.87% BNP Paribas S.A. (Diversified Banks)(a) 136,847 9,375,581 -------------------------------------------------------------------------- Credit Agricole S.A. (Diversified Banks)(a)(b) 160,300 4,728,373 -------------------------------------------------------------------------- Eiffage S.A. (Construction & Engineering) (Acquired 3/03/2004-04/08/2004; Cost $6,814,881)(c) 96,800 9,654,921 -------------------------------------------------------------------------- Elior (Restaurants)(a) 489,000 4,383,840 -------------------------------------------------------------------------- Imerys S.A. (Construction Materials)(a) 96,176 6,815,700 -------------------------------------------------------------------------- JC Decaux S.A. (Advertising)(a)(b) 190,200 4,760,541 -------------------------------------------------------------------------- M6 Metropole Television (Broadcasting & Cable TV)(a) 187,400 4,908,425 -------------------------------------------------------------------------- Neopost S.A. (Office Electronics)(a) 68,000 4,748,417 -------------------------------------------------------------------------- Pernod Ricard (Distillers & Vintners)(a)(b) 34,868 4,856,238 -------------------------------------------------------------------------- Renault S.A. (Automobile Manufacturers)(a)(b) 69,000 5,809,437 -------------------------------------------------------------------------- Societe Generale (Diversified Banks)(a)(b) 42,790 3,996,096 -------------------------------------------------------------------------- Technip S.A. (Oil & Gas Equipment & Services)(a) 24,350 3,841,502 -------------------------------------------------------------------------- Total S.A. (Integrated Oil & Gas)(a) 63,473 13,287,140 -------------------------------------------------------------------------- Vinci S.A. (Construction & Engineering)(a) 86,100 10,323,384 ========================================================================== 91,489,595 ========================================================================== GERMANY-5.84% Continental A.G. (Tires & Rubber)(a) 190,125 10,434,028 -------------------------------------------------------------------------- Puma A.G. Rudolf Dassler Sport (Footwear) (Acquired 01/30/02-08/13/03; Cost $7,672,307)(a)(b)(c) 137,200 34,533,115 ========================================================================== 44,967,143 ========================================================================== GREECE-4.42% Coca-Cola Hellenic Bottling Co. S.A. (Soft Drinks)(a) 119,446 2,670,856 --------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------------------------- GREECE-(CONTINUED) Cosmote Mobile Telecommunications S.A. (Wireless Telecomunication Services)(a) 149,633 $ 2,715,569 -------------------------------------------------------------------------- EFG Eurobank Ergasias (Diversified Banks)(a) 221,000 6,081,315 -------------------------------------------------------------------------- Germanos S.A. (Computer & Electronics Retail)(a) 190,400 5,090,701 -------------------------------------------------------------------------- OPAP S.A. (Casinos & Gaming) (Acquired 07/14/03-01/30/04; Cost $5,515,048)(a)(c) 430,600 8,822,084 -------------------------------------------------------------------------- Public Power Corp. (Electric Utilities)(a) 151,980 3,792,321 -------------------------------------------------------------------------- Titan Cement Co. (Construction Materials)(a) 184,900 4,880,214 ========================================================================== 34,053,060 ========================================================================== HUNGARY-2.16% OTP Bank Rt. (Diversified Banks)(a) 654,600 16,630,897 ========================================================================== IRELAND-10.83% Anglo Irish Bank Corp. PLC (Diversified Banks)(a) 1,828,585 34,902,471 -------------------------------------------------------------------------- CRH PLC (Construction Materials)(a) 263,350 6,320,495 -------------------------------------------------------------------------- Depfa Bank PLC (Diversified Banks)(a) 753,970 11,605,504 -------------------------------------------------------------------------- Grafton Group PLC (Trading Companies & Distributors)(b)(d) 2,212,114 19,955,099 -------------------------------------------------------------------------- IAWS Group PLC (Agricultural Products)(a) 299,800 3,992,958 -------------------------------------------------------------------------- Independent News & Media PLC (Publishing) 2,289,800 6,680,203 ========================================================================== 83,456,730 ========================================================================== ITALY-5.19% Banco Popolare di Verona e Novara Scrl (Diversified Banks)(a) 331,000 5,902,515 -------------------------------------------------------------------------- Davide Campari-Milano S.p.A. (Distillers & Vintners)(a) 104,400 5,943,983 -------------------------------------------------------------------------- Eni S.p.A. (Integrated Oil & Gas)(a)(b) 569,414 13,066,331 -------------------------------------------------------------------------- Lottomatica S.p.A. (Casinos & Gaming)(a) 221,900 6,699,139 -------------------------------------------------------------------------- Mediaset S.p.A. (Broadcasting & Cable TV)(a)(b) 732,200 8,394,654 ========================================================================== 40,006,622 ========================================================================== LUXEMBOURG-0.56% SBS Broadcasting S.A. (Broadcasting & Cable TV)(b) 126,200 4,346,328 ========================================================================== NETHERLANDS-4.23% Aalberts Industries N.V. (Industrial Conglomerates)(a) 252,436 9,451,315 -------------------------------------------------------------------------- Axalto Holding N.V. (Computer Storage & Peripherals)(b) 102,600 2,428,714 -------------------------------------------------------------------------- Hunter Douglas N.V. (Home Furnishings)(a) 111,700 5,315,626 --------------------------------------------------------------------------
F-1
MARKET SHARES VALUE -------------------------------------------------------------------------- NETHERLANDS-(CONTINUED) Randstad Holding N.V. (Employment Services)(a) 115,325 $ 3,912,015 -------------------------------------------------------------------------- Royal Numico N.V. (Packaged Foods & Meats)(a)(b)(e) 120,627 4,088,301 -------------------------------------------------------------------------- TPG N.V. (Air Freight & Logistics)(a) 306,460 7,431,264 ========================================================================== 32,627,235 ========================================================================== NORWAY-3.34% Aktiv Kapital A.S.A. (Specialized Finance)(a) 330,000 5,566,130 -------------------------------------------------------------------------- Ekornes A.S.A. (Home Furnishings)(a) 381,951 8,743,211 -------------------------------------------------------------------------- Smedvig A.S.A.-Class A (Oil & Gas Drilling)(a)(e) 436,778 5,471,592 -------------------------------------------------------------------------- Telenor A.S.A. (Integrated Telecommunication Services)(a) 744,928 5,963,627 ========================================================================== 25,744,560 ========================================================================== RUSSIA-1.53% AO VimpelCom-ADR (Wireless Telecommunication Services)(b) 103,100 11,753,400 ========================================================================== SPAIN-4.30% Corporacion Mapfre S.A. (Multi-Line Insurance)(a) 721,763 9,162,962 -------------------------------------------------------------------------- Enagas (Gas Utilities) (Acquired 06/25/2002- 10/26/2004; Cost $4,230,189)(a)(c) 503,260 6,387,769 -------------------------------------------------------------------------- Gestevision Telecinco S.A. (Movies & Entertainment) (Acquired 06/23/204- 10/04/2004; Cost $4,440,678)(b)(c)(e) 394,900 7,564,256 -------------------------------------------------------------------------- Grupo Ferrovial, S.A. (Construction & Engineering)(a)(b) 164,648 7,321,381 -------------------------------------------------------------------------- Industria de Diseno Textil, S.A. (Apparel Retail)(a)(b) 105,600 2,695,104 ========================================================================== 33,131,472 ========================================================================== SWEDEN-3.12% Assa Abloy A.B.-Class B (Building Products)(a)(b)(e) 479,475 6,514,755 -------------------------------------------------------------------------- Gambro A.B.-Class A (Health Care Services)(a) 335,400 3,931,976 -------------------------------------------------------------------------- Swedish Match A.B. (Tobacco)(a) 352,452 3,904,614 -------------------------------------------------------------------------- Volvo A.B.-Class B (Construction & Farm Machinery & Heavy Trucks)(a) 254,840 9,700,310 ========================================================================== 24,051,655 ========================================================================== SWITZERLAND-5.02% Novartis A.G. (Pharmaceuticals)(a) 82,500 3,966,207 -------------------------------------------------------------------------- Rieter Holding A.G. (Auto Parts & Equipment)(a) 13,000 3,462,159 -------------------------------------------------------------------------- Roche Holding A.G. (Pharmaceuticals)(a)(b) 45,150 4,636,532 -------------------------------------------------------------------------- Swatch Group A.G. (The)-Class B (Apparel, Accessories & Luxury Goods)(a)(b) 44,200 5,956,740 -------------------------------------------------------------------------- Syngenta A.G. (Fertilizers & Agricultural Chemicals)(a)(b) 124,020 11,871,868 -------------------------------------------------------------------------- UBS A.G. (Diversified Capital Markets)(a) 121,140 8,798,742 ========================================================================== 38,692,248 ==========================================================================
MARKET SHARES VALUE -------------------------------------------------------------------------- UNITED KINGDOM-22.30% Balfour Beatty PLC (Construction & Engineering)(a) 1,418,900 $ 7,079,751 -------------------------------------------------------------------------- Cattles PLC (Consumer Finance)(a) 1,432,020 9,375,560 -------------------------------------------------------------------------- Centrica PLC (Gas Utilities)(a) 1,185,534 5,255,357 -------------------------------------------------------------------------- Daily Mail and General Trust (Publishing)(a) 309,800 4,127,719 -------------------------------------------------------------------------- Enterprise Inns PLC (Restaurants)(a) 1,258,580 14,338,374 -------------------------------------------------------------------------- ICAP PLC (Investment Banking & Brokerage)(a) 849,625 3,664,221 -------------------------------------------------------------------------- Imperial Tobacco Group PLC (Tobacco)(a) 529,180 12,393,846 -------------------------------------------------------------------------- Inchcape PLC (Distributors)(a) 188,530 5,122,067 -------------------------------------------------------------------------- Intertek Group PLC (Diversified Commercial Services)(a) 420,000 5,310,704 -------------------------------------------------------------------------- Johnston Press PLC (Publishing)(a) 930,190 9,413,959 -------------------------------------------------------------------------- Next PLC (Department Stores)(a) 241,120 7,409,555 -------------------------------------------------------------------------- Punch Taverns PLC (Restaurants)(a) 878,500 8,944,071 -------------------------------------------------------------------------- Reckitt Benckiser PLC (Household Products)(a) 343,045 9,424,718 -------------------------------------------------------------------------- Royal Bank of Scotland Group PLC (Diversified Banks)(a) 119,543 3,529,326 -------------------------------------------------------------------------- Shire Pharmaceuticals Group PLC (Pharmaceuticals)(a) 971,000 9,266,084 -------------------------------------------------------------------------- T&F Informa PLC (Publishing)(a) 823,880 5,778,674 -------------------------------------------------------------------------- Tesco PLC (Food Retail)(a) 1,910,235 10,082,321 -------------------------------------------------------------------------- Travis Perkins PLC (Home Improvement Retail)(a) 228,790 5,800,711 -------------------------------------------------------------------------- Ultra Electronics Holdings PLC (Aerospace & Defense)(a) 378,810 4,309,240 -------------------------------------------------------------------------- Vodafone Group PLC (Wireless Telecommunication Services)(a) 5,153,546 13,265,627 -------------------------------------------------------------------------- Warner Chilcott PLC (Pharmaceuticals) 458,040 7,247,580 -------------------------------------------------------------------------- William Hill PLC (Casinos & Gaming)(a) 741,830 6,672,754 -------------------------------------------------------------------------- WS Atkins PLC (Diversified Commercial Services)(a) 333,000 4,064,058 ========================================================================== 171,876,277 ========================================================================== UNITED STATES OF AMERICA-0.78% Autoliv, Inc.-SDR (Auto Parts & Equipment)(a)(b)(e) 140,106 5,983,474 ========================================================================== Total Stocks & Other Equity Interests (Cost $440,020,741) 702,536,024 ========================================================================== MONEY MARKET FUNDS-6.86% Liquid Assets Portfolio-Institutional Class(f) 26,427,712 26,427,712 -------------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class(f) 26,427,712 26,427,712 ========================================================================== Total Money Market Funds (Cost $52,855,424) 52,855,424 ========================================================================== TOTAL INVESTMENTS-98.02% (excluding investments purchased with cash collateral from securities loaned) (Cost $492,876,165) 755,391,448 ==========================================================================
F-2
MARKET SHARES VALUE -------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-1.51% STIC Prime Portfolio-Institutional Class(f)(g) 11,605,133 $ 11,605,133 ========================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $11,605,133) 11,605,133 ========================================================================== TOTAL INVESTMENTS-99.53% (Cost $504,481,298) 766,996,581 ========================================================================== OTHER ASSETS LESS LIABILITIES-0.47% 3,617,272 ========================================================================== NET ASSETS-100.00% $770,613,853 __________________________________________________________________________ ==========================================================================
Investment Abbreviations: ADR - American Depositary Receipt SDR - Swedish Depository Receipt
Notes to Schedule of Investments: (a) In accordance with procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The aggregate market value of these securities at October 31, 2004 was $632,905,523, which represented 82.52% of the Fund's Total Investments. See Note 1A. (b) Non-income producing security. (c) Security not registered under the Securities Act of 1933, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The Fund has no rights to demand registration of these securities. The aggregate market value of these securities at October 31, 2004 was $66,962,145, which represented 8.69% of the Fund's net assets. Unless otherwise indicated, these securities are not considered to be illiquid. (d) Consists of more than one class of securities traded together as a unit. In addition to the security listed, each unit includes warrants to purchase common or preferred shares of the issuer. (e) All or a portion of this security has been pledged as collateral for security lending transactions at October 31, 2004. (f) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (g) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 7. See accompanying notes which are an integral part of the financial statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2004 ASSETS: Investments, at market value (cost $440,020,741)* $ 702,536,024 ------------------------------------------------------------ Investments in affiliated money market funds (cost $64,460,557) 64,460,557 ============================================================ Total investments (cost $504,481,298) 766,996,581 ============================================================ Foreign currencies, at value (cost $4,421,590) 4,429,776 ------------------------------------------------------------ Receivables for: Investments sold 12,894,201 ------------------------------------------------------------ Fund shares sold 3,092,376 ------------------------------------------------------------ Dividends and interest 1,373,431 ------------------------------------------------------------ Investment for trustee deferred compensation and retirement plans 92,483 ------------------------------------------------------------ Other assets 31,044 ============================================================ Total assets 788,909,892 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 5,037,693 ------------------------------------------------------------ Fund shares reacquired 787,793 ------------------------------------------------------------ Trustee deferred compensation and retirement plans 121,634 ------------------------------------------------------------ Collateral upon return of securities loaned 11,605,133 ------------------------------------------------------------ Accrued distribution fees 295,499 ------------------------------------------------------------ Accrued trustees' fees 1,433 ------------------------------------------------------------ Accrued transfer agent fees 249,731 ------------------------------------------------------------ Accrued operating expenses 197,123 ============================================================ Total liabilities 18,296,039 ============================================================ Net assets applicable to shares outstanding $ 770,613,853 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $ 659,502,450 ------------------------------------------------------------ Undistributed net investment income 911,149 ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities and foreign currencies (152,446,612) ------------------------------------------------------------ Unrealized appreciation of investment securities and foreign currencies 262,646,866 ============================================================ $ 770,613,853 ____________________________________________________________ ============================================================ NET ASSETS: Class A $ 407,565,792 ____________________________________________________________ ============================================================ Class B $ 130,863,261 ____________________________________________________________ ============================================================ Class C $ 45,221,583 ____________________________________________________________ ============================================================ Class R $ 2,131,028 ____________________________________________________________ ============================================================ Investor Class $ 184,832,189 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 15,540,237 ____________________________________________________________ ============================================================ Class B 5,227,230 ____________________________________________________________ ============================================================ Class C 1,805,353 ____________________________________________________________ ============================================================ Class R 81,550 ____________________________________________________________ ============================================================ Investor Class 7,050,465 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 26.23 ------------------------------------------------------------ Offering price per share: (Net asset value of $26.23 divided by 94.50%) $ 27.76 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 25.03 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 25.05 ____________________________________________________________ ============================================================ Class R: Net asset value and offering price per share $ 26.13 ____________________________________________________________ ============================================================ Investor Class: Net asset value and offering price per share $ 26.22 ____________________________________________________________ ============================================================
* At October 31, 2004, securities with an aggregate market value of $10,970,171 were on loan to brokers. See accompanying notes which are an integral part of the financial statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2004 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $1,526,636) $ 13,409,609 -------------------------------------------------------------------------- Dividends from affiliated money market funds (including security lending income of $303,157)* 671,418 -------------------------------------------------------------------------- Interest 72,277 ========================================================================== Total investment income 14,153,304 ========================================================================== EXPENSES: Advisory fees 6,422,801 -------------------------------------------------------------------------- Administrative services fees 197,749 -------------------------------------------------------------------------- Custodian fees 719,279 -------------------------------------------------------------------------- Distribution fees: Class A 1,253,282 -------------------------------------------------------------------------- Class B 1,224,702 -------------------------------------------------------------------------- Class C 382,134 -------------------------------------------------------------------------- Class R 7,233 -------------------------------------------------------------------------- Investor Class 364,443 -------------------------------------------------------------------------- Transfer agent fees 2,394,316 -------------------------------------------------------------------------- Trustees' fees and retirement benefits 24,575 -------------------------------------------------------------------------- Other 687,508 ========================================================================== Total expenses 13,678,022 ========================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangement (118,693) ========================================================================== Net expenses 13,559,329 ========================================================================== Net investment income 593,975 ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain (loss) from: Investment securities 67,422,430 -------------------------------------------------------------------------- Foreign currencies (336,059) ========================================================================== 67,086,371 ========================================================================== Change in net unrealized appreciation of: Investment securities 113,289,261 -------------------------------------------------------------------------- Foreign currencies 172,160 ========================================================================== 113,461,421 ========================================================================== Net gain from investment securities and foreign currencies 180,547,792 ========================================================================== Net increase in net assets resulting from operations $181,141,767 __________________________________________________________________________ ==========================================================================
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties. See accompanying notes which are an integral part of the financial statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2004 and 2003
2004 2003 ------------------------------------------------------------------------------------------ OPERATIONS: Net investment income (loss) $ 593,975 $ (975,951) ------------------------------------------------------------------------------------------ Net realized gain from investment securities, foreign currencies and futures contracts 67,086,371 20,497,751 ------------------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities and foreign currencies 113,461,421 92,232,326 ========================================================================================== Net increase in net assets resulting from operations 181,141,767 111,754,126 ========================================================================================== Distributions to shareholders from net investment income: Class A (106,111) -- ------------------------------------------------------------------------------------------ Investor Class (212,530) -- ========================================================================================== Decrease in net assets resulting from distributions (318,641) -- ========================================================================================== Share transactions-net: Class A 12,387,787 (62,533,328) ------------------------------------------------------------------------------------------ Class B (8,714,512) (13,312,226) ------------------------------------------------------------------------------------------ Class C 4,006,947 (3,175,123) ------------------------------------------------------------------------------------------ Class R 1,093,306 467,649 ------------------------------------------------------------------------------------------ Investor Class 139,066,257 162,286 ========================================================================================== Net increase (decrease) in net assets resulting from share transactions 147,839,785 (78,390,742) ========================================================================================== Net increase in net assets 328,662,911 33,363,384 ========================================================================================== NET ASSETS: Beginning of year 441,950,942 408,587,558 ========================================================================================== End of year (including undistributed net investment income (loss) of $911,149 and $267,863, respectively) $770,613,853 $441,950,942 __________________________________________________________________________________________ ==========================================================================================
See accompanying notes which are an integral part of the financial statements. F-6 NOTES TO FINANCIAL STATEMENTS October 31, 2004 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM European Growth Fund (the "Fund") is a series portfolio of AIM International Mutual Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. On November 25, 2003, the Fund was restructured from a separate series of AIM International Funds, Inc. to a new series portfolio of the Trust. The Fund's investment objective is long-term growth of capital. Companies are listed in the Schedule of Investments based on the country in which they are organized. Under the Trust's organizational documents, the Fund's officers, trustees, employees and agents are 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. However, the Fund has not had prior claims or losses pursuant to these contracts. 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. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally will be 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 valued at amortized cost which approximates market 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 market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market 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, domestic and foreign index futures and exchange-traded funds. F-7 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. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities.' Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. 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. E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. F. REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on certain share classes that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is accounted for as an addition to shares of beneficial interest by the Fund and is allocated among the share classes based on the relative net assets of each class. G. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. H. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. I. 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 made or received 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. F-8 NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.95% of the first $500 million of the Fund's average daily net assets, plus 0.90% of the Fund's average daily net assets in excess of $500 million. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund, if any). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $5,185. For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $51,465 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2004, AIM was paid $197,749 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the year ended October 31, 2004, the Fund paid AISI $2,394,316. AISI may make payments to intermediaries to provide omnibus account services, sub-accounting services and/or networking services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and Investor Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C, Class R and Investor Class shares (collectively the "Plans"). The Fund, pursuant to the Class A, Class B, Class C and Class R Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. The Fund, pursuant to the Investor Class Plan, pays AIM Distributors for its allocated share of expenses incurred pursuant to the Investor Class Plan for the period, up to a maximum annual rate of 0.25% of the average daily net assets of the Investor Class shares. Pursuant to the Plans, for the year ended October 31, 2004, the Class A, Class B, Class C, Class R and Investor Class shares paid $1,253,282, $1,224,702, $382,134, $7,233 and $364,443, respectively. AIM reimbursed $51,136 of Investor Class expenses related to an overpayment of prior period Rule 12b-1 fees of the INVESCO European Fund (a fund acquired by the fund on November 24, 2003) paid to INVESCO Distributors, Inc., the prior distributor of INVESCO European Fund and an AIM affiliate. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2004, AIM Distributors advised the Fund it retained $89,602 in front-end sales commissions from the sale of Class A shares and $337, $6,872, $4,051, and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. F-9 NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2004. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME GAIN (LOSS) --------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $3,005,612 $109,618,954 $ (86,196,854) $-- $26,427,712 $185,689 $-- --------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 3,005,612 109,618,954 (86,196,854) -- 26,427,712 182,572 -- =========================================================================================================================== Subtotal $6,011,224 $219,237,908 $(172,393,708) $-- $52,855,424 $368,261 $-- ===========================================================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME* GAIN (LOSS) --------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $12,113,481 $234,865,605 $(246,979,086) $-- $ -- $294,062 $-- --------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class -- 36,343,819 (24,738,686) -- 11,605,133 9,095 -- =========================================================================================================================== Subtotal $12,113,481 $271,209,424 $(271,717,772) $-- $11,605,133 $303,157 $-- =========================================================================================================================== Total $18,124,705 $490,447,332 $(444,111,480) $-- $64,460,557 $671,418 $-- ___________________________________________________________________________________________________________________________ ===========================================================================================================================
* Dividend income is net of income rebate paid to security lending counterparties. NOTE 4--EXPENSE OFFSET ARRANGEMENT The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $10,907 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $10,907. NOTE 5--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2004, the Fund paid legal fees of $6,377 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 6--BORROWINGS Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. F-10 During the year ended October 31, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated at an amount equal to the Federal Funds rate plus 100 basis points. NOTE 7--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At October 31, 2004, securities with an aggregate value of $10,970,171 were on loan to brokers. The loans were secured by cash collateral of $11,605,133 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $303,157 for securities lending transactions. NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS DISTRIBUTIONS TO SHAREHOLDERS: The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003 -------------------------------------------------------------------------------- Distributions paid from ordinary income $318,641 $ -- ________________________________________________________________________________ ================================================================================
TAX COMPONENTS OF NET ASSETS: As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004 --------------------------------------------------------------------------- Undistributed ordinary income $ 1,011,608 --------------------------------------------------------------------------- Unrealized appreciation -- investments 261,698,966 --------------------------------------------------------------------------- Temporary book/tax differences (100,460) --------------------------------------------------------------------------- Capital loss carryforward (151,498,711) --------------------------------------------------------------------------- Shares of beneficial interest 659,502,450 =========================================================================== Total net assets $ 770,613,853 ___________________________________________________________________________ ===========================================================================
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to the tax deferral of losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $131,583. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan expenses. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $67,322,664 of capital loss carryforward in the fiscal year ended October 31, 2005. F-11 The Fund utilized $58,432,870 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* --------------------------------------------------------------------------- October 31, 2008 $ 54,381,587 --------------------------------------------------------------------------- October 31, 2009 97,117,124 =========================================================================== Total capital loss carryforward $151,498,711 ___________________________________________________________________________ ===========================================================================
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gain as of November 24, 2003 the date of the reorganization of INVESCO European Fund into the Fund are realized on securities held at such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization. NOTE 9--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 year ended October 31, 2004 was $341,901,899 and $323,653,174, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $262,601,026 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (1,033,643) ============================================================================== Net unrealized appreciation of investment securities $261,567,383 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $505,429,198.
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of net operating losses, foreign currency transactions, redomestication expenses, and capital loss limitations and expiration of the capital loss carryforward, on October 31, 2004, undistributed net investment income was increased by $419,043, undistributed net realized gain (loss) was increased by $310,976 and shares of beneficial interest decreased by $49,386. Further, as a result of tax deferrals acquired in the reorganization of INVESCO European Fund into the Fund, undistributed net investment income was decreased by $51,091, undistributed net realized gain (loss) was decreased by $74,785,113 and shares of beneficial interest increased by $74,155,571. These reclassifications had no effect on the net assets of the Fund. F-12 NOTE 11--SHARE INFORMATION The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and Investor Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares and Investor Class shares are sold at net asset value. Under certain circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING(a) -------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------ 2004 2003 -------------------------- ------------------------------ SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------------------------------------------------------------- Sold: Class A 4,125,663 $ 97,941,773 82,916,233 $ 1,366,427,023 -------------------------------------------------------------------------------------------------------------------------- Class B 860,401 19,605,645 734,581 11,741,120 -------------------------------------------------------------------------------------------------------------------------- Class C 748,539 17,048,651 4,899,091 77,913,071 -------------------------------------------------------------------------------------------------------------------------- Class R 74,842 1,721,074 439,162 7,228,264 -------------------------------------------------------------------------------------------------------------------------- Investor Class(b) 780,496 18,487,554 8,159 162,338 ========================================================================================================================== Issued as reinvestment of dividends: Class A 4,447 91,218 -- -- -------------------------------------------------------------------------------------------------------------------------- Investor Class(b) 9,940 203,374 -- -- ========================================================================================================================== Issued in connection with acquisitions:(c) Class A 22,379 452,046 -- -- -------------------------------------------------------------------------------------------------------------------------- Class B 5,121 99,255 -- -- -------------------------------------------------------------------------------------------------------------------------- Class C 53,300 1,033,743 -- -- -------------------------------------------------------------------------------------------------------------------------- Investor Class(b) 7,999,868 161,401,679 -- -- ========================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 283,516 6,765,403 236,630 3,953,498 -------------------------------------------------------------------------------------------------------------------------- Class B (296,150) (6,765,403) (245,600) (3,953,498) ========================================================================================================================== Reacquired:(d) Class A (3,960,360) (92,862,653) (86,282,624) (1,432,913,849) -------------------------------------------------------------------------------------------------------------------------- Class B (955,724) (21,654,009) (1,338,030) (21,099,848) -------------------------------------------------------------------------------------------------------------------------- Class C (633,985) (14,075,447) (5,072,535) (81,088,194) -------------------------------------------------------------------------------------------------------------------------- Class R (26,338) (627,768) (407,105) (6,760,615) -------------------------------------------------------------------------------------------------------------------------- Investor Class(b) (1,747,995) (41,026,350) (3) (52) ========================================================================================================================== 7,347,960 $147,839,785 (4,112,041) $ (78,390,742) __________________________________________________________________________________________________________________________ ==========================================================================================================================
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 13% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially. (b) Investor Class shares commenced sales on September 30, 2003. (c) As of the opening of business on November 24, 2003, the Fund acquired all of the net assets of INVESCO European Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on June 11, 2003 and INVESCO European Fund shareholders on October 28, 2003. The acquisition was accomplished by a tax-free exchange of 8,080,668 shares of the Fund for 18,162,024 shares of INVESCO European Fund outstanding as of the close of business on November 21, 2003. INVESCO European Fund's net assets at that date of $162,986,723 including $27,261,043 of unrealized appreciation were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $448,879,513. (d) Amount is net of redemption fees of $4,825, $1,632, $518, $20 and $2,335 for Class A, Class B, Class C, Class R and Investor Class shares for 2004, respectively. F-13 NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A -------------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------------------- 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 20.02 $ 15.60 $ 16.52 $ 23.59 $ 16.42 --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.05(a) (0.01)(a) (0.07)(a) (0.06)(a) (0.21)(a) --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 6.17 4.43 (0.85) (7.01) 7.38 ================================================================================================================================= Total from investment operations 6.22 4.42 (0.92) (7.07) 7.17 ================================================================================================================================= Less dividends from net investment income (0.01) -- -- -- -- ================================================================================================================================= Redemption fees added to beneficial interest 0.00 -- -- -- -- ================================================================================================================================= Net asset value, end of period $ 26.23 $ 20.02 $ 15.60 $ 16.52 $ 23.59 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 31.06% 28.33% (5.57)% (29.97)% 43.67% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $407,566 $301,659 $283,812 $157,651 $273,605 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 1.87%(c) 2.01%(d) 1.93% 1.83% 1.69% ================================================================================================================================= Ratio of net investment income (loss) to average net assets 0.19%(c) (0.04)% (0.42)% (0.32)% (0.82)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 60% 81% 94% 99% 112% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $358,080,480. (d) After fee waivers and/or reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 2.02%.
CLASS B -------------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------------------- 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 19.23 $ 15.08 $ 16.07 $ 23.11 $ 16.20 --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.10)(a) (0.11)(a) (0.18)(a) (0.19)(a) (0.38)(a) --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 5.90 4.26 (0.81) (6.85) 7.29 ================================================================================================================================= Total from investment operations 5.80 4.15 (0.99) (7.04) 6.91 ================================================================================================================================= Redemption fees added to beneficial interest 0.00 -- -- -- -- ================================================================================================================================= Net asset value, end of period $ 25.03 $ 19.23 $ 15.08 $ 16.07 $ 23.11 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 30.16% 27.52% (6.16)% (30.46)% 42.65% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $130,863 $107,959 $ 97,436 $105,324 $169,614 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 2.52%(c) 2.66%(d) 2.58% 2.50% 2.39% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.46)%(c) (0.69)% (1.07)% (0.98)% (1.52)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 60% 81% 94% 99% 112% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $122,470,171. (d) After fee waivers and/or reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 2.67%. F-14 NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C -------------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------------------- 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 19.24 $ 15.09 $ 16.09 $ 23.13 $ 16.21 --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.10)(a) (0.11)(a) (0.18)(a) (0.19)(a) (0.38)(a) --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 5.91 4.26 (0.82) (6.85) 7.30 ================================================================================================================================= Total from investment operations 5.81 4.15 (1.00) (7.04) 6.92 ================================================================================================================================= Redemption fees added to beneficial interest 0.00 -- -- -- -- ================================================================================================================================= Net asset value, end of period $ 25.05 $ 19.24 $ 15.09 $ 16.09 $ 23.13 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 30.20% 27.50% (6.22)% (30.44)% 42.69% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $ 45,222 $ 31,509 $ 27,323 $ 32,604 $ 54,164 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets 2.52%(c) 2.66%(d) 2.58% 2.50% 2.39% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.46)%(c) (0.69)% (1.07)% (0.98)% (1.52)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 60% 81% 94% 99% 112% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $38,213,383. (d) After fee waivers and/or reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 2.67%.
CLASS R ------------------------------------ JUNE 3, 2002 YEAR ENDED (DATE SALES OCTOBER 31, COMMENCED) TO ------------------- OCTOBER 31, 2004 2003 2002 -------------------------------------------------------------------------------------------------- Net asset value, beginning of period $19.98 $15.59 $ 18.35 -------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.01(a) (0.03)(a) (0.04)(a) -------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 6.14 4.42 (2.72) ================================================================================================== Total from investment operations 6.15 4.39 (2.76) ================================================================================================== Redemption fees added to beneficial interest 0.00 -- -- ================================================================================================== Net asset value, end of period $26.13 $19.98 $ 15.59 __________________________________________________________________________________________________ ================================================================================================== Total return(b) 30.78% 28.16% (15.04)% __________________________________________________________________________________________________ ================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $2,131 $ 660 $ 15 __________________________________________________________________________________________________ ================================================================================================== Ratio of expenses to average net assets 2.02%(c) 2.16%(d) 2.08%(e) ================================================================================================== Ratio of net investment income (loss) to average net assets 0.04%(c) (0.19)% (0.57)%(e) __________________________________________________________________________________________________ ================================================================================================== Portfolio turnover rate(f) 60% 81% 94% __________________________________________________________________________________________________ ==================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $1,446,548. (d) After fee waivers and/or reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 2.17%. (e) Annualized. (f) Not annualized for periods less than one year. F-15 NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
INVESTOR CLASS ------------------------------------ SEPTEMBER 30, 2003 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2004 2003 -------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 20.01 $18.84 -------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.09(a) 0.00(a) ================================================================================================== Net gains on securities (both realized and unrealized) 6.15 1.17 ================================================================================================== Total from investment operations 6.24 1.17 ================================================================================================== Less dividends from net investment income (0.03) -- ================================================================================================== Redemption fees added to beneficial interest 0.00 -- ================================================================================================== Net asset value, end of period $ 26.22 $20.01 __________________________________________________________________________________________________ ================================================================================================== Total return(b) 31.20% 6.21% __________________________________________________________________________________________________ ================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $184,832 $ 163 __________________________________________________________________________________________________ ================================================================================================== Ratio of expenses to average net assets With fee waivers and/or expense reimbursements 1.71%(c) 1.79%(d) -------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.74%(c) 1.79%(d) ================================================================================================== Ratio of net investment income to average net assets 0.35%(c) 0.18%(d) __________________________________________________________________________________________________ ================================================================================================== Portfolio turnover rate(e) 60% 81% __________________________________________________________________________________________________ ==================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $165,656,229. (d) Annualized (e) Not annualized for periods less than one year. NOTE 13--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. The mutual fund industry as a whole is currently subject to regulatory inquiries and litigation related to a wide range of issues. These issues include, among others, market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. In addition, as described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. Additional regulatory inquiries related to the above or other issues also may be received by the AIM Funds, IFG, AIM and/or related entities and individuals in the future. As a result of the matters discussed below, investors in the AIM Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. Settled Enforcement Actions and Investigations Related to Market Timing On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to F-16 NOTE 13--LEGAL PROCEEDINGS (CONTINUED) disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing. Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid. The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs. None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders. Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected. On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years. On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year. As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds. At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM. The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund. Ongoing Regulatory Inquiries Concerning IFG and AIM IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following F-17 NOTE 13--LEGAL PROCEEDINGS (CONTINUED) issues, some of which concern one or more such Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, and investments in securities of other registered investment companies. These regulators include the SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. IFG and certain of these other parties also have received more limited inquiries from the United States Department of Labor ("DOL") and the United States Attorney's Office for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries. AIM, certain related entities, certain of their current and former officers and/or certain of the AIM Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the SEC, the NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, the United States Attorney's Office for the Southern District of New York, the United States Attorney's Office for the Central District of California, the United States Attorney's Office for the District of Massachusetts, the Massachusetts Securities Division and the U.S. Postal Inspection Service, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries. Private Civil Actions Alleging Market Timing Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal and state securities laws; (ii) violation of various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. Private Civil Actions Alleging Improper Use of Fair Value Pricing Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM) alleging that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) alleging that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of F-18 NOTE 13--LEGAL PROCEEDINGS (CONTINUED) the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees. Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. F-19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of AIM European Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM European Growth Fund (the "Fund") at October 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /S/ PRICEWATERHOUSECOOPERS LLP December 20, 2004 Houston, Texas F-20 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM European Growth Fund ("Fund"), a portfolio of AIM International Mutual Funds, a Delaware statutory trust (formerly AIM International Funds, Inc., a Maryland corporation), ("Company"), was held on October 21, 2003. The meeting was adjourned and reconvened on October 28, 2003, November 4, 2003, November 11, 2003, November 17, 2003 and reconvened on November 21, 2003. The meeting was held for the following purposes: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: Bob R. Baker, Frank S. Bayley, James T. Bunch, Bruce L. Crockett, Albert R. Dowden, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling, Robert H. Graham, Gerald J. Lewis, Prema Mathai-Davis, Lewis F. Pennock, Ruth H. Quigley, Louis S. Sklar, Larry Soll, Ph.D. and Mark H. Williamson. (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation. The results of the voting on the above matters were as follows:
WITHHOLDING TRUSTEES/MATTER VOTES FOR AUTHORITY ------------------------------------------------------------------------------------------------- (1)* Bob R. Baker................................................ 162,211,196 3,444,279 Frank S. Bayley............................................. 162,236,962 3,418,513 James T. Bunch.............................................. 162,287,588 3,367,887 Bruce L. Crockett........................................... 162,276,496 3,378,979 Albert R. Dowden............................................ 162,251,386 3,404,089 Edward K. Dunn, Jr.......................................... 162,221,226 3,434,249 Jack M. Fields.............................................. 162,278,318 3,377,157 Carl Frischling............................................. 162,182,906 3,472,569 Robert H. Graham............................................ 162,243,892 3,411,583 Gerald J. Lewis............................................. 162,147,868 3,507,607 Prema Mathai-Davis.......................................... 162,219,866 3,435,609 Lewis F. Pennock............................................ 162,263,207 3,392,268 Ruth H. Quigley............................................. 162,163,064 3,492,411 Louis S. Sklar.............................................. 162,243,759 3,411,716 Larry Soll, Ph.D............................................ 162,236,226 3,419,249 Mark H. Williamson.......................................... 162,238,962 3,416,513
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ---------------------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 76,302,938 2,822,366 86,530,171**
The Special Meeting of Shareholders of the Company was reconvened on October 28, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ---------------------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 84,066,011 2,989,031 83,338,957**
The Special Meeting of Shareholders of the Company was reconvened on November 4, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ---------------------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 95,512,525 3,144,748 78,504,573**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-21 The Special Meeting of Shareholders of the Company was reconvened on November 11, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ---------------------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 109,217,698 3,531,752 71,913,039**
The Special Meeting of Shareholders of the Company was reconvened on November 17, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ---------------------------------------------------------------------------------------------------------------- (2)** To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 116,710,545 3,761,148 69,451,190**
The Special Meeting of Shareholders of the Company was reconvened on November 21, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ---------------------------------------------------------------------------------------------------------------- (2)* Approval of an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 137,239,949 4,617,039 51,798,672**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-22 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
TRUSTEE AND/ NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE --------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS --------------------------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management None Trustee and President Group Inc. (financial services holding company); Director and Vice Chairman, AMVESCAP PLC and Chairman, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: President and Chief Executive Officer, A I M Management Group Inc.; Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products --------------------------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive None Trustee and Executive Vice Officer, A I M Management Group Inc. President (financial services holding company); Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent), Fund Management Company (registered broker dealer) and INVESCO Distributors, Inc. (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc.; President and Chief Executive Officer, INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. --------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES --------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett(3) -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance company); Trustee and Chair (technology consulting company) and Captaris, Inc. (unified messaging provider) --------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation --------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered Trustee investment company) Formerly: Partner, law firm of Baker & McKenzie --------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning None Trustee & Bunch Ltd., (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation --------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and Cortland Trust, Inc. (Chairman) Trustee private business corporations, including (registered investment company); the Boss Group Ltd. (private investment Annuity and Life Re (Holdings), and management) and Magellan Insurance Ltd. (insurance company) Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo companies --------------------------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Retired None Trustee Formerly: Chairman, Mercantile Mortgage Corp.; President and Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. --------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff, and Discovery Global Trustee Century Group, Inc. (government affairs Education Fund (non-profit) company) and Texana Timber LP (sustainable forestry company) ---------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to October 4, 2004, Mr. Graham served as Chairman of the Board of Trustees of the Trust. (2) Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. (3) Mr. Crockett was elected Chair of the Board of Trustees of the Trust effective October 4, 2004. TRUSTEES AND OFFICERS (continued) As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
TRUSTEE AND/ NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE --------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered Trustee Naftalis and Frankel LLP investment company) --------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc. Trustee (California) Formerly: Associate Justice of the California Court of Appeals --------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None Trustee of the USA --------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee --------------------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee --------------------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1991 Executive Vice President, Development None Trustee and Operations, Hines Interests Limited Partnership (real estate development company) --------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee --------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS --------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley(4) -- 1959 2004 Senior Vice President, A I M Management N/A Senior Vice President and Group Inc. (financial services holding Chief Compliance Officer company); Senior Vice President and Chief Compliance Officer, A I M Advisors, Inc.; Vice President and Chief Compliance Officer, A I M Capital Management, Inc. and A I M Distributors, Inc.; and Vice President, AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds --------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A Senior Vice President, Secretary and General Counsel, A I M Secretary and Chief Legal Management Group Inc. (financial Officer services holding company) and A I M Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., and AIM Investment Services, Inc.; Director, Vice President and General Counsel, Fund Management Company and Senior Vice President, A I M Distributors, Inc. Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC and Vice President, A I M Distributors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income N/A Vice President Officer and Senior Investment Officer, A I M Capital Management, Inc. and Vice President, A I M Advisors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Director of Money N/A Vice President Market Research and Special Projects, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A Vice President and Treasurer Advisors, Inc. Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A Vice President Director and Chief Cash Management Officer, A I M Capital Management, Inc; Director and President, Fund Management Company; and Vice President, A I M Advisors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen -- 1940 1999 Executive Vice President, A I M N/A Vice President Management Group, Inc.; Senior Vice President, A I M Advisors, Inc., and President, Director of Investments, Chief Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. Formerly: Director of A I M Advisors, Inc. and A I M Management Group Inc., A I M Advisors, Inc.; and Director and Chairman, A I M Capital Management, Inc. ---------------------------------------------------------------------------------------------------------------------------------
(4) Ms. Brinkley was elected Senior Vice President and Chief Compliance Officer of the Trust effective September 20, 2004. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers Suite 100 11 Greenway Plaza Inc. LLP Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Houston, TX 77046-1173 Suite 100 Street Houston, TX 77046-1173 Suite 2900 Houston, Texas 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis AIM Investment State Street Bank Andrews & Ingersoll, & Frankel LLP Services, Inc. and Trust Company LLP 919 Third Avenue P.O. Box 4739 225 Franklin Street 1735 Market Street New York, NY 10022-3852 Houston, TX 77210-4739 Boston, MA Philadelphia, PA 19103-7599 02110-2801
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED) Of ordinary dividends paid to shareholders during the Fund's tax year ended October 31, 2004, 0% is eligible for the dividends received deduction for corporations. For its tax year ended October 31, 2004, the Fund designates 100%, or the maximum amount allowable, of its dividend distributions as qualified dividend income. Your actual amount of qualified dividend income for the calendar year will be reported on Form 1099-DIV. You should consult your tax advisor regarding treatment of these amounts. DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund(5) AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Equity Fund(6) AIM Intermediate Government Fund AIM Charter Fund AIM Global Growth Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund AIM Money Market Fund AIM Core Stock Fund(1) AIM International Core Equity Fund(1) AIM Short Term Bond Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund(7) AIM Total Return Bond Fund AIM Diversified Dividend Fund AIM International Growth Fund Premier U.S. Government Money AIM Dynamics Fund(1) AIM Trimark Fund Portfolio(1) AIM Emerging Growth Fund AIM Large Cap Basic Value Fund SECTOR EQUITY TAX-FREE AIM Large Cap Growth Fund AIM Libra Fund AIM Advantage Health Sciences Fund(1) AIM High Income Municipal Fund AIM Mid Cap Basic Value Fund AIM Energy Fund(1) AIM Municipal Bond Fund AIM Mid Cap Core Equity Fund(2) AIM Financial Services Fund(1) AIM Tax-Exempt Cash Fund AIM Mid Cap Growth Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund AIM Mid Cap Stock Fund1 AIM Gold & Precious Metals Fund(1) AIM Opportunities I Fund AIM Health Sciences Fund(1) AIM ALLOCATION SOLUTIONS AIM Opportunities II Fund AIM Leisure Fund(1) AIM Opportunities III Fund AIM Multi-Sector Fund(1) AIM Aggressive Allocation Fund AIM Premier Equity Fund AIM Real Estate Fund AIM Conservative Allocation Fund AIM S&P 500 Index Fund(1) AIM Technology Fund(1) AIM Moderate Allocation Fund AIM Select Equity Fund AIM Utilities Fund(1) AIM Small Cap Equity Fund(3) AIM Small Cap Growth Fund(4) ============================================================================== AIM Small Company Growth Fund(1) CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. AIM Total Return Fund*(1) FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR AIM Trimark Endeavor Fund FINANCIAL ADVISOR AND READ IT THOROUGHLY BEFORE INVESTING. AIM Trimark Small Companies Fund ============================================================================== AIM Weingarten Fund
* Domestic equity and income fund (1) The following name changes became effective October 15, 2004: INVESCO Advantage Health Sciences Fund to AIM Advantage Health Sciences Fund, INVESCO Core Equity Fund to AIM Core Stock Fund, INVESCO Dynamics Fund to AIM Dynamics Fund, INVESCO Energy Fund to AIM Energy Fund, INVESCO Financial Services Fund to AIM Financial Services Fund, INVESCO Gold & Precious Metals Fund to AIM Gold & Precious Metals Fund, INVESCO Health Sciences Fund to AIM Health Sciences Fund, INVESCO International Core Equity Fund to AIM International Core Equity Fund, INVESCO Leisure Fund to AIM Leisure Fund, INVESCO Mid-Cap Growth Fund to AIM Mid Cap Stock Fund, INVESCO Multi-Sector Fund to AIM Multi-Sector Fund, INVESCO S&P 500 Index Fund to AIM S&P 500 Index Fund, INVESCO Small Company Growth Fund to AIM Small Company Growth Fund, INVESCO Technology Fund to AIM Technology Fund, INVESCO Total Return Fund to AIM Total Return Fund, INVESCO U.S. Government Money Fund to Premier U.S. Government Money Portfolio, INVESCO Utilities Fund to AIM Utilities Fund. (2) As of the close of business on February 27, 2004, AIM Mid Cap Core Equity Fund is available to new investors on a limited basis. For information on who may continue to invest in AIM Mid Cap Core Equity Fund, please contact your financial advisor. (3) Effective December 13, 2004, AIM Small Cap Equity Fund is open to all investors. (4) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (5) AIM European Small Company Fund will close to new investors when net assets reach $500 million. (6) Effective March 31, 2004, AIM Global Trends Fund was renamed AIM Global Equity Fund. (7) AIM International Emerging Growth Fund will close to new investors when net assets reach $500 million. If used after January 20, 2005, this report must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $132 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $363 billion in assets under management. Data as of September 30, 2004. AIMinvestments.com EGR-AR-1 A I M Distributors, Inc. [YOUR GOALS. OUR SOLUTIONS.]--Registered Trademark-- ------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Registered Trademark-- Plans Accounts -------------------------------------------------------------------------------------
AIM GLOBAL AGGRESSIVE GROWTH FUND Annual Report to Shareholders o October 31, 2004 [COVER IMAGE] YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE] --Registered Trademark-- --Registered Trademark-- ==================================================================================================================================== AIM GLOBAL AGGRESSIVE GROWTH FUND SEEKS TO PROVIDE ABOVE-AVERAGE LONG-TERM GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of 10/31/04 and is based on total net assets. ==================================================================================================================================== ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION o Effective 9/30/03, Class B shares are o The unmanaged MSCI World Index is a o The returns shown in the Management's not available as an investment for group of global securities tracked by Discussion of Fund Performance are based retirement plans maintained pursuant to Morgan Stanley Capital International. on net asset values calculated for Section 401 of the Internal Revenue Code, shareholder transactions. Generally including 401(k) plans, money purchase o The unmanaged MSCI World Growth Index accepted accounting principles require pension plans and profit sharing plans. is a subset of the MSCI World Index, a adjustments to be made to the net assets Plans that have existing accounts group of global securities tracked by of the fund at period end for financial invested in Class B shares will continue Morgan Stanley Capital International; the reporting purposes, and as such, the net to be allowed to make additional Growth subset measures performance of asset values for shareholder transactions purchases. companies with higher price/earnings and the returns based on those net asset ratios and higher forecasted growth values may differ from the net asset PRINCIPAL RISKS OF INVESTING IN THE FUND values. values and returns reported in the Financial Highlights. o International investing presents o The unmanaged Lipper Global Fund Index certain risks not associated with represents an average of the performance o Industry classifications used in this investing solely in the United States. of global funds tracked by Lipper, Inc., report are generally according to the These include risks relating to an independent mutual fund performance Global Industry Classification Standard, fluctuations in the value of the U.S. monitor. which was developed by and is the dollar relative to the values of other exclusive property and a service mark of currencies, the custody arrangements made o The unmanaged MSCI Europe Index is a Morgan Stanley Capital International Inc. for the fund's foreign holdings, group of European securities tracked by and Standard & Poor's. differences in accounting, political Morgan Stanley Capital International. risks and the lesser degree of public The fund files its complete schedule of information required to be provided by o The unmanaged Standard & Poor's portfolio holdings with the Securities non-U.S. companies. Composite Index of 500 Stocks (the S&P and Exchange Commission ("SEC") for the 500--Registered Trademark-- Index) is an 1st and 3rd quarters of each fiscal year o Investing in emerging markets involves index of common stocks frequently used as on Form N-Q. The fund's Form N-Q filings greater risk and potential reward than a general measure of U.S. stock market are available on the SEC's Web site at investing in more established markets. performance. http://www.sec.gov. Copies of the fund's Forms N-Q may be reviewed and copied at o Investing in small and mid-size o A direct investment cannot be made in the SEC's Public Reference Room at 450 companies involves risks not associated an index. Unless otherwise indicated, Fifth Street, N.W., Washington, D.C. with investing in more established index results include reinvested 20549-0102. You can obtain information on companies, including business risk, dividends, and they do not reflect sales the operation of the Public Reference significant stock price fluctuations and charges. Performance of an index of funds Room, including information about illiquidity. reflects fund expenses; performance of a duplicating fee charges, by calling market index does not. 1-202-942-8090 or by electronic request at the following E-mail address: o The fund is not managed to track the publicinfo@sec.gov. The SEC file numbers performance of any particular index, for the fund are 811-6463 and 33-44611. including the indexes defined here, and The fund's most recent portfolio consequently, the performance of the fund holdings, as filed on Form N-Q, are also may deviate significantly from the available at AIMinvestments.com. performance of the indexes. A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800-959-4246 or on the AIM Web site, AIMinvestments.com. On the home page, scroll down and click on AIM Funds Proxy Policy. The information is also available on the Securities and Exchange Commission's Web site, sec.gov. Information regarding how the fund voted proxies related to its portfolio securities during the 12 months ended 6/30/04 is available at our Web site. Go to AIMinvestments.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select your fund from the drop-down menu.
============================================================================= 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 TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER OF THE AIM FAMILY OF FUNDS--Registered Trademark--: NEW BOARD CHAIRMAN [PHOTO OF It is our pleasure to introduce you to Bruce Crockett, the ROBERT H. new Chairman of the Board of Trustees of the AIM Funds. Bob GRAHAM] Graham has served as Chairman of the Board of Trustees of the AIM Funds ever since Ted Bauer retired from that ROBERT H. GRAHAM position in 2000. However, as you may be aware, the U.S. Securities and Exchange Commission recently adopted a rule [PHOTO OF requiring that an independent fund trustee, meaning a MARK H. trustee who is not an officer of the fund's investment WILLIAMSON] advisor, serve as chairman of the funds' Board. In addition, a similar provision was included in the terms of AIM MARK H. WILLIAMSON Advisors' recent settlements with certain regulators. Accordingly, the AIM Funds' Board recently elected Mr. [PHOTO OF Crockett, one of the fourteen independent trustees on the BRUCE L. AIM Funds' Board, as Chairman. His appointment became CROCKETT] effective on October 4, 2004. Mr. Graham will remain on the funds' Board, as will Mark Williamson, President and Chief BRUCE L. CROCKETT Executive Officer of AIM. Mr. Graham will also remain Chairman of AIM Investments--Registered Trademark--. Mr. Crockett has been a member of the AIM Funds' board since 1992, when AIM acquired certain funds that had been advised by CIGNA. He had been a member of the board of those funds since 1978. Mr. Crockett has more than 30 years of experience in finance and general management and has been Chairman of Crockett Technologies Associates since 1996. He is the first independent chairman of the funds' board in AIM's history, as he is not affiliated with AIM or AMVESCAP in any way. He is committed to ensuring that the AIM Funds adhere to the highest standards of corporate governance for the benefit of fund shareholders, and we at AIM share that commitment. MARKET CONDITIONS DURING THE FISCAL YEAR Virtually every equity index, domestic and foreign, produced positive returns for the fiscal year ended October 31, 2004. Domestically, the S&P 500 Index was up 9.41% for the year. Globally, the MSCI World Index advanced more than 13%. However, a goodly portion of this positive performance was achieved during 2003. Year to date as of October 31, the S&P 500 Index was up just over 3%, the MSCI World Index just about 5%. In the pages that follow, you will find a more detailed discussion of the market conditions that affected your fund during the fiscal year. While it is agreeable to report positive market performance for the year covered by this report, as ever, we encourage our shareholders to look past short-term performance and focus on their long-term investment goals. Over the short term, the one sure thing about the investment markets is their unpredictability. Over the long term, equities have produced very attractive returns. For the 25-year period ended October 31, 2004, the S&P 500 Index averaged 13.50% growth per year and the MSCI World Index averaged 11.16%. While past performance cannot guarantee future results, we believe staying invested for the long term offers the best opportunity for capital growth. YOUR FUND The following pages of this report provide an explanation of how your fund was managed during the fiscal year, how it performed in comparison to various benchmarks, and a presentation of its long-term performance. We hope you find this information helpful. Current information about your fund and about the markets in general is always available on our Web site, AIMinvestments.com. As always, AIM remains committed to building solutions for your investment goals, and we thank you for your continued participation in AIM Investments. If you have any questions, please contact our Client Service representatives at 800-959-4246. Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON ------------------------------------ ----------------------------------- Robert H. Graham Mark H. Williamson Chairman, AIM Investments CEO & President, AIM Investments President & Vice Chairman, AIM Funds Trustee, AIM Funds December 16, 2004 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, and A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE STRENGTH OF FOREIGN MARKETS BOLSTERS FUND fiscal year including the Canadian PERFORMANCE dollar, Australian dollar, Japanese yen, euro and British pound. For the fiscal year ended October 31, oil prices, geopolitical concerns 2004, AIM Global Aggressive Growth Fund including the war in Iraq and election YOUR FUND Class A shares returned 18.98% at net uncertainty took its toll in the second asset value. PERFORMANCE SHOWN AT NAV half of the reporting period. Conditions Established, well-managed DOES NOT INCLUDE FRONT-END SALES CHARGES, varied, however, by region and country. companies--those that can continue to WHICH WOULD HAVE REDUCED THE PERFORMANCE. grow and report strong earnings--were Returns for other share classes are shown The U.S. economy expanded at an rewarded by the market during the fiscal in the table on page 3. For the same annualized rate of 3.3% and 3.9% in the year. The fund's investment strategy, period, the fund outperformed all of its second and third quarters of therefore, worked well in this benchmarks including the MSCI World 2004--despite higher oil prices. Given environment as we focused on companies Index, MSCI World Growth Index and Lipper generally positive economic news, the with high returns on invested capital and Global Fund Index which returned 13.25%, Federal Reserve raised the fed funds rate accelerating earnings and which are 7.01% and 12.86%, respectively. by 75 basis points during the reporting reasonably priced. period. U.S. stocks posted generally We attribute the fund's higher return positive returns with the S&P 500 Index European stocks contributed the most to several factors: The fund invests in returning 9.41% for the fiscal year. to fund performance and were the largest small and mid-cap stocks which regional allocation for the fund. Our outperformed their large-cap peers during European stocks outperformed U.S. significant overweight to European stocks the fiscal year (the MSCI World and MSCI stocks by a two-to-one margin. All 16 and underweight to U.S. equities compared World Growth Indices are primarily constituents of the MSCI Europe Index to the MSCI World Growth Index stems from large-cap) and stock selection which posted positive returns on a our belief that European stocks, in helped create a strong portfolio during a dollar-denominated basis. Growth trends general, offer more attractive valuations volatile reporting period. and domestic demand proved divergent on than their U.S. peers. the continent with accelerating growth MARKET CONDITIONS and consumption in France and the U.K. U.S. stocks, however, played a and weaker demand in Germany. critical role for the fund as nearly 30% Global markets posted positive returns of the portfolio was in domestic stocks for the fiscal year with international In Asia, deflationary pressures as of the close of the fiscal year. The stocks generally producing higher returns continued to ease in Japan. However, consumer discretionary sector proved one than their U.S. counterparts. Amid strong after rising with little interruption of the largest contributors to fund corporate earnings releases, world since mid-2003, Japanese stocks fell in performance with a number of U.S. stocks markets moved significantly higher in the the second quarter amid concerns over the including Starbucks, a well-known coffee fourth quarter of 2003. Indeed, most of country's oil dependence and a slowing store chain, among the best performers the gains by world markets were produced rate of economic expansion. for the group. Amid aggressive global in late 2003 and early 2004 as rising store expansion, Starbucks reported Despite pockets of strength, the U.S. higher earnings-per-share for the fiscal dollar proved weak and many major foreign year than their original target. currencies appreciated against it during the Given our bottom-up investment philosophy--we invest in individual companies; not countries or sectors--we often
==================================================================================================================================== PORTFOLIO COMPOSITION TOP 10 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. United States 27.1% 1. Anglo Irish Bank Corp. PLC (Ireland) 5.7% [PIE CHART] 2. United Kingdom 9.7 2. AO VimpelCom-ADR (Russia) 2.4 Information Technology 9.3% 3. Japan 9.3 3. OTP Bank Rt. (Hungary) 2.3 Health Care 8.4% 4. Ireland 7.3 4. Enterprise Inns PLC Consumer Staples 8.1% 5. Germany 4.5 (United Kingdom) 2.2 Telecommunication Services 5.9% 6. Canada 3.8 5. Puma A.G. Rudolf Dassler Sport (Germany) 1.8 Materials 3.4% 7. France 3.6 6. Syngenta A.G. (Switzerland) 1.7 Energy 2.5% 8. Spain 3.5 7. Continental A.G. (Germany) 1.4 Utilities 0.5% 9. Mexico 3.1 8. Standard Bank Group Ltd. Money Market Funds Plus Other 10. Greece 2.5 (South Africa) 1.2 Assets Less Liabilities 4.8% 9. America Movil S.A. de C.V.- Series L-ADR (Mexico) 1.2 Consumer Discretionary 26.3% 10. Trend Micro Inc. (Japan) 1.2 Financials 21.0% Industrials 9.8% *Excluding money market fund holdings. The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. ====================================================================================================================================
2 find stocks that fit our growth strategy Another key aspect in our investment JASON T. HOLZER in emerging market countries. For strategy was that we did not hedge Mr. Holzer, Chartered example, Vimplecom, the second largest currencies. We purchased stocks in their [HOLZER Financial Analyst, is provider of wireless telecommunication local currency and then translated that PHOTO] co-manager of AIM services in Russia, has grown 100% in value back into the fund in U.S. dollars. Global Aggressive each of the last two years amid a Given the fund's foreign bias, currency Growth Fund. Mr. Holzer relatively untapped market for cell appreciation (compared with the U.S. joined AIM in 1996. He received a B.A. in phones. While many emerging market stocks dollar) helped boost fund return. quantitative economics and an M.S. in can exhibit the type of growth trends engineering-economic systems from that fit our investment strategy, we IN CLOSING Stanford University. typically invest in companies with strong corporate governance and which are often Given a rather volatile market JAMES G. BIRDSALL the largest in their industry. environment and the negative impact of Mr. Birdsall is rising oil prices, we are pleased to [BIRDSALL co-manager of AIM Strong performance from our financial provide shareholders with double-digit PHOTO] Global Aggressive stocks, particularly long-time fund returns for the fiscal year and remain Growth Fund. He joined holding, Anglo Irish Bank--which we committed to our objective of longterm AIM in 1995. Mr. believe is one of the fast growing and growth of capital. Birdsall received his B.B.A. with a most efficiently run banks in concentration in finance from Stephen F. Europe--helped the fund outperform all of THE VIEWS AND OPINIONS EXPRESSED IN Austin State University. He also earned its benchmark indexes for the fiscal MANAGEMENT'S DISCUSSION OF FUND an M.B.A. with a concentration in finance year. PERFORMANCE ARE THOSE OF A I M ADVISORS, and international business at the INC. THESE VIEWS AND OPINIONS ARE SUBJECT University of St. Thomas. Our exposure to Taro Pharmaceutical, TO CHANGE AT ANY TIME BASED ON FACTORS an Israeli drug company, was the largest SUCH AS MARKET AND ECONOMIC CONDITIONS. BARRETT K. SIDES single stock drag on performance. Taro THESE VIEWS AND OPINIONS MAY NOT BE Mr. Sides is co-manager declined amid a sell-off of generic drug RELIED UPON AS INVESTMENT ADVICE OR [SIDES of AIM Global companies and increasing competition from RECOMMENDATIONS, OR AS AN OFFER FOR A PHOTO] Aggressive Growth Fund. India. Given earnings downgrades, we sold PARTICULAR SECURITY. THE INFORMATION IS He joined AIM in 1990. the stock as it no longer fit our NOT A COMPLETE ANALYSIS OF EVERY ASPECT Mr. Sides graduated investment criteria. OF ANY MARKET, COUNTRY, INDUSTRY, with a B.S. in economics from Bucknell SECURITY OR THE FUND. STATEMENTS OF FACT University. He also received a master's On a sector basis, information ARE FROM SOURCES CONSIDERED RELIABLE, BUT in international business from the technology was the only sector to post a A I M ADVISORS, INC. MAKES NO University of St. Thomas. negative result for the fund. Amid a REPRESENTATION OR WARRANTY AS TO THEIR downturn in the tech sector, many of our COMPLETENESS OR ACCURACY. ALTHOUGH Assisted by Asia/Latin America Team, semiconductor holdings fell HISTORICAL PERFORMANCE IS NO GUARANTEE OF Europe/Canada Team and Large Cap Growth precipitously. Given largely FUTURE RESULTS, THESE INSIGHTS MAY HELP Team disappointing earnings, we sold most of YOU UNDERSTAND OUR INVESTMENT MANAGEMENT our Taiwanese semiconductor holdings as PHILOSOPHY. they no longer fit the fund's growth strategy. During the fiscal year, we See important fund and index significantly reduced our technology disclosures inside front cover. exposure, putting that money to work in more defensive sectors such as consumer staples. ========================================= ========================================= TOP 10 INDUSTRIES* FUND VS. INDEXES 1. Diversified Banks 14.1% TOTAL RETURNS, 10/31/03-10/31/04, EXCLUDING APPLICABLE SALES CHARGES. IF 2. Pharmaceuticals 4.6 SALES CHARGES WERE INCLUDED, RETURNS WOULD BE LOWER. 3. Wireless Telecommunication Services 4.0 Class A Shares 18.98% 4. Restaurants 3.7 Class B Shares 18.44 5. Application Software 3.5 Class C Shares 18.42 6. Apparel Retail 3.4 MSCI World Index (Broad Market Index) 13.25 7. Auto Parts & Equipment 2.7 MSCI World Growth Index 8. Industrial Machinery 2.4 (Style-specific Index) 7.01 9. Casinos & Gaming 2.3 Lipper Global Fund Index (Peer Group Index) 12.86 10. Hypermarkets & Super Centers 2.3 ========================================= SOURCE: LIPPER, INC. TOTAL NET ASSETS $844.9 MILLION TOTAL NUMBER OF HOLDINGS* 130 ========================================= ========================================= [RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE RECORD, PLEASE TURN TO PAGE 5.
3 INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE together with the amount you invested, to costs of investing in the fund and other estimate the expenses that you paid over funds. To do so, compare this 5% As a shareholder of the fund, you incur the period. Simply divide your account hypothetical example with the 5% two types of costs: (1) transaction value by $1,000 (for example, an $8,600 hypothetical examples that appear in the costs, which may include sales charges account value divided by $1,000 = 8.6), shareholder reports of the other funds. (loads) on purchase payments; contingent then multiply the result by the number in deferred sales charges on redemptions; the table under the heading entitled Please note that the expenses shown in and redemption fees, if any; and (2) "Actual Expenses Paid During Period" to the table are meant to highlight your ongoing costs, including management fees; estimate the expenses you paid on your ongoing costs only and do not reflect any distribution and/or service fees (12b-1); account during this period. transactional costs, such as sales and other fund expenses. This example is charges (loads) on purchase payments, intended to help you understand your HYPOTHETICAL EXAMPLE FOR COMPARISON contingent deferred sales charges on ongoing costs (in dollars) of investing PURPOSES redemptions, and redemption fees, if any. in the fund and to compare these costs Therefore, the hypothetical information with ongoing costs of investing in other The table below also provides information is useful in comparing ongoing costs mutual funds. The example is based on an about hypothetical account values and only, and will not help you determine the investment of $1,000 invested at the hypothetical expenses based on the fund's relative total costs of owning different beginning of the period and held for the actual expense ratio and an assumed rate funds. In addition, if these entire period, May 1, 2004 - October 31, of return of 5% per year before expenses, transactional costs were included, your 2004. which is not the fund's actual return. costs would have been higher. The hypothetical account values and ACTUAL EXPENSES expenses may not be used to estimate the actual ending account balance or expenses The table below provides information about you paid for the period. You may use this actual account values and actual expenses. information to compare the ongoing You may use the information in this table,
==================================================================================================================================== ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING VALUE PAID DURING (5/1/04) (10/31/04)(1) PERIOD(2) (10/31/04) PERIOD(2) Class A $1,000.00 $1,061.20 $10.57 $1,014.88 $10.33 Class B 1,000.00 1,058.50 13.14 1,012.37 12.85 Class C 1,000.00 1,059.10 13.15 1,012.37 12.85 (1) The actual ending account value is based on the actual total return of the fund for the period May 1, 2004, to October 31, 2004, 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 actual cumulative return at net asset value for the period May 1, 2004, to October 31, 2004, was 6.12%, 5.85%, and 5.91% for Class A, B, and C shares, respectively. (2) Expenses are equal to the fund's annualized expense ratio (2.04%, 2.54%, and 2.54% for Class A, B, and C shares, respectively) multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). [ARROW BUTTON For More Information Visit IMAGE] AIMinvestments.com ====================================================================================================================================
4 LONG-TERM PERFORMANCE YOUR FUND'S LONG-TERM PERFORMANCE ==================================================================================================================================== Past performance cannot guarantee RESULTS OF A $10,000 INVESTMENT comparable future results. 9/15/94-10/31/04 Index data from 8/31/94 Your fund's total return includes [MOUNTAIN CHART] reinvested distributions, applicable sales charges, fund expenses and AIM GLOBAL AGGRESSIVE AIM GLOBAL AGGRESSIVE management fees. Results for Class B GROWTH FUND GROWTH FUND LIPPER GLOBAL MSCI WORLD shares are calculated as if a DATE CLASS A SHARES CLASS B SHARES FUND INDEX INDEX hypothetical shareholder had liquidated his entire investment in the fund at the 9/15/1994 $ 9525 $10000 $10000 $10000 close of the reporting period and paid 10/94 9735 10210 9979 10010 the applicable contingent deferred sales 10/95 12467 13020 10392 10959 charges. Index results include reinvested 10/96 15062 15635 11934 12745 dividends, but they do not reflect sales 10/97 16516 17059 14075 14883 charges. Performance of an index of funds 10/98 15166 15574 14885 17153 reflects fund expenses and management 10/99 20975 21424 18442 21427 fees; performance of a market index does 10/00 26064 26474 20641 21661 not. Performance shown in the chart does 10/01 15933 16102 15753 16134 not reflect deduction of taxes a 10/02 13933 14016 13666 13738 shareholder would pay on fund 10/03 18087 18090 16752 16995 distributions or sale of fund shares. 10/04 $21526 $21639 $18905 $19248 Performance of the indexes does not Source: Lipper, Inc. reflect the effects of taxes. CLASS C SHARES applicable contingent deferred sales In evaluating this chart, please note Inception (8/4/97) 2.09% charge (CDSC) for the period involved. that the chart uses a logarithmic scale 5 Years 0.01 The CDSC on Class B shares declines from along the vertical axis (the value 1 Year 17.42 5% beginning at the time of purchase to scale). This means that each scale 0% at the beginning of the seventh year. increment always represents the same ========================================= The CDSC on Class C shares is 1% for the percent change in price; in a linear In addition to returns as of the close of first year after purchase. chart each scale increment always the fiscal year, industry regulations represents the same absolute change in require us to provide average annual The performance of the fund's share price. In this example, the scale total returns as of 9/30/04, the most classes will differ due to different increment between $5,000 and $10,000 is recent calendar quarter-end. sales charge structures and class the same as that between $10,000 and ========================================= expenses. $20,000. In a linear chart, the latter scale increment would be twice as large. AVERAGE ANNUAL TOTAL RETURNS A redemption fee of 2% will be imposed The benefit of using a logarithmic scale As of 9/30/04, most recent calendar on certain redemptions or exchanges out is that it better illustrates performance quarter-end, including applicable sales of the fund within 30 days of purchase. during the fund's early years depicted in charges Exceptions to the redemption fee are the chart before reinvested distributions listed in the fund's prospectus. and compounding create the potential for CLASS A SHARES the original investment to grow to very 10 Years 7.52 large numbers. Had the chart used a 5 Years 0.36 linear scale along its vertical axis, you 1 Year 16.33 would not be able to see as clearly the movements in the value of the fund and CLASS B SHARES the indexes during the early years 10 Years 7.57 depicted. We use a logarithmic scale in 5 Years 0.51 financial reports of funds that have more 1 Year 16.54 than five years of performance history. CLASS C SHARES ========================================= Inception (8/4/97) 1.53% AVERAGE ANNUAL TOTAL RETURNS 5 Years 0.82 As of 10/31/04, including applicable 1 Year 20.52 sales charges The performance data quoted represent CLASS A SHARES past performance and cannot guarantee 10 Years 7.73 comparable future results; current 5 Years -0.45 performance may be lower or higher. 1 Year 13.34 Please visit AIMinvestments.com for the most recent month-end performance. CLASS B SHARES Performance figures reflect reinvested 10 Years 7.80 distributions, changes in net asset value 5 Years -0.30 and the effect of the maximum sales 1 Year 13.44 charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares. Class A share performance reflects the maximum 4.75% sales charge, and Class B and Class C share performance reflects the ====================================================================================================================================
5 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2004
MARKET SHARES VALUE -------------------------------------------------------------------------- FOREIGN STOCKS & OTHER EQUITY INTERESTS-68.09% AUSTRIA-1.07% Erste Bank der oesterreichischen Sparkassen A.G. (Diversified Banks)(a)(b) 201,700 $ 9,021,634 ========================================================================== BELGIUM-0.61% Delhaize Group (Food Retail)(a)(b) 79,000 5,122,840 ========================================================================== BERMUDA-1.55% Esprit Holdings Ltd. (Apparel Retail)(a) 1,825,500 9,757,824 -------------------------------------------------------------------------- Giordano International Ltd. (Apparel Retail)(a) 5,900,000 3,298,338 ========================================================================== 13,056,162 ========================================================================== BRAZIL-0.20% Companhia Brasileira de Distribuicao Grupo Pao de Acucar-ADR (Hypermarkets & Super Centers) 72,700 1,730,260 ========================================================================== CANADA-3.80% Brascan Corp. (Other Diversified Financial Services) 171,000 6,090,796 -------------------------------------------------------------------------- PetroKazakhstan Inc.-Class A (Integrated Oil & Gas) 140,000 5,172,838 -------------------------------------------------------------------------- Power Financial Corp. (Other Diversified Financial Services) 263,200 6,483,291 -------------------------------------------------------------------------- Precision Drilling Corp. (Oil & Gas Drilling)(c) 76,900 4,760,867 -------------------------------------------------------------------------- Shoppers Drug Mart Corp. (Drug Retail) (Acquired 05/16/03-11/18/03; Cost $5,546,847)(c)(d)(e)(f) 316,500 9,628,315 ========================================================================== 32,136,107 ========================================================================== FRANCE-3.60% Imerys S.A. (Construction Materials)(a)(b) 99,600 7,058,348 -------------------------------------------------------------------------- JC Decaux S.A. (Advertising)(a)(b)(c) 251,200 6,287,318 -------------------------------------------------------------------------- M6 Metropole Television (Broadcasting & Cable TV)(a)(b) 231,000 6,050,407 -------------------------------------------------------------------------- Pernod Ricard (Distillers & Vintners)(a)(b) 49,000 6,824,471 -------------------------------------------------------------------------- Technip S.A. (Oil & Gas Equipment & Services)(a)(b) 26,700 4,212,242 ========================================================================== 30,432,786 ========================================================================== GERMANY-4.45% Adidas-Salomon A.G. (Apparel, Accessories & Luxury Goods)(a)(b) 47,700 6,697,319 -------------------------------------------------------------------------- Celesio A.G. (Health Care Distributors)(a) 61,100 4,443,122 -------------------------------------------------------------------------- Continental A.G. (Tires & Rubber)(a)(b) 212,340 11,653,184 --------------------------------------------------------------------------
MARKET SHARES VALUE --------------------------------------------------------------------------
GERMANY-(CONTINUED) Puma A.G. Rudolf Dassler Sport (Footwear) (Acquired 10/29/02-10/30/03; Cost $4,715,039)(a)(d) 58,662 $ 14,765,172 ========================================================================== 37,558,797 ========================================================================== GREECE-2.47% Coca-Cola Hellenic Bottling Co. S.A. (Soft Drinks)(a) 135,150 3,022,004 -------------------------------------------------------------------------- Cosmote Mobile Telecommunications S.A. (Wireless Telecommunication Services)(a) 208,650 3,786,622 -------------------------------------------------------------------------- EFG Eurobank Ergasias (Diversified Banks)(a) 190,000 5,228,279 -------------------------------------------------------------------------- OPAP S.A. (Casinos & Gaming) (Acquired 07/14/03-01/30/04; Cost $5,368,735)(a)(d) 430,000 8,809,791 ========================================================================== 20,846,696 ========================================================================== HUNGARY-2.30% OTP Bank Rt. (Diversified Banks)(a) 763,500 19,397,632 ========================================================================== INDIA-0.80% Ranbaxy Laboratories Ltd. (Pharmaceuticals)(a) 280,500 6,788,087 ========================================================================== IRELAND-7.29% Anglo Irish Bank Corp. PLC (Diversified Banks)(a) 2,538,315 48,449,192 -------------------------------------------------------------------------- Depfa Bank PLC (Diversified Banks)(a) 481,000 7,403,806 -------------------------------------------------------------------------- Independent News & Media PLC (Publishing) 1,970,400 5,748,394 ========================================================================== 61,601,392 ========================================================================== ITALY-1.43% Banco Popolare di Verona e Novara Scrl (Diversified Banks)(a) 470,000 8,381,215 -------------------------------------------------------------------------- Lottomatica S.p.A. (Casinos & Gaming)(a) 122,200 3,689,206 ========================================================================== 12,070,421 ========================================================================== JAPAN-9.25% Clarion Co., Ltd. (Consumer Electronics)(a)(c) 1,998,000 4,136,349 -------------------------------------------------------------------------- Daiwa House Industry Co., Ltd. (Homebuilding)(a) 335,000 3,429,909 -------------------------------------------------------------------------- Fanuc Ltd. (Industrial Machinery)(a)(b) 136,700 8,257,093 -------------------------------------------------------------------------- JSR Corp. (Specialty Chemicals)(a) 243,000 4,432,870 -------------------------------------------------------------------------- Mars Engineering Corp. (Leisure Products)(a) 97,400 3,659,841 -------------------------------------------------------------------------- NHK Spring Co., Ltd. (Auto Parts & Equipment)(a) 818,000 5,655,901 -------------------------------------------------------------------------- Nidec Corp. (Electronic Equipment Manufacturers)(a)(b) 44,600 4,844,899 -------------------------------------------------------------------------- NOK Corp. (Auto Parts & Equipment)(a)(b) 237,000 7,202,752 -------------------------------------------------------------------------- OMRON Corp. (Electronic Equipment Manufacturers)(a) 271,000 6,156,627 --------------------------------------------------------------------------
F-1
MARKET SHARES VALUE -------------------------------------------------------------------------- JAPAN-(CONTINUED) Sekisui Chemical Co., Ltd. (Homebuilding)(a) 711,000 $ 4,528,170 -------------------------------------------------------------------------- Stanley Electric Co., Ltd. (Auto Parts & Equipment)(a)(b) 261,000 4,034,193 -------------------------------------------------------------------------- Suzuki Motor Corp. (Automobile Manufacturers)(a) 318,000 5,629,353 -------------------------------------------------------------------------- THK CO., Ltd. (Industrial Machinery)(a)(b) 202,900 3,530,340 -------------------------------------------------------------------------- Trend Micro Inc. (Application Software)(a)(b) 205,100 9,826,782 -------------------------------------------------------------------------- USS Co., Ltd. (Specialty Stores)(a)(b) 34,400 2,787,075 ========================================================================== 78,112,154 ========================================================================== MEXICO-3.12% Alfa, S.A.-Class A (Industrial Conglomerates) 2,135,900 8,301,856 -------------------------------------------------------------------------- America Movil S.A. de C.V.-Series L-ADR (Wireless Telecommunication Services)(b) 227,200 9,996,800 -------------------------------------------------------------------------- CEMEX, S.A. de C.V.-ADW, expiring 12/21/04 (Construction Materials)(g) 1,111 3,888 -------------------------------------------------------------------------- Wal-Mart de Mexico S.A. de C.V.-Series V (Hypermarkets & Super Centers) 2,478,400 8,097,381 ========================================================================== 26,399,925 ========================================================================== NETHERLANDS-0.62% Royal Numico N.V. (Packaged Foods & Meats)(a)(b)(c) 155,000 5,253,274 ========================================================================== NORWAY-0.96% Telenor A.S.A. (Integrated Telecommunication Services)(a)(b) 1,017,300 8,144,139 ========================================================================== PUERTO RICO-0.57% Doral Financial Corp. (Thrifts & Mortgage Finance) 115,000 4,827,700 ========================================================================== RUSSIA-2.38% AO VimpelCom-ADR (Wireless Telecommunication Services)(b)(c) 176,290 20,097,060 ========================================================================== SOUTH AFRICA-2.13% Standard Bank Group Ltd. (Diversified Banks) 1,171,442 10,338,090 -------------------------------------------------------------------------- Telkom South Africa Ltd. (Integrated Telecommunication Services) (Acquired 11/25/03-08/17/04; Cost $5,657,852)(d) 537,400 7,642,826 ========================================================================== 17,980,916 ========================================================================== SOUTH KOREA-1.37% Hana Bank (Diversified Banks)(a) 287,400 7,186,444 -------------------------------------------------------------------------- Shinsegae Co., Ltd. (Hypermarkets & Super Centers)(a) 15,600 4,392,202 ========================================================================== 11,578,646 ========================================================================== SPAIN-3.52% Cintra Concesiones de Infraestructuras de Transporte S.A. (Highways & Railtracks)(c) 425,000 4,214,518 --------------------------------------------------------------------------
MARKET SHARES VALUE --------------------------------------------------------------------------
SPAIN-(CONTINUED) Corporacion Mapfre S.A. (Multi-Line Insurance)(a)(b) 456,572 $ 5,796,296 -------------------------------------------------------------------------- Enagas (Gas Utilities) (Acquired 07/29/04- 08/02/04; Cost $4,083,275)(a)(d) 373,000 4,734,407 -------------------------------------------------------------------------- Gestevision Telecinco S.A. (Movies & Entertainment) (Acquired 07/28/04-10/04/04; Cost $6,375,521)(c)(d) 395,000 7,566,171 -------------------------------------------------------------------------- Grupo Ferrovial, S.A. (Construction & Engineering)(a) 167,600 7,452,647 ========================================================================== 29,764,039 ========================================================================== SWEDEN-1.63% Assa Abloy A.B.-Class B (Building Products)(a)(b) 370,000 5,027,289 -------------------------------------------------------------------------- Gambro A.B.-Class A (Health Care Services)(a)(b) 368,700 4,322,360 -------------------------------------------------------------------------- Swedish Match A.B. (Tobacco)(a)(b) 401,600 4,449,097 ========================================================================== 13,798,746 ========================================================================== SWITZERLAND-2.11% Baloise Holding A.G.-Class R (Multi-Line Insurance)(a) 92,000 3,667,134 -------------------------------------------------------------------------- Syngenta A.G. (Fertilizers & Agricultural Chemicals)(a)(c) 147,600 14,129,074 ========================================================================== 17,796,208 ========================================================================== TAIWAN-0.46% Novatek Microelectronics Corp., Ltd. (Semiconductors)(a) 141,306 343,991 -------------------------------------------------------------------------- President Chain Store Corp. (Food Retail)(a) 2,387,840 3,567,979 ========================================================================== 3,911,970 ========================================================================== THAILAND-0.40% Siam Commercial Bank PCL (Diversified Banks)(a) 3,213,000 3,373,028 ========================================================================== TURKEY-0.31% Koc Holding A.S. (Industrial Conglomerates) 431,000,000 2,611,679 ========================================================================== UNITED KINGDOM-9.69% Amdocs Ltd. (Application Software)(c) 225,000 5,658,750 -------------------------------------------------------------------------- Cattles PLC (Consumer Finance)(a) 614,500 4,023,185 -------------------------------------------------------------------------- Daily Mail & General Trust-Class A (Publishing)(a) 341,000 4,543,423 -------------------------------------------------------------------------- Enterprise Inns PLC (Restaurants)(a) 1,659,600 18,906,994 -------------------------------------------------------------------------- ICAP PLC (Investment Banking & Brokerage)(a) 1,147,875 4,950,499 -------------------------------------------------------------------------- Inchcape PLC (Distributors)(a) 180,100 4,893,037 -------------------------------------------------------------------------- Shire Pharmaceuticals Group PLC (Pharmaceuticals)(a) 909,000 8,674,428 -------------------------------------------------------------------------- T&F Informa PLC (Publishing)(a) 618,900 4,340,949 -------------------------------------------------------------------------- Travis Perkins PLC (Home Improvement Retail)(a) 353,460 8,961,577 -------------------------------------------------------------------------- Warner Chilcott PLC (Pharmaceuticals) 420,085 6,647,016 -------------------------------------------------------------------------- William Hill PLC (Casinos & Gaming)(a) 731,060 6,575,878 --------------------------------------------------------------------------
F-2
MARKET SHARES VALUE -------------------------------------------------------------------------- UNITED KINGDOM-(CONTINUED) WS Atkins PLC (Diversified Commercial Services)(a) 304,000 $ 3,710,131 ========================================================================== 81,885,867 ========================================================================== Total Foreign Stocks & Other Equity Interests (Cost $356,391,613) 575,298,165 ========================================================================== DOMESTIC COMMON STOCKS & OTHER EQUITY INTERESTS-27.14% AEROSPACE & DEFENSE-1.25% Rockwell Collins, Inc.(b) 155,000 5,497,850 -------------------------------------------------------------------------- United Defense Industries, Inc.(c) 125,000 5,017,500 ========================================================================== 10,515,350 ========================================================================== APPAREL RETAIL-1.82% American Eagle Outfitters, Inc. 125,000 5,110,000 -------------------------------------------------------------------------- Foot Locker, Inc. 201,900 4,926,360 -------------------------------------------------------------------------- Limited Brands 215,000 5,327,700 ========================================================================== 15,364,060 ========================================================================== APPLICATION SOFTWARE-1.64% Autodesk, Inc. 85,000 4,483,750 -------------------------------------------------------------------------- Citrix Systems, Inc.(c) 200,000 4,826,000 -------------------------------------------------------------------------- Intuit Inc.(b)(c) 100,000 4,536,000 ========================================================================== 13,845,750 ========================================================================== ASSET MANAGEMENT & CUSTODY BANKS-1.03% Investors Financial Services Corp.(b) 80,900 3,113,841 -------------------------------------------------------------------------- Legg Mason, Inc. 88,200 5,619,222 ========================================================================== 8,733,063 ========================================================================== AUTO PARTS & EQUIPMENT-0.66% Autoliv, Inc.-SDR(a)(c) 129,760 5,541,630 ========================================================================== BROADCASTING & CABLE TV-0.64% Univision Communications Inc.-Class A(c) 175,000 5,418,000 ========================================================================== COMMUNICATIONS EQUIPMENT-1.15% Avaya Inc.(c) 175,000 2,520,000 -------------------------------------------------------------------------- Comverse Technology, Inc.(c) 350,000 7,224,000 ========================================================================== 9,744,000 ========================================================================== CONSUMER FINANCE-0.51% Providian Financial Corp.(c) 275,000 4,276,250 ========================================================================== DATA PROCESSING & OUTSOURCED SERVICES-0.88% Alliance Data Systems Corp.(b)(c) 175,000 7,399,000 ========================================================================== DISTILLERS & VINTNERS-0.49% Constellation Brands, Inc.-Class A(c) 105,000 4,119,150 ==========================================================================
MARKET SHARES VALUE --------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-0.56% Bright Horizons Family Solutions, Inc.(c) 75,000 $ 4,747,500 ========================================================================== ELECTRICAL COMPONENTS & EQUIPMENT-0.79% Rockwell Automation, Inc. 160,000 6,670,400 ========================================================================== ENVIRONMENTAL SERVICES-0.54% Stericycle, Inc.(b)(c) 100,000 4,533,000 ========================================================================== HEALTH CARE EQUIPMENT-2.22% Bard (C.R.), Inc. 80,000 4,544,000 -------------------------------------------------------------------------- DENTSPLY International Inc. 80,000 4,160,800 -------------------------------------------------------------------------- Fisher Scientific International Inc.(b)(c) 100,000 5,736,000 -------------------------------------------------------------------------- Varian Medical Systems, Inc.(b)(c) 107,600 4,320,140 ========================================================================== 18,760,940 ========================================================================== HEALTH CARE SERVICES-0.27% DaVita, Inc.(c) 77,500 2,295,550 ========================================================================== HYPERMARKETS & SUPER CENTERS-0.57% Costco Wholesale Corp.(b) 100,000 4,794,000 ========================================================================== INDUSTRIAL CONGLOMERATES-0.52% Textron Inc. 65,000 4,429,750 ========================================================================== INDUSTRIAL MACHINERY-1.05% Danaher Corp.(b) 85,000 4,686,050 -------------------------------------------------------------------------- Eaton Corp.(b) 65,000 4,156,750 ========================================================================== 8,842,800 ========================================================================== MANAGED HEALTH CARE-0.24% Coventry Health Care, Inc.(c) 50,000 2,045,000 ========================================================================== OIL & GAS EQUIPMENT & SERVICES-0.80% Varco International, Inc.(c) 245,000 6,781,600 ========================================================================== PERSONAL PRODUCTS-0.89% Estee Lauder Cos. Inc. (The)-Class A 175,000 7,516,250 ========================================================================== PHARMACEUTICALS-1.97% Eon Labs, Inc.(b)(c) 200,000 4,922,000 -------------------------------------------------------------------------- IVAX Corp.(b)(c) 206,250 3,733,125 -------------------------------------------------------------------------- Medicis Pharmaceutical Corp.-Class A(b) 100,000 4,067,000 -------------------------------------------------------------------------- Sepracor Inc.(b)(c) 85,000 3,904,050 ========================================================================== 16,626,175 ========================================================================== PUBLISHING-0.51% Getty Images, Inc.(b)(c) 73,500 4,346,055 ========================================================================== REGIONAL BANKS-0.57% Bank of Hawaii Corp. 100,000 4,775,000 ==========================================================================
F-3
MARKET SHARES VALUE -------------------------------------------------------------------------- RESTAURANTS-1.43% Starbucks Corp.(b)(c) 85,000 $ 4,494,800 -------------------------------------------------------------------------- Yum! Brands, Inc. 175,000 7,612,500 ========================================================================== 12,107,300 ========================================================================== SEMICONDUCTOR EQUIPMENT-0.52% Novellus Systems, Inc.(c) 170,000 4,404,700 ========================================================================== SEMICONDUCTORS-0.85% Microchip Technology Inc.(b) 238,370 7,210,693 ========================================================================== SPECIALIZED FINANCE-0.62% Chicago Mercantile Exchange (The)(b) 30,000 5,271,900 ========================================================================== SPECIALTY CHEMICALS-0.36% Ecolab Inc. 90,000 3,046,500 ========================================================================== SPECIALTY STORES-0.68% Williams-Sonoma, Inc.(c) 150,000 5,725,500 ========================================================================== SYSTEMS SOFTWARE-0.82% McAfee Inc.(c) 285,000 6,897,000 ========================================================================== TECHNOLOGY DISTRIBUTORS-0.29% CDW Corp. 40,000 2,481,200 ========================================================================== Total Domestic Common Stocks & Other Equity Interests (Cost $187,383,856) 229,265,066 ==========================================================================
MARKET SHARES VALUE --------------------------------------------------------------------------
MONEY MARKET FUNDS-0.36% Liquid Assets Portfolio-Institutional Class(h) 1,521,179 $ 1,521,179 -------------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class(h) 1,521,179 1,521,179 ========================================================================== Total Money Market Funds (Cost $3,042,358) 3,042,358 ========================================================================== TOTAL INVESTMENTS-95.59% (excluding investments purchased with cash collateral from securities loaned) (Cost $546,817,827) 807,605,589 ========================================================================== INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-18.07% Liquid Assets Portfolio-Institutional Class(h)(i) 76,343,445 76,343,445 -------------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class(h)(i) 76,343,445 76,343,445 ========================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $152,686,890) 152,686,890 ========================================================================== TOTAL INVESTMENTS-113.66% (Cost $699,504,717) 960,292,479 ========================================================================== OTHER ASSETS LESS LIABILITIES-(13.66%) (115,429,972) ========================================================================== NET ASSETS-100.00% $ 844,862,507 __________________________________________________________________________ ==========================================================================
Investment Abbreviations: ADR - American Depositary Receipt ADW - American Depositary Warrant SDR - Swedish Depositary Receipt
Notes to Schedule of Investments: (a) In accordance with the procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The aggregate market value of these securities at October 31, 2004 was $445,221,299, which represented 46.36% of the Fund's Total Investments. See Note 1A. (b) All or a portion of this security has been pledged as collateral for security lending transactions at October 31, 2004. (c) Non-income producing security. (d) Security not registered under the Securities Act of 1933, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The Fund has no rights to demand registration of these securities. The aggregate market value of these securities at October 31, 2004 was $53,146,682, which represented 6.29% of the Fund's net assets. Unless otherwise indicated, these securities are not considered to be illiquid. (e) Security considered to be illiquid. The market value of this security considered illiquid at October 31, 2004 represented 1.14% of the Fund's net assets. (f) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The market value of this security at October 31, 2004 represented 1.00% of the Fund's Total Investments. See Note 1A. (g) Non-income producing security acquired as part of a unit with or in exchange for other securities. (h) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (i) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 8. See accompanying notes which are an integral part of the financial statements. F-4 STATEMENT OF ASSETS AND LIABILITIES October 31, 2004 ASSETS: Investments, at market value (cost $543,775,469)* $ 804,563,231 ------------------------------------------------------------ Investments in affiliated money market funds (cost $155,729,248) 155,729,248 ============================================================ Total investments (cost $699,504,717) 960,292,479 ============================================================ Foreign currencies, at value (cost $26,068,523) 26,399,352 ------------------------------------------------------------ Receivables for: Investments sold 18,718,692 ------------------------------------------------------------ Fund shares sold 696,200 ------------------------------------------------------------ Dividends 499,126 ------------------------------------------------------------ Investment for trustee deferred compensation and retirement plans 89,527 ------------------------------------------------------------ Other assets 27,210 ============================================================ Total assets 1,006,722,586 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 5,919,000 ------------------------------------------------------------ Fund shares reacquired 1,868,552 ------------------------------------------------------------ Trustee deferred compensation and retirement plans 161,525 ------------------------------------------------------------ Collateral upon return of securities loaned 152,686,890 ------------------------------------------------------------ Accrued distribution fees 440,848 ------------------------------------------------------------ Accrued trustees' fees 1,705 ------------------------------------------------------------ Accrued transfer agent fees 479,441 ------------------------------------------------------------ Accrued operating expenses 302,118 ============================================================ Total liabilities 161,860,079 ============================================================ Net assets applicable to shares outstanding $ 844,862,507 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $ 734,648,887 ------------------------------------------------------------ Undistributed net investment income (loss) (149,425) ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities and foreign currencies (150,912,880) ------------------------------------------------------------ Unrealized appreciation of investment securities and foreign currencies 261,275,925 ============================================================ $ 844,862,507 ____________________________________________________________ ============================================================ NET ASSETS: Class A $ 566,573,196 ____________________________________________________________ ============================================================ Class B $ 257,230,144 ____________________________________________________________ ============================================================ Class C $ 21,059,167 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 33,343,936 ____________________________________________________________ ============================================================ Class B 16,149,795 ____________________________________________________________ ============================================================ Class C 1,321,664 ____________________________________________________________ ============================================================ Class A : Net asset value per share $ 16.99 ------------------------------------------------------------ Offering price per share: (Net asset value of $16.99 divided by 95.25%) $ 17.84 ____________________________________________________________ ============================================================ Class B : Net asset value and offering price per share $ 15.93 ____________________________________________________________ ============================================================ Class C : Net asset value and offering price per share $ 15.93 ____________________________________________________________ ============================================================
* At October 31, 2004, securities with an aggregate market value of $146,237,086 were on loan to brokers. See accompanying notes which are an integral part of the financial statements. F-5 STATEMENT OF OPERATIONS For the year ended October 31, 2004 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $794,813) $ 10,094,171 -------------------------------------------------------------------------- Dividends from affiliated money market funds (including security lending income of $243,132)* 447,327 -------------------------------------------------------------------------- Interest 20,164 ========================================================================== Total investment income 10,561,662 ========================================================================== EXPENSES: Advisory fees 7,851,633 -------------------------------------------------------------------------- Administrative services fees 220,653 -------------------------------------------------------------------------- Custodian fees 819,970 -------------------------------------------------------------------------- Distribution fees: Class A 2,577,112 -------------------------------------------------------------------------- Class B 3,359,503 -------------------------------------------------------------------------- Class C 210,311 -------------------------------------------------------------------------- Transfer agent fees 3,597,353 -------------------------------------------------------------------------- Trustees' fees and retirement benefits 28,577 -------------------------------------------------------------------------- Other 817,747 ========================================================================== Total expenses 19,482,859 ========================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangement (102,553) ========================================================================== Net expenses 19,380,306 ========================================================================== Net investment income (loss) (8,818,644) ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain (loss) from: Investment securities 120,293,010 -------------------------------------------------------------------------- Foreign currencies (563,844) ========================================================================== 119,729,166 ========================================================================== Change in net unrealized appreciation of: Investment securities 37,856,032 -------------------------------------------------------------------------- Foreign currencies 484,327 ========================================================================== 38,340,359 ========================================================================== Net gain from investment securities and foreign currencies 158,069,525 ========================================================================== Net increase in net assets resulting from operations $149,250,881 __________________________________________________________________________ ==========================================================================
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties. See accompanying notes which are an integral part of the financial statements. F-6 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2004 and 2003
2004 2003 -------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (8,818,644) $ (9,672,167) -------------------------------------------------------------------------------------------- Net realized gain from investment securities, foreign currencies and futures contracts 119,729,166 27,837,740 -------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities and foreign currencies 38,340,359 193,235,338 ============================================================================================ Net increase in net assets resulting from operations 149,250,881 211,400,911 ============================================================================================ Share transactions-net: Class A 13,287,763 (55,232,478) -------------------------------------------------------------------------------------------- Class B (175,103,307) (104,788,041) -------------------------------------------------------------------------------------------- Class C (2,607,686) (3,906,281) ============================================================================================ Net increase (decrease) in net assets resulting from share transactions (164,423,230) (163,926,800) ============================================================================================ Net increase (decrease) in net assets (15,172,349) 47,474,111 ============================================================================================ NET ASSETS: Beginning of year 860,034,856 812,560,745 ============================================================================================ End of year (including undistributed net investment income (loss) of $(149,425) and $(140,210), respectively) $ 844,862,507 $ 860,034,856 ____________________________________________________________________________________________ ============================================================================================
See accompanying notes which are an integral part of the financial statements. F-7 NOTES TO FINANCIAL STATEMENTS October 31, 2004 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Global Aggressive Growth Fund (the "Fund") is a series portfolio of AIM International Mutual Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. On November 25, 2003, the Fund was restructured from a separate series of AIM International Funds, Inc. to a new series portfolio of the Trust. The Fund's investment objective is above-average long-term growth of capital. Companies are listed in the Schedule of Investments based on the country in which they are organized. Under the Trust's organizational documents, the Fund's officers, trustees, employees and agents are 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. However, the Fund has not had prior claims or losses pursuant to these contracts. 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. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally will be 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 valued at amortized cost which approximates market 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 market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market 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, domestic and foreign index futures and exchange-traded funds. F-8 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. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. 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. E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. F. REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on certain share classes that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is accounted for as an addition to shares of beneficial interest by the Fund and is allocated among the share classes based on the relative net assets of each class. G. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. H. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. I. 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 made or received 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 advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.90% of the first $1 billion of the Fund's average daily net assets, plus 0.85% of F-9 the Fund's average daily net assets in excess of $1 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund, if any). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $4,042. For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $84,133 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2004, AIM was paid $220,653 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the year ended October 31, 2004, the Fund paid AISI $3,597,353. AISI may make payments to intermediaries to provide omnibus account services, sub-accounting services and/or networking services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.50% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2004, the Class A, Class B and Class C shares paid $2,577,112, $3,359,503 and $210,311, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2004, AIM Distributors advised the Fund that it retained $74,455 in front-end sales commissions for the sale of Class A shares and $1,207, $23,930 and $907 from Class A, Class B and Class C shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2004. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME GAIN (LOSS) ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $13,178,755 $142,308,822 (153,966,398) $ -- $1,521,179 $103,232 $ -- ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 13,178,755 142,308,822 (153,966,398) -- 1,521,179 100,963 -- ================================================================================================================================== Subtotal $26,357,510 $284,617,644 (307,932,796) $ -- $3,042,358 $204,195 $ -- ==================================================================================================================================
F-10 INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME* GAIN (LOSS) ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ 67,998,953 $249,912,331 (241,567,839) $ -- $ 76,343,445 $122,794 $ -- ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 67,998,954 248,323,102 (239,978,611) -- 76,343,445 120,338 -- ================================================================================================================================== Subtotal $135,997,907 $498,235,433 (481,546,450) $ -- $152,686,890 $243,132 $ -- ================================================================================================================================== Total $162,355,417 $782,853,077 (789,479,246) $ -- $155,729,248 $447,327 $ -- __________________________________________________________________________________________________________________________________ ==================================================================================================================================
* Dividend income is net of income rebate paid to security lending counterparties. NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $4,881,960 and $7,311,234, respectively. NOTE 5--EXPENSE OFFSET ARRANGEMENT The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $14,378, under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $14,378. NOTE 6--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2004, the Fund paid legal fees of $7,309 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 7--BORROWINGS Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the year ended October 31, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated at an amount equal to the Federal Funds rate plus 100 basis points. F-11 NOTE 8--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At October 31, 2004, securities with an aggregate value of $146,237,086 were on loan to brokers. The loans were secured by cash collateral of $152,686,890 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $243,132 for securities lending transactions. NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS DISTRIBUTIONS TO SHAREHOLDERS: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2004 and 2003. TAX COMPONENTS OF NET ASSETS: As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004 --------------------------------------------------------------------------- Unrealized appreciation -- investments $ 259,095,356 --------------------------------------------------------------------------- Temporary book/tax differences (149,425) --------------------------------------------------------------------------- Capital loss carryforward (148,732,311) --------------------------------------------------------------------------- Shares of beneficial interest 734,648,887 =========================================================================== Total net assets $ 844,862,507 ___________________________________________________________________________ ===========================================================================
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $488,162. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan expenses. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. The Fund utilized $120,716,904 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* --------------------------------------------------------------------------- October 31, 2010 $148,732,311 =========================================================================== Total capital loss carryforward $148,732,311 ___________________________________________________________________________ ===========================================================================
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. NOTE 10--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2004 was $565,271,163 and $740,007,202, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $264,109,875 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (5,502,681) ============================================================================== Net unrealized appreciation of investment securities $258,607,194 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $701,685,285.
F-12 NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions and net operating losses, on October 31, 2004, undistributed net investment income (loss) was increased by $8,809,429, undistributed net realized gain (loss) was increased by $592,660 and shares of beneficial interest decreased by $9,402,089. This reclassification had no effect on the net assets of the Fund. NOTE 12--SHARE INFORMATION The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under certain circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING(A) -------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------ 2004 2003 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------------------------------------------------------------- Sold: Class A 4,622,748 $ 71,616,617 68,284,222 $ 794,508,847 -------------------------------------------------------------------------------------------------------------------------- Class B 775,098 11,562,193 1,029,386 11,457,035 -------------------------------------------------------------------------------------------------------------------------- Class C 212,782 3,180,392 2,302,210 25,526,168 ========================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 6,909,424 111,234,847 2,977,413 35,471,200 -------------------------------------------------------------------------------------------------------------------------- Class B (7,355,880) (111,234,847) (3,153,173) (35,471,200) ========================================================================================================================== Reacquired:(b) Class A (10,817,220) (169,563,701) (75,474,194) (885,212,525) -------------------------------------------------------------------------------------------------------------------------- Class B (5,078,337) (75,430,653) (7,319,506) (80,773,876) -------------------------------------------------------------------------------------------------------------------------- Class C (388,928) (5,788,078) (2,636,776) (29,432,449) ========================================================================================================================== (11,120,313) $(164,423,230) (13,990,418) $(163,926,800) __________________________________________________________________________________________________________________________ ==========================================================================================================================
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in aggregate they own 17% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially. (b) Amount is net of redemption fees of $6,487, $3,766, and $255 for Class A, Class B and Class C shares, respectively. F-13 NOTE 13--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A --------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 14.28 $ 11.00 $ 12.58 $ 25.87 $ 21.95 ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.13)(a) (0.13) (0.15)(a) (0.13) (0.28)(a) ----------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.84 3.41 (1.43) (8.42) 5.56 ============================================================================================================================= Total from investment operations 2.71 3.28 (1.58) (8.55) 5.28 ============================================================================================================================= Less distributions from net realized gains -- -- -- (4.74) (1.36) ============================================================================================================================= Redemptions fees added to shares of beneficial interest 0.00 -- -- -- -- ============================================================================================================================= Net asset value, end of period $ 16.99 $ 14.28 $ 11.00 $ 12.58 $ 25.87 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Total return(b) 18.98% 29.82% (12.56)% (38.87)% 24.27% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $566,573 $465,855 $405,360 $563,828 $1,103,740 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratio of expenses to average net assets 2.02%(c)(d) 2.10%(d) 2.00% 1.87% 1.65% ============================================================================================================================= Ratio of net investment income (loss) to average net assets (0.81)%(c) (0.97)% (1.19)% (0.75)% (0.96)% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Portfolio turnover rate 68% 64% 73% 87% 62% _____________________________________________________________________________________________________________________________ =============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $515,422,364. (d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements were 2.03% and 2.11% for the years ended October 31, 2004 and 2003, respectively.
CLASS B --------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.45 $ 10.42 $ 11.97 $ 24.98 $ 21.35 ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.19)(a) (0.19) (0.20)(a) (0.21) (0.42)(a) ----------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.67 3.22 (1.35) (8.06) 5.41 ============================================================================================================================= Total from investment operations 2.48 3.03 (1.55) (8.27) 4.99 ============================================================================================================================= Less distributions from net realized gains -- -- -- (4.74) (1.36) ============================================================================================================================= Redemptions fees added to shares of beneficial interest 0.00 -- -- -- -- ============================================================================================================================= Net asset value, end of period $ 15.93 $ 13.45 $ 10.42 $ 11.97 $ 24.98 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Total return(b) 18.44% 29.08% (12.95)% (39.19)% 23.56% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $257,230 $374,027 $388,101 $583,933 $1,158,979 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratio of expenses to average net assets 2.52%(c)(d) 2.60%(d) 2.51% 2.39% 2.19% ============================================================================================================================= Ratio of net investment income (loss) to average net assets (1.31)%(c) (1.47)% (1.70)% (1.27)% (1.50)% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Portfolio turnover rate 68% 64% 73% 87% 62% _____________________________________________________________________________________________________________________________ =============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $335,950,281. (d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements were 2.53% and 2.61% for the years ended October 31, 2004 and 2003, respectively. F-14 NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C -------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------- 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.46 $ 10.42 $ 11.98 $ 24.99 $ 21.35 ---------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.19)(a) (0.19) (0.20)(a) (0.21) (0.42)(a) ---------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.66 3.23 (1.36) (8.06) 5.42 ====================================================================================================================== Total from investment operations 2.47 3.04 (1.56) (8.27) 5.00 ====================================================================================================================== Less distributions from net realized gains -- -- -- (4.74) (1.36) ====================================================================================================================== Redemptions fees added to shares of beneficial interest 0.00 -- -- -- -- ====================================================================================================================== Net asset value, end of period $ 15.93 $ 13.46 $ 10.42 $ 11.98 $ 24.99 ______________________________________________________________________________________________________________________ ====================================================================================================================== Total return(b) 18.35% 29.17% (13.02)% (39.17)% 23.61% ______________________________________________________________________________________________________________________ ====================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $21,059 $20,153 $19,099 $28,260 $50,908 ______________________________________________________________________________________________________________________ ====================================================================================================================== Ratio of expenses to average net assets 2.52%(c)(d) 2.60%(d) 2.51% 2.39% 2.19% ====================================================================================================================== Ratio of net investment income (loss) to average net assets (1.31)%(c) (1.47)% (1.70)% (1.28)% (1.50)% ______________________________________________________________________________________________________________________ ====================================================================================================================== Portfolio turnover rate 68% 64% 73% 87% 62% ______________________________________________________________________________________________________________________ ======================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $21,031,052. (d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements were 2.53% and 2.61% for the years ended October 31, 2004 and 2003, respectively. NOTE 14--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. The mutual fund industry as a whole is currently subject to regulatory inquiries and litigation related to a wide range of issues. These issues include, among others, market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. In addition, as described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. Additional regulatory inquiries related to the above or other issues also may be received by the AIM Funds, IFG, AIM and/or related entities and individuals in the future. As a result of the matters discussed below, investors in the AIM Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. Settled Enforcement Actions and Investigations Related to Market Timing On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the F-15 NOTE 14--LEGAL PROCEEDINGS (CONTINUED) settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing. Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid. The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs. None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders. Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected. On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years. On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year. As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds. At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM. The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund. Ongoing Regulatory Inquiries Concerning IFG and AIM IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more such Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, and investments in securities of other registered investment companies. These regulators include the SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, the Attorney F-16 NOTE 14--LEGAL PROCEEDINGS (CONTINUED) General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. IFG and certain of these other parties also have received more limited inquiries from the United States Department of Labor ("DOL") and the United States Attorney's Office for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries. AIM, certain related entities, certain of their current and former officers and/or certain of the AIM Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the SEC, the NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, the United States Attorney's Office for the Southern District of New York, the United States Attorney's Office for the Central District of California, the United States Attorney's Office for the District of Massachusetts, the Massachusetts Securities Division and the U.S. Postal Inspection Service, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries. Private Civil Actions Alleging Market Timing Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal and state securities laws; (ii) violation of various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. Private Civil Actions Alleging Improper Use of Fair Value Pricing Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM) alleging that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) alleging that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees. F-17 NOTE 14--LEGAL PROCEEDINGS (CONTINUED) Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. F-18 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of AIM Global Aggressive Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM Global Aggressive Growth Fund (the "Fund") at October 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /S/ PRICEWATERHOUSECOOPERS LLP December 20, 2004 Houston, Texas F-19 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Global Aggressive Growth Fund ("Fund"), a portfolio of AIM International Mutual Funds, a Delaware statutory trust (formerly AIM International Funds, Inc., a Maryland corporation), ("Company"), was held on October 21, 2003. The meeting was adjourned and reconvened on October 28, 2003, November 4, 2003, November 11, 2003, November 17, 2003 and reconvened on November 21, 2003. The meeting was held for the following purposes: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: Bob R. Baker, Frank S. Bayley, James T. Bunch, Bruce L. Crockett, Albert R. Dowden, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling, Robert H. Graham, Gerald J. Lewis, Prema Mathai-Davis, Lewis F. Pennock, Ruth H. Quigley, Louis S. Sklar, Larry Soll, Ph.D. and Mark H. Williamson. (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation. The results of the voting on the above matters were as follows:
WITHHOLDING TRUSTEES/MATTER VOTES FOR AUTHORITY ------------------------------------------------------------------------------------------------ (1)* Bob R. Baker................................................ 162,211,196 3,444,279 Frank S. Bayley............................................. 162,236,962 3,418,513 James T. Bunch.............................................. 162,287,588 3,367,887 Bruce L. Crockett........................................... 162,276,496 3,378,979 Albert R. Dowden............................................ 162,251,386 3,404,089 Edward K. Dunn, Jr.......................................... 162,221,226 3,434,249 Jack M. Fields.............................................. 162,278,318 3,377,157 Carl Frischling............................................. 162,182,906 3,472,569 Robert H. Graham............................................ 162,243,892 3,411,583 Gerald J. Lewis............................................. 162,147,868 3,507,607 Prema Mathai-Davis.......................................... 162,219,866 3,435,609 Lewis F. Pennock............................................ 162,263,207 3,392,268 Ruth H. Quigley............................................. 162,163,064 3,492,411 Louis S. Sklar.............................................. 162,243,759 3,411,716 Larry Soll, Ph.D............................................ 162,236,226 3,419,249 Mark H. Williamson.......................................... 162,238,962 3,416,513
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 76,302,938 2,822,366 86,530,171**
The Special Meeting of Shareholders of the Company was reconvened on October 28, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 84,066,011 2,989,031 83,338,957**
The Special Meeting of Shareholders of the Company was reconvened on November 4, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 95,512,525 3,144,748 78,504,573**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-20 PROXY RESULTS (UNAUDITED) The Special Meeting of Shareholders of the Company was reconvened on November 11, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS -------------------------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 109,217,698 3,531,752 71,913,039**
The Special Meeting of Shareholders of the Company was reconvened on November 17, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS -------------------------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 116,710,545 3,761,148 69,451,190**
The Special Meeting of Shareholders of the Company was reconvened on November 21, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS -------------------------------------------------------------------------------------------------------------------- (2)* Approval of an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation........................................ 137,239,949 4,617,039 51,798,672**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-21 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
TRUSTEE AND/ NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE --------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS --------------------------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management None Trustee and President Group Inc. (financial services holding company); Director and Vice Chairman, AMVESCAP PLC and Chairman, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: President and Chief Executive Officer, A I M Management Group Inc.; Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products --------------------------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive None Trustee and Executive Vice Officer, A I M Management Group Inc. President (financial services holding company); Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent), Fund Management Company (registered broker dealer) and INVESCO Distributors, Inc. (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc.; President and Chief Executive Officer, INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. --------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES --------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett(3) -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance company); Trustee and Chair (technology consulting company) and Captaris, Inc. (unified messaging provider) --------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation --------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered Trustee investment company) Formerly: Partner, law firm of Baker & McKenzie --------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning None Trustee & Bunch Ltd., (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation --------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and Cortland Trust, Inc. (Chairman) Trustee private business corporations, including (registered investment company); the Boss Group Ltd. (private investment Annuity and Life Re (Holdings), and management) and Magellan Insurance Ltd. (insurance company) Company Formerly: Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo companies --------------------------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Retired None Trustee Formerly: Chairman, Mercantile Mortgage Corp.; President and Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. --------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff, and Discovery Global Trustee Century Group, Inc. (government affairs Education Fund (non-profit) company) and Texana Timber LP (sustainable forestry company) ---------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to October 4, 2004, Mr. Graham served as Chairman of the Board of Trustees of the Trust. (2) Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. (3) Mr. Crockett was elected Chair of the Board of Trustees of the Trust effective October 4, 2004. Trustees and Officers (continued) As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
TRUSTEE AND/ NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE --------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered Trustee Naftalis and Frankel LLP investment company) --------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc. Trustee (California) Formerly: Associate Justice of the California Court of Appeals --------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None Trustee of the USA --------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee --------------------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee --------------------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1991 Executive Vice President, Development None Trustee and Operations, Hines Interests Limited Partnership (real estate development company) --------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee --------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS --------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley(4) -- 1959 2004 Senior Vice President, A I M Management N/A Senior Vice President and Group Inc. (financial services holding Chief Compliance Officer company); Senior Vice President and Chief Compliance Officer, A I M Advisors, Inc.; Vice President and Chief Compliance Officer, A I M Capital Management, Inc. and A I M Distributors, Inc.; and Vice President, AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds --------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A Senior Vice President, Secretary and General Counsel, A I M Secretary and Chief Legal Management Group Inc. (financial Officer services holding company) and A I M Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., and AIM Investment Services, Inc.; Director, Vice President and General Counsel, Fund Management Company and Senior Vice President, A I M Distributors, Inc. Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; Senior Vice President and General Counsel, Liberty Funds Group, LLC and Vice President, A I M Distributors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income N/A Vice President Officer and Senior Investment Officer, A I M Capital Management, Inc. and Vice President, A I M Advisors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Director of Money N/A Vice President Market Research and Special Projects, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A Vice President and Treasurer Advisors, Inc. Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing N/A Vice President Director and Chief Cash Management Officer, A I M Capital Management, Inc; Director and President, Fund Management Company; and Vice President, A I M Advisors, Inc. --------------------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen -- 1940 1999 Executive Vice President, A I M N/A Vice President Management Group, Inc.; Senior Vice President, A I M Advisors, Inc., and President, Director of Investments, Chief Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. Formerly: Director of A I M Advisors, Inc. and A I M Management Group Inc., A I M Capital Management, Inc.; and Director and Chairman, A I M Capital Management, Inc. ---------------------------------------------------------------------------------------------------------------------------------
(4) Ms. Brinkley was elected Senior Vice President and Chief Compliance Officer of the Trust effective September 20, 2004. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers Suite 100 11 Greenway Plaza Inc. LLP Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Houston, TX 77046-1173 Suite 100 Street Houston, TX 77046-1173 Suite 2900 Houston, Texas 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis AIM Investment State Street Bank Andrews & Ingersoll, & Frankel LLP Services, Inc. and Trust Company LLP 919 Third Avenue P.O. Box 4739 225 Franklin Street 1735 Market Street New York, NY 10022-3852 Houston, TX 77210-4739 Boston, MA Philadelphia, PA 19103-7599 02110-2801
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund(5) AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Equity Fund(6) AIM Intermediate Government Fund AIM Charter Fund AIM Global Growth Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund AIM Money Market Fund AIM Core Stock Fund(1) AIM International Core Equity Fund(1) AIM Short Term Bond Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund(7) AIM Total Return Bond Fund AIM Diversified Dividend Fund AIM International Growth Fund Premier U.S. Government Money Portfolio(1) AIM Dynamics Fund(1) AIM Trimark Fund AIM Emerging Growth Fund TAX-FREE AIM Large Cap Basic Value Fund SECTOR EQUITY AIM Large Cap Growth Fund AIM High Income Municipal Fund AIM Libra Fund AIM Advantage Health Sciences Fund(1) AIM Municipal Bond Fund AIM Mid Cap Basic Value Fund AIM Energy Fund(1) AIM Tax-Exempt Cash Fund AIM Mid Cap Core Equity Fund(2) AIM Financial Services Fund(1) AIM Tax-Free Intermediate Fund AIM Mid Cap Growth Fund AIM Global Health Care Fund AIM Mid Cap Stock Fund(1) AIM Gold & Precious Metals Fund(1) AIM ALLOCATION SOLUTIONS AIM Opportunities I Fund AIM Health Sciences Fund(1) AIM Opportunities II Fund AIM Leisure Fund(1) AIM Aggressive Allocation Fund AIM Opportunities III Fund AIM Multi-Sector Fund(1) AIM Conservative Allocation Fund AIM Premier Equity Fund AIM Real Estate Fund AIM Moderate Allocation Fund AIM S&P 500 Index Fund(1) AIM Technology Fund(1) AIM Select Equity Fund AIM Utilities Fund(1) AIM Small Cap Equity Fund(3) AIM Small Cap Growth Fund(4) =============================================================================== AIM Small Company Growth Fund(1) CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. AIM Total Return Fund*(1) FOR THIS AND OTHER IMPORTANT INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS AIM Trimark Endeavor Fund FROM YOUR FINANCIAL ADVISOR AND READ IT THOROUGHLY BEFORE INVESTING. AIM Trimark Small Companies Fund =============================================================================== AIM Weingarten Fund
* Domestic equity and income fund (1) The following name changes became effective October 15, 2004: INVESCO Advantage Health Sciences Fund to AIM Advantage Health Sciences Fund, INVESCO Core Equity Fund to AIM Core Stock Fund, INVESCO Dynamics Fund to AIM Dynamics Fund, INVESCO Energy Fund to AIM Energy Fund, INVESCO Financial Services Fund to AIM Financial Services Fund, INVESCO Gold & Precious Metals Fund to AIM Gold & Precious Metals Fund, INVESCO Health Sciences Fund to AIM Health Sciences Fund, INVESCO International Core Equity Fund to AIM International Core Equity Fund, INVESCO Leisure Fund to AIM Leisure Fund, INVESCO Mid-Cap Growth Fund to AIM Mid Cap Stock Fund, INVESCO Multi-Sector Fund to AIM Multi-Sector Fund, INVESCO S&P 500 Index Fund to AIM S&P 500 Index Fund, INVESCO Small Company Growth Fund to AIM Small Company Growth Fund, INVESCO Technology Fund to AIM Technology Fund, INVESCO Total Return Fund to AIM Total Return Fund, INVESCO U.S. Government Money Fund to Premier U.S. Government Money Portfolio, INVESCO Utilities Fund to AIM Utilities Fund. (2) As of the close of business on February 27, 2004, AIM Mid Cap Core Equity Fund is available to new investors on a limited basis. For information on who may continue to invest in AIM Mid Cap Core Equity Fund, please contact your financial advisor. (3) Effective December 13, 2004, AIM Small Cap Equity Fund is open to all investors. (4) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (5) AIM European Small Company Fund will close to new investors when net assets reach $500 million. (6) Effective March 31, 2004, AIM Global Trends Fund was renamed AIM Global Equity Fund. (7) AIM International Emerging Growth Fund will close to new investors when net assets reach $500 million. If used after January 20, 2005, this report must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $132 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $363 billion in assets under management. Data as of September 30, 2004. AIMinvestments.com GLA-AR-1 A I M Distributors, Inc. YOUR GOALS. OUR SOLUTIONS.--Registered Trademark-- ------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Registered Trademark-- Plans Accounts -------------------------------------------------------------------------------------
AIM GLOBAL GROWTH FUND Annual Report to Shareholders o October 31, 2004 [COVER IMAGE] [YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE] --Registered Trademark-- --Registered Trademark-- =================================================================================================================================== AIM GLOBAL GROWTH FUND SEEKS TO PROVIDE LONG-TERM CAPITAL GROWTH. o Unless otherwise stated, information presented in this report is as of 10/31/04 and is based on total net assets. =================================================================================================================================== ABOUT SHARE CLASSES independent mutual fund performance The fund files its complete schedule of monitor. portfolio holdings with the Securities o Effective 9/30/03, Class B shares are and Exchange Commission ("SEC") for the not available as an investment for o The unmanaged MSCI Europe Index is a 1st and 3rd quarters of each fiscal year retirement plans maintained pursuant to group of European securities tracked by on Form N-Q. The fund's Form N-Q filings Section 401 of the Internal Revenue Morgan Stanley Capital International. are available on the SEC's Web site at Code, including 401(k) plans, money http://www.sec.gov. Copies of the fund's purchase pension plans and profit o The unmanaged Standard & Poor's Forms N-Q may be reviewed and copied at sharing plans. Plans that have existing Composite Index of 500 Stocks (the S&P the SEC's Public Reference Room at 450 accounts invested in Class B shares will 500--Registered Trademark-- Index) is an Fifth Street, N.W., Washington, D.C. continue to be allowed to make index of common stocks frequently used 20549-0102. You can obtain information additional purchases. as a general measure of U.S. stock on the operation of the Public Reference market performance. Room, including information about PRINCIPAL RISKS OF INVESTING IN THE FUND duplicating fee charges, by calling o A direct investment cannot be made in 1-202-942-8090 or by electronic request o International investing presents an index. Unless otherwise indicated, at the following e-mail address: certain risks not associated with index results include reinvested publicinfo@sec.gov. The SEC file numbers investing solely in the United States. dividends, and they do not reflect sales for the fund are 811-6463 and 33-44611. These include risks relating to charges. Performance of an index of The fund's most recent portfolio fluctuations in the value of the U.S. funds reflects fund expenses; holdings, as filed on Form N-Q, are also dollar relative to the values of other performance of a market index does not. available at AIMinvestments.com. currencies, the custody arrangements made for the fund's foreign holdings, o The fund is not managed to track the A description of the policies and differences in accounting, political performance of any particular index, procedures that the fund uses to risks and the lesser degree of public including the indexes defined here, and determine how to vote proxies relating information required to be provided by consequently, the performance of the to portfolio securities is available non-U.S. companies. fund may deviate significantly from the without charge, upon request, from our performance of the indexes. Client Services department at o The fund may participate in the 800-959-4246 or on the AIM Web site, initial public offering (IPO) market in OTHER INFORMATION AIMinvestments.com. On the home page, some market cycles. Because of the scroll down and click on AIM Funds Proxy fund's small asset base, any investment o The returns shown in the Management's Policy. The information is also the fund may make in IPOs may Discussion of Fund Performance are based available on the Securities and Exchange significantly affect the fund's total on net asset values calculated for Commission's Web site, sec.gov. return. As the fund's assets grow, the shareholder transactions. Generally impact of IPO investments will decline, accepted accounting principles require Information regarding how the fund voted which may reduce the effect of IPO adjustments to be made to the net assets proxies related to its portfolio investments on the fund's total return. of the fund at period end for financial securities during the 12 months ended reporting purposes, and as such, the net 6/30/04 is available at our Web site. Go ABOUT INDEXES USED IN THIS REPORT asset values for shareholder to AIMinvestments.com, access the About transactions and the returns based on Us tab, click on Required Notices and o The unmanaged MSCI World Index is a those net asset values may differ from then click on Proxy Voting Activity. group of global securities tracked by the net asset values and returns Next, select your fund from the Morgan Stanley Capital International. reported in the Financial Highlights. drop-down menu. oThe unmanaged MSCI World Growth Index is o Industry classifications used in this a subset of the MSCI World Index, a report are generally according to the group of global securities tracked by Global Industry Classification Standard, Morgan Stanley Capital International; which was developed by and is the the Growth subset measures performance exclusive property and a service mark of of companies with higher price/earnings Morgan Stanley Capital International ratios and higher forecasted growth Inc. and Standard & Poor's. values. o The unmanaged Lipper Global Fund Index represents an average of the performance of global funds tracked by Lipper, Inc., an
============================================================================= 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 TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER OF THE AIM FAMILY OF FUNDS--Registered Trademark--: NEW BOARD CHAIRMAN [PHOTO OF It is our pleasure to introduce you to Bruce Crockett, the ROBERT H. new Chairman of the Board of Trustees of the AIM Funds. Bob GRAHAM] Graham has served as Chairman of the Board of Trustees of the AIM Funds ever since Ted Bauer retired from that ROBERT H. GRAHAM position in 2000. However, as you may be aware, the U.S. Securities and Exchange Commission recently adopted a rule requiring that an independent fund trustee, meaning a [PHOTO OF trustee who is not an officer of the fund's investment MARK H. advisor, serve as chairman of the funds' Board. In addition, WILLIAMSON] a similar provision was included in the terms of AIM Advisors' recent settlements with certain regulators. MARK H. WILLIAMSON Accordingly, the AIM Funds' Board recently elected Mr. Crockett, one of the fourteen independent trustees on the AIM Funds' Board, as Chairman. His appointment became [PHOTO OF effective on October 4, 2004. Mr. Graham will remain on the BRUCE L. funds' Board, as will Mark Williamson, President and Chief CROCKETT Executive Officer of AIM. Mr. Graham will also remain Chairman of AIM Investments--Registered Trademark--. BRUCE L. CROCKETT Mr. Crockett has been a member of the AIM Funds' board since 1992, when AIM acquired certain funds that had been advised by CIGNA. He had been a member of the board of those funds since 1978. Mr. Crockett has more than 30 years of experience in finance and general management and has been Chairman of Crockett Technologies Associates since 1996. He is the first independent chairman of the funds' board in AIM's history, as he is not affiliated with AIM or AMVESCAP in any way. He is committed to ensuring that the AIM Funds adhere to the highest standards of corporate governance for the benefit of fund shareholders, and we at AIM share that commitment. MARKET CONDITIONS DURING THE FISCAL YEAR Virtually every equity index, domestic and foreign, produced positive returns for the fiscal year ended October 31, 2004. Domestically, the S&P 500 Index was up 9.41% for the year. Globally, the MSCI World Index advanced more than 13%. However, a goodly portion of this positive performance was achieved during 2003. Year to date as of October 31, the S&P 500 Index was up just over 3%, the MSCI World Index just about 5%. In the pages that follow, you will find a more detailed discussion of the market conditions that affected your fund during the fiscal year. While it is agreeable to report positive market performance for the year covered by this report, as ever, we encourage our shareholders to look past short-term performance and focus on their long-term investment goals. Over the short term, the one sure thing about the investment markets is their unpredictability. Over the long term, equities have produced very attractive returns. For the 25-year period ended October 31, 2004, the S&P 500 Index averaged 13.50% growth per year and the MSCI World Index averaged 11.16%. While past performance cannot guarantee future results, we believe staying invested for the long term offers the best opportunity for capital growth. YOUR FUND The following pages of this report provide an explanation of how your fund was managed during the fiscal year, how it performed in comparison to various benchmarks, and a presentation of its long-term performance. We hope you find this information helpful. Current information about your fund and about the markets in general is always available on our Web site, AIMinvestments.com. As always, AIM remains committed to building solutions for your investment goals, and we thank you for your continued participation in AIM Investments. If you have any questions, please contact our Client Service representatives at 800-959-4246. Sincerely, /s/ Robert H. Graham /s/ Mark H. Williamson -------------------------------- -------------------------------- Robert H. Graham Mark H. Williamson Chairman, AIM Investments CEO & President, AIM Investments President & Vice Chairman, AIM Funds Trustee, AIM Funds December 16, 2004 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, and A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE EUROPEAN EXPOSURE BOLSTERS FUND second and third quarters of 2004. Stock PERFORMANCE markets, however, were volatile amid rising commodity prices, geopolitical For the fiscal year ended October 31, (IMF) estimates, averaged 5% between concerns and election uncertainty. 2004, AIM Global Growth Fund Class A mid-2003 and mid-2004--well in excess of shares returned 11.74% at net asset the 4% historical trend. European stocks outperformed U.S. value. PERFORMANCE SHOWN AT NAV DOES NOT stocks by a 2 to 1 margin. All 16 INCLUDE FRONT-END SALES CHARGES, WHICH Rising commodity prices, particularly constituents of the MSCI Europe Index WOULD HAVE REDUCED THE PERFORMANCE. oil, which reached more than $50 a posted positive returns on a Returns for other share classes are barrel in October, contributed to a dollar-denominated basis. Growth trends shown in the table on page 3. Based on weakening of the global expansion. The and domestic demand proved divergent on strong stock selection, the fund IMF reported that gross domestic product the continent with accelerating growth outperformed its style-specific index, (GDP) growth in several major countries and consumption in France and the U.K. the MSCI World Growth Index, which fell below expectations in the second and weaker demand in Germany. returned 7.01%. The fund slightly quarter of 2004 due to higher imported underperformed, the MSCI World Index and oil prices. Federal Reserve Chairman, In Asia, deflationary pressures Lipper Global Fund Index, which returned Alan Greenspan, indicated in October continued to ease in Japan. However, 13.25% and 12.86%, respectively, for the that higher oil prices--essentially a after rising with little interruption fiscal year. It should be noted that tax on U.S. residents--amounted to 3/4 since mid-2003, Japanese stocks fell in both indices include value and growth of one percent of U.S. GDP. Non-energy the second quarter amid concerns over stocks among their constituents, while commodity prices fell somewhat in the the country's oil dependence and a the fund is comprised of growth stocks summer, but were still 21.5% higher in slowing rate of economic expansion. only. The fund's lower return therefore August than the prior year. Higher was due to the decided outperformance of commodity prices in general, force YOUR FUND value stocks during the fiscal year. companies to pay higher raw material costs, which can ultimately reduce The fund's investment strategy--which MARKET CONDITIONS profit margins. focuses on companies with high returns on invested capital, strong revenue Global markets posted positive returns Given this environment, energy stocks and/or earnings growth and which are for the fiscal year with international produced the highest sector returns for reasonably priced--helped the fund stocks generally producing higher global markets, while information weather volatile market conditions. A returns than their U.S. counterparts. technology proved the worst. Amid a testament to our investment strategy is Countervailing forces, however, were at spate of earnings downgrades, the found in the fund's double-digit return work during the fiscal year. Amid strong information technology sector suffered in an environment where global growth corporate earnings releases, world significant losses--plunging nearly 10% stocks underperformed global value markets moved significantly higher in for the third quarter. stocks by 1,000 basis points or 10%. the fourth quarter of 2003. Global growth, according to International On a regional basis, despite higher Over the reporting period, we Monetary Fund oil prices, the U.S. economy grew at an increased our European weighting, making annualized rate of 3.3% and 3.9% in the it the fund's largest regional allocation. We continued to believe that European stocks, in general, offered more attractive valuations than their
=================================================================================================================================== PORTFOLIO COMPOSITION TOP 10 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. United States 29.0% 1. Eni S.p.A. (Italy) 2.0% [PIE CHART] 2. United Kingdom 11.8 2. Total S.A. (France) 1.9 Industrials 9.7% 3. France 10.2 3. Syngenta A.G. (Switzerland) 1.8 Health Care 7.7% 4. Japan 9.3 4. Hoya Corp. (Japan) 1.8 Energy 5.8% 5. Switzerland 6.0 5. Manulife Financial Corp. Materials 4.8% (Canada) 1.7 6. Italy 3.4 Telecommunication Services 4.1% 6. Imperial Tobacco Group PLC 7. Canada 3.3 (United Kingdom) 1.7 Utilities 0.9% 8. Ireland 2.9 7. Reckitt Benckiser PLC Money Market Funds Plus Other (United Kingdom) 1.6 Assets Less Liabilities 3.8% 9. Sweden 2.2 8. Next PLC (United Kingdom) 1.6 Financials 19.0% 10. Australia 2.1 9. Tesco PLC (United Kingdom) 1.6 Information Technology 16.5% 10. Vinci S.A. (France) 1.5 Consumer Discretionary 14.7% Consumer Staples 13.0% The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. *Excluding money market fund holdings. ===================================================================================================================================
2 U.S. counterparts. Indeed, valuation which despite an underperforming The views and opinions expressed in measures including price/earnings, Japanese market appreciated Management's Discussion of Fund price/book and price/cash flow remained significantly during the fiscal year. Performance are those of A I M Advisors, significantly lower for European stocks Inc. These views and opinions are (represented by MSCI Europe Index) than Health care was the lowest-returning subject to change at any time based on those in the U.S. (represented by S&P sector for the fund. We remained factors such as market and economic 500) as of the close of the fiscal year. cautious of the U.S. health care market, conditions. These views and opinions may particularly large pharmaceuticals (with not be relied upon as investment advice Our increased exposure to Europe came the exception of Pfizer) as fundamentals or recommendations, or as an offer for a largely at the expense of U.S. stocks. for this group are relatively weak as particular security. The information is We significantly reduced our domestic companies struggle with major revenue not a complete analysis of every aspect exposure during the fiscal year--much of products losing patent protection. The of any market, country, industry, which was in the tech sector. We sold largest detractor in this sector was security or the Fund. Statements of fact Intel and Veritas Software amid Pfizer. The company was battered this are from sources considered reliable, disappointing earnings. Given little year along with other U.S. and European but A I M Advisors, Inc. makes no visibility for near-term improvement, we drugs stocks amid safety concerns and representation or warranty as to their felt they no longer fit our investment pricing pressures. Third quarter 2004 completeness or accuracy. Although discipline. Despite this, the fund earnings, however, rose after merger historical performance is no guarantee produced a positive tech sector expenses fell and from sales of Lipitor of future results, these insights may return--outperforming our style-specific and Celebrex. help you understand our investment benchmark by nearly 600 basis points. management philosophy. Given our bias toward foreign markets Financial and consumer-related stocks during the fiscal year, a weak U.S. See important fund and index provided the largest contributions to dollar proved beneficial as we do not disclosures inside front cover. fund returns. Strong performance in the hedge currencies. Foreign currency commercial banking area and Canadian appreciation, therefore, helped boost KIRK L. ANDERSON insurance holdings drove performance. fund returns. Mr. Anderson is Our overweight in financials compared to [ANDERSON co-manager of the AIM the MSCI World Growth Index provided the IN CLOSING PHOTO] Global Growth Fund. He cyclical exposure to offset our reduced joined AIM in 1994. Mr. information technology position. Amid the effects of higher commodity Anderson earned a B.A. prices and market volatility, we are in political science from Texas A&M Strong stock selection in both the pleased to provide shareholders with University. He also received an M.S. in consumer discretionary and consumer positive returns for the fiscal year and finance from the University of Houston. staples sectors led to decidedly higher remain committed to our investment sector returns than our style-specific objective of long-term growth of capital MATTHEW W. DENNIS benchmark. Notable contributors by investing in companies that have Mr. Dennis, Chartered included: U.K specialty retailers Next demonstrated superior earnings growth. [DENNIS Financial Analyst, is and GUS; Renault, which profited from PHOTO] co-manager of AIM Global increased domestic demand in France; and Growth Fund. He has been Toyota, in the investment business since 1994. Mr. Dennis received a B.A. in economics from The University of Texas at Austin. He also earned an M.S. in finance from Texas A&M University. BARRETT K. SIDES Mr. Sides is co-manager [SIDES of AIM Global Growth PHOTO] Fund. He joined AIM in 1990. Mr. Sides graduated with a B.S. in economics from Bucknell University. He also received a master's in international business from the University of St. Thomas. Assisted by Large Cap Growth Team, Asia/Latin America Team and Europe/Canada Team ====================================================================================== TOP 10 INDUSTRIES* FUND VS. INDEXES 1. Diversified Banks 7.8% TOTAL RETURNS, 10/31/03-10/31/04, EXCLUDING APPLICABLE SALES CHARGES. IF 2. Integrated Oil & Gas 5.5 SALES CHARGES WERE INCLUDED, RETURNS WOULD BE LOWER. 3. Pharmaceuticals 5.0 CLASS A SHARES 11.74% 4. Electronic Equipment Manufacturers 4.2 CLASS B SHARES 11.14 5. Automobile Manufacturers 3.2 CLASS C SHARES 11.21 6. Systems Software 2.8 MSCI WORLD INDEX (BROAD MARKET INDEX) 13.25 7. Wireless Telecommunication Services 2.6 MSCI WORLD GROWTH INDEX (STYLE-SPECIFIC INDEX) 7.01 8. Household Products 2.6 LIPPER GLOBAL FUND INDEX 9. Hypermarkets & Super (PEER GROUP INDEX) 12.86 Centers 2.6 Source: Lipper, Inc. 10. Property & Casualty Insurance 2.4 TOTAL NET ASSETS $452.8 million TOTAL NUMBER OF HOLDINGS* 112 ====================================================================================== [RIGHT ARROW GRAPHIC] For a presentation of your fund's long-term performance record, please turn to page 5.
3 INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE You may use the information in this or expenses you paid for the period. You table, together with the amount you may use this information to compare the As a shareholder of the fund, you incur invested, to estimate the expenses that ongoing costs of investing in the fund two types of costs: (1) transaction you paid over the period. Simply divide and other funds. To do so, compare this costs, which may include sales charges your account value by $1,000 (for 5% hypothetical example with the 5% (loads) on purchase payments; contingent example, an $8,600 account value divided hypothetical examples that appear in the deferred sales charges on redemptions; by $1,000 = 8.6), then multiply the shareholder reports of the other funds. and redemption fees, if any; and (2) result by the number in the table under ongoing costs, including management the heading entitled "Actual Expenses Please note that the expenses shown in fees; distribution and/or service fees Paid During Period" to estimate the the table are meant to highlight your (12b-1); and other fund expenses. This expenses you paid on your account during ongoing costs only and do not reflect example is intended to help you this period. any transactional costs, such as sales understand your ongoing costs (in charges (loads) on purchase payments, dollars) of investing in the fund and to HYPOTHETICAL EXAMPLE FOR COMPARISON contingent deferred sales charges on compare these costs with ongoing costs PURPOSES redemptions, and redemption fees, if of investing in other mutual funds. The any. Therefore, the hypothetical example is based on an investment of The table below also provides information is useful in comparing $1,000 invested at the beginning of the information about hypothetical account ongoing costs only, and will not help period and held for the entire period, values and hypothetical expenses based you determine the relative total costs May 1, 2004-October 31, 2004. on the fund's actual expense ratio and of owning different funds. In addition, an assumed rate of return of 5% per year if these transactional costs were ACTUAL EXPENSES before expenses, which is not the fund's included, your costs would have been actual return. The hypothetical account higher. The table below provides information values and expenses may not be used to about actual account values and actual estimate the actual ending account expenses. balance =================================================================================================================================== ACTUAL HYPOTHETICAL (5% annual return before expenses) Beginning Account Ending Account Expenses Ending Account Expenses Value Value Paid During Value Paid During (5/1/04) (10/31/04)(1) Period(2) (10/31/04) Period(2) Class A $ 1,000.00 $ 1,040.60 $ 10.26 $ 1,015.08 $ 10.13 Class B 1,000.00 1,038.20 12.81 1,012.57 12.65 Class C 1,000.00 1,038.20 12.81 1,012.57 12.65 (1) The actual ending account value is based on the actual total return of the fund for the period May 1, 2004, to October 31, 2004, 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 actual cumulative return at net asset value for the period May 1, 2004, to October 31, 2004, was 4.06%, 3.82% and 3.82% for Class A, B and C shares, respectively. (2) Expenses are equal to the fund's annualized expense ratio (2.00%, 2.50% and 2.50% for Class A, B and C shares, respectively) multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). =================================================================================================================================== [ARROW BUTTON For More Information Visit IMAGE] AIMinvestments.com
4 LONG-TERM PERFORMANCE YOUR FUND'S LONG-TERM PERFORMANCE =================================================================================================================================== Past performance cannot guarantee RESULTS OF A $10,000 INVESTMENT comparable future results. 9/15/94-10/31/04 Index data from 8/31/94 Your fund's total return includes [MOUNTAIN CHART] reinvested distributions, applicable sales charges, fund expenses and AIM Global AIM Global management fees. Results for Class B Growth Fund Growth Fund Lipper Global MSCI World shares are calculated as if a Date Class A Shares Class B Shares Fund Index Index hypothetical shareholder had liquidated his entire investment in the fund at the 8/31/94 $ 9525 $10000 $10000 $10000 close of the reporting period and paid 10/94 9744 10220 9979 10010 the applicable contingent deferred sales 10/95 11741 12260 10392 10959 charges. Index results include 10/96 13768 14296 11934 12745 reinvested dividends, but they do not 10/97 16143 16676 14075 14883 reflect sales charges. Index results 10/98 17826 18306 14885 17153 include reinvested dividends, but they 10/99 23970 24476 18442 21427 do not reflect sales charges. 10/00 26721 27142 20641 21661 Performance of an index of funds 10/01 15722 15880 15753 16134 reflects fund expenses and management 10/02 13653 13727 13666 13738 fees; performance of a market index does 10/03 16081 16087 16752 16995 not. Performance shown in the chart does 10/04 $17955 $18060 $18905 $19248 not reflect deduction of taxes a Source: Lipper, Inc. shareholder would pay on fund AVERAGE ANNUAL TOTAL RETURNS distributions or sale of fund shares. As of 10/31/04, including applicable CLASS C SHARES Performance of the indexes does not sales charges Inception (8/4/97) -0.17% reflect the effects of taxes. 5 Years -5.11 CLASS A SHARES 1 Year 14.17 In evaluating this chart, please note Inception (9/15/94) 5.95% that the chart uses a logarithmic scale 10 Years 5.79 The performance data quoted represent along the vertical axis (the value 5 Years -6.52 past performance and cannot guarantee scale). This means that each scale 1 Year 6.45 comparable future results; current increment always represents the same performance may be lower or higher. percent change in price; in a linear CLASS B SHARES Please visit AIMinvestments.com for the chart each scale increment always Inception (9/15/94) 6.01% most recent month-end performance. represents the same absolute change in 10 Years 5.86 Performance figures reflect reinvested price. In this example, the scale 5 Years -6.45 distributions, changes in net asset increment between $5,000 and $10,000 is 1 Year 6.14 value and the effect of the maximum the same as that between $10,000 and sales charge unless otherwise stated. $20,000. In a linear chart, the latter CLASS C SHARES Investment return and principal value scale increment would be twice as large. Inception (8/4/97) 0.15% will fluctuate so that you may have a The benefit of using a logarithmic scale 5 Years -6.08 gain or loss when you sell shares. is that it better illustrates 1 Year 10.21 performance during the fund's early Class A share performance reflects years depicted in the chart before In addition to returns as of the close the maximum 4.75% sales charge, and reinvested distributions and compounding of the fiscal year, industry regulations Class B and Class C share performance create the potential for the original require us to provide average annual reflects the applicable contingent investment to grow to very large total returns as of 9/30/04, the most deferred sales charge (CDSC) for the numbers. Had the chart used a linear recent calendar quarter-end. period involved. The CDSC on Class B scale along its vertical axis, you would shares declines from 5% beginning at the not be able to see as clearly the AVERAGE ANNUAL TOTAL RETURNS time of purchase to 0% at the beginning movements in the value of the fund and of the seventh year. The CDSC on Class C the indexes during the early years As of 9/30/04, most recent calendar shares is 1% for the first year after depicted. We use a logarithmic scale in quarter-end, including applicable sales purchase. financial reports of funds that have charges more than five years of performance The performance of the fund's share history. CLASS A SHARES classes will differ due to different Inception (9/15/94) 5.75% sales charge structures and class 10 Years 5.96 expenses. 5 Years -5.55 1 Year 10.31 A redemption fee of 2% will be imposed on certain redemptions or CLASS B SHARES exchanges out of the fund within 30 days Inception (9/15/94) 5.81% of purchase. Exceptions to the 10 Years 6.02 redemption fee are listed in the fund's 5 Years -5.48 prospectus. 1 Year 10.18 ===================================================================================================================================
5 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2004
MARKET SHARES VALUE ------------------------------------------------------------------------- FOREIGN STOCKS & OTHER EQUITY INTERESTS-67.30% AUSTRALIA-2.09% BHP Billiton Ltd. (Diversified Metals & Mining)(a)(b) 420,500 $ 4,359,082 ------------------------------------------------------------------------- Promina Group Ltd. (Property & Casualty Insurance) (Acquired 02/26/04-08/19/04; Cost $1,829,585)(a)(c) 680,000 2,314,465 ------------------------------------------------------------------------- QBE Insurance Group Ltd. (Property & Casualty Insurance)(a)(b) 271,300 2,792,843 ========================================================================= 9,466,390 ========================================================================= BELGIUM-0.60% Algemene Maatschappij voor Nijverheidskredit N.V. (Diversified Banks)(a) 17,500 1,320,630 ------------------------------------------------------------------------- KBC Bankverzekeringsholding (Diversified Banks)(a) 19,000 1,400,932 ========================================================================= 2,721,562 ========================================================================= BERMUDA-0.92% Nabors Industries, Ltd. (Oil & Gas Drilling)(d) 34,000 1,670,080 ------------------------------------------------------------------------- Tyco International Ltd. (Industrial Conglomerates) 80,000 2,492,000 ========================================================================= 4,162,080 ========================================================================= BRAZIL-0.70% Companhia de Bebidas das Americas-ADR (Brewers) 128,000 3,174,400 ========================================================================= CANADA-3.30% Manulife Financial Corp. (Life & Health Insurance)(b) 169,100 7,897,535 ------------------------------------------------------------------------- Power Corp. of Canada (Other Diversified Financial Services) 127,000 3,057,427 ------------------------------------------------------------------------- Suncor Energy, Inc. (Integrated Oil & Gas)(b) 116,100 3,970,412 ========================================================================= 14,925,374 ========================================================================= FRANCE-10.16% BNP Paribas S.A. (Diversified Banks)(a)(b) 79,130 5,421,308 ------------------------------------------------------------------------- Bouygues S.A. (Wireless Telecommunication Services)(a)(b) 47,600 1,887,111 ------------------------------------------------------------------------- Credit Agricole S.A. (Diversified Banks)(a)(b) 94,200 2,778,620 ------------------------------------------------------------------------- Lafarge S.A. (Construction Materials)(a)(b) 25,100 2,304,294 ------------------------------------------------------------------------- Pernod Ricard (Distillers & Vintners)(a)(b) 31,370 4,369,054 ------------------------------------------------------------------------- PSA Peugeot Citroen (Automobile Manufacturers)(a)(b) 55,967 3,461,770 ------------------------------------------------------------------------- Renault S.A. (Automobile Manufacturers)(a)(b) 72,760 6,126,010 -------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------------------------
FRANCE-(CONTINUED) Societe Generale (Diversified Banks)(a)(b) 45,970 $ 4,293,072 ------------------------------------------------------------------------- Total S.A. (Integrated Oil & Gas)(a)(b) 40,659 8,511,364 ------------------------------------------------------------------------- Vinci S.A. (Construction & Engineering)(a)(b) 57,080 6,843,888 ========================================================================= 45,996,491 ========================================================================= GERMANY-1.58% Adidas-Salomon A.G. (Apparel, Accessories & Luxury Goods)(a) 27,020 3,793,743 ------------------------------------------------------------------------- Metro A.G. (Hypermarkets & Super Centers)(a)(b) 70,290 3,373,485 ========================================================================= 7,167,228 ========================================================================= GREECE-1.68% EFG Eurobank Ergasias (Diversified Banks)(a) 114,900 3,161,733 ------------------------------------------------------------------------- OPAP S.A. (Casinos & Gaming) (Acquired 07/01/04-08/27/04; Cost $4,167,684)(a)(c) 217,200 4,449,969 ========================================================================= 7,611,702 ========================================================================= HONG KONG-1.11% Cheung Kong (Holdings) Ltd. (Real Estate Management & Development)(a) 378,000 3,130,761 ------------------------------------------------------------------------- Sun Hung Kai Properties Ltd. (Real Estate Management & Development)(a)(b) 203,000 1,878,961 ========================================================================= 5,009,722 ========================================================================= INDIA-1.34% Infosys Technologies Ltd.-ADR (IT Consulting & Services)(b) 91,300 6,071,450 ========================================================================= IRELAND-2.93% Anglo Irish Bank Corp. PLC (Diversified Banks)(a) 318,700 6,083,074 ------------------------------------------------------------------------- CRH PLC (Construction Materials)(a) 161,890 3,885,419 ------------------------------------------------------------------------- Depfa Bank PLC (Diversified Banks)(a) 213,700 3,289,383 ========================================================================= 13,257,876 ========================================================================= ISRAEL-1.34% Teva Pharmaceutical Industries Ltd.-ADR (Pharmaceuticals)(b) 232,900 6,055,400 ========================================================================= ITALY-3.42% Eni S.p.A. (Integrated Oil & Gas)(a)(b) 396,600 9,100,772 ------------------------------------------------------------------------- Mediaset S.p.A. (Broadcasting & Cable TV)(a)(b) 558,200 6,399,748 ========================================================================= 15,500,520 ========================================================================= JAPAN-9.28% Canon Inc. (Office Electronics)(a) 94,700 4,687,027 -------------------------------------------------------------------------
F-1
MARKET SHARES VALUE ------------------------------------------------------------------------- JAPAN-(CONTINUED) Hoya Corp. (Electronic Equipment Manufacturers)(a) 79,800 $ 8,210,542 ------------------------------------------------------------------------- Keyence Corp. (Electronic Equipment Manufacturers)(a) 27,000 6,093,685 ------------------------------------------------------------------------- Kyocera Corp. (Electronic Equipment Manufacturers)(a) 24,600 1,785,019 ------------------------------------------------------------------------- Nitto Denko Corp. (Specialty Chemicals)(a) 63,000 2,994,961 ------------------------------------------------------------------------- Orix Corp. (Consumer Finance)(a) 12,300 1,442,258 ------------------------------------------------------------------------- SMC Corp. (Industrial Machinery)(a) 22,100 2,368,724 ------------------------------------------------------------------------- Takeda Pharmaceutical Co. Ltd. (Pharmaceuticals)(a) 64,800 3,134,297 ------------------------------------------------------------------------- Toyota Motor Corp. (Automobile Manufacturers)(a) 127,900 4,969,218 ------------------------------------------------------------------------- Trend Micro Inc. (Application Software)(a)(b) 132,100 6,329,195 ========================================================================= 42,014,926 ========================================================================= MEXICO-1.38% Grupo Televisa S.A.-ADR (Broadcasting & Cable TV) 42,500 2,337,500 ------------------------------------------------------------------------- Wal-Mart de Mexico S.A. de C.V.-Series V (Hypermarkets & Super Centers) 1,198,300 3,915,063 ========================================================================= 6,252,563 ========================================================================= NETHERLANDS-1.35% Royal Numico N.V. (Packaged Foods & Meats)(a)(d) 72,500 2,457,176 ------------------------------------------------------------------------- TPG N.V. (Air Freight & Logistics)(a) 150,600 3,651,858 ========================================================================= 6,109,034 ========================================================================= NORWAY-0.82% Telenor A.S.A. (Integrated Telecommunication Services)(a)(b) 467,200 3,740,236 ========================================================================= SINGAPORE-1.64% DBS Group Holdings Ltd. (Diversified Banks)(a) 295,000 2,770,887 ------------------------------------------------------------------------- Singapore Airlines Ltd. (Airlines)(a) 324,000 2,087,489 ------------------------------------------------------------------------- United Overseas Bank Ltd. (Diversified Banks)(a) 314,000 2,551,630 ========================================================================= 7,410,006 ========================================================================= SOUTH KOREA-0.61% Samsung Electronics Co., Ltd. (Electronic Equipment Manufacturers)(a) 7,000 2,752,421 ========================================================================= SPAIN-0.95% Industria de Diseno Textil, S.A. (Apparel Retail)(a) 64,700 1,651,262 ------------------------------------------------------------------------- Telefonica S.A. (Integrated Telecommunication Services)(a) 160,200 2,666,964 ========================================================================= 4,318,226 =========================================================================
MARKET SHARES VALUE -------------------------------------------------------------------------
SWEDEN-2.24% Assa Abloy A.B.-Class B (Building Products)(a)(b) 338,500 $ 4,599,290 ------------------------------------------------------------------------- Volvo A.B.-Class B (Construction & Farm Machinery & Heavy Trucks)(a)(b) 145,800 5,549,777 ========================================================================= 10,149,067 ========================================================================= SWITZERLAND-6.03% Alcon, Inc. (Health Care Supplies) 68,000 4,841,600 ------------------------------------------------------------------------- Compagnie Financiere Richemont A.G.-Class A (Apparel, Accessories & Luxury Goods)(a) 89,000 2,536,636 ------------------------------------------------------------------------- Novartis A.G. (Pharmaceuticals)(a) 48,000 2,307,611 ------------------------------------------------------------------------- Roche Holding A.G. (Pharmaceuticals)(a) 26,650 2,736,735 ------------------------------------------------------------------------- Syngenta A.G. (Fertilizers & Agricultural Chemicals)(a)(d) 86,190 8,250,575 ------------------------------------------------------------------------- UBS A.G. (Diversified Capital Markets)(a) 91,130 6,619,030 ========================================================================= 27,292,187 ========================================================================= UNITED KINGDOM-11.83% Aviva PLC (Multi-line Insurance)(a) 305,520 3,065,858 ------------------------------------------------------------------------- Centrica PLC (Gas Utilities)(a) 935,865 4,148,599 ------------------------------------------------------------------------- GUS PLC (Catalog Retail)(a) 327,400 5,368,130 ------------------------------------------------------------------------- Imperial Tobacco Group PLC (Tobacco)(a) 324,870 7,608,732 ------------------------------------------------------------------------- mm02 PLC (Wireless Telecommunication Services)(a)(d) 1,775,800 3,442,383 ------------------------------------------------------------------------- Next PLC (Department Stores)(a) 229,100 7,040,184 ------------------------------------------------------------------------- Reckitt Benckiser PLC (Household Products)(a) 258,780 7,109,646 ------------------------------------------------------------------------- Royal Bank of Scotland Group PLC (Diversified Banks)(a) 71,503 2,111,018 ------------------------------------------------------------------------- Tesco PLC (Food Retail)(a) 1,332,269 7,031,786 ------------------------------------------------------------------------- Vodafone Group PLC (Wireless Telecommunication Services)(a) 2,577,830 6,635,535 ========================================================================= 53,561,871 ========================================================================= Total Foreign Stocks & Other Equity Interests (Cost $222,140,598) 304,720,732 ========================================================================= DOMESTIC COMMON STOCKS-28.95% AEROSPACE & DEFENSE-0.25% Northrop Grumman Corp. 22,000 1,138,500 ========================================================================= BIOTECHNOLOGY-0.51% Genentech, Inc.(d) 51,000 2,322,030 ========================================================================= COMMUNICATIONS EQUIPMENT-1.75% Cisco Systems, Inc.(d) 178,000 3,419,380 ------------------------------------------------------------------------- Motorola, Inc. 189,000 3,262,140 ------------------------------------------------------------------------- QUALCOMM Inc. 30,000 1,254,300 ========================================================================= 7,935,820 =========================================================================
F-2
MARKET SHARES VALUE ------------------------------------------------------------------------- COMPUTER HARDWARE-1.01% Dell Inc.(d) 130,000 $ 4,557,800 ========================================================================= COMPUTER STORAGE & PERIPHERALS-0.27% Lexmark International, Inc.-Class A(d) 14,500 1,205,095 ========================================================================= CONSUMER FINANCE-0.94% Capital One Financial Corp. 26,000 1,917,760 ------------------------------------------------------------------------- SLM Corp. 52,000 2,353,520 ========================================================================= 4,271,280 ========================================================================= DEPARTMENT STORES-0.29% J.C. Penney Co., Inc. 38,000 1,314,420 ========================================================================= DIVERSIFIED COMMERCIAL SERVICES-1.06% Cendant Corp. 234,000 4,818,060 ========================================================================= ELECTRICAL COMPONENTS & EQUIPMENT-1.16% Rockwell Automation, Inc. 126,000 5,252,940 ========================================================================= FOOTWEAR-0.56% NIKE, Inc.-Class B 31,000 2,520,610 ========================================================================= HEALTH CARE EQUIPMENT-0.40% Waters Corp.(d) 44,000 1,816,760 ========================================================================= HOME IMPROVEMENT RETAIL-1.03% Home Depot, Inc. (The) 113,500 4,662,580 ========================================================================= HOUSEHOLD PRODUCTS-1.06% Procter & Gamble Co. (The) 94,000 4,810,920 ========================================================================= HOUSEWARES & SPECIALTIES-0.56% Fortune Brands, Inc. 35,000 2,548,700 ========================================================================= HYPERMARKETS & SUPER CENTERS-0.94% Wal-Mart Stores, Inc. 79,000 4,259,680 ========================================================================= INDUSTRIAL CONGLOMERATES-1.18% 3M Co. 40,000 3,102,800 ------------------------------------------------------------------------- General Electric Co. 65,000 2,217,800 ========================================================================= 5,320,600 ========================================================================= INTEGRATED OIL & GAS-0.69% Exxon Mobil Corp. 63,000 3,100,860 ========================================================================= INTERNET RETAIL-1.39% eBay Inc.(d) 64,500 6,295,845 =========================================================================
MARKET SHARES VALUE -------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES-1.44% Yahoo! Inc.(d) 180,000 $ 6,514,200 ========================================================================= INVESTMENT BANKING & BROKERAGE-1.02% Goldman Sachs Group, Inc. (The) 47,000 4,623,860 ========================================================================= MANAGED HEALTH CARE-0.75% UnitedHealth Group Inc. 47,000 3,402,800 ========================================================================= MOTORCYCLE MANUFACTURERS-0.27% Harley-Davidson, Inc. 21,000 1,208,970 ========================================================================= OTHER DIVERSIFIED FINANCIAL SERVICES-0.82% Citigroup Inc. 83,500 3,704,895 ========================================================================= PACKAGED FOODS & MEATS-0.42% Hershey Foods Corp. 37,000 1,875,530 ========================================================================= PERSONAL PRODUCTS-1.99% Avon Products, Inc. 53,000 2,096,150 ------------------------------------------------------------------------- Estee Lauder Cos. Inc. (The)-Class A 56,000 2,405,200 ------------------------------------------------------------------------- Gillette Co. (The) 109,000 4,521,320 ========================================================================= 9,022,670 ========================================================================= PHARMACEUTICALS-1.84% Johnson & Johnson 66,000 3,853,080 ------------------------------------------------------------------------- Pfizer Inc. 155,000 4,487,250 ========================================================================= 8,340,330 ========================================================================= PROPERTY & CASUALTY INSURANCE-1.30% Allstate Corp. (The) 122,500 5,891,025 ========================================================================= SEMICONDUCTOR EQUIPMENT-0.26% Novellus Systems, Inc.(d) 45,000 1,165,950 ========================================================================= SEMICONDUCTORS-1.00% Analog Devices, Inc. 42,500 1,711,050 ------------------------------------------------------------------------- Linear Technology Corp. 27,500 1,041,700 ------------------------------------------------------------------------- Microchip Technology Inc. 59,000 1,784,750 ========================================================================= 4,537,500 ========================================================================= SYSTEMS SOFTWARE-2.79% Microsoft Corp. 240,000 6,717,600 ------------------------------------------------------------------------- Symantec Corp.(d) 104,000 5,921,760 ========================================================================= 12,639,360 ========================================================================= Total Domestic Common Stocks (Cost $107,352,268) 131,079,590 =========================================================================
F-3
MARKET SHARES VALUE ------------------------------------------------------------------------- MONEY MARKET FUNDS-2.53% Liquid Assets Portfolio-Institutional Class(e) 5,732,411 $ 5,732,411 ------------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class(e) 5,732,411 5,732,411 ========================================================================= Total Money Market Funds (Cost $11,464,822) 11,464,822 ========================================================================= TOTAL INVESTMENTS-98.78% (excluding investments purchased with cash collateral from securities loaned) (Cost $340,957,688) 447,265,144 ========================================================================= INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-16.86% Liquid Assets Portfolio-Institutional Class(e)(f) 76,311,756 76,311,756 ========================================================================= Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $76,311,756) 76,311,756 ========================================================================= TOTAL INVESTMENTS-115.64% (Cost $417,269,444) 523,576,900 ========================================================================= OTHER ASSETS LESS LIABILITIES-(15.64%) (70,799,209) ========================================================================= NET ASSETS-100.00% $452,777,691 _________________________________________________________________________ =========================================================================
Investment Abbreviations: ADR - American Depositary Receipt
Notes to Schedule of Investments: (a) In accordance with the procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The aggregate market value of these securities at October 31, 2004 was $259,237,865, which represented 49.51% of the Fund's Total Investments. See Note 1A. (b) All or a portion of this security has been pledged as collateral for security lending transactions at October 31, 2004. (c) Security not registered under the Securities Act of 1933, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The Fund has no rights to demand registration of these securities. The aggregate market value of these securities at October 31, 2004 was $6,764,434, which represented 1.49% of the Fund's net assets. Unless otherwise indicated, these securities are not considered to be illiquid. (d) Non-income producing security. (e) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (f) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 8. See accompanying notes which are an integral part of the financial statements. F-4 STATEMENT OF ASSETS AND LIABILITIES October 31, 2004 ASSETS: Investments, at market value (cost $329,492,866)* $435,800,322 ----------------------------------------------------------- Investments in affiliated money market funds (cost $87,776,578) 87,776,578 =========================================================== Total investments (cost $417,269,444) 523,576,900 =========================================================== Foreign currencies, at value (cost $2,455,303) 2,437,127 ----------------------------------------------------------- Receivables for: Investments sold 6,207,032 ----------------------------------------------------------- Fund shares sold 184,829 ----------------------------------------------------------- Dividends and interest 1,050,522 ----------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 64,891 ----------------------------------------------------------- Other assets 20,935 =========================================================== Total assets 533,542,236 ___________________________________________________________ =========================================================== LIABILITIES: Payables for: Investments purchased 2,357,699 ----------------------------------------------------------- Fund shares reacquired 1,377,822 ----------------------------------------------------------- Trustee deferred compensation and retirement plans 93,741 ----------------------------------------------------------- Collateral upon return of securities loaned 76,311,756 ----------------------------------------------------------- Accrued distribution fees 245,680 ----------------------------------------------------------- Accrued trustees' fees 1,650 ----------------------------------------------------------- Accrued transfer agent fees 256,229 ----------------------------------------------------------- Accrued operating expenses 119,968 =========================================================== Total liabilities 80,764,545 =========================================================== Net assets applicable to shares outstanding $452,777,691 ___________________________________________________________ =========================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $733,895,943 ----------------------------------------------------------- Undistributed net investment income (loss) (100,003) ----------------------------------------------------------- Undistributed net realized gain (loss) from investment securities, foreign currencies and futures contracts (387,342,445) ----------------------------------------------------------- Unrealized appreciation of investment securities, foreign currencies and futures contracts 106,324,196 =========================================================== $452,777,691 ___________________________________________________________ =========================================================== NET ASSETS: Class A $286,068,011 ___________________________________________________________ =========================================================== Class B $139,060,789 ___________________________________________________________ =========================================================== Class C $ 27,648,891 ___________________________________________________________ =========================================================== SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 17,177,019 ___________________________________________________________ =========================================================== Class B 8,825,336 ___________________________________________________________ =========================================================== Class C 1,753,791 ___________________________________________________________ =========================================================== Class A: Net asset value per share $ 16.65 ----------------------------------------------------------- Offering price per share: (Net asset value of $16.65 divided by 95.25%) $ 17.48 ___________________________________________________________ =========================================================== Class B: Net asset value and offering price per share $ 15.76 ___________________________________________________________ =========================================================== Class C: Net asset value and offering price per share $ 15.77 ___________________________________________________________ ===========================================================
* At October 31, 2004, securities with an aggregate market value of $72,785,666 were on loan to brokers. See accompanying notes which are an integral part of the financial statements. F-5 STATEMENT OF OPERATIONS For the year ended October 31, 2004 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $839,817) $ 8,493,842 ------------------------------------------------------------------------- Dividends from affiliated money market funds (including security lending income of $228,615)* 351,573 ------------------------------------------------------------------------- Interest 12,396 ========================================================================= Total investment income 8,857,811 ========================================================================= EXPENSES: Advisory fees 4,385,634 ------------------------------------------------------------------------- Administrative services fees 138,670 ------------------------------------------------------------------------- Custodian fees 273,232 ------------------------------------------------------------------------- Distribution fees: Class A 1,605,248 ------------------------------------------------------------------------- Class B 1,642,789 ------------------------------------------------------------------------- Class C 306,284 ------------------------------------------------------------------------- Transfer agent fees 2,317,227 ------------------------------------------------------------------------- Trustees' fees and retirement benefits 22,101 ------------------------------------------------------------------------- Other 449,799 ========================================================================= Total expenses 11,140,984 ========================================================================= Less: Fees waived, expenses reimbursed, and expense offset arrangements (70,428) ========================================================================= Net expenses 11,070,556 ========================================================================= Net investment income (loss) (2,212,745) ========================================================================= REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS: Net realized gain (loss) from: Investment securities 64,934,153 ------------------------------------------------------------------------- Foreign currencies (353,846) ------------------------------------------------------------------------- Futures contracts 731,857 ========================================================================= 65,312,164 ========================================================================= Change in net unrealized appreciation (depreciation) of: Investment securities (7,405,576) ------------------------------------------------------------------------- Foreign currencies 24,510 ------------------------------------------------------------------------- Futures contracts (255,322) ========================================================================= (7,636,388) ========================================================================= Net gain from investment securities, foreign currencies and futures contracts 57,675,776 ========================================================================= Net increase in net assets resulting from operations $55,463,031 _________________________________________________________________________ =========================================================================
* Dividends from affiliated money market funds are net of income rebate paid to securities lending counterparties. See accompanying notes which are an integral part of the financial statements. F-6 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2004 and 2003
2004 2003 -------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (2,212,745) $ (4,177,942) -------------------------------------------------------------------------------------------- Net realized gain (loss) from investment securities, foreign currencies, futures contracts and option contracts 65,312,164 (7,066,109) -------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities, foreign currencies, futures contracts and option contracts (7,636,388) 99,499,525 ============================================================================================ Net increase in net assets resulting from operations 55,463,031 88,255,474 ============================================================================================ Share transactions-net: Class A (77,829,276) (61,964,974) -------------------------------------------------------------------------------------------- Class B (60,815,446) (51,840,921) -------------------------------------------------------------------------------------------- Class C (8,514,512) (6,896,642) ============================================================================================ Net increase (decrease) in net assets resulting from share transactions (147,159,234) (120,702,537) ============================================================================================ Net increase (decrease) in net assets (91,696,203) (32,447,063) ============================================================================================ NET ASSETS: Beginning of year 544,473,894 576,920,957 ============================================================================================ End of year (including undistributed net investment income (loss) of $(100,003) and $(79,013), respectively). $ 452,777,691 $ 544,473,894 ____________________________________________________________________________________________ ============================================================================================
See accompanying notes which are an integral part of the financial statements. F-7 NOTES TO FINANCIAL STATEMENTS October 31, 2004 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Global Growth Fund (the "Fund") is a series portfolio of AIM International Mutual Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. On November 25, 2003, the Fund was restructured from a separate series of AIM International Funds, Inc. to a new series portfolio of the Trust. The Fund's investment objective is long-term growth of capital. Companies are listed in the Schedule of Investments based on the country in which they are organized. Under the Trust's organizational documents, the Fund's officers, trustees, employees and agents are 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. However, the Fund has not had prior claims or losses pursuant to these contracts. 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. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally will be 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 valued at amortized cost which approximates market 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 market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market 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, domestic and foreign index futures and exchange-traded funds. F-8 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. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. 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. E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. F. REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on certain share classes that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is accounted for as an addition to shares of beneficial interest by the Fund and is allocated among the share classes based on the relative net assets of each class. G. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. H. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. I. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. J. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each F-9 day's trading. Variation margin payments are made or received 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 advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $1 billion of the Fund's average daily net assets, plus 0.80% of the Fund's average daily net assets in excess of $1 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $2,704. For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $58,997 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2004, AIM was paid $138,670 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the year ended October 31, 2004, the Fund paid AISI $2,317,227. AISI may make payments to intermediaries to provide omnibus account services, sub-accounting services and/or networking services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.50% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2004, the Class A, Class B and Class C shares paid $1,605,248, $1,642,789 and $306,284, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During year ended October 31, 2004, AIM Distributors advised the Fund that it retained $42,952 in front-end sales commissions from the sale of Class A shares and $391, $13,328 and $1,224 from Class A, Class B and Class C shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. F-10 NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2004. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/2003 AT COST FROM SALES (DEPRECIATION) 10/31/2004 INCOME GAIN (LOSS) ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ 9,455,693 $ 86,003,642 $ (89,726,924) $ -- $ 5,732,411 $ 61,974 $ -- ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 9,455,693 86,003,642 (89,726,924) -- 5,732,411 60,984 -- ================================================================================================================================== Subtotal $18,911,386 $172,007,284 $(179,453,848) $ -- $11,464,822 $122,958 $ -- ==================================================================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/2003 AT COST FROM SALES (DEPRECIATION) 10/31/2004 INCOME GAIN (LOSS) ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $32,430,653 $265,366,055 $(221,484,952) $ -- $76,311,756 $228,615 $ -- ================================================================================================================================== Total $51,342,039 $437,373,339 $(400,938,800) $ -- $87,776,578 $351,573 $ -- __________________________________________________________________________________________________________________________________ ==================================================================================================================================
* Dividend income is net of income rebate paid to security lending counterparties. NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in purchases and sales of securities of $0 and $513,836, respectively. NOTE 5--EXPENSE OFFSET ARRANGEMENT The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $8,727 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $8,727. NOTE 6--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2004, the Fund paid legal fees of $6,145 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 7--BORROWINGS Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by F-11 collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the year ended October 31, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated at an amount equal to the Federal Funds rate plus 100 basis points. NOTE 8--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At October 31, 2004, securities with an aggregate value of $72,785,666 were on loan to brokers. The loans were secured by cash collateral of $76,311,756 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $228,615 for securities lending transactions. NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS DISTRIBUTIONS TO SHAREHOLDERS: There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2004 and 2003. TAX COMPONENTS OF NET ASSETS: As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004 ----------------------------------------------------------------------------- Unrealized appreciation -- investments $ 105,717,592 ----------------------------------------------------------------------------- Temporary book/tax differences (86,156) ----------------------------------------------------------------------------- Capital loss carryforward (386,749,688) ----------------------------------------------------------------------------- Shares of beneficial interests 733,895,943 ============================================================================= Total net assets $ 452,777,691 _____________________________________________________________________________ =============================================================================
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to losses on wash sales and the recognition of income for tax purposes on certain passive foreign investment companies. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $16,740. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan expenses. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. F-12 The Fund utilized $65,084,737 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* ----------------------------------------------------------------------------- October 31, 2009 $274,385,811 ----------------------------------------------------------------------------- October 31, 2010 101,042,257 ----------------------------------------------------------------------------- October 31, 2011 11,321,620 ============================================================================= Total capital loss carryforward $386,749,688 _____________________________________________________________________________ =============================================================================
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. NOTE 10--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2004 was $281,106,362 and $423,139,707, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $110,333,775 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (4,632,923) ============================================================================== Net unrealized appreciation of investment securities $105,700,852 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $417,876,048.
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of disallowance of redomestication expenses, net operating losses and foreign currencies transactions, on October 31, 2004, undistributed net investment income (loss) was increased by $2,191,755, undistributed net realized gain (loss) was increased by $363,886 and shares of beneficial interest decreased by $2,555,641. This reclassification had no effect on the net assets of the Fund. F-13 NOTE 12--SHARE INFORMATION The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under certain circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING(A) ------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2004 2003 --------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------- Sold: Class A 1,232,139 $ 19,652,547 51,726,502 $ 670,164,581 ------------------------------------------------------------------------------------------------------------------------- Class B 565,634 8,560,279 752,382 9,376,506 ------------------------------------------------------------------------------------------------------------------------- Class C 221,675 3,352,828 1,419,606 17,656,486 ========================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 1,762,944 28,418,398 1,238,115 16,013,175 ------------------------------------------------------------------------------------------------------------------------- Class B (1,859,129) (28,418,398) (1,298,734) (16,013,175) ========================================================================================================================= Reacquired:(b) Class A (7,934,725) (125,900,221) (57,392,873) (748,142,730) ------------------------------------------------------------------------------------------------------------------------- Class B (2,711,929) (40,957,327) (3,671,639) (45,204,252) ------------------------------------------------------------------------------------------------------------------------- Class C (783,613) (11,867,340) (1,977,996) (24,553,128) ========================================================================================================================= (9,507,004) $(147,159,234) (9,204,637) $(120,702,537) _________________________________________________________________________________________________________________________ =========================================================================================================================
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 15% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially. (b) Amount is net of redemption fees of $1,549, $802 and $149 for Class A, Class B and Class C shares for 2004, respectively. F-14 NOTE 13--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A ----------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 14.91 $ 12.66 $ 14.58 $ 24.83 $ 23.43 ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.04)(a) (0.08) (0.11)(a) (0.13) (0.03)(a) ------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.78 2.33 (1.81) (10.08) 2.77 ========================================================================================================================= Total from investment operations 1.74 2.25 (1.92) (10.21) 2.74 ========================================================================================================================= Less distributions from net realized gains -- -- -- (0.04) (1.34) ========================================================================================================================= Redemption fees added to shares of beneficial interest 0.00 -- -- -- -- ========================================================================================================================= Net asset value, end of period $ 16.65 $ 14.91 $ 12.66 $ 14.58 $ 24.83 _________________________________________________________________________________________________________________________ ========================================================================================================================= Total return(b) 11.67% 17.77% (13.17)% (41.17)% 11.52% _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $286,068 $329,739 $335,954 $439,612 $796,992 _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.96%(c) 2.04% 1.95% 1.68% 1.62% ------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.97%(c) 2.04% 1.95% 1.79% 1.63% ========================================================================================================================= Ratio of net investment income (loss) to average net assets (0.24)%(c) (0.58)% (0.75)% (0.66)% (0.10)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Portfolio turnover rate 56% 75% 98% 134% 110% _________________________________________________________________________________________________________________________ =========================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustment in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $321,049,610.
CLASS B ----------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 14.18 $ 12.09 $ 14.00 $ 23.98 $ 22.78 ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.11)(a) (0.15) (0.17)(a) (0.24) (0.17)(a) ------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.69 2.24 (1.74) (9.70) 2.71 ========================================================================================================================= Total from investment operations 1.58 2.09 (1.91) (9.94) 2.54 ========================================================================================================================= Less distributions from net realized gains -- -- -- (0.04) (1.34) ========================================================================================================================= Redemption fees added to shares of beneficial interest 0.00 -- -- -- -- ========================================================================================================================= Net asset value, end of period $ 15.76 $ 14.18 $ 12.09 $ 14.00 $ 23.98 _________________________________________________________________________________________________________________________ ========================================================================================================================= Total return(b) 11.14% 17.29% (13.64)% (41.50)% 10.95% _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $139,061 $181,891 $206,189 $369,171 $806,409 _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.46%(c) 2.54% 2.45% 2.19% 2.16% ------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.47%(c) 2.54% 2.45% 2.30% 2.17% ========================================================================================================================= Ratio of net investment income (loss) to average net assets (0.74)%(c) (1.08)% (1.25)% (1.16)% (0.64)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Portfolio turnover rate 56% 75% 98% 134% 110% _________________________________________________________________________________________________________________________ =========================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustment in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $164,278,886. F-15 NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C ------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------ 2004 2003 2002 2001 2000 -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 14.18 $ 12.10 $ 14.01 $ 23.98 $ 22.79 -------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.11)(a) (0.15) (0.17)(a) (0.22) (0.17)(a) -------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.70 2.23 (1.74) (9.71) 2.70 ==================================================================================================================== Total from investment operations 1.59 2.08 (1.91) (9.93) 2.53 ==================================================================================================================== Less distributions from net realized gains -- -- -- (0.04) (1.34) ==================================================================================================================== Redemption fees added to shares of beneficial interest 0.00 -- -- -- -- ==================================================================================================================== Net asset value, end of period $ 15.77 $ 14.18 $ 12.10 $ 14.01 $ 23.98 ____________________________________________________________________________________________________________________ ==================================================================================================================== Total return(b) 11.21% 17.19% (13.63)% (41.46)% 10.90% ____________________________________________________________________________________________________________________ ==================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $27,649 $32,844 $34,778 $51,624 $88,810 ____________________________________________________________________________________________________________________ ==================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.46%(c) 2.54% 2.45% 2.19% 2.16% -------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.47%(c) 2.54% 2.45% 2.30% 2.17% ==================================================================================================================== Ratio of net investment income (loss) to average net assets (0.74)%(c) (1.08)% (1.25)% (1.16)% (0.64)% ____________________________________________________________________________________________________________________ ==================================================================================================================== Portfolio turnover rate 56% 75% 98% 134% 110% ____________________________________________________________________________________________________________________ ====================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustment in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $30,628,412. NOTE 14--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. The mutual fund industry as a whole is currently subject to regulatory inquiries and litigation related to a wide range of issues. These issues include, among others, market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. In addition, as described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. Additional regulatory inquiries related to the above or other issues also may be received by the AIM Funds, IFG, AIM and/or related entities and individuals in the future. As a result of the matters discussed below, investors in the AIM Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. Settled Enforcement Actions and Investigations Related to Market Timing On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the F-16 NOTE 14--LEGAL PROCEEDINGS (CONTINUED) settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing. Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid. The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs. None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders. Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected. On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years. On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year. As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds. At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM. The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund. Ongoing Regulatory Inquiries Concerning IFG and AIM IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more such Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, and investments in securities of other registered investment companies. These regulators include the SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, the Attorney F-17 NOTE 14--LEGAL PROCEEDINGS (CONTINUED) General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. IFG and certain of these other parties also have received more limited inquiries from the United States Department of Labor ("DOL") and the United States Attorney's Office for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries. AIM, certain related entities, certain of their current and former officers and/or certain of the AIM Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the SEC, the NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, the United States Attorney's Office for the Southern District of New York, the United States Attorney's Office for the Central District of California, the United States Attorney's Office for the District of Massachusetts, the Massachusetts Securities Division and the U.S. Postal Inspection Service, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries. Private Civil Actions Alleging Market Timing Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal and state securities laws; (ii) violation of various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. Private Civil Actions Alleging Improper Use of Fair Value Pricing Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM) alleging that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) alleging that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees. F-18 NOTE 14--LEGAL PROCEEDINGS (CONTINUED) Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. F-19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of AIM Global Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM Global Growth Fund (the "Fund") at October 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /S/ PRICEWATERHOUSECOOPERS LLP December 20, 2004 Houston, Texas F-20 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM Global Growth Fund ("Fund"), a portfolio of AIM International Mutual Funds, a Delaware statutory trust, (formerly AIM International Funds, Inc., a Maryland corporation), ("Company"), was held on October 21, 2003. The meeting was adjourned and reconvened on October 28, 2003, November 4, 2003, November 11, 2003, November 17, 2003 and reconvened on November 21, 2003. The meeting was held for the following purposes: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: Bob R. Baker, Frank S. Bayley, James T. Bunch, Bruce L. Crockett, Albert R. Dowden, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling, Robert H. Graham, Gerald J. Lewis, Prema Mathai-Davis, Lewis F. Pennock, Ruth H. Quigley, Louis S. Sklar, Larry Soll, Ph.D. and Mark H. Williamson. (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation. The results of the voting on the above matters were as follows:
WITHHOLDING TRUSTEES/MATTER VOTES FOR AUTHORITY --------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 162,211,196 3,444,279 Frank S. Bayley.............................. 162,236,962 3,418,513 James T. Bunch............................... 162,287,588 3,367,887 Bruce L. Crockett............................ 162,276,496 3,378,979 Albert R. Dowden............................. 162,251,386 3,404,089 Edward K. Dunn, Jr. ......................... 162,221,226 3,434,249 Jack M. Fields............................... 162,278,318 3,377,157 Carl Frischling.............................. 162,182,906 3,472,569 Robert H. Graham............................. 162,243,892 3,411,583 Gerald J. Lewis.............................. 162,147,868 3,507,607 Prema Mathai-Davis........................... 162,219,866 3,435,609 Lewis F. Pennock............................. 162,263,207 3,392,268 Ruth H. Quigley.............................. 162,163,064 3,492,411 Louis S. Sklar............................... 162,243,759 3,411,716 Larry Soll, Ph.D. ........................... 162,236,226 3,419,249 Mark H. Williamson........................... 162,238,962 3,416,513
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS --------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 76,302,938 2,822,366 86,530,171**
The Special Meeting of Shareholders of the Company was reconvened on October 28, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 84,066,011 2,989,031 83,338,957**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-21 PROXY RESULTS (UNAUDITED) The Special Meeting of Shareholders of the Company was reconvened on November 4, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 95,512,525 3,144,748 78,504,573**
The Special Meeting of Shareholders of the Company was reconvened on November 11, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 109,217,698 3,531,752 71,913,039**
The Special Meeting of Shareholders of the Company was reconvened on November 17, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 116,710,545 3,761,148 69,451,190**
The Special Meeting of Shareholders of the Company was reconvened on November 21, 2003. The following matter was then considered:
VOTES WITHHELD/ MATTER VOTES FOR AGAINST ABSTENTIONS ------------------------------------------------------------------------------------------------- (2)* Approval of an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 137,239,949 4,617,039 51,798,672**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-22 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS ------------------------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management Group Inc. None Trustee and President (financial services holding company); Director and Vice Chairman, AMVESCAP PLC and Chairman, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: President and Chief Executive Officer, A I M Management Group Inc.; Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products ------------------------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, None Trustee and Executive Vice A I M Management Group Inc. (financial services President holding company); Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent), Fund Management Company (registered broker dealer) and INVESCO Distributors, Inc. (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc.; President and Chief Executive Officer, INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. ------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett(3) -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance Trustee and Chair (technology consulting company) company); and Captaris, Inc. (unified messaging provider) ------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation ------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. Trustee (registered investment Formerly: Partner, law firm of Baker & McKenzie company) ------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning & Bunch None Trustee Ltd., (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation ------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private Cortland Trust, Inc. Trustee business corporations, including the Boss Group (Chairman) (registered Ltd. (private investment and management) and investment company); Magellan Insurance Company Annuity and Life Re (Holdings), Ltd. Formerly: Director, President and Chief Executive (insurance company) Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo companies ------------------------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Retired None Trustee Formerly: Chairman, Mercantile Mortgage Corp.; President and Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. ------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Administaff, and Trustee Group, Inc. (government affairs company) and Discovery Global Texana Timber LP (sustainable forestry company) Education Fund (non- profit) -------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to October 4, 2004, Mr. Graham served as Chairman of the Board of Trustees of the Trust. (2) Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. (3) Mr. Crockett was elected Chair of the Board of Trustees of the Trust effective October 4, 2004. Trustees and Officers (continued) As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Cortland Trust, Inc. Trustee Levin Naftalis and Frankel LLP (registered investment company) -------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution General Chemical Trustee Services (California) Group, Inc. Formerly: Associate Justice of the California Court of Appeals -------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive None Trustee Officer, YWCA of the USA -------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & None Trustee Cooper -------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee -------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1991 Executive Vice President, None Trustee Development and Operations, Hines Interests Limited Partnership (real estate development company) -------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------- OTHER OFFICERS -------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley(4) -- 1959 2004 Senior Vice President, A I M N/A Senior Vice President and Chief Management Group Inc. Compliance Officer (financial services holding company); Senior Vice President and Chief Compliance Officer, A I M Advisors, Inc.; Vice President and Chief Compliance Officer, A I M Capital Management, Inc. and A I M Distributors, Inc.; and Vice President, AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds -------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 Director, Senior Vice N/A Senior Vice President, President, Secretary and Secretary and Chief Legal General Counsel, A I M Officer Management Group Inc. (financial services holding company) and A I M Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., and AIM Investment Services, Inc.; Director, Vice President and General Counsel, Fund Management Company and Senior Vice President, A I M Distributors, Inc. Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; Senior Vice President and General Counsel, Liberty Funds Group, LLC and Vice President, A I M Distributors, Inc. -------------------------------------------------------------------------------------------------------------- Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed N/A Vice President Income Officer and Senior Investment Officer, A I M Capital Management, Inc. and Vice President, A I M Advisors, Inc. -------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Director N/A Vice President of Money Market Research and Special Projects, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. -------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund N/A Vice President and Treasurer Treasurer, A I M Advisors, Inc. Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. -------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Director of Cash Management, N/A Vice President Managing Director and Chief Cash Management Officer, A I M Capital Management, Inc; Director and President, Fund Management Company; and Vice President, A I M Advisors, Inc. -------------------------------------------------------------------------------------------------------------- Edgar M. Larsen -- 1940 1999 Executive Vice President, N/A Vice President A I M Management Group, Inc.; Senior Vice President, A I M Advisors, Inc., and President, Director of Investments, Chief Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. Formerly: Director of A I M Advisors, Inc. and A I M Management Group Inc., A I M Advisors, Inc.; and Director and Chairman, A I M Capital Management, Inc. --------------------------------------------------------------------------------------------------------------
(4) Ms. Brinkley was elected Senior Vice President and Chief Compliance Officer of the Trust effective September 20, 2004. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.347.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers Suite 100 11 Greenway Plaza Inc. LLP Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Houston, TX 77046-1173 Suite 100 Street Houston, TX Suite 2900 77046-1173 Houston, Texas 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis AIM Investment State Street Bank Andrews & Ingersoll, & Frankel LLP Services, Inc. and Trust Company LLP 919 Third Avenue P.O. Box 4739 225 Franklin Street 1735 Market Street New York, NY 10022-3852 Houston, TX Boston, MA Philadelphia, PA 19103-7599 77210-4739 02110-2801
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund(5) AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Equity Fund(6) AIM Intermediate Government Fund AIM Charter Fund AIM Global Growth Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund AIM Money Market Fund AIM Core Stock Fund(1) AIM International Core Equity Fund(1) AIM Short Term Bond Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund(7) AIM Total Return Bond Fund AIM Diversified Dividend Fund AIM International Growth Fund Premier U.S. Government Money Portfolio(1) AIM Dynamics Fund(1) AIM Trimark Fund AIM Emerging Growth Fund TAX-FREE AIM Large Cap Basic Value Fund SECTOR EQUITY AIM Large Cap Growth Fund AIM High Income Municipal Fund AIM Libra Fund AIM Advantage Health Sciences Fund(1) AIM Municipal Bond Fund AIM Mid Cap Basic Value Fund AIM Energy Fund(1) AIM Tax-Exempt Cash Fund AIM Mid Cap Core Equity Fund(2) AIM Financial Services Fund(1) AIM Tax-Free Intermediate Fund AIM Mid Cap Growth Fund AIM Global Health Care Fund AIM Mid Cap Stock Fund(1) AIM Gold & Precious Metals Fund(1) AIM ALLOCATION SOLUTIONS AIM Opportunities I Fund AIM Health Sciences Fund(1) AIM Opportunities II Fund AIM Leisure Fund(1) AIM Aggressive Allocation Fund AIM Opportunities III Fund AIM Multi-Sector Fund(1) AIM Conservative Allocation Fund AIM Premier Equity Fund AIM Real Estate Fund AIM Moderate Allocation Fund AIM S&P 500 Index Fund(1) AIM Technology Fund(1) AIM Select Equity Fund AIM Utilities Fund(1) AIM Small Cap Equity Fund(3) AIM Small Cap Growth Fund(4) ============================================================================== AIM Small Company Growth Fund(1) CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. AIM Total Return Fund*(1) FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR AIM Trimark Endeavor Fund FINANCIAL ADVISOR AND READ IT THOROUGHLY BEFORE INVESTING. AIM Trimark Small Companies Fund ============================================================================== AIM Weingarten Fund
* Domestic equity and income fund (1) The following name changes became effective October 15, 2004: INVESCO Advantage Health Sciences Fund to AIM Advantage Health Sciences Fund, INVESCO Core Equity Fund to AIM Core Stock Fund, INVESCO Dynamics Fund to AIM Dynamics Fund, INVESCO Energy Fund to AIM Energy Fund, INVESCO Financial Services Fund to AIM Financial Services Fund, INVESCO Gold & Precious Metals Fund to AIM Gold & Precious Metals Fund, INVESCO Health Sciences Fund to AIM Health Sciences Fund, INVESCO International Core Equity Fund to AIM International Core Equity Fund, INVESCO Leisure Fund to AIM Leisure Fund, INVESCO Mid-Cap Growth Fund to AIM Mid Cap Stock Fund, INVESCO Multi-Sector Fund to AIM Multi-Sector Fund, INVESCO S&P 500 Index Fund to AIM S&P 500 Index Fund, INVESCO Small Company Growth Fund to AIM Small Company Growth Fund, INVESCO Technology Fund to AIM Technology Fund, INVESCO Total Return Fund to AIM Total Return Fund, INVESCO U.S. Government Money Fund to Premier U.S. Government Money Portfolio, INVESCO Utilities Fund to AIM Utilities Fund. (2) As of the close of business on February 27, 2004, AIM Mid Cap Core Equity Fund is available to new investors on a limited basis. For information on who may continue to invest in AIM Mid Cap Core Equity Fund, please contact your financial advisor. (3) Effective December 13, 2004, AIM Small Cap Equity Fund is open to all investors. (4) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (5) AIM European Small Company Fund will close to new investors when net assets reach $500 million. (6) Effective March 31, 2004, AIM Global Trends Fund was renamed AIM Global Equity Fund. (7) AIM International Emerging Growth Fund will close to new investors when net assets reach $500 million. If used after January 20, 2005, this report must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $132 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $363 billion in assets under management. Data as of September 30, 2004. AIMinvestments.com GLG-AR-1 A I M Distributors, Inc. [YOUR GOALS. OUR SOLUTIONS.]--Registered Trademark-- ------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Registered Trademark-- Plans Accounts -------------------------------------------------------------------------------------
AIM INTERNATIONAL GROWTH FUND Annual Report to Shareholders o October 31, 2004 [COVER IMAGE] [YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE] --Registered Trademark-- --Registered Trademark-- =================================================================================================================================== AIM INTERNATIONAL GROWTH FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of 10/31/04 and is based on total net assets. =================================================================================================================================== ABOUT SHARE CLASSES o Effective 9/30/03, Class B shares are o The unmanaged Standard & Poor's The fund files its complete schedule of not available as an investment for Composite Index of 500 Stocks (the S&P portfolio holdings with the Securities retirement plans maintained pursuant to 500--Registered Trademark-- Index) is an and Exchange Commission ("SEC") for the Section 401 of the Internal Revenue index of common stocks frequently used 1st and 3rd quarters of each fiscal year Code, including 401(k) plans, money as a general measure of U.S. stock on Form N-Q. The fund's Form N-Q filings purchase pension plans and profit market performance. are available on the SEC's Web site at sharing plans. Plans that have existing http://www.sec.gov. Copies of the fund's accounts invested in Class B shares will o The unmanaged MSCI Europe Index is a Forms N-Q may be reviewed and copied at continue to be allowed to make group of European securities tracked by the SEC's Public Reference Room at 450 additional purchases. Morgan Stanley Capital International. Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information o Class R shares are available only to o The unmanaged MSCI World Index is a on the operation of the Public Reference certain retirement plans. Please see the group of global securities tracked by Room, including information about prospectus for more information. Morgan Stanley Capital International. duplicating fee charges, by calling 1-202-942-8090 or by electronic request PRINCIPAL RISKS OF INVESTING IN THE FUND o A direct investment cannot be made in at the following e-mail address: an index. Unless otherwise indicated, publicinfo@sec.gov. The SEC file numbers o International investing presents index results include reinvested for the fund are 811-6463 and 33-44611. certain risks not associated with dividends, and they do not reflect sales The fund's most recent portfolio investing solely in the United States. charges. Performance of an index of holdings, as filed on Form N-Q, are also These include risks relating to funds reflects fund expenses; available at AIMinvestments.com. fluctuations in the value of the U.S. performance of a market index does not. dollar relative to the values of other A description of the policies and currencies, the custody arrangements o The fund is not managed to track the procedures that the fund uses to made for the fund's foreign holdings, performance of any particular index, determine how to vote proxies relating differences in accounting, political including the indexes defined here, and to portfolio securities is available risks and the lesser degree of public consequently, the performance of the without charge, upon request, from our information required to be provided by fund may deviate significantly from the Client Services department at non-U.S. companies. performance of the indexes. 800-959-4246 or on the AIM Web site, AIMinvestments.com. On the home page, o Investing in emerging markets involves OTHER INFORMATION scroll down and click on AIM Funds Proxy greater risk and potential reward than Policy. The information is also investing in more established markets. o The returns shown in the Management's available on the Securities and Exchange Discussion of Fund Performance are based Commission's Web site, sec.gov. ABOUT INDEXES USED IN THIS REPORT on net asset values calculated for shareholder transactions. Generally Information regarding how the fund voted o The unmanaged MSCI Europe, Australasia accepted accounting principles require proxies related to its portfolio and the Far East Index (the MSCI adjustments to be made to the net assets securities during the 12 months ended EAFE--Registered Trademark--) is a group of the fund at period end for financial 6/30/04 is available at our Web site. Go of foreign securities tracked by Morgan reporting purposes, and as such, the net to AIMinvestments.com, access the About Stanley Capital International. asset values for shareholder Us tab, click on Required Notices and transactions and the returns based on then click on Proxy Voting Activity. o The unmanaged MSCI Europe, Australasia those net asset values may differ from Next, select your fund from the and the Far East (the MSCI EAFE the net asset values and returns drop-down menu. --Registered Trademark--) Growth Index reported in the Financial Highlights. is a subset of the unmanaged MSCI EAFE--Registered Trademark--, which o Industry classifications used in this represents the performance of foreign report are generally according to the stocks tracked by Morgan Stanley Capital Global Industry Classification Standard, International. The Growth portion which was developed by and is the measures performance of companies with exclusive property and a service mark of higher price/earnings ratios and higher Morgan Stanley Capital International forecasted growth values. Inc. and Standard & Poor's. o The unmanaged Lipper International Fund Index represents an average of the 30 largest international funds tracked by Lipper, Inc., an independent mutual fund performance monitor, and is considered representative of international stocks.
============================================================================= 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 TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER OF THE AIM FAMILY OF FUNDS--Registered Trademark--: NEW BOARD CHAIRMAN [PHOTO OF It is our pleasure to introduce you to Bruce Crockett, the ROBERT H. new Chairman of the Board of Trustees of the AIM Funds. Bob GRAHAM] Graham has served as Chairman of the Board of Trustees of the AIM Funds ever since Ted Bauer retired from that ROBERT H. GRAHAM position in 2000. However, as you may be aware, the U.S. Securities and Exchange Commission recently adopted a rule requiring that an independent fund trustee, meaning a [PHOTO OF trustee who is not an officer of the fund's investment MARK H. advisor, serve as chairman of the funds' Board. In addition, WILLIAMSON] a similar provision was included in the terms of AIM Advisors' recent settlements with certain regulators. MARK H. WILLIAMSON Accordingly, the AIM Funds' Board recently elected Mr. Crockett, one of the fourteen independent trustees on the AIM Funds' Board, as Chairman. His appointment became [PHOTO OF effective on October 4, 2004. Mr. Graham will remain on the BRUCE L. funds' Board, as will Mark Williamson, President and Chief CROCKETT] Executive Officer of AIM. Mr. Graham will also remain Chairman of AIM Investments--Registered Trademark--. BRUCE L. CROCKETT Mr. Crockett has been a member of the AIM Funds' board since 1992, when AIM acquired certain funds that had been advised by CIGNA. He had been a member of the board of those funds since 1978. Mr. Crockett has more than 30 years of experience in finance and general management and has been Chairman of Crockett Technologies Associates since 1996. He is the first independent chairman of the funds' board in AIM's history, as he is not affiliated with AIM or AMVESCAP in any way. He is committed to ensuring that the AIM Funds adhere to the highest standards of corporate governance for the benefit of fund shareholders, and we at AIM share that commitment. MARKET CONDITIONS DURING THE FISCAL YEAR Virtually every equity index, domestic and foreign, produced positive returns for the fiscal year ended October 31, 2004. Domestically, the S&P 500 Index was up 9.41% for the year. Globally, the MSCI World Index advanced more than 13%. However, a goodly portion of this positive performance was achieved during 2003. Year to date as of October 31, the S&P 500 Index was up just over 3%, the MSCI World Index just about 5%. In the pages that follow, you will find a more detailed discussion of the market conditions that affected your fund during the fiscal year. While it is agreeable to report positive market performance for the year covered by this report, as ever, we encourage our shareholders to look past short-term performance and focus on their long-term investment goals. Over the short term, the one sure thing about the investment markets is their unpredictability. Over the long term, equities have produced very attractive returns. For the 25-year period ended October 31, 2004, the S&P 500 Index averaged 13.50% growth per year and the MSCI World Index averaged 11.16%. While past performance cannot guarantee future results, we believe staying invested for the long term offers the best opportunity for capital growth. YOUR FUND The following pages of this report provide an explanation of how your fund was managed during the fiscal year, how it performed in comparison to various benchmarks, and a presentation of its long-term performance. We hope you find this information helpful. Current information about your fund and about the markets in general is always available on our Web site, AIMinvestments.com. As always, AIM remains committed to building solutions for your investment goals, and we thank you for your continued participation in AIM Investments. If you have any questions, please contact our Client Service representatives at 800-959-4246. Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON ------------------------------------ -------------------------------- Robert H. Graham Mark H. Williamson Chairman, AIM Investments CEO & President, AIM Investments President & Vice Chairman, AIM Funds Trustee, AIM Funds December 16, 2004 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, and A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE STRENGTH OF EUROPEAN HOLDINGS BOOSTS Australian dollar, Japanese yen, euro FUND PERFORMANCE and British pound. For the fiscal year ended October 31, of the 16 countries that comprise the YOUR FUND 2004, AIM International Growth Fund MSCI Europe Index, all posted positive Class A shares returned 19.47% at net returns on a dollar-denominated basis. During much of 2003, distressed or asset value. PERFORMANCE SHOWN AT NAV Economic recovery continued in the euro highly leveraged companies were in DOES NOT INCLUDE FRONT-END SALES zone--the 12 countries that use the euro favor. That sentiment reversed in 2004 CHARGES, WHICH WOULD HAVE REDUCED THE as their currency--led primarily by with stocks that can continue to grow PERFORMANCE. Returns for other share export growth. Domestic demand proved and report strong earnings being classes are shown in the table on page divergent with higher growth in France rewarded by the market. The fund's 3. For the same period, the fund either and weaker demand in Germany. In the investment strategy worked well in this paced or outperformed all its benchmarks United Kingdom, private consumption environment as we focused on companies including the MSCI EAFE Index, MSCI EAFE remained strong, buoyed by sustained with high returns on invested capital, Growth Index and Lipper International income growth and rising housing wealth. accelerating earnings and which are Fund Index which returned 18.84%, reasonably priced. 14.00%, and 16.54%, respectively. Export growth and domestic demand fueled Australian and Canadian On a regional basis, European stocks We attribute the fund's good economies. Both countries' stock markets contributed the most to fund performance compared to its benchmarks registered double-digit gains for the performance. Both strong stock selection to several factors: Strong stock fiscal year with Australian stocks and currency appreciation were factors. selection, particularly in Europe, and setting new highs late in October 2004. As part of the fund's investment strong performance in several philosophy, we do not hedge countries/regions that are not included In Asia, China continued its efforts currencies--our belief is that foreign in some of the fund's benchmarks, such to slow its economy through a variety of currency exposure increases the as Canada and Latin America. measures including an interest rate hike diversification benefit of international of 27 basis points (0.27%). China's investing. Strong foreign currency MARKET CONDITIONS cooling efforts had a negative impact on appreciation, particularly by the euro some trading partners, particularly and pound, helped boost the fund's Foreign markets produced positive Japan. After rising with little return. results for the fiscal year, interruption since mid-2003, Japanese outperforming U.S. markets (S&P 500 markets fell in the second quarter of We select stocks based on a bottom-up Index) by a two-to-one margin. Most of 2004 amid concerns over the country's investment philosophy. That means we the gains by world markets were produced oil dependence and a slowing rate of invest in companies, not countries or in late 2003 and early 2004 as rising economic expansion. sectors. A good example of this is oil prices and geopolitical concerns German sporting goods manufacturer Puma. took a toll in the second half of the Despite pockets of strength, the U.S. Despite a beleaguered German economy, we reporting period. Conditions varied, dollar proved weak against many major have invested in Puma for many years. however, by region and country. foreign currencies including the The company continues to show earnings Canadian dollar, momentum--third quarter 2004 earnings European markets produced some of the were up 22% year-over-year and the best regional returns for the fiscal company reported its highest ever gross year. In fact, profit margin for a single quarter.
=================================================================================================================================== PORTFOLIO COMPOSITION TOP 10 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. United Kingdom 16.1% 1. Total S.A. (France) 2.2% [PIE CHART] 2. Japan 15.8 2. Eni S.p.A. (Italy) 2.0 Energy 7.5% 3. France 11.0 3. Manulife Financial Corp. Telecommunication Services 6.4% (Canada) 2.0 4. Canada 7.2 Health Care 6.1% 4. Reckitt Benckiser PLC 5. Switzerland 5.9 (United Kingdom) 1.8 Materials 5.5% 6. Italy 4.3 5. Syngenta A.G. Utilities 0.8% (Switzerland) 1.8 7. Germany 3.6 Money Market Funds Plus Other 6. Infosys Technologies Ltd. Assets Less Liabilities 3.8% 8. Ireland 3.1 (India) 1.8 Financials 20.3% 9. Australia 2.9 7. Vodafone Group PLC (United Kingdom) 1.8 Consumer Discretionary 19.2% 10. Mexico 2.6 8. Tesco PLC (United Kingdom) 1.7 Consumer Staples 10.9% 9. Next PLC (United Kingdom) 1.7 Information Technology 10.5% 10. Imperial Tobacco Group PLC Industrials 9.0% (United Kingdom) 1.7 The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. *Excluding money market fund holdings. ===================================================================================================================================
2 As mentioned earlier, our exposure to than-expected third quarter earnings. SHUXIN CAO Canada and Latin America--areas that are Mr. Cao, Chartered not part of the fund's style-specific or During the fiscal year, we reduced [CAO Financial Analyst, is broad market benchmarks--gave the fund a our exposure to both health care and PHOTO] manager of AIM competitive edge. Canadian oil company information technology stocks and International Growth Suncor Energy and Mexico's America Movil increased our exposure to financials and Fund. He joined AIM in were among the fund's top five stock consumer discretionary stocks--both of 1997. Mr. Cao graduated from Tianjin contributors during the fiscal year. which contributed significantly to fund Foreign Language Institute with a B.A. returns. in English. He also received an M.B.A. Our limited exposure to the weak from Texas A&M University and is a Japanese market was also a significant IN CLOSING Certified Public Accountant. contributor to the fund's relative performance. Given sector rotation For the fiscal year, foreign markets JASON T. HOLZER earlier in the year--from exporters once again outperformed U.S. markets. Mr. Holzer, Chartered which are often more suitable for our Yet despite this, foreign stocks [HOLZER Financial Analyst, is investment philosophy to more continued to trade at a discount to PHOTO] manager of AIM domestically based companies--we did not their U.S. peers. We are pleased to International Growth find many Japanese stocks that fit our provide shareholders double digit Fund. Mr. Holzer joined investment philosophy. returns for the fiscal year and remain AIM in 1996. He received a B.A. in committed to our investment objective of quantitative economics and an M.S. in Although all sectors of the fund long-term growth of capital by investing engineering-economic systems from reported positive results for the fiscal in international stocks with strong Stanford University. year, information technology returns earnings momentum. were the lowest. The tech-heavy Taiwan CLAS G. OLSSON market was hard hit by declines in THE VIEWS AND OPINIONS EXPRESSED IN Mr. Olsson is co-lead semiconductor stocks. Long-time fund MANAGEMENT'S DISCUSSION OF FUND [OLSSON manager of AIM holding Taiwan Semiconductor was not PERFORMANCE ARE THOSE OF A I M ADVISORS, PHOTO] International Growth immune to this trend. However, third INC. THESE VIEWS AND OPINIONS ARE Fund. Mr. Olsson joined quarter 2004 results for the company SUBJECT TO CHANGE AT ANY TIME BASED ON AIM in 1994. Mr. Olsson proved strong--beating many analysts FACTORS SUCH AS MARKET AND ECONOMIC became a commissioned naval officer at expectations--and we continued to own CONDITIONS. THESE VIEWS AND OPINIONS MAY the Royal Swedish Naval Academy in 1988. the stock. NOT BE RELIED UPON AS INVESTMENT ADVICE He also received a B.B.A. from The OR RECOMMENDATIONS, OR AS AN OFFER FOR A University of Texas at Austin. On a country basis, only Taiwan and PARTICULAR SECURITY. THE INFORMATION IS Israel posted negative returns for the NOT A COMPLETE ANALYSIS OF EVERY ASPECT BARRETT K. SIDES fund. The stock price of Teva OF ANY MARKET, COUNTRY, INDUSTRY, Mr. Sides is co-lead Pharmaceutical, an Israeli SECURITY OR THE FUND. STATEMENTS OF FACT [SIDES manager of AIM pharmaceutical company, fell ARE FROM SOURCES CONSIDERED RELIABLE, PHOTO] International Growth precipitously amid a sell-off of generic BUT A I M ADVISORS, INC. MAKES NO Fund. He joined AIM in drug companies and increasing REPRESENTATION OR WARRANTY AS TO THEIR 1990. Mr. Sides competition from India. We continued to COMPLETENESS OR ACCURACY. ALTHOUGH graduated with a B.S. in economics from own the stock based on stronger- HISTORICAL PERFORMANCE IS NO GUARANTEE Bucknell University. He also received a OF FUTURE RESULTS, THESE INSIGHTS MAY MASTER'S In INTERNATIONAL business from HELP YOU UNDERSTAND OUR INVESTMENT the University of St. Thomas. MANAGEMENT PHILOSOPHY. Assisted by Asia/Latin America Team and See important fund and index Europe/Canada Team disclosures inside front cover. ========================================================================================= TOP 10 INDUSTRIES* FUND VS. INDEXES 1. Diversified Banks 12.6% TOTAL RETURNS, 10/31/03-10/31/04, EXCLUDING APPLICABLE SALES CHARGES. IF SALES 2. Integrated Oil & Gas 6.2 CHARGES WERE INCLUDED, RETURNS WOULD BE LOWER. 3. Pharmaceuticals 6.1 CLASS A SHARES 19.47% 4. Electronic Equipment Manufacturers 5.6 CLASS B SHARES 18.64 5. Wireless Telecommunication CLASS C SHARES 18.70 Services 4.5 CLASS R SHARES 19.15 6. Automobile Manufacturers 4.0 MSCI EAFE INDEX 7. Apparel, Accessories & (BROAD MARKET INDEX) 18.84 Luxury Goods 2.2 MSCI EAFE GROWTH INDEX 8. Life & Health Insurance 2.0 (STYLE-SPECIFIC INDEX) 14.00 9. Broadcasting & Cable TV 2.0 LIPPER INTERNATIONAL FUND INDEX (PEER GROUP INDEX) 16.54 10. Construction & Engineering 1.9 SOURCE: LIPPER, INC. TOTAL NET ASSETS $1.7 BILLION TOTAL NUMBER OF HOLDINGS* 112 ========================================================================================= [RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE RECORD, PLEASE TURN TO PAGE 5.
3 INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE You may use the information in this or expenses you paid for the period. You table, together with the amount you may use this information to compare the As a shareholder of the fund, you incur invested, to estimate the expenses that ongoing costs of investing in the fund two types of costs: (1) transaction you paid over the period. Simply divide and other funds. To do so, compare this costs, which may include sales charges your account value by $1,000 (for 5% hypothetical example with the 5% (loads) on purchase payments; contingent example, an $8,600 account value divided hypothetical examples that appear in the deferred sales charges on redemptions; by $1,000 = 8.6), then multiply the shareholder reports of the other funds. and redemption fees, if any; and (2) result by the number in the table under ongoing costs, including management the heading entitled "Actual Expenses Please note that the expenses shown fees; distribution and/or service fees Paid During Period" to estimate the in the table are meant to highlight your (12b-1); and other fund expenses. This expenses you paid on your account during ongoing costs only and do not reflect example is intended to help you this period. any transactional costs, such as sales understand your ongoing costs (in charges (loads) on purchase payments, dollars) of investing in the fund and to HYPOTHETICAL EXAMPLE FOR COMPARISON contingent deferred sales charges on compare these costs with ongoing costs PURPOSES redemptions, and redemption fees, if of investing in other mutual funds. The any. Therefore, the hypothetical example is based on an investment of The table below also provides information is useful in comparing $1,000 invested at the beginning of the information about hypothetical account ongoing costs only, and will not help period and held for the entire period, values and hypothetical expenses based you determine the relative total costs May 1, 2004--October 31, 2004. on the fund's actual expense ratio and of owning different funds. In addition, an assumed rate of return of 5% per year if these transactional costs were ACTUAL EXPENSES before expenses, which is not the fund's included, your costs would have been actual return. The hypothetical account higher. The table below provides information values and expenses may not be used to about actual account values and actual estimate the actual ending account expenses. balance =================================================================================================================================== ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) Beginning Account Ending Account Expenses Ending Account Expenses Value Value Paid During Value Paid During (5/1/04) (10/31/04)(1) Period(2) (10/31/04) Period(2) Class A $1,000.00 $1,077.10 $ 8.46 $1,016.99 $ 8.21 Class B 1,000.00 1,073.30 12.09 1,013.47 11.74 Class C 1,000.00 1,073.20 12.09 1,013.47 11.74 Class R 1,000.00 1,075.70 9.50 1,015.99 9.22 (1) The actual ending account value is based on the actual total return of the fund for the period May 1, 2004, to October 31, 2004, 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 actual cumulative return at net asset value for the period May 1, 2004, to October 31, 2004, was 7.71%, 7.33%, 7.32%, and 7.57% for Class A, B, C, and R shares, respectively. (2) Expenses are equal to the fund's annualized expense ratio (1.62%, 2.32%, 2.32% and 1.82% for Class A, B, C, and R shares, respectively) multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). =================================================================================================================================== [ARROW BUTTON For More Information Visit IMAGE] AIMinvestments.com
4 LONG-TERM PERFORMANCE YOUR FUND'S LONG-TERM PERFORMANCE =================================================================================================================================== Past performance cannot guarantee RESULTS OF A $10,000 INVESTMENT comparable future results. 4/7/92-10/31/04 Index data from 3/31/92 Your fund's total return includes [MOUNTAIN CHART] reinvested distributions, applicable sales charges, fund expenses and AIM INTERNATIONAL management fees. Index results include GROWTH FUND LIPPER INTERNATIONAL MSCI EAFE MSCI EAFE reinvested dividends, but they do not DATE CLASS A SHARES FUND INDEX GROWTH INDEX INDEX reflect sales charges. Performance of an index of funds reflects fund expenses 4/7/1992 $ 9450 $10000 $10000 $10000 and management fees; performance of a 10/92 9602 9600 9895 9822 market index does not. Performance shown 10/93 13189 12870 13163 13501 in the chart does not reflect deduction 10/94 14630 14351 13584 14863 of taxes a shareholder would pay on fund 10/95 15396 14284 13764 14808 distributions or sale of fund shares. 10/96 17825 16087 14945 16359 Performance of the indexes does not 10/97 19864 18238 15298 17116 reflect the effects of taxes. 10/98 21078 19085 17044 18767 10/99 26502 23483 20508 23090 In evaluating this chart, please note 10/00 27338 24294 19001 22421 that the chart uses a logarithmic scale 10/01 19691 18442 13169 16831 along the vertical axis (the value 10/02 17290 16550 11630 14608 scale). This means that each scale 10/03 20750 20944 14111 18557 increment always represents the same 10/04 $24797 $24408 $16087 $22052 percent change in price; in a linear Source: Lipper, Inc. chart each scale increment always CLASS R SHARES represents the same absolute change in 10 Years 5.17% The performance data quoted represent price. In this example, the scale 5 Years -1.59 past performance and cannot guarantee increment between $5,000 and $10,000 is 1 Year 19.15 comparable future results; current the same as that between $10,000 and performance may be lower or higher. $20,000. In a linear chart, the latter In addition to returns as of the close Please visit AIMinvestments.com for the scale increment would be twice as large. of the fiscal year, industry regulations most recent month-end performance. The benefit of using a logarithmic scale require us to provide average annual Performance figures reflect reinvested is that it better illustrates total returns as of 9/30/04, the most distributions, changes in net asset performance during the fund's early recent calendar quarter-end. value and the effect of the maximum years depicted in the chart before sales charge unless otherwise stated. reinvested distributions and compounding AVERAGE ANNUAL TOTAL RETURNS Investment return and principal value create the potential for the original As of 9/30/04, most recent calendar will fluctuate so that you may have a investment to grow to very large quarter-end, including applicable sales gain or loss when you sell shares. numbers. Had the chart used a linear charges scale along its vertical axis, you would Class A share performance reflects not be able to see as clearly the CLASS A SHARES the maximum 5.50% sales charge, and movements in the value of the fund and Inception (4/7/92) 7.21% Class B and Class C share performance the indexes during the early years 10 Years 4.74 reflects the applicable contingent depicted. We use a logarithmic scale in 5 Years -1.73 deferred sales charge (CDSC) for the financial reports of funds that have 1 Year 15.69 period involved. The CDSC on Class B more than five years of performance shares declines from 5% beginning at the history. CLASS B SHARES time of purchase to 0% at the beginning Inception (9/15/94) 4.42% of the seventh year. The CDSC on Class C AVERAGE ANNUAL TOTAL RETURNS 10 Years 4.69 shares is 1% for the first year after As of 10/31/04, including applicable 5 Years -1.67 purchase. Class R shares do not have a sales charges 1 Year 16.56 front-end sales charge; returns shown are at net asset value and do not CLASS A SHARES CLASS C SHARES reflect a 0.75% CDSC that may be imposed Inception (4/7/92) 7.49% Inception (8/4/97) 0.73% on a total redemption of retirement plan 10 Year 4.82 5 Years -1.31 assets within the first year. 5 Years -2.43 1 Year 20.62 1 Year 12.87 The performance of the fund's share CLASS R SHARES classes will differ due to different CLASS B SHARES 10 Years 5.08% sales charge structures and class Inception (9/15/94) 4.78% 5 Years -0.88 expenses. 10 Year 4.78 1 Year 22.00 5 Years -2.37 A redemption fee of 2% will be 1 Year 13.64 Class R shares' inception date is imposed on certain redemptions or 6/3/02. Returns since that date are exchanges out of the fund within 30 days CLASS C SHARES historical returns. All other returns of purchase. Exceptions to the Inception (8/4/97) 1.26% are blended returns of historical Class redemption fee are listed in the fund's 5 Years -2.01 R share performance and restated Class A prospectus. 1 Year 17.70 share performance (for periods prior to the inception date of Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R shares. ===================================================================================================================================
5 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/04 AIM INTERNATIONAL GROWTH FUND INSTITUTIONAL CLASS SHARES ========================================= Please note that past performance is not AVERAGE ANNUAL TOTAL RETURNS indicative of future results. More recent The following information has been For periods ended 10/31/04 returns may be more or less than those prepared to provide Institutional Class Inception (3/15/02) 7.98% shown. All returns assume reinvestment of shareholders with a performance overview 1 Year 20.15 distributions at net asset value. specific to their holdings. Institutional Investment return and principal value Class shares are offered exclusively to ========================================= will fluctuate so your shares, when institutional investors, including AVERAGE ANNUAL TOTAL RETURNS redeemed, may be worth more or less than defined contribution plans that meet For periods ended 9/30/04 their original cost. See full report for certain criteria. Inception (3/15/02) 6.59% information on comparative benchmarks. 1 Year 23.11 Please consult your fund prospectus for more information. For the most current ========================================= month-end performance, please call 800-451-4246 or visit AIMinvestments.com. Institutional Class shares have no sales charge; therefore, performance is at net asset value. Performance of Institutional Class shares will differ from performance of other share classes due to differing sales charges and class expenses.
Over for information on your fund's expenses. FOR INSTITUTIONAL INVESTOR USE ONLY This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use. [YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE] --Registered Trademark-- --Registered Trademark-- AIMinvestments.com IGR-INS-1 10/04 INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE $1,000 (for example, an $8,600 account To do so, compare this 5% hypothetical value divided by $1,000 = 8.6), then example with the 5% hypothetical examples As a shareholder of the fund, you incur multiply the result by the number in the that appear in the shareholder reports of ongoing costs, including management fees; table under the heading entitled "Actual the other funds. and other fund expenses. This example is Expenses Paid During Period" to estimate intended to help you understand your the expenses you paid on your account Please note that the expenses shown in ongoing costs (in dollars) of investing during this period. the table are meant to highlight your in the fund and to compare these costs ongoing costs only. Therefore, the with ongoing costs of investing in other HYPOTHETICAL EXAMPLE FOR hypothetical information is useful in mutual funds. The example is based on an COMPARISON PURPOSES comparing ongoing costs only, and will investment of $1,000 invested at the not help you determine the relative total beginning of the period and held for the The table below also provides information costs of owning different funds. entire period, May 1, 2004, to October about hypothetical account values and 31, 2004. hypothetical expenses based on the fund's actual expense ratio and an assumed rate ACTUAL EXPENSES of return of 5% per year before expenses, which is not the fund's actual return. The table below provides information The hypothetical account values and about actual account values and actual expenses may not be used to estimate the expenses. You may use the information in actual ending account balance or expenses this table, together with the amount you you paid for the period. You may use this invested, to estimate the expenses that information to compare the ongoing costs you paid over the period. Simply divide of investing in the fund and other funds. your account value by
==================================================================================================================================== ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING VALUE PAID DURING (05/01/04) (10/31/04)(1) PERIOD(2) (10/31/04) PERIOD(2) Institutional Class $1,000.00 $1,079.50 $5.75 $1,019.61 $5.58 (1) The actual ending account value is based on the actual total return of the fund for the period May 1, 2004, to October 31, 2004, 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 actual cumulative return at net asset value for the period May 1, 2004, to October 31, 2004, was 7.95% for Institutional Class shares. (2) Expenses are equal to the fund's annualized expense ratio of 1.10% for the Institutional Class shares, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). ====================================================================================================================================
AIMinvestments.com IGR-INS-1 10/04 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2004
MARKET SHARES VALUE -------------------------------------------------------------------------- FOREIGN STOCKS & OTHER EQUITY INTERESTS-96.20% AUSTRALIA-2.94% BHP Billiton Ltd. (Diversified Metals & Mining)(a) 2,031,300 $ 21,057,319 -------------------------------------------------------------------------- Coca-Cola Amatil Ltd. (Soft Drinks)(a) 1,920,000 10,592,317 -------------------------------------------------------------------------- Promina Group Ltd. (Property & Casualty Insurance) (Acquired 05/12/03-08/19/04; Cost $5,627,292)(a)(b) 2,851,200 9,704,416 -------------------------------------------------------------------------- QBE Insurance Group Ltd. (Property & Casualty Insurance)(a) 908,000 9,347,224 ========================================================================== 50,701,276 ========================================================================== AUSTRIA-0.58% Erste Bank der oesterreichischen Sparkassen A.G. (Diversified Banks)(a) 222,824 9,966,468 ========================================================================== BELGIUM-1.09% Algemene Maatschappij voor Nijverheidskredit N.V. (Diversified Banks)(a) 124,000 9,357,604 -------------------------------------------------------------------------- KBC Bankverzekeringsholding (Diversified Banks)(a) 128,400 9,467,349 ========================================================================== 18,824,953 ========================================================================== BERMUDA-0.63% Esprit Holdings Ltd. (Apparel Retail)(a) 2,034,500 10,874,990 ========================================================================== BRAZIL-0.69% Companhia de Bebidas das Americas-ADR (Brewers) 479,700 11,896,560 ========================================================================== CANADA-7.16% Canadian National Railway Co. (Railroads) 274,250 14,769,733 -------------------------------------------------------------------------- Canadian Natural Resources Ltd. (Oil & Gas Exploration & Production) 135,900 5,722,105 -------------------------------------------------------------------------- EnCana Corp. (Oil & Gas Exploration & Production) 181,100 8,981,394 -------------------------------------------------------------------------- Manulife Financial Corp. (Life & Health Insurance) 729,850 34,086,434 -------------------------------------------------------------------------- Petro-Canada (Integrated Oil & Gas) 201,350 10,990,843 -------------------------------------------------------------------------- Power Corp. of Canada (Other Diversified Financial Services) 426,200 10,260,435 -------------------------------------------------------------------------- Shoppers Drug Mart Corp. (Drug Retail)(c) 375,200 11,414,041 -------------------------------------------------------------------------- Shoppers Drug Mart Corp. (Drug Retail) (Acquired 11/18/03; Cost $2,955,117)(b)(c)(d)(e) 138,500 4,213,339 -------------------------------------------------------------------------- Suncor Energy, Inc. (Integrated Oil & Gas) 668,000 22,844,404 ========================================================================== 123,282,728 ==========================================================================
MARKET SHARES VALUE -------------------------------------------------------------------------- DENMARK-0.58% Danske Bank A.S. (Diversified Banks)(a) 355,000 $ 9,967,049 ========================================================================== FRANCE-10.97% BNP Paribas S.A. (Diversified Banks)(a) 333,188 22,827,179 -------------------------------------------------------------------------- Bouygues S.A. (Wireless Telecommunication Services)(a) 245,000 9,713,071 -------------------------------------------------------------------------- Credit Agricole S.A. (Diversified Banks)(a) 311,000 9,173,575 -------------------------------------------------------------------------- Lafarge S.A. (Construction Materials)(a) 91,250 8,377,163 -------------------------------------------------------------------------- Pernod Ricard S.A. (Distillers & Vintners)(a) 166,838 23,236,349 -------------------------------------------------------------------------- PSA Peugeot Citroen (Automobile Manufacturers)(a) 201,935 12,490,442 -------------------------------------------------------------------------- Renault S.A. (Automobile Manufacturers)(a) 305,667 25,735,555 -------------------------------------------------------------------------- Societe Generale (Diversified Banks)(a) 169,800 15,857,377 -------------------------------------------------------------------------- Total S.A. (Integrated Oil & Gas)(a) 181,749 38,046,482 -------------------------------------------------------------------------- Vinci S.A. (Construction & Engineering)(a) 195,830 23,480,004 ========================================================================== 188,937,197 ========================================================================== GERMANY-3.61% Adidas-Salomon A.G. (Apparel, Accessories & Luxury Goods)(a) 94,900 13,324,435 -------------------------------------------------------------------------- Continental A.G. (Tires & Rubber)(a) 284,200 15,596,849 -------------------------------------------------------------------------- Deutsche Telekom A.G. (Integrated Telecommunication Services)(a)(c) 353,004 6,813,054 -------------------------------------------------------------------------- Metro A.G. (Hypermarkets & Super Centers)(a) 234,383 11,248,932 -------------------------------------------------------------------------- Puma A.G. Rudolf Dassler Sport (Footwear) (Acquired 10/08/03-10/30/03; Cost $8,366,627)(a)(b) 60,302 15,177,959 ========================================================================== 62,161,229 ========================================================================== GREECE-1.33% EFG Eurobank Ergasias (Diversified Banks)(a) 227,000 6,246,418 -------------------------------------------------------------------------- OPAP S.A. (Casinos & Gaming) (Acquired 04/02/04-08/27/04; Cost $14,296,226)(a)(b) 809,600 16,586,993 ========================================================================== 22,833,411 ========================================================================== HONG KONG-1.89% Cheung Kong (Holdings) Ltd. (Real Estate Management & Development)(a) 999,000 8,274,153 --------------------------------------------------------------------------
F-1
MARKET SHARES VALUE -------------------------------------------------------------------------- HONG KONG-(CONTINUED) CNOOC Ltd.-ADR (Oil & Gas Exploration & Production)(f) 152,800 $ 7,915,040 -------------------------------------------------------------------------- Hutchison Whampoa Ltd. (Industrial Conglomerates)(a) 1,303,000 10,007,096 -------------------------------------------------------------------------- Sun Hung Kai Properties Ltd. (Real Estate Management & Development)(a) 688,000 6,368,106 ========================================================================== 32,564,395 ========================================================================== HUNGARY-1.18% OTP Bank Rt. (Diversified Banks)(a) 801,800 20,370,690 ========================================================================== INDIA-2.25% Housing Development Finance Corp. Ltd. (Thrifts & Mortgage Finance)(a) 554,736 7,846,115 -------------------------------------------------------------------------- Infosys Technologies Ltd. (IT Consulting & Other Services)(a) 735,888 30,859,334 ========================================================================== 38,705,449 ========================================================================== IRELAND-3.09% Anglo Irish Bank Corp. PLC (Diversified Banks)(a) 1,335,300 25,487,068 -------------------------------------------------------------------------- CRH PLC (Construction Materials)(a) 645,380 15,489,354 -------------------------------------------------------------------------- Depfa Bank PLC (Diversified Banks)(a) 790,000 12,160,096 ========================================================================== 53,136,518 ========================================================================== ISRAEL-1.29% Teva Pharmaceutical Industries Ltd.-ADR (Pharmaceuticals)(f) 854,000 22,204,000 ========================================================================== ITALY-4.30% Banco Popolare di Verona e Novara Scrl (Diversified Banks)(a) 779,880 13,907,110 -------------------------------------------------------------------------- Eni S.p.A. (Integrated Oil & Gas)(a) 1,500,949 34,442,245 -------------------------------------------------------------------------- Mediaset S.p.A. (Broadcasting & Cable TV)(a) 2,245,500 25,744,599 ========================================================================== 74,093,954 ========================================================================== JAPAN-15.81% Canon Inc. (Office Electronics)(a) 314,000 15,540,933 -------------------------------------------------------------------------- Daiwa House Industry Co., Ltd. (Homebuilding)(a) 828,000 8,477,505 -------------------------------------------------------------------------- Fanuc Ltd. (Industrial Machinery)(a) 252,200 15,233,642 -------------------------------------------------------------------------- Hoya Corp. (Electronic Equipment Manufacturers)(a) 275,800 28,376,787 -------------------------------------------------------------------------- JSR Corp. (Specialty Chemicals)(a) 492,000 8,975,193 -------------------------------------------------------------------------- Keyence Corp. (Electronic Equipment Manufacturers)(a) 95,200 21,485,880 -------------------------------------------------------------------------- Kyocera Corp. (Electronic Equipment Manufacturers)(a) 151,300 10,978,593 --------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------------------------- JAPAN-(CONTINUED) Nidec Corp. (Electronic Equipment Manufacturers)(a) 85,100 $ 9,244,414 -------------------------------------------------------------------------- Nissan Motor Co., Ltd. (Automobile Manufacturers)(a) 876,900 9,891,094 -------------------------------------------------------------------------- Nitto Denko Corp. (Specialty Chemicals)(a) 231,700 11,014,803 -------------------------------------------------------------------------- NOK Corp. (Auto Parts & Equipment)(a)(f) 452,000 13,736,895 -------------------------------------------------------------------------- Omron Corp. (Electronic Equipment Manufacturers)(a) 665,600 15,121,222 -------------------------------------------------------------------------- Orix Corp. (Consumer Finance)(a) 62,000 7,269,916 -------------------------------------------------------------------------- Sekisui Chemical Co., Ltd. (Homebuilding)(a) 1,521,000 9,686,844 -------------------------------------------------------------------------- SMC Corp. (Industrial Machinery)(a) 79,300 8,499,540 -------------------------------------------------------------------------- Takeda Pharmaceutical Co. Ltd. (Pharmaceuticals)(a) 387,400 18,738,067 -------------------------------------------------------------------------- Toyota Motor Corp. (Automobile Manufacturers)(a) 553,000 21,485,358 -------------------------------------------------------------------------- Trend Micro Inc. (Application Software)(a) 394,900 18,920,509 -------------------------------------------------------------------------- Yamanouchi Pharmaceutical Co., Ltd. (Pharmaceuticals)(a)(f) 534,000 19,639,256 ========================================================================== 272,316,451 ========================================================================== MEXICO-2.63% America Movil S.A. de C.V.-Series L-ADR (Wireless Telecommunication Services) 528,600 23,258,400 -------------------------------------------------------------------------- Grupo Televisa S.A.-ADR (Broadcasting & Cable TV) 147,800 8,129,000 -------------------------------------------------------------------------- Wal-Mart de Mexico S.A. de C.V.-Series V (Hypermarkets & Super Centers) 4,251,000 13,888,786 ========================================================================== 45,276,186 ========================================================================== NETHERLANDS-1.35% Royal Numico N.V. (Packaged Foods & Meats)(a)(c) 266,950 9,047,493 -------------------------------------------------------------------------- TPG N.V. (Air Freight & Logistics)(a) 586,050 14,210,965 ========================================================================== 23,258,458 ========================================================================== NORWAY-0.95% Telenor A.S.A. (Integrated Telecommunication Services)(a) 2,041,002 16,339,531 ========================================================================== SINGAPORE-2.16% DBS Group Holdings Ltd. (Diversified Banks)(a) 1,165,000 10,942,656 -------------------------------------------------------------------------- Keppel Corp. Ltd. (Industrial Conglomerates)(a) 2,021,000 9,732,639 -------------------------------------------------------------------------- Singapore Airlines Ltd. (Airlines)(a) 1,073,000 6,913,197 -------------------------------------------------------------------------- United Overseas Bank Ltd. (Diversified Banks)(a) 1,185,000 9,629,558 ========================================================================== 37,218,050 ==========================================================================
F-2
MARKET SHARES VALUE -------------------------------------------------------------------------- SOUTH AFRICA-0.54% Standard Bank Group Ltd. (Diversified Banks) 1,048,161 $ 9,250,123 ========================================================================== SOUTH KOREA-1.51% Hana Bank (Diversified Banks)(a) 563,100 14,080,329 -------------------------------------------------------------------------- Samsung Electronics Co., Ltd. (Electronic Equipment Manufacturers)(a) 30,540 12,008,421 ========================================================================== 26,088,750 ========================================================================== SPAIN-1.42% Grupo Ferrovial, S.A. (Construction & Engineering)(a) 218,500 9,716,010 -------------------------------------------------------------------------- Industria de Diseno Textil, S.A. (Apparel Retail)(a) 236,900 6,046,119 -------------------------------------------------------------------------- Telefonica S.A. (Integrated Telecommunication Services)(a) 525,700 8,751,704 ========================================================================== 24,513,833 ========================================================================== SWEDEN-2.47% Assa Abloy A.B.-Class B (Building Products)(a)(f) 1,457,300 19,800,726 -------------------------------------------------------------------------- Volvo A.B.-Class B (Construction & Farm Machinery & Heavy Trucks)(a) 598,700 22,789,106 ========================================================================== 42,589,832 ========================================================================== SWITZERLAND-5.91% Compagnie Financiere Richemont A.G.-Class A (Apparel, Accessories & Luxury Goods)(a) 330,000 9,405,504 -------------------------------------------------------------------------- Novartis A.G. (Pharmaceuticals)(a) 184,000 8,845,843 -------------------------------------------------------------------------- Roche Holding A.G. (Pharmaceuticals)(a) 100,975 10,369,299 -------------------------------------------------------------------------- Swatch Group A.G. (The)-Class B (Apparel, Accessories & Luxury Goods)(a) 111,630 15,044,137 -------------------------------------------------------------------------- Syngenta A.G. (Fertilizers & Agricultural Chemicals)(a)(c) 323,400 30,957,605 -------------------------------------------------------------------------- UBS A.G. (Diversified Capital Markets)(a) 372,698 27,070,112 ========================================================================== 101,692,500 ========================================================================== TAIWAN-1.06% Hon Hai Precision Industry Co., Ltd. (Electronic Manufacturing Services)(a) 2,808,548 10,327,513 -------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd. (Semiconductors)(a) 5,926,396 7,864,545 ========================================================================== 18,192,058 ========================================================================== UNITED KINGDOM-16.07% Aviva PLC (Multi-line Insurance)(a) 1,303,500 13,080,473 --------------------------------------------------------------------------
MARKET SHARES VALUE -------------------------------------------------------------------------- UNITED KINGDOM-(CONTINUED) Centrica PLC (Gas Utilities)(a) 3,005,091 $ 13,321,277 -------------------------------------------------------------------------- Enterprise Inns PLC (Restaurants)(a) 1,094,900 12,473,649 -------------------------------------------------------------------------- GUS PLC (Catalog Retail)(a) 1,300,200 21,318,394 -------------------------------------------------------------------------- Imperial Tobacco Group PLC (Tobacco)(a) 1,268,400 29,707,009 -------------------------------------------------------------------------- mm02 PLC (Wireless Telecommunication Services)(a)(c) 7,678,990 14,885,701 -------------------------------------------------------------------------- Next PLC (Department Stores)(a) 975,120 29,965,186 -------------------------------------------------------------------------- Reckitt Benckiser PLC (Household Products)(a) 1,158,430 31,826,368 -------------------------------------------------------------------------- Royal Bank of Scotland Group PLC (Diversified Banks)(a) 282,272 8,333,653 -------------------------------------------------------------------------- Shire Pharmaceuticals Group PLC (Pharmaceuticals)(a) 1,813,000 17,301,143 -------------------------------------------------------------------------- Tesco PLC (Food Retail)(a) 5,704,573 30,109,038 -------------------------------------------------------------------------- Travis Perkins PLC (Home Improvement Retail)(a) 137,700 3,491,227 -------------------------------------------------------------------------- Vodafone Group PLC (Wireless Telecommunication Services)(a) 11,803,400 30,382,868 -------------------------------------------------------------------------- Warner Chilcott PLC (Pharmaceuticals) 464,000 7,341,885 -------------------------------------------------------------------------- William Hill PLC (Casinos & Gaming)(a) 1,454,530 13,083,484 ========================================================================== 276,621,355 ========================================================================== UNITED STATES OF AMERICA-0.74% Autoliv, Inc.-SDR (Auto Parts & Equipment)(a)(f) 296,600 12,666,827 ========================================================================== Total Foreign Stocks & Other Equity Interests (Cost $1,189,207,887) 1,656,544,821 ========================================================================== PRINCIPAL AMOUNT BONDS & NOTES-0.00% INDIA-0.00% Hindustan Lever Ltd. (Household Products), Sec. Deb., 9.00%, 01/01/05 (Cost $0)(g)(h) INR 1,100,000 1,480 ========================================================================== SHARES MONEY MARKET FUNDS-0.30% Liquid Assets Portfolio-Institutional Class(i) 2,582,491 2,582,491 -------------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class(i) 2,582,491 2,582,491 ========================================================================== Total Money Market Funds (Cost $5,164,982) 5,164,982 ========================================================================== TOTAL INVESTMENTS-96.50% (excluding investments purchased with cash collateral from securities loaned) (Cost $1,194,372,869) 1,661,711,283 ==========================================================================
F-3
MARKET SHARES VALUE -------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-2.65% STIC Prime Portfolio-Institutional Class(i)(j) 45,583,860 $ 45,583,860 ========================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $45,583,860) 45,583,860 ========================================================================== TOTAL INVESTMENTS-99.15% (Cost $1,239,956,729) 1,707,295,143 ========================================================================== OTHER ASSETS LESS LIABILITIES-0.85% 14,564,465 ========================================================================== NET ASSETS-100.00% 1,721,859,608 __________________________________________________________________________ ==========================================================================
Investment Abbreviations: ADR - American Depositary Receipt Deb. - Debentures INR - Indian Rupee Sec. - Secured SDR - Swedish Depositary Receipt
Notes to Schedule of Investments: (a) In accordance with the procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The aggregate market value of these securities at October 31, 2004 was $1,429,378,299, which represented 83.72% of the Fund's Total Investments. See Note 1A. (b) Security not registered under the Securities Act of 1933, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The Fund has no rights to demand registration of these securities. The aggregate market value of these securities at October 31, 2004 was $45,682,707, which represented 2.65% of the Fund's net assets. Unless otherwise indicated, these securities are not considered to be illiquid. (c) Non-income producing security. (d) Security considered to be illiquid. The market value of the security considered to be illiquid at October 31, 2004 represented 0.24% of the Fund's net assets. (e) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The market value of this security at October 31, 2004 represented 0.25% of the Fund's Total Investments. See Note 1A. (f) All or a portion of this security has been pledged as collateral for security lending transactions at October 31, 2004. (g) Foreign denominated security. Par value is denominated in currency indicated. (h) Acquired through a corporate action. (i) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (j) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 8. See accompanying notes which are an integral part of the financial statements. F-4 STATEMENT OF ASSETS AND LIABILITIES October 31, 2004 ASSETS: Investments, at market value (cost $1,189,207,887)* $1,656,546,301 ------------------------------------------------------------ Investments in affiliated money market funds (cost $50,748,842) 50,748,842 ============================================================ Total investments (cost $1,239,956,729) 1,707,295,143 ============================================================ Foreign currencies, at value (cost $48,884,865) 49,219,738 ------------------------------------------------------------ Receivables for: Investments sold 22,497,658 ------------------------------------------------------------ Fund shares sold 2,973,243 ------------------------------------------------------------ Dividends and interest 4,260,262 ------------------------------------------------------------ Investment for trustee deferred compensation and retirement plans 125,623 ------------------------------------------------------------ Other assets 67,983 ============================================================ Total assets 1,786,439,650 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 14,370,264 ------------------------------------------------------------ Fund shares reacquired 2,921,029 ------------------------------------------------------------ Trustee deferred compensation and retirement plans 226,256 ------------------------------------------------------------ Collateral upon return of securities loaned 45,583,860 ------------------------------------------------------------ Accrued distribution fees 642,322 ------------------------------------------------------------ Accrued trustees' fees 2,587 ------------------------------------------------------------ Accrued transfer agent fees 493,792 ------------------------------------------------------------ Accrued operating expenses 339,932 ============================================================ Total liabilities 64,580,042 ============================================================ Net assets applicable to shares outstanding $1,721,859,608 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $1,625,890,309 ------------------------------------------------------------ Undistributed net investment income (274,968) ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities and foreign currencies (371,595,811) ------------------------------------------------------------ Unrealized appreciation of investment securities and foreign currencies 467,840,078 ============================================================ $1,721,859,608 ____________________________________________________________ ============================================================ NET ASSETS: Class A $1,288,548,330 ____________________________________________________________ ============================================================ Class B $ 301,379,592 ____________________________________________________________ ============================================================ Class C $ 116,136,045 ____________________________________________________________ ============================================================ Class R $ 2,450,291 ____________________________________________________________ ============================================================ Institutional Class $ 13,345,350 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 70,939,774 ____________________________________________________________ ============================================================ Class B 17,740,778 ____________________________________________________________ ============================================================ Class C 6,830,056 ____________________________________________________________ ============================================================ Class R 135,841 ____________________________________________________________ ============================================================ Institutional Class 727,790 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 18.16 ------------------------------------------------------------ Offering price per share: (Net asset value of $18.16 divided by 94.50%) $ 19.22 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 16.99 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 17.00 ____________________________________________________________ ============================================================ Class R: Net asset value and offering price per share $ 18.04 ____________________________________________________________ ============================================================ Institutional Class: Net asset value and offering price per share $ 18.34 ____________________________________________________________ ============================================================
* At October 31, 2004, securities with an aggregate market value of $42,967,569 were on loan to brokers. See accompanying notes which are an integral part of the financial statements. F-5 STATEMENT OF OPERATIONS For the year ended October 31, 2004 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $3,486,691) $ 31,665,458 -------------------------------------------------------------------------- Dividends from affiliated money market funds (including security lending income of $753,192)* 1,111,187 -------------------------------------------------------------------------- Interest 66,507 ========================================================================== Total investment income 32,843,152 ========================================================================== EXPENSES: Advisory fees 15,471,920 -------------------------------------------------------------------------- Administrative services fees 406,261 -------------------------------------------------------------------------- Custodian fees 1,427,788 -------------------------------------------------------------------------- Distribution fees: Class A 3,605,122 -------------------------------------------------------------------------- Class B 3,409,829 -------------------------------------------------------------------------- Class C 1,164,018 -------------------------------------------------------------------------- Class R 7,331 -------------------------------------------------------------------------- Transfer agent fees -- Class A, B, C and R 5,204,470 -------------------------------------------------------------------------- Transfer agent fees -- Institutional Class 1,291 -------------------------------------------------------------------------- Trustees' fees and retirement benefits 43,687 -------------------------------------------------------------------------- Other 1,387,996 ========================================================================== Total expenses 32,129,713 ========================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangement (752,762) ========================================================================== Net expenses 31,376,951 ========================================================================== Net investment income 1,466,201 ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain (loss) from: Investment securities 156,993,737 -------------------------------------------------------------------------- Foreign currencies (2,470,095) ========================================================================== 154,523,642 ========================================================================== Change in net unrealized appreciation of: Investment securities 134,519,622 -------------------------------------------------------------------------- Foreign currencies 580,234 ========================================================================== 135,099,856 ========================================================================== Net gain from investment securities and foreign currencies 289,623,498 ========================================================================== Net increase in net assets resulting from operations $291,089,699 __________________________________________________________________________ ==========================================================================
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties. See accompanying notes which are an integral part of the financial statements. F-6 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2004 and 2003
2004 2003 ---------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 1,466,201 $ (1,742,405) ---------------------------------------------------------------------------------------------- Net realized gain from investment securities, foreign currencies and futures contracts 154,523,642 50,432,815 ---------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities and foreign currencies 135,099,856 262,653,706 ============================================================================================== Net increase in net assets resulting from operations 291,089,699 311,344,116 ============================================================================================== Distributions to shareholders from net investment income: Class A (1,576,989) -- ---------------------------------------------------------------------------------------------- Institutional Class (477) -- ============================================================================================== Decrease in net assets resulting from distributions (1,577,466) -- ============================================================================================== Share transactions-net: Class A (38,592,887) (206,630,297) ---------------------------------------------------------------------------------------------- Class B (118,039,680) (101,031,208) ---------------------------------------------------------------------------------------------- Class C (17,787,137) (20,132,725) ---------------------------------------------------------------------------------------------- Class R 1,355,519 636,461 ---------------------------------------------------------------------------------------------- Institutional Class 12,408,997 (8,827) ============================================================================================== Net increase (decrease) in net assets resulting from share transactions (160,655,188) (327,166,596) ============================================================================================== Net increase (decrease) in net assets 128,857,045 (15,822,480) ============================================================================================== NET ASSETS: Beginning of year 1,593,002,563 1,608,825,043 ============================================================================================== End of year (including undistributed net investment income of $(274,968) and $1,385,424, respectively) $1,721,859,608 $1,593,002,563 ______________________________________________________________________________________________ ==============================================================================================
See accompanying notes which are an integral part of the financial statements. F-7 NOTES TO FINANCIAL STATEMENTS October 31, 2004 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM International Growth Fund (the "Fund") is a series portfolio of AIM International Mutual Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. On November 25, 2003, the Fund was restructured from a separate series of AIM International Funds, Inc. to a new series portfolio of the Trust. The Fund's investment objective is long-term growth of capital. Companies are listed in the Schedule of Investments based on the country in which they are organized. Under the Trust's organizational documents, the Fund's officers, trustees, employees and agents are 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. However, the Fund has not had prior claims or losses pursuant to these contracts. 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. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally will be 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 valued at amortized cost which approximates market 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 market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market 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, domestic and foreign index futures and exchange-traded funds. F-8 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. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. 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. E. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. F. REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on certain share classes that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is accounted for as an addition to shares of beneficial interest by the Fund and is allocated among the share classes based on the relative net assets of each class. G. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. H. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. I. 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 made or received 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. F-9 NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.95% of the first $1 billion of the Fund's average daily net assets, plus 0.90% of the Fund's average daily net assets in excess of $1 billion. AIM has contractually agreed to waive advisory fees payable by the Fund to AIM at the annual rate of 0.05% on net assets in excess of $500 million through October 31, 2004. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund, if any). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $589,365. For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $138,987 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2004, AIM was paid $406,261 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $5,204,470 for Class A, Class B, Class C and Class R shares and $1,291 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to selected dealers and financial institutions who furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2004, the Class A, Class B, Class C and Class R shares paid $3,605,122, $3,409,829, $1,164,018 and $7,331, respectively. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2004, AIM Distributors advised the Fund that it retained $109,586 in front-end sales commissions from the sale of Class A shares and $19,715, $26,420, $11,222 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors. F-10 NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2004. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME GAIN (LOSS) ----------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ -- $ 228,893,344 $ (226,310,853) $ -- $ 2,582,491 $ 180,122 $ -- ----------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class -- 228,893,344 (226,310,853) -- 2,582,491 177,873 -- =================================================================================================================================== Subtotal $ -- $ 457,786,688 $ (452,621,706) $ -- $ 5,164,982 $ 357,995 $ -- ===================================================================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME* GAIN (LOSS) ----------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ 42,838,030 $ 538,335,070 $ (581,173,100) $ -- $ -- $ 684,183 $ -- ----------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class -- 71,937,655 (26,353,795) -- 45,583,860 69,009 -- =================================================================================================================================== Subtotal $ 42,838,030 $ 610,272,725 $ (607,526,895) $ -- $45,583,860 $ 753,192 $ -- =================================================================================================================================== Total $ 42,838,030 $1,068,059,413 $(1,060,148,601) $ -- $50,748,842 $1,111,187 $ -- ___________________________________________________________________________________________________________________________________ ===================================================================================================================================
* Dividend income is net of income rebate paid to security lending counterparties. NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2004, the Fund engaged in sales of securities of $966,780. NOTE 5--EXPENSE OFFSET ARRANGEMENT The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $24,410 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $24,410. NOTE 6--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2004, the Fund paid legal fees of $10,236 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. F-11 NOTE 7--BORROWINGS Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. During the year ended October 31, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated at an amount equal to the Federal Funds rate plus 100 basis points. NOTE 8--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At October 31, 2004, securities with an aggregate value of $42,967,569 were on loan to brokers. The loans were secured by cash collateral of $45,583,860 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $753,192 for securities lending transactions. NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS DISTRIBUTIONS TO SHAREHOLDERS: The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003 ---------------------------------------------------------------------------------- Distributions paid from ordinary income $1,577,466 $ -- ----------------------------------------------------------------------------------
TAX COMPONENTS OF NET ASSETS: As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004 ---------------------------------------------------------------------------- Unrealized appreciation -- investments $ 466,413,770 ---------------------------------------------------------------------------- Temporary book/tax differences (205,161) ---------------------------------------------------------------------------- Capital loss carryforward (370,239,310) ---------------------------------------------------------------------------- Shares of beneficial interest 1,625,890,309 ============================================================================ Total net assets $1,721,859,608 ____________________________________________________________________________ ============================================================================
F-12 The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to losses on wash sales and the recognition for tax purposes of unrealized gains on passive foreign investment companies. The tax-basis unrealized appreciation (depreciation) on investments amount includes appreciation on foreign currencies of $501,663. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan expenses. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $358,249,158 of capital loss carryforward in the fiscal year ended October 31, 2005. The Fund utilized $156,443,936 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* --------------------------------------------------------------------------- October 31, 2008 $ 5,430,111 --------------------------------------------------------------------------- October 31, 2009 143,347,811 --------------------------------------------------------------------------- October 31, 2010 221,461,388 =========================================================================== Total capital loss carryforward $370,239,310 ___________________________________________________________________________ ===========================================================================
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. NOTE 10--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2004 was $861,106,035 and $1,035,117,892 respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $474,514,513 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (8,602,406) ============================================================================== Net unrealized appreciation of investment securities $465,912,107 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,241,383,036.
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions, net operating losses and redomestication costs, on October 31, 2004, undistributed net investment income was decreased by $1,549,127, undistributed net realized gain was increased by $2,470,169 and shares of beneficial interest decreased by $921,042. This reclassification had no effect on the net assets of the Fund. F-13 NOTE 12--SHARE INFORMATION The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a CDSC. Class R shares and Institutional Class shares are sold at net asset value. Under certain circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING(a) ----------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------- 2004 2003 ---------------------------- ------------------------------- SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------------------------------------------------------------------- Sold: Class A 16,594,554 $ 276,996,258 360,002,923 $ 4,667,044,231 ----------------------------------------------------------------------------------------------------------------------------- Class B 1,606,048 25,327,091 1,810,130 22,361,870 ----------------------------------------------------------------------------------------------------------------------------- Class C 1,702,233 26,571,147 18,493,883 227,638,038 ----------------------------------------------------------------------------------------------------------------------------- Class R 125,195 2,109,225 1,257,373 16,539,372 ----------------------------------------------------------------------------------------------------------------------------- Institutional Class 727,969 12,499,824 -- -- ============================================================================================================================= Issued as reinvestment of dividends: Class A 94,013 1,482,529 -- -- ============================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 3,753,177 63,985,626 2,013,886 26,283,106 ----------------------------------------------------------------------------------------------------------------------------- Class B (4,001,836) (63,985,626) (2,133,943) (26,283,106) ============================================================================================================================= Reacquired:(b) Class A (22,889,869) (381,057,300) (374,808,645) (4,899,957,634) ----------------------------------------------------------------------------------------------------------------------------- Class B (5,052,339) (79,381,145) (7,880,064) (97,109,972) ----------------------------------------------------------------------------------------------------------------------------- Class C (2,824,116) (44,358,284) (20,026,701) (247,770,763) ----------------------------------------------------------------------------------------------------------------------------- Class R (46,636) (753,706) (1,203,936) (15,902,911) ----------------------------------------------------------------------------------------------------------------------------- Institutional Class (5,334) (90,827) (663) (8,827) ============================================================================================================================= (10,216,941) $(160,655,188) (22,475,757) $ (327,166,596) _____________________________________________________________________________________________________________________________ =============================================================================================================================
(a) There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and owns 29% of the outstanding shares of the Fund. AIM Distributors 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 shareholder is also owned beneficially. (b) Amount is net of redemption fees of $12,886, $3,679, $1,251, $15 and $20 for Class A, Class B, Class C, Class R and Institutional Class shares for 2004, respectively. F-14 NOTE 13--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A ------------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------------ 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 15.23 $ 12.69 $ 14.45 $ 21.60 $ 21.73 --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.05(a) 0.01(a) (0.03)(a) (0.01) 0.08(a) --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.90 2.53 (1.73) (5.66) 0.72 ================================================================================================================================= Total from investment operations 2.95 2.54 (1.76) (5.67) 0.80 ================================================================================================================================= Less distributions: Dividends from net investment income (0.02) -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- -- (1.48) (0.93) ================================================================================================================================= Total distributions (0.02) -- -- (1.48) (0.93) ================================================================================================================================= Redemption fees added to beneficial interest 0.00 -- -- -- -- ================================================================================================================================= Net asset value, end of period $ 18.16 $ 15.23 $ 12.69 $ 14.45 $ 21.60 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 19.40% 20.02% (12.18)% (27.96)% 3.16% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,288,548 $1,117,420 $1,093,344 $1,404,269 $2,325,636 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.70%(c) 1.74% 1.70% 1.57% 1.44% --------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.74%(c) 1.82% 1.74% 1.61% 1.48% ================================================================================================================================= Ratio of net investment income (loss) to average net assets 0.27%(c) 0.09% (0.21)% (0.04)% 0.30% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 54% 77% 77% 85% 87% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $1,201,707,231. F-15 NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B ----------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------- 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 14.32 $ 12.02 $ 13.78 $ 20.81 $ 21.11 ------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.07)(a) (0.08)(a) (0.12)(a) (0.13) (0.11)(a) ------------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 2.74 2.38 (1.64) (5.42) 0.74 ============================================================================================================================== Total from investment operations 2.67 2.30 (1.76) (5.55) 0.63 ============================================================================================================================== Less distributions from net realized gains -- -- -- (1.48) (0.93) ============================================================================================================================== Redemption fees added to beneficial interest 0.00 -- -- -- -- ============================================================================================================================== Net asset value, end of period $ 16.99 $ 14.32 $ 12.02 $ 13.78 $ 20.81 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Total return(b) 18.64% 19.14% (12.77)% (28.48)% 2.42% ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $301,380 $360,671 $401,288 $612,125 $997,843 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.40%(c) 2.44% 2.40% 2.27% 2.18% ------------------------------------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 2.44%(c) 2.52% 2.44% 2.31% 2.22% ============================================================================================================================== Ratio of net investment income (loss) to average net assets (0.43)%(c) (0.61)% (0.91)% (0.75)% (0.44)% ______________________________________________________________________________________________________________________________ ============================================================================================================================== Portfolio turnover rate 54% 77% 77% 85% 87% ______________________________________________________________________________________________________________________________ ==============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $340,982,904.
CLASS C ----------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------------------- 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 14.33 $ 12.03 $ 13.79 $ 20.82 $ 21.13 ------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) (0.07)(a) (0.08)(a) (0.12)(a) (0.13) (0.11)(a) ------------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 2.74 2.38 (1.64) (5.42) 0.73 ============================================================================================================================== Total from investment operations 2.67 2.30 (1.76) (5.55) 0.62 ============================================================================================================================== Less distributions from net realized gains -- -- -- (1.48) (0.93) ============================================================================================================================== Redemption fees added to beneficial interest 0.00 -- -- -- -- ============================================================================================================================== Net asset value, end of period $ 17.00 $ 14.33 $ 12.03 $ 13.79 $ 20.82 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Total return(b) 18.63% 19.12% (12.76)% (28.47)% 2.37% ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $116,136 $113,965 $114,070 $165,857 $253,998 ______________________________________________________________________________________________________________________________ ============================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.40%(c) 2.44% 2.40% 2.27% 2.18% ------------------------------------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 2.44%(c) 2.52% 2.44% 2.31% 2.22% ============================================================================================================================== Ratio of net investment income (loss) to average net assets (0.43)%(c) (0.61)% (0.91)% (0.75)% (0.44)% ______________________________________________________________________________________________________________________________ ============================================================================================================================== Portfolio turnover rate 54% 77% 77% 85% 87% ______________________________________________________________________________________________________________________________ ==============================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $116,401,845. F-16 NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R --------------------------------------- JUNE 3, 2002 YEAR ENDED (DATE SALES OCTOBER 31, COMMENCED) TO ------------------- OCTOBER 31, 2004 2003 2002 ----------------------------------------------------------------------------------------------------- Net asset value, beginning of period $15.14 $12.69 $ 15.27 ----------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.01(a) 0.01(a) (0.02)(a) ----------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.89 2.44 (2.56) ===================================================================================================== Total from investment operations 2.90 2.45 (2.58) ===================================================================================================== Redemption fees added to beneficial interest 0.00 -- -- ===================================================================================================== Net asset value, end of period $18.04 $15.14 $ 12.69 _____________________________________________________________________________________________________ ===================================================================================================== Total return(b) 19.15% 19.31% (16.90)% _____________________________________________________________________________________________________ ===================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $2,450 $ 867 $ 49 _____________________________________________________________________________________________________ ===================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.90%(c) 1.94% 1.89%(d) ----------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.94%(c) 2.02% 1.93%(d) ===================================================================================================== Ratio of net investment income (loss) to average net assets 0.07%(c) (0.11)% (0.40)%(d) _____________________________________________________________________________________________________ ===================================================================================================== Portfolio turnover rate(e) 54% 77% 77% _____________________________________________________________________________________________________ =====================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $1,466,140. (d) Annualized. (e) Not annualized for periods less than one year. F-17 NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS ----------------------------------------- MARCH 15, 2002 YEAR ENDED (DATE SALES OCTOBER 31, COMMENCED) TO -------------------- OCTOBER 31, 2004 2003 2002 ------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 15.37 $12.73 $ 15.09 ------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.15(a) 0.09(a) 0.03(a) ------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.93 2.55 (2.39) ======================================================================================================= Total from investment operations 3.08 2.64 (2.36) ======================================================================================================= Less distributions from net investment income (0.11) -- -- ======================================================================================================= Redemption fees added to beneficial interest 0.00 -- -- ======================================================================================================= Net asset value, end of period $ 18.34 $15.37 $ 12.73 _______________________________________________________________________________________________________ ======================================================================================================= Total return(b) 20.15% 20.74% (15.64)% _______________________________________________________________________________________________________ ======================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $13,345 $ 79 $ 74 _______________________________________________________________________________________________________ ======================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.13%(c) 1.17% 1.16%(d) ------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.17%(c) 1.21% 1.20%(d) ======================================================================================================= Ratio of net investment income to average net assets 0.84%(c) 0.66% 0.33%(d) _______________________________________________________________________________________________________ ======================================================================================================= Portfolio turnover rate(e) 54% 77% 77% _______________________________________________________________________________________________________ =======================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. (c) Ratios are based on average daily net assets of $2,988,526. (d) Annualized. (e) Not annualized for periods less than one year. NOTE 14--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. The mutual fund industry as a whole is currently subject to regulatory inquiries and litigation related to a wide range of issues. These issues include, among others, market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. In addition, as described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. Additional regulatory inquiries related to the above or other issues also may be received by the AIM Funds, IFG, AIM and/or related entities and individuals in the future. As a result of the matters discussed below, investors in the AIM Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. Settled Enforcement Actions and Investigations Related to Market Timing On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities F-18 NOTE 14--LEGAL PROCEEDINGS (CONTINUED) ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing. Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid. The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs. None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders. Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected. On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years. On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year. As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds. At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM. The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund. F-19 NOTE 14--LEGAL PROCEEDINGS (CONTINUED) Ongoing Regulatory Inquiries Concerning IFG and AIM IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more such Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, and investments in securities of other registered investment companies. These regulators include the SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. IFG and certain of these other parties also have received more limited inquiries from the United States Department of Labor ("DOL") and the United States Attorney's Office for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries. AIM, certain related entities, certain of their current and former officers and/or certain of the AIM Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the SEC, the NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, the United States Attorney's Office for the Southern District of New York, the United States Attorney's Office for the Central District of California, the United States Attorney's Office for the District of Massachusetts, the Massachusetts Securities Division and the U.S. Postal Inspection Service, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries. Private Civil Actions Alleging Market Timing Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal and state securities laws; (ii) violation of various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. Private Civil Actions Alleging Improper Use of Fair Value Pricing Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM) alleging that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. F-20 NOTE 14--LEGAL PROCEEDINGS (CONTINUED) Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) alleging that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees. Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. F-21 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of AIM International Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM International Growth Fund (the "Fund") at October 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /S/ PRICEWATERHOUSECOOPERS LLP December 20, 2004 Houston, Texas F-22 PROXY RESULTS (UNAUDITED) A Special Meeting of Shareholders of AIM International Growth Fund, ("Fund"), a portfolio of AIM International Mutual Funds, a Delaware statutory trust (formerly AIM International Funds, Inc., a Maryland corporation), ("Company"), was held on October 21, 2003. The meeting was adjourned and reconvened on October 28, 2003, November 4, 2003, November 11, 2003, November 17, 2003 and reconvened on November 21, 2003. The meeting was held for the following purposes: (1)* To elect sixteen individuals to the Board, each of whom will serve until his or her successor is elected and qualified: Bob R. Baker, Frank S. Bayley, James T. Bunch, Bruce L. Crockett, Albert R. Dowden, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling, Robert H. Graham, Gerald J. Lewis, Prema Mathai-Davis, Lewis F. Pennock, Ruth H. Quigley, Louis S. Sklar, Larry Soll, Ph D. and Mark H. Williamson. (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation. The results of the voting on the above matters were as follows:
WITHHOLDING TRUSTEES/MATTER VOTES FOR AUTHORITY -------------------------------------------------------------------------------- (1)* Bob R. Baker................................. 162,211,196 3,444,279 Frank S. Bayley.............................. 162,236,962 3,418,513 James T. Bunch............................... 162,287,588 3,367,887 Bruce L. Crockett............................ 162,276,496 3,378,979 Albert R. Dowden............................. 162,251,386 3,404,089 Edward K. Dunn, Jr. ......................... 162,221,226 3,434,249 Jack M. Fields............................... 162,278,318 3,377,157 Carl Frischling.............................. 162,182,906 3,472,569 Robert H. Graham............................. 162,243,892 3,411,583 Gerald J. Lewis.............................. 162,147,868 3,507,607 Prema Mathai-Davis........................... 162,219,866 3,435,609 Lewis F. Pennock............................. 162,263,207 3,392,268 Ruth H. Quigley.............................. 162,163,064 3,492,411 Louis S. Sklar............................... 162,243,759 3,411,716 Larry Soll, Ph.D. ........................... 162,236,226 3,419,249 Mark H. Williamson........................... 162,238,962 3,416,513
WITHHELD/ MATTER VOTES FOR VOTES AGAINST ABSTENTIONS --------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 76,302,938 2,822,366 86,530,171*
The Special Meeting of Shareholders of the Company was reconvened on October 28, 2003. The following matter was then considered:
WITHHELD/ MATTER VOTES FOR VOTES AGAINST ABSTENTIONS --------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 84,066,011 2,989,031 83,338,957**
The Special Meeting of Shareholders of the Company was reconvened on November 4, 2003. The following matter was then considered:
WITHHELD/ MATTER VOTES FOR VOTES AGAINST ABSTENTIONS --------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 95,512,525 3,144,748 78,504,573**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-23 The Special Meeting of Shareholders of the Company was reconvened on November 11, 2003. The following matter was then considered:
WITHHELD/ MATTER VOTES FOR VOTES AGAINST ABSTENTIONS -------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 109,217,698 3,531,752 71,913,039**
The Special Meeting of Shareholders of the Company was reconvened on November 17, 2003. The following matter was then considered:
WITHHELD/ MATTER VOTES FOR VOTES AGAINST ABSTENTIONS -------------------------------------------------------------------------------------------------- (2)* To approve an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 116,710,545 3,761,148 69,451,190**
The Special Meeting of Shareholders of the Company was reconvened on November 21, 2003. The following matter was then considered:
WITHHELD/ MATTER VOTES FOR VOTES AGAINST ABSTENTIONS -------------------------------------------------------------------------------------------------- (2)* Approval of an Agreement and Plan of Reorganization which provides for the redomestication of Company as a Delaware statutory trust and, in connection therewith, the sale of all of Company's assets and the dissolution of Company as a Maryland corporation.................................. 137,239,949 4,617,039 51,798,672**
* Proposal required approval by a combined vote of all the portfolios of AIM International Funds, Inc. ** Includes Broker Non-Votes F-24 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS ------------------------------------------------------------------------------------------------------------------------------- Robert H. Graham(1) -- 1946 1991 Director and Chairman, A I M Management Group Inc. None Trustee and President (financial services holding company); Director and Vice Chairman, AMVESCAP PLC and Chairman, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: President and Chief Executive Officer, A I M Management Group Inc.; Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products ------------------------------------------------------------------------------------------------------------------------------- Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, None Trustee and Executive Vice A I M Management Group Inc. (financial services President holding company); Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent), Fund Management Company (registered broker dealer) and INVESCO Distributors, Inc. (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc.; President and Chief Executive Officer, INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. ------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett(3) -- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance Trustee and Chair (technology consulting company) company); and Captaris, Inc. (unified messaging provider) ------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation ------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. Trustee (registered investment Formerly: Partner, law firm of Baker & McKenzie company) ------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning & Bunch None Trustee Ltd., (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation ------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private Cortland Trust, Inc. Trustee business corporations, including the Boss Group (Chairman) (registered Ltd. (private investment and management) and investment company); Magellan Insurance Company Annuity and Life Re (Holdings), Ltd. Formerly: Director, President and Chief Executive (insurance company) Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; and director of various affiliated Volvo companies ------------------------------------------------------------------------------------------------------------------------------- Edward K. Dunn, Jr. -- 1935 1998 Retired None Trustee Formerly: Chairman, Mercantile Mortgage Corp.; President and Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. ------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Administaff, and Trustee Group, Inc. (government affairs company) and Discovery Global Texana Timber LP (sustainable forestry company) Education Fund (non- profit) -------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to October 4, 2004, Mr. Graham served as Chairman of the Board of Trustees of the Trust. (2) Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. (3) Mr. Crockett was elected Chair of the Board of Trustees of the Trust effective October 4, 2004. Trustees and Officers (continued) As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. Trustee Naftalis and Frankel LLP (registered investment company) ------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution General Chemical Trustee Services (California) Group, Inc. Formerly: Associate Justice of the California Court of Appeals ------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, None Trustee YWCA of the USA ------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & None Trustee Cooper ------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee ------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1991 Executive Vice President, None Trustee Development and Operations, Hines Interests Limited Partnership (real estate development company) ------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee ------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS ------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley(4) -- 1959 2004 Senior Vice President, A I M N/A Senior Vice President and Chief Management Group Inc. (financial Compliance Officer services holding company); Senior Vice President and Chief Compliance Officer, A I M Advisors, Inc.; Vice President and Chief Compliance Officer, A I M Capital Management, Inc. and A I M Distributors, Inc.; and Vice President, AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds ------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A Senior Vice President, Secretary and General Counsel, Secretary and Chief Legal A I M Management Group Inc. Officer (financial services holding company); and A I M Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., and AIM Investment Services, Inc.; Director, Vice President and General Counsel, Fund Management Company and Senior Vice President, A I M Distributors, Inc. Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; Senior Vice President and General Counsel, Liberty Funds Group, LLC and Vice President, A I M Distributors, Inc. ------------------------------------------------------------------------------------------------------------------- Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed N/A Vice President Income Officer and Senior Investment Officer, A I M Capital Management, Inc. and Vice President, A I M Advisors, Inc. ------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Director of N/A Vice President Money Market Research and Special Projects, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. ------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, N/A Vice President and Treasurer A I M Advisors, Inc. Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. ------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Director of Cash Management, N/A Vice President Managing Director and Chief Cash Management Officer, A I M Capital Management, Inc; Director and President, Fund Management Company; and Vice President, A I M Advisors, Inc. ------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen -- 1940 1999 Executive Vice President, A I M N/A Vice President Management Group, Inc.; Senior Vice President, A I M Advisors, Inc., and President, Director of Investments, Chief Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. Formerly: Director of A I M Advisors, Inc. and A I M Management Group Inc., A I M Advisors, Inc.; and Director and Chairman, A I M Capital Management, Inc. -------------------------------------------------------------------------------------------------------------------
(4) Ms. Brinkley was elected Senior Vice President and Chief Compliance Officer of the Trust effective September 20, 2004. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, PricewaterhouseCoopers Suite 100 11 Greenway Plaza Inc. LLP Houston, TX 77046-1173 Suite 100 11 Greenway Plaza 1201 Louisiana Houston, TX 77046-1173 Suite 100 Street Houston, TX Suite 2900 77046-1173 Houston, Texas 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis AIM Investment State Street Bank Andrews & Ingersoll, & Frankel LLP Services, Inc. and Trust Company LLP 919 Third Avenue P.O. Box 4739 225 Franklin Street 1735 Market Street New York, NY 10022-3852 Houston, TX Boston, MA Philadelphia, PA 19103-7599 77210-4739 02110-2801
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED) Of ordinary dividends paid to shareholders during the Fund's tax year ended October 31, 2004, 0% is eligible for the dividends received deduction for corporations. For its tax year ended October 31, 2004, the Fund designates 100%, or the maximum amount allowable of its dividend distributions as qualified dividend income. Your actual amount of qualified dividend income for the calendar year will be reported on Form 1099-DIV. You should consult your tax advisor regarding treatment of these amounts. DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM Floating Rate Fund AIM Basic Value Fund AIM European Small Company Fund(5) AIM High Yield Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund AIM Capital Development Fund AIM Global Equity Fund(6) AIM Intermediate Government Fund AIM Charter Fund AIM Global Growth Fund AIM Limited Maturity Treasury Fund AIM Constellation Fund AIM Global Value Fund AIM Money Market Fund AIM Core Stock Fund(1) AIM International Core Equity Fund(1) AIM Short Term Bond Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund(7) AIM Total Return Bond Fund AIM Diversified Dividend Fund AIM International Growth Fund Premier U.S. Government Money Portfolio(1) AIM Dynamics Fund(1) AIM Trimark Fund AIM Emerging Growth Fund TAX-FREE AIM Large Cap Basic Value Fund SECTOR EQUITY AIM Large Cap Growth Fund AIM High Income Municipal Fund AIM Libra Fund AIM Advantage Health Sciences Fund(1) AIM Municipal Bond Fund AIM Mid Cap Basic Value Fund AIM Energy Fund(1) AIM Tax-Exempt Cash Fund AIM Mid Cap Core Equity Fund(2) AIM Financial Services Fund(1) AIM Tax-Free Intermediate Fund AIM Mid Cap Growth Fund AIM Global Health Care Fund AIM Mid Cap Stock Fund(1) AIM Gold & Precious Metals Fund(1) AIM ALLOCATION SOLUTIONS AIM Opportunities I Fund AIM Health Sciences Fund(1) AIM Opportunities II Fund AIM Leisure Fund(1) AIM Aggressive Allocation Fund AIM Opportunities III Fund AIM Multi-Sector Fund(1) AIM Conservative Allocation Fund AIM Premier Equity Fund AIM Real Estate Fund AIM Moderate Allocation Fund AIM S&P 500 Index Fund(1) AIM Technology Fund(1) AIM Select Equity Fund AIM Utilities Fund(1) AIM Small Cap Equity Fund(3) AIM Small Cap Growth Fund(4) ======================================================================================== AIM Small Company Growth Fund(1) CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AIM Total Return Fund*(1) AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AIM Trimark Endeavor Fund AND READ IT THOROUGHLY BEFORE INVESTING. AIM Trimark Small Companies Fund ======================================================================================== AIM Weingarten Fund
* Domestic equity and income fund (1) The following name changes became effective October 15, 2004: INVESCO Advantage Health Sciences Fund to AIM Advantage Health Sciences Fund, INVESCO Core Equity Fund to AIM Core Stock Fund, INVESCO Dynamics Fund to AIM Dynamics Fund, INVESCO Energy Fund to AIM Energy Fund, INVESCO Financial Services Fund to AIM Financial Services Fund, INVESCO Gold & Precious Metals Fund to AIM Gold & Precious Metals Fund, INVESCO Health Sciences Fund to AIM Health Sciences Fund, INVESCO International Core Equity Fund to AIM International Core Equity Fund, INVESCO Leisure Fund to AIM Leisure Fund, INVESCO Mid-Cap Growth Fund to AIM Mid Cap Stock Fund, INVESCO Multi-Sector Fund to AIM Multi-Sector Fund, INVESCO S&P 500 Index Fund to AIM S&P 500 Index Fund, INVESCO Small Company Growth Fund to AIM Small Company Growth Fund, INVESCO Technology Fund to AIM Technology Fund, INVESCO Total Return Fund to AIM Total Return Fund, INVESCO U.S. Government Money Fund to Premier U.S. Government Money Portfolio, INVESCO Utilities Fund to AIM Utilities Fund. (2) As of the close of business on February 27, 2004, AIM Mid Cap Core Equity Fund is available to new investors on a limited basis. For information on who may continue to invest in AIM Mid Cap Core Equity Fund, please contact your financial advisor. (3) Effective December 13, 2004, AIM Small Cap Equity Fund is open to all investors. (4) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (5) AIM European Small Company Fund will close to new investors when net assets reach $500 million. (6) Effective March 31, 2004, AIM Global Trends Fund was renamed AIM Global Equity Fund. (7) AIM International Emerging Growth Fund will close to new investors when net assets reach $500 million. If used after January 20, 2005, this report must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $132 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $363 billion in assets under management. Data as of September 30, 2004. ================================================================================ 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 THOROUGHLY BEFORE INVESTING. ================================================================================ AIMinvestments.com IGR-AR-1 A I M Distributors, Inc. [YOUR GOALS. OUR SOLUTIONS.]--Registered Trademark-- ------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Alternative Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Investments Management --Registered Trademark-- Plans Accounts -------------------------------------------------------------------------------------
AIM INTERNATIONAL CORE EQUITY FUND Annual Report to Shareholders . October 31, 2004 [COVER IMAGE] On October 15, 2004, INVESCO International Core Equity Fund was renamed AIM International Core Equity Fund. [YOUR GOALS. OUR SOLUTIONS.] - REGISTERED TRADEMARK - [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - AIM INTERNATIONAL CORE EQUITY FUND SEEKS TOTAL RETURN THROUGH CAPITAL APPRECIATION AND CURRENT INCOME. . Unless otherwise stated, information presented in this report is as of 10/31/04 and is based on total net assets. . On 10/15/04, INVESCO International Core Equity Fund was renamed AIM International Core Equity Fund. ABOUT SHARE CLASSES . Effective 9/30/03, Class B shares are not available as an investment for retirement plans maintained pursuant to Section 401 of the Internal Revenue Code, including 401(k) plans, money purchase pension plans and profit sharing plans. Plans that have existing accounts invested in Class B shares will continue to be allowed to make additional purchases. . Investor Class shares are closed to most investors. For more information on who may continue to invest in the Investor Class shares, please see the prospectus. . Class R shares are available only to certain retirement plans. Please see the prospectus for more information. PRINCIPAL RISKS OF INVESTING IN THE FUND . International investing presents certain risks not associated with investing solely in the United States. These include risks relating to fluctuations in the value of the U.S. dollar relative to the values of other currencies, the custody arrangements made for the fund's foreign holdings, differences in accounting, political risks and the lesser degree of public information required to be provided by non-U.S. companies. The fund may invest 100% of its assets in the securities of non-U.S. issuers. . Investing in emerging markets involves greater risk and potential reward than investing in more established markets. . The fund may participate in the initial public offering (IPO) market in some market cycles. Because of the fund's small asset base, any investment the fund may make in IPOs may significantly affect the fund's total return. As the fund's assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the fund's total return. ABOUT INDEXES USED IN THIS REPORT . The unmanaged MSCI Europe Index is a group of European securities tracked by Morgan Stanley Capital International. . The unmanaged MSCI Europe, Australasia and the Far East Index (the MSCI EAFE --registered trademark--) is a group of foreign securities tracked by Morgan Stanley Capital International. . The unmanaged MSCI World Index is a group of global securities tracked by Morgan Stanley Capital International. . The unmanaged Lipper International Fund Index represents an average of the 30 largest international funds tracked by Lipper, Inc., an independent mutual fund performance monitor, and is considered representative of international stocks. . The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500 --registered trademark-- Index) is an index of common stocks frequently used as a general measure of U.S. stock market performance. . The fund is not managed to track the performance of any particular index, including the indexes defined here, and consequently, the performance of the fund may deviate significantly from the performance of the indexes. . A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of an index of funds reflects fund expenses; performance of a market index does not. OTHER INFORMATION . The returns shown in the Management's Discussion of Fund Performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights. . Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. and Standard & Poor's. The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the 1st and 3rd quarters of each fiscal year on Form N-Q. The fund's Form N-Q filings are available on the SEC's Web site at http://www.sec.gov. Copies of the fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 1-202-942-8090 or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file numbers for the fund are 811-6463 and 33-44611. The fund's most recent portfolio holdings, as filed on Form N-Q, are also available at AIMinvestments.com. A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800-959-4246 or on the AIM Web site, AIMinvestments.com. On the home page, scroll down and click on AIM Funds Proxy Policy. The information is also available on the Securities and Exchange Commission's Web site, sec.gov. Information regarding how the fund voted proxies related to its portfolio securities during the 12 months ended 6/30/04 is available at our Web site. Go to AIMinvestments.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select your fund from the drop-down menu. 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 TO OUR SHAREHOLDERS DEAR FELLOW SHAREHOLDER OF THE AIM FAMILY OF FUNDS --registered trademark-- : NEW BOARD CHAIRMAN It is our pleasure to introduce you to Bruce Crockett, the new Chairman of the Board of Trustees of [GRAHAM the AIM Funds. Bob Graham has served as Chairman of the Board of Trustees of the AIM Funds ever PHOTO] since Ted Bauer retired from that position in 2000. However, as you may be aware, the U.S. Securities and Exchange Commission recently adopted a rule requiring that an independent fund trustee, meaning a trustee who is not an officer of the fund's investment advisor, serve as chairman of the ROBERT H. GRAHAM funds' Board. In addition, a similar provision was included in the terms of AIM Advisors' recent settlements with certain regulators. Accordingly, the AIM Funds' Board recently elected Mr. Crockett, one of the fourteen independent trustees on the AIM Funds' Board, as Chairman. His appointment became effective on October 4, 2004. Mr. Graham will remain on the funds' Board, as will Mark Williamson, President and Chief Executive Officer of AIM. Mr. Graham will also remain Chairman of AIM Investments --registered trademark--. Mr. Crockett has been a member of the AIM Funds' board since 1992, when AIM acquired certain funds that had been advised by CIGNA. He had been a member of the board of those funds since [WILLIAMSON 1978. Mr. Crockett has more than 30 years of experience in finance and general management and has PHOTO] been Chairman of Crockett Technologies Associates since 1996. He is the first independent chairman of the funds' board in AIM's history, as he is not affiliated with AIM or AMVESCAP in any way. He is committed to ensuring that the AIM Funds adhere to the highest standards of corporate governance for the benefit of fund shareholders, and we at AIM share that commitment. MARK H. WILLIAMSON MARKET CONDITIONS DURING THE FISCAL YEAR Virtually every equity index, domestic and foreign, produced positive returns for the fiscal year ended October 31, 2004. Domestically, the S&P 500 Index was up 9.41% for the year. Globally, the MSCI [CROCKETT World Index advanced more than 13%. However, a goodly portion of this positive performance was PHOTO] achieved during 2003. Year to date as of October 31, the S&P 500 Index was up just over 3%, the MSCI World Index just about 5%. In the pages that follow, you will find a more detailed discussion of the market conditions that affected your fund during the fiscal year. BRUCE L. CROCKETT While it is agreeable to report positive market performance for the year covered by this report, as ever, we encourage our shareholders to look past short-term performance and focus on their long-term investment goals. Over the short term, the one sure thing about the investment markets is their unpredictability. Over the long term, equities have produced very attractive returns. For the 25-year period ended October 31, 2004, the S&P 500 Index averaged 13.50% growth per year and the MSCI World Index averaged 11.16%. While past performance cannot guarantee future results, we believe staying invested for the long term offers the best opportunity for capital growth. YOUR FUND The following pages of this report provide an explanation of how your fund was managed during the fiscal year, how it performed in comparison to various benchmarks, and a presentation of its long-term performance. We hope you find this information helpful. Current information about your fund and about the markets in general is always available on our Web site, AIMinvestments.com. As always, AIM remains committed to building solutions for your investment goals, and we thank you for your continued participation in AIM Investments. If you have any questions, please contact our Client Service representatives at 800-959-4246.
Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON ---------------------------------- ----------------------------- Robert H. Graham Mark H. Williamson Chairman, AIM Investments CEO & President, AIM Investments President & Vice Chairman, AIM Funds Trustee, AIM Funds December 16, 2004 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, and A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE FUND'S RIGOROUS SELECTION CRITERIA PRODUCED STRONG RETURNS AIM International Core Equity Fund's Investor Class shares returned 20.84% for the fiscal year ended October 31, 2004. Investor Class shares have no front-end or contingent deferred sales charges; therefore, performance is at net asset value. Results for the fund's other share classes and for its benchmark indexes are shown in the table on page 3. The fund outperformed both its peer group and its broad market index for the period. Comparable funds, as measured by the Lipper International Fund Index, returned 16.54%. The broad market for foreign stocks, as represented by the MSCI EAFE Index, had a total return of 18.84%. The fund's outperformance of its benchmarks resulted primarily from favorable stock selection. Additionally, the dollar's decline against the euro, the British pound and several other foreign currencies gave a boost to the fund's returns from holdings denominated in those currencies. MARKET CONDITIONS Despite the negative impact of higher oil prices, foreign markets produced positive results for the fiscal year. The international market (MSCI EAFE Index) returned 18.44%, twice the 9.41% return of the U.S. market (S&P 500 Index). Most of the gains by world markets were produced in late 2003 and early 2004 as high commodity prices, geopolitical concerns and U.S. election uncertainty took their toll in the second half of the reporting period. Conditions varied, however, by region and country. European markets produced some of the best regional returns during the fiscal year. In fact, all 16 countries that comprise the MSCI Europe Index posted positive returns (in U.S. dollars). Economic recovery, albeit subdued compared to other areas of the world, continued in the euro zone--the 12 countries that use the euro as their currency--with economic growth rates the strongest for the area in some time. Euro zone countries were divergent in their domestic consumption rates, with higher growth in France and Spain and weaker demand in Italy and Germany. In the United Kingdom, private consumption remained strong, buoyed by sustained income growth and rising housing wealth. Export growth and domestic demand fueled the Australian and Canadian economies. Both countries' stock markets registered double-digit gains for the fiscal year, with Australian stocks setting new highs late in October. Despite pockets of strength, the U.S. dollar proved weak compared to many foreign currencies, including the Canadian dollar, Australian dollar, Japanese yen, euro and British pound. The energy and utilities sectors produced the highest returns for international markets; information technology was the worst-performing sector and the only sector to produce negative returns. YOUR FUND The primary focus of our investment strategy continued to be stock selection, driven by precise financial research criteria, rather than macro or sector considerations. Accordingly, we continued to invest in well-established companies, conducting bottom-up research on the individual firms and favoring the stocks of companies with strong balance sheets and a history of earnings stability. This has been a very good year for such companies. They were neglected by the market during much of 2003, and we found some very attractive opportunities for investment at good prices. As these companies came back into favor in the market in 2004, they gained value. While maintaining a consistent investment discipline through varying market conditions, we took advantage of some opportunities that arose. Our position in energy was overweight compared to the index. As prices for energy stocks rose with the price of oil, we sold some of these holdings to take profits. The financials sector made the largest contribution to fund performance for the fiscal year. This sector was underweighted in the fund compared to the MSCI EAFE Index, but financials' rate of return for the fund was -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION By sector [PIE CHART] Consumer Staples 9.6% Materials 8.1% Information Technology 8.0% Industrials 7.8% Telecommunication Services 7.8% Utilities 3.9% Money Market Funds Plus Other Assets Less Liabilities 1.9% Financials 21.1% Consumer Discretionary 12.4% Health Care 9.8% Energy 9.6% TOP 10 EQUITY HOLDINGS* 1. Danske Bank A.S. 2.4% 2. Nokia Oyj 2.3 3. Compagnie Generale des Etablissements Michelin-Class B 2.3 4. Takeda Pharmaceutical Co. Ltd. 2.3 5. Royal Bank of Scotland Group PLC 2.2 6. Diageo PLC 2.1 7. GlaxoSmithKline PLC-ADR 2.0 8. Cadbury Schweppes PLC 1.9 9. BP PLC 1.8 10. Eni S.p.A.-ADR 1.8 TOP 10 INDUSTRIES* 1. Diversified Banks 12.0% 2. Pharmaceuticals 9.0 3. Integrated Oil & Gas 8.6 4. Integrated Telecommunication Services 7.8 5. Packaged Foods & Meats 4.0 6. Electric Utilities 3.9 7. Paper Products 2.6 8. Life & Health Insurance 2.6 9. Specialty Chemicals 2.6 10. Consumer Electronics 2.4
The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security. * Excluding money market fund holdings. -------------------------------------------------------------------------------- 2 higher, indicating favorable stock selection. The second largest contributor was energy. Its rate of return for the fund was also higher, and the fund's overweight position in energy further boosted this sector's total contribution to fund performance. The fund's rate of return on industrials was nearly double that of the index, but as its weighting was smaller, its total contribution to fund results was less. The information technology sector made the smallest contribution to fund results but remained positive. Returns on the fund's holdings in this sector also significantly outpaced those in the index, again indicating favorable stock selection. Individual holdings that contributed to fund performance included the following: . Italian oil and gas company Eni had a good year to date for sales, earnings and profits, and reported a 75% jump in third-quarter net income. . The stock of Danish financial services firm Danske Bank showed strong one-year returns, supported by a 10% increase in the company's core earnings for the first nine months of 2004. Holdings that detracted from fund performance included: . Finland-based Nokia underperformed throughout the first half of 2004 because of declining margins due to increased competition. We retained our position in Nokia because we consider the balance sheet exceptionally strong, and the stock trades at values we find very attractive. . The stock of Japan's NEC Electronics dropped when the firm had to cut its forecast for the year ending March 2005 because of a drop in demand among its clients for microchips, the company's mainstay. However, we retained a position in the stock, as the company's fundamentals remain strong, and we believe that microchip demand will recover. IN CLOSING The fund remained committed to its disciplined stock selection criteria, which favor equities of well-established, financially sound companies diversified across sectors and countries. We are pleased by the fund's performance over the past fiscal year, and we thank you for your continued investment in AIM International Core Equity Fund. The views and opinions expressed in Management's Discussion of Fund Performance are those of A I M Advisors, Inc. These views and opinions are subject to change at any time based on factors such as market and economic conditions. These views and opinions may not be relied upon as investment advice or recommendations, or as an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the fund. Statements of fact are from sources considered reliable, but A I M Advisors, Inc. makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy. The fund is team managed by INVESCO Global Asset Management (N.A.), Inc. See important fund and index disclosures inside front cover. -------------------------------------------------------------------------------- TOP 10 COUNTRIES* 1. Japan 20.4% 2. United Kingdom 20.0 3. Switzerland 9.5 4. Netherlands 9.1 5. France 5.7 6. Finland 4.9 7. Italy 3.0 8. Germany 3.0 9. Sweden 2.9 10. Denmark 2.4
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND VS. INDEXES Total returns, 10/31/03-10/31/04, excluding applicable sales charges. If sales charges were included, returns would be lower. Class A Shares 20.78% Class B Shares 20.04 Class C Shares 20.25 Class R Shares** 18.49 Investor Class Shares 20.84 MSCI EAFE (Broad Market and Style-specific Index) 18.84 Lipper International Fund Index (Peer Group Index) 16.54 Source: Lipper, Inc. **Cumulative return since inception on 11/24/03
-------------------------------------------------------------------------------- TOTAL NET ASSETS $183.8 million TOTAL NUMBER OF HOLDINGS* 82
* Excluding money market fund holdings -------------------------------------------------------------------------------- [RIGHT ARROW GRAPHIC] For a presentation of your fund's long-term performance record, please turn to page 5. 3 INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, May 1, 2004 - October 31, 2004. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. --------------------------------------------------------------------------------
HYPOTHETICAL ACTUAL (5% annual return before expenses) -------------------------- ---------------------------------- Beginning Account Ending Account Expenses Ending Account Expenses Value Value Paid During Value Paid During (5/1/04) (10/31/04)/1/ Period/2/ (10/31/04) Period/2/ ----------------- -------------- ----------- -------------- ----------- Class A $1,000.00 $1,075.70 $ 9.24 $1,016.24 $ 8.97 Class B 1,000.00 1,073.00 12.61 1,012.97 12.25 Class C 1,000.00 1,072.30 12.61 1,012.97 12.25 Class R 1,000.00 1,074.60 10.01 1,015.48 9.73 Investor 1,000.00 1,076.90 8.72 1,016.74 8.47
/1/ The actual ending account value is based on the actual total return of the fund for the period May 1, 2004, to October 31, 2004, 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 actual cumulative return at net asset value for the period May 1, 2004, to October 31, 2004, was 7.57%, 7.30%, 7.23%, 7.46% and 7.69% for Class A, B, C, R and Investor Class shares, respectively. /2/ Expenses are equal to the fund's annualized expense ratio (1.77%, 2.42%, 2.42%, 1.92% and 1.67% for Class A, B, C, R and Investor Class shares, respectively) multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). -------------------------------------------------------------------------------- [ARROW For More Information Visit BUTTON AIMinvestments.com IMAGE]
4 LONG-TERM PERFORMANCE YOUR FUND'S LONG-TERM PERFORMANCE Past performance cannot guarantee comparable future results. Your fund's total return includes reinvested distributions, applicable sales charges, fund expenses and management fees. Performance of an index of funds reflects fund expenses and management fees; performance of a market index does not. Performance shown in the chart does not reflect deduction of taxes a shareholder would pay on fund distributions or sale of fund shares. Performance of the indexes does not reflect the effects of taxes. In evaluating this chart, please note that the chart uses a logarithmic scale along the vertical axis (the value scale). This means that each scale increment always represents the same percent change in price; in a linear chart each scale increment always represents the same absolute change in price. In this example, the scale increment between $5,000 and $10,000 is the same as that between $10,000 and $20,000. In a linear chart, the latter scale increment would be twice as large. The benefit of using a logarithmic scale is that it better illustrates performance during the fund's early years before reinvested distributions and compounding create the potential for the original investment to grow to very large numbers. Had the chart used a linear scale along its vertical axis, you would not be able to see as clearly the movements in the value of the fund and the indexes during the fund's early years. We use a logarithmic scale in financial reports of funds that have more than five years of performance history. RESULTS OF A $10,000 INVESTMENT 10/28/98-10/31/04. Index results are from 10/31/98. [MOUNTAIN CHART]
AIM International Lipper Core Equity Fund International MSCI EAFE Date Investor Class Shares Fund Index Index ---- --------------------- ---------- ----- 10/28/1998 10000 10/98 10020 10000 10000 11/98 10340 10501 10512 12/98 10650 10759 10927 01/99 10429 10825 10895 02/99 10109 10546 10635 03/99 10379 10897 11079 04/99 10589 11405 11528 05/99 10329 10981 10934 06/99 10680 11502 11361 07/99 10780 11759 11698 08/99 10850 11852 11741 09/99 10840 11890 11859 10/99 11199 12305 12303 11/99 11686 13207 12731 12/99 13146 14830 13873 01/00 12043 13962 12992 02/00 12486 14883 13342 03/00 12682 14922 13859 04/00 12002 13975 13130 05/00 11919 13591 12809 06/00 12620 14220 13310 07/00 12126 13759 12752 08/00 12424 13992 12862 09/00 11672 13177 12236 10/00 11497 12729 11947 11/00 11103 12192 11499 12/00 11555 12647 11908 01/01 11950 12722 11902 02/01 11239 11829 11009 03/01 10540 10997 10276 04/01 11273 11666 10990 05/01 11070 11384 10602 06/01 10686 11062 10168 07/01 10392 10775 9983 08/01 10200 10559 9730 09/01 9208 9408 8745 10/01 9228 9663 8969 11/01 9623 10024 9299 12/01 9668 10203 9354 01/02 9352 9791 8857 02/02 9566 9928 8920 03/02 10120 10453 9445 04/02 10391 10526 9464 05/02 10572 10677 9584 06/02 10154 10256 9203 07/02 9092 9232 8294 08/02 9160 9239 8275 09/02 8054 8244 7387 10/02 8303 8672 7784 11/02 8720 9082 8137 12/02 8529 8792 7863 01/03 8156 8470 7535 02/03 7930 8219 7362 03/03 7783 8018 7218 04/03 8461 8811 7925 05/03 8913 9377 8405 06/03 9026 9599 8608 07/03 9218 9868 8817 08/03 9388 10153 9030 09/03 9523 10357 9308 10/03 9998 10974 9888 11/03 10311 11195 10108 12/03 11106 11956 10898 01/04 11220 12213 11052 02/04 11492 12493 11307 03/04 11436 12553 11370 04/04 11220 12179 11113 05/04 11311 12172 11137 06/04 11696 12418 11395 07/04 11322 12011 11025 08/04 11356 12075 11074 09/04 11663 12396 11363 10/04 12080 12789 11751
Source: Lipper, Inc. AVERAGE ANNUAL TOTAL RETURNS As of 10/31/04, including applicable sales charges CLASS A SHARES Inception (3/28/02) 4.36% 1 Year 14.12 CLASS B SHARES Inception (3/28/02) 5.19% 1 Year 15.04 CLASS C SHARES Inception (2/14/00) -1.49% 1 Year 19.25 CLASS R SHARES* Inception (11/24/03) 18.49% INVESTOR CLASS SHARES Inception (10/28/98) 3.19% 5 Years 1.53 1 Year 20.84
As required by industry regulations, we also present long-term performance for the period ended 9/30/04, the most recent calendar quarter end. AVERAGE ANNUAL TOTAL RETURNS As of 9/30/04, most recent calendar quarter-end, including applicable sales charges CLASS A SHARES Inception (3/28/02) 3.07% 1 Year 15.58 CLASS B SHARES Inception (3/28/02) 3.87% 1 Year 16.53 CLASS C SHARES Inception (2/14/00) -2.26% 1 Year 20.85 CLASS R SHARES* Inception (11/24/03) 14.43% INVESTOR CLASS SHARES Inception (10/28/98) 2.63% 5 Years 1.47 1 Year 22.47
* Cumulative return that has not been annualized. The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit AIMinvestments.com for the most recent month-end performance. Performance figures reflect reinvested distributions, changes in net asset value and the effect of the maximum sales charge unless otherwise stated. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares. Class A share performance reflects the maximum 5.50% sales charge, and Class B and Class C share performance reflects the applicable contingent deferred sales charge (CDSC) for the period involved. The CDSC on Class B shares declines from 5% beginning at the time of purchase to 0% at the beginning of the seventh year. The CDSC on Class C shares is 1% for the first year after purchase. Class R shares do not have a front-end sales charge; returns shown are at net asset value and do not reflect a 0.75% CDSC that may be imposed on a total redemption of retirement plan assets within the first year. Investor Class shares do not have a front-end sales charge or CDSC; therefore, performance shown is at net asset value. The performance of the fund's share classes will differ due to different sales charge structures and class expenses. Had the advisor not waived fees and/or reimbursed expenses, performance would have been lower. A redemption fee of 2% will be imposed on certain redemptions or exchanges out of the fund within 30 days of purchase. Exceptions to the redemption fee are listed in the fund's prospectus. 5 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/04 AIM INTERNATIONAL CORE EQUITY FUND (Formerly INVESCO International Core Equity Fund) INSTITUTIONAL CLASS SHARES The following information has been prepared to provide Institutional Class shareholders with a performance overview specific to their holdings. Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria. TOTAL RETURN For period ended 10/31/04 Inception (4/30/04) 7.97%* * Cumulative total return that has not been annualized TOTAL RETURN For period ended 9/30/04 Inception (4/30/04) 4.19%* * Cumulative total return that has not been annualized Institutional Class shares have no sales charge; therefore, performance is at net asset value. Performance of Institutional Class shares will differ from performance of other share classes due to differing sales charges and class expenses. Please note that past performance is not indicative of future results. More recent returns may be more or less than those shown. All returns assume reinvestment of distributions at net asset value. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. See full report for information on comparative benchmarks. Please consult your fund prospectus for more information. For the most current month-end performance, please call 800-525-8085 or visit AIMinvestments.com. Over for information on your fund's expenses. FOR INSTITUTIONAL INVESTOR USE ONLY This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use. AIMINVESTMENTS.COM [YOUR GOALS. OUR I-ICE-INS-1 10/04 SOLUTIONS.] [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - - REGISTERED TRADEMARK - INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the fund, you incur ongoing costs, including management fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, May 1, 2004, to October 31, 2004. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. --------------------------------------------------------------------------------
HYPOTHETICAL ACTUAL (5% annual return before expenses) -------------------------- ---------------------------------- Beginning Account Ending Account Expenses Ending Account Expenses Value Value Paid During Value Paid During (05/01/04) (10/31/04)/1/ Period/2/ (10/31/04) Period/2/ ----------------- -------------- ----------- -------------- ----------- Institutional Class $1,000.00 $1,079.70 $5.59 $1,019.76 $5.43
/1/ The actual ending account value is based on the actual total return of the fund for the period May 1, 2004, to October 31, 2004, 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 actual cumulative return at net asset value for the period May 1, 2004, to October 31, 2004, was 7.97% for the Institutional Class shares. /2/ Expenses are equal to the fund's annualized expense ratio, 1.07% for the Institutional Class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). -------------------------------------------------------------------------------- AIMINVESTMENTS.COM I-ICE-INS-1 10/04 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2004
MARKET SHARES VALUE ------------------------------------------------------------------------------- FOREIGN STOCKS & OTHER EQUITY INTERESTS-98.05% AUSTRALIA-1.62% National Australia Bank Ltd. (Diversified Banks)/(a)(b)/ 87,500 $ 1,854,907 ------------------------------------------------------------------------------- National Australia Bank Ltd.-ADR (Diversified Banks)/(a)/ 10,600 1,120,950 ------------------------------------------------------------------------------- 2,975,857 ------------------------------------------------------------------------------- BELGIUM-1.18% Belgacom S.A. (Integrated Telecommunication Services)/(c)/ 58,900 2,170,526 ------------------------------------------------------------------------------- CANADA-2.21% BCE Inc. (Integrated Telecommunication Services)/(a)/ 92,900 2,157,928 ------------------------------------------------------------------------------- EnCana Corp. (Oil & Gas Exploration & Production)/(a)/ 38,200 1,894,474 ------------------------------------------------------------------------------- 4,052,402 ------------------------------------------------------------------------------- CHINA-0.99% China Life Insurance Co., Ltd.-ADR (Life & Health Insurance)/(a)(c)/ 68,300 1,809,950 ------------------------------------------------------------------------------- DENMARK-2.41% Danske Bank A.S. (Diversified Banks)/(a)(b)/ 157,700 4,427,616 ------------------------------------------------------------------------------- FINLAND-4.93% Nokia Oyj (Communications Equipment)/(b)/ 272,700 4,223,319 ------------------------------------------------------------------------------- Stora Enso Oyj -- Class R (Paper Products)/(b)/ 209,200 2,994,878 ------------------------------------------------------------------------------- UPM-Kymmene Oyj (Paper Products)/(b)/ 93,100 1,850,229 ------------------------------------------------------------------------------- 9,068,426 ------------------------------------------------------------------------------- FRANCE-5.67% Compagnie Generale des Etablissements Michelin -- Class B (Tires & Rubber)/(a)(b)/ 76,539 4,192,497 ------------------------------------------------------------------------------- Societe Generale-ADR (Diversified Banks)/(a)(d)/ 164,000 3,033,295 ------------------------------------------------------------------------------- Total S.A.-ADR (Integrated Oil & Gas)/(a)/ 30,590 3,189,925 ------------------------------------------------------------------------------- 10,415,717 ------------------------------------------------------------------------------- GERMANY-3.00% BASF A.G. (Diversified Chemicals)/(b)/ 22,000 1,381,801 ------------------------------------------------------------------------------- BASF A.G.-ADR (Diversified Chemicals) 40,450 2,541,474 ------------------------------------------------------------------------------- Deutsche Bank A.G. (Diversified Capital Markets)/(a)(b)/ 8,900 678,949 ------------------------------------------------------------------------------- Deutsche Bank A.G. (Diversified Capital Markets)/(a)/ 11,900 906,185 ------------------------------------------------------------------------------- 5,508,409 ------------------------------------------------------------------------------- HONG KONG-1.44% Cheung Kong (Holdings) Ltd. (Real Estate Management & Development)/(b)/ 108,000 894,503 ------------------------------------------------------------------------------- Hutchison Whampoa Ltd. (Industrial Conglomerates)/(b)/ 228,100 1,751,818 ------------------------------------------------------------------------------- 2,646,321 -------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------------------------------- ITALY-3.03% Enel S.p.A. (Electric Utilities)/(b)/ 252,900 $ 2,297,178 ------------------------------------------------------------------------------- Eni S.p.A.-ADR (Integrated Oil & Gas)/(a)/ 28,650 3,278,419 ------------------------------------------------------------------------------- 5,575,597 ------------------------------------------------------------------------------- JAPAN-20.40% Canon Inc. (Office Electronics)/(b)/ 19,000 940,375 ------------------------------------------------------------------------------- Canon Inc.-ADR (Office Electronics) 35,560 1,760,220 ------------------------------------------------------------------------------- East Japan Railway Co. (Railroads)/(b)/ 315 1,659,557 ------------------------------------------------------------------------------- Eisai Co., Ltd. (Pharmaceuticals)/(b)/ 54,700 1,578,084 ------------------------------------------------------------------------------- Fuji Photo Film Co., Ltd. (Photographic Products)/(a)(b)/ 44,000 1,497,767 ------------------------------------------------------------------------------- Fuji Photo Film Co., Ltd.-ADR (Photographic Products) 83,150 2,828,763 ------------------------------------------------------------------------------- Hitachi, Ltd.-ADR (Electronic Equipment Manufacturers)/(a)/ 26,625 1,668,056 ------------------------------------------------------------------------------- Ito-Yokado Co., Ltd. (Hypermarket & Super Centers)/(b)/ 45,000 1,615,545 ------------------------------------------------------------------------------- Kao Corp. (Household Products)/(b)/ 112,000 2,587,455 ------------------------------------------------------------------------------- Millea Holdings, Inc. (Property & Casualty Insurance)/(b)/ 125 1,651,560 ------------------------------------------------------------------------------- NEC Electronics Corp. (Semiconductors)/(a)(b)/ 34,900 1,706,254 ------------------------------------------------------------------------------- Nintendo Co., Ltd. (Home Entertainment Software)/(b)/ 23,900 2,697,098 ------------------------------------------------------------------------------- Nippon Telegraph & Telephone Corp. (Integrated Telecommunication Services)/(b)/ 495 2,108,005 ------------------------------------------------------------------------------- Nippon Telegraph & Telephone Corp.-ADR (Integrated Telecommunication Services)/(a)/ 24,585 522,431 ------------------------------------------------------------------------------- Olympus Corp. (Health Care Equipment)/(a)(b)/ 83,000 1,609,447 ------------------------------------------------------------------------------- Shin-Etsu Chemical Co., Ltd. (Specialty Chemicals)/(b)/ 49,700 1,890,828 ------------------------------------------------------------------------------- Sony Corp.-ADR (Consumer Electronics) 79,590 2,773,712 ------------------------------------------------------------------------------- Takeda Pharmaceutical Co. Ltd. (Pharmaceuticals)/(b)/ 85,500 4,135,531 ------------------------------------------------------------------------------- Toyota Motor Corp. (Automobile Manufacturers)/(b)/ 58,400 2,268,978 ------------------------------------------------------------------------------- 37,499,666 ------------------------------------------------------------------------------- MEXICO-2.14% Fomento Economico Mexicano, S.A. de C.V.-ADR (Soft Drinks)/(a)/ 21,700 956,970 ------------------------------------------------------------------------------- Telefonos de Mexico S.A. de C.V.-Series L-ADR (Integrated Telecommunication Services)/(a)/ 86,700 2,968,608 ------------------------------------------------------------------------------- 3,925,578 ------------------------------------------------------------------------------- NETHERLANDS-9.12% ABN AMRO Holding N.V. (Diversified Banks)/(b)/ 63,300 1,525,528 ------------------------------------------------------------------------------- Aegon N.V. (Life & Health Insurance)/(b)/ 269,100 2,969,022 ------------------------------------------------------------------------------- DSM N.V. (Specialty Chemicals)/(a)(b)/ 51,570 2,825,893 ------------------------------------------------------------------------------- ING Groep N.V.-ADR (Other Diversified Financial Services) 110,300 2,937,289 ------------------------------------------------------------------------------- Koninklijke (Royal) Philips Electronics N.V.-New York Shares (Consumer Electronics)/(a)/ 68,550 1,632,861 -------------------------------------------------------------------------------
F-1
MARKET SHARES VALUE ------------------------------------------------------------------------------- NETHERLANDS-(Continued) Royal Dutch Petroleum Co.-New York Shares (Integrated Oil & Gas)/(a)/ 39,300 $ 2,131,632 ------------------------------------------------------------------------------- TPG N.V. (Air Freight & Logistics)/(b)/ 112,750 2,734,044 ------------------------------------------------------------------------------- 16,756,269 ------------------------------------------------------------------------------- NORWAY-1.05% Statoil A.S.A. (Integrated Oil & Gas)/(a)(b)/ 132,100 1,930,573 ------------------------------------------------------------------------------- PORTUGAL-1.10% Portugal Telecom, SGPS, S.A.-ADR (Integrated Telecommunication Services) 178,700 2,022,884 ------------------------------------------------------------------------------- SOUTH KOREA-2.39% Kookmin Bank (Diversified Banks)/(b)/ 30,300 1,016,108 ------------------------------------------------------------------------------- Korea Electric Power Corp.-ADR (Electric Utilities)/(a)/ 90,408 1,037,884 ------------------------------------------------------------------------------- KT Corp.-ADR (Integrated Telecommunication Services)/(a)/ 126,600 2,337,036 ------------------------------------------------------------------------------- 4,391,028 ------------------------------------------------------------------------------- SPAIN-2.01% Endesa, S.A.-ADR (Electric Utilities) 90,900 1,856,178 ------------------------------------------------------------------------------- Repsol YPF, S.A.-ADR (Integrated Oil & Gas) 85,200 1,846,284 ------------------------------------------------------------------------------- 3,702,462 ------------------------------------------------------------------------------- SWEDEN-2.92% Ainax A.B. (Construction & Farm Machinery & Heavy Trucks)/(a)(c)/ 2 72 ------------------------------------------------------------------------------- Nordea Bank A.B. (Diversified Banks)/(b)/ 262,300 2,279,102 ------------------------------------------------------------------------------- Volvo A.B. -- Class B (Construction & Farm Machinery & Heavy Trucks)/(a)(b)/ 80,900 3,079,403 ------------------------------------------------------------------------------- 5,358,577 ------------------------------------------------------------------------------- SWITZERLAND-9.48% Compagnie Financiere Richemont A.G. -- Class A (Apparel, Accessories & Luxury Goods)/(b)(e)/ 69,500 1,980,856 ------------------------------------------------------------------------------- Credit Suisse Group (Diversified Capital Markets)/(b)/ 76,600 2,634,839 ------------------------------------------------------------------------------- Nestle S.A. (Packaged Foods & Meats)/(b)/ 6,500 1,544,514 ------------------------------------------------------------------------------- Nestle S.A.-ADR (Packaged Foods & Meats)/(d)/ 38,850 2,289,788 ------------------------------------------------------------------------------- Novartis A.G. (Pharmaceuticals)/(b)/ 32,600 1,567,253 ------------------------------------------------------------------------------- Novartis A.G.-ADR (Pharmaceuticals)/(a)/ 62,500 3,000,625 ------------------------------------------------------------------------------- Roche Holding A.G. (Pharmaceuticals)/(b)/ 21,725 2,230,978 ------------------------------------------------------------------------------- Zurich Financial Services A.G. (Multi-Line Insurance)/(b)/ 15,236 2,181,470 ------------------------------------------------------------------------------- 17,430,323 -------------------------------------------------------------------------------
MARKET SHARES VALUE ------------------------------------------------------------------------------ TAIWAN-0.93% Taiwan Semiconductor Manufacturing Co. Ltd.-ADR (Semiconductors) 225,400 $ 1,706,278 ------------------------------------------------------------------------------ UNITED KINGDOM-20.03% Anglo American PLC (Diversified Metals & Mining)/(b)/ 59,100 1,302,213 ------------------------------------------------------------------------------ BAA PLC (Airport Services)/(b)/ 178,000 1,876,702 ------------------------------------------------------------------------------ BAE SYSTEMS PLC (Aerospace & Defense)/(b)/ 726,900 3,188,007 ------------------------------------------------------------------------------ Boots Group PLC (Drug Retail)/(b)/ 97,200 1,175,718 ------------------------------------------------------------------------------ BP PLC (Integrated Oil & Gas)/(b)/ 342,600 3,331,036 ------------------------------------------------------------------------------ Cadbury Schweppes PLC (Packaged Foods & Meats)/(b)/ 426,200 3,556,931 ------------------------------------------------------------------------------ Diageo PLC (Distillers & Vintners)/(b)/ 287,100 3,851,193 ------------------------------------------------------------------------------ GlaxoSmithKline PLC (Pharmaceuticals)/(b)/ 17,500 369,079 ------------------------------------------------------------------------------ GlaxoSmithKline PLC-ADR (Pharmaceuticals)/(a)/ 85,000 3,604,000 ------------------------------------------------------------------------------ HSBC Holdings PLC-ADR (Diversified Banks)/(a)/ 34,400 2,787,432 ------------------------------------------------------------------------------ Kingfisher PLC (Home Improvement Retail)/(b)/ 458,000 2,548,493 ------------------------------------------------------------------------------ Reed Elsevier PLC (Publishing)/(b)/ 350,400 3,137,968 ------------------------------------------------------------------------------ Royal Bank of Scotland Group PLC (Diversified Banks)/(b)/ 137,000 4,044,717 ------------------------------------------------------------------------------ Scottish Power PLC (Electric Utilities)/(b)/ 252,100 2,043,575 ------------------------------------------------------------------------------ 36,817,064 ------------------------------------------------------------------------------ Total Foreign Stocks & Other Equity Interests (Cost $140,715,153) 180,191,523 ------------------------------------------------------------------------------ MONEY MARKET FUNDS-1.90% Premier Portfolio (Cost $3,494,279)/(f)/ 3,494,279 3,494,279 ------------------------------------------------------------------------------ TOTAL INVESTMENTS-99.95% (excluding investments purchased with cash collateral from securities loaned) (Cost $144,209,432) 183,685,802 ------------------------------------------------------------------------------ INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-21.19% PREMIER PORTFOLIO/(f)(g)/ 38,945,109 38,945,109 ------------------------------------------------------------------------------ Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $38,945,109) 38,945,109 ------------------------------------------------------------------------------ TOTAL INVESTMENTS-121.14% (Cost $183,154,541) 222,630,911 ------------------------------------------------------------------------------ OTHER ASSETS LESS LIABILITIES-(21.14%) (38,843,739) ------------------------------------------------------------------------------ NET ASSETS-100.00% $183,787,172 ------------------------------------------------------------------------------
Investment Abbreviations: ADR- American Depositary Receipt
Notes to Schedule of Investments: (a) All or a portion of this security has been pledged as collateral for security lending transactions at October 31, 2004. (b) In accordance with the procedures established by the Board of Trustees, the foreign security is fair valued using adjusted closing market prices. The aggregate market value of these securities at October 31, 2004 was $115,419,396, which represented 51.84% of the Fund's Total Investments. See Note 1A. (c) Non-income producing security. (d) 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 market value of these securities at October 31, 2004 was $5,323,083, which represented 2.39% of the Fund's Total Investments. See Note 1A. (e) Consists of more than one class of securities traded together as a unit. In addition to the security listed, each unit includes a participation certificate of the issuer. (f) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (g) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 7. See accompanying notes which are an integral part of the financial statements. F-2 STATEMENT OF ASSETS AND LIABILITIES October 31, 2004
ASSETS: Investments, at market value (cost $140,715,153)* $180,191,523 ------------------------------------------------------------------------------- Investments in affiliated money market funds (cost $42,439,388) 42,439,388 ------------------------------------------------------------------------------- Total investments (cost $183,154,541) 222,630,911 ------------------------------------------------------------------------------- Foreign currencies, at value (cost $795) 1,257 ------------------------------------------------------------------------------- Receivables for: Fund shares sold 636,481 ------------------------------------------------------------------------------- Dividends 293,191 ------------------------------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 44,493 ------------------------------------------------------------------------------- Other assets 54,058 ------------------------------------------------------------------------------- Total assets 223,660,391 ------------------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 318,027 ------------------------------------------------------------------------------- Fund shares reacquired 221,202 ------------------------------------------------------------------------------- Trustee deferred compensation and retirement plans 51,855 ------------------------------------------------------------------------------- Collateral upon return of securities loaned 38,945,109 ------------------------------------------------------------------------------- Accrued distribution fees 75,696 ------------------------------------------------------------------------------- Accrued trustees' fees 1,365 ------------------------------------------------------------------------------- Accrued transfer agent fees 167,206 ------------------------------------------------------------------------------- Accrued operating expenses 92,759 ------------------------------------------------------------------------------- Total liabilities 39,873,219 ------------------------------------------------------------------------------- Net assets applicable to shares outstanding $183,787,172 ------------------------------------------------------------------------------- NET ASSETS CONSIST OF: Shares of beneficial interest $155,143,928 ------------------------------------------------------------------------------- Undistributed net investment income 1,050,690 ------------------------------------------------------------------------------- Undistributed net realized gain (loss) from investment securities and foreign currencies (11,891,437) ------------------------------------------------------------------------------- Unrealized appreciation of investment securities and foreign currencies 39,483,991 ------------------------------------------------------------------------------- $183,787,172 -------------------------------------------------------------------------------
NET ASSETS: Class A $60,602,623 ----------------------------------------------------------- Class B $23,811,520 ----------------------------------------------------------- Class C $36,489,569 ----------------------------------------------------------- Class R $ 2,117,656 ----------------------------------------------------------- Investor Class $44,344,503 ----------------------------------------------------------- Institutional Class $16,421,301 ----------------------------------------------------------- SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 5,761,151 ----------------------------------------------------------- Class B 2,282,309 ----------------------------------------------------------- Class C 3,568,670 ----------------------------------------------------------- Class R 201,505 ----------------------------------------------------------- Investor Class 4,168,672 ----------------------------------------------------------- Institutional Class 1,555,250 ----------------------------------------------------------- Class A: Net asset value per share $ 10.52 ----------------------------------------------------------- Offering price per share: (Net asset value of $10.52 / 94.50%) $ 11.13 ----------------------------------------------------------- Class B: Net asset value and offering price per share $ 10.43 ----------------------------------------------------------- Class C: Net asset value and offering price per share $ 10.22 ----------------------------------------------------------- Class R: Net asset value and offering price per share $ 10.51 ----------------------------------------------------------- Investor Class: Net asset value and offering price per share $ 10.64 ----------------------------------------------------------- Institutional Class: Net asset value and offering price per share $ 10.56 -----------------------------------------------------------
* At October 31, 2004, securities with an aggregate market value of $37,763,490 were on loan to brokers. See accompanying notes which are an integral part of the financial statements. F-3 STATEMENT OF OPERATIONS For the year ended October 31, 2004
INVESTMENT INCOME: Dividends (net of foreign withholding tax of $609,058) $ 4,520,571 ---------------------------------------------------------------------------------------------------------- Dividends from affiliated money market funds (including security lending income of $133,106)* 165,006 ---------------------------------------------------------------------------------------------------------- Total investment income 4,685,577 ---------------------------------------------------------------------------------------------------------- EXPENSES: Advisory fees 1,264,410 ---------------------------------------------------------------------------------------------------------- Administrative services fees 72,949 ---------------------------------------------------------------------------------------------------------- Custodian fees 111,992 ---------------------------------------------------------------------------------------------------------- Distribution fees: Class A 196,657 ---------------------------------------------------------------------------------------------------------- Class B 223,210 ---------------------------------------------------------------------------------------------------------- Class C 360,934 ---------------------------------------------------------------------------------------------------------- Class R 7,603 ---------------------------------------------------------------------------------------------------------- Investor Class 122,109 ---------------------------------------------------------------------------------------------------------- Transfer agent fees: Class A 258,512 ---------------------------------------------------------------------------------------------------------- Class B 108,543 ---------------------------------------------------------------------------------------------------------- Class C 145,745 ---------------------------------------------------------------------------------------------------------- Class R 5,831 ---------------------------------------------------------------------------------------------------------- Investor Class 297,706 ---------------------------------------------------------------------------------------------------------- Institutional Class 2,395 ---------------------------------------------------------------------------------------------------------- Trustees' fees and retirement benefits 16,527 ---------------------------------------------------------------------------------------------------------- Other 303,337 ---------------------------------------------------------------------------------------------------------- Total expenses 3,498,460 ---------------------------------------------------------------------------------------------------------- Less:Fees waived, expenses reimbursed and expense offset arrangement (60,651) ---------------------------------------------------------------------------------------------------------- Net expenses 3,437,809 ---------------------------------------------------------------------------------------------------------- Net investment income 1,247,768 ---------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain (loss) from: Investment securities 11,181,881 ---------------------------------------------------------------------------------------------------------- Foreign currencies (213,010) ---------------------------------------------------------------------------------------------------------- 10,968,871 ---------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of: Investment securities 19,042,317 ---------------------------------------------------------------------------------------------------------- Foreign currencies (5,588) ---------------------------------------------------------------------------------------------------------- 19,036,729 ---------------------------------------------------------------------------------------------------------- Net gain from investment securities and foreign currencies 30,005,600 ---------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $31,253,368 ----------------------------------------------------------------------------------------------------------
* Dividends from affiliated money market funds are net of income rebate paid to security lending counterparties. See accompanying notes which are an integral part of the financial statements. F-4 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2004 and 2003
2004 ---------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 1,247,768 ---------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) from investment securities and foreign currencies 10,968,871 ---------------------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities and foreign currencies 19,036,729 ---------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 31,253,368 ---------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from net investment income: Class A (186,438) ---------------------------------------------------------------------------------------------------------------------- Class B (58,073) ---------------------------------------------------------------------------------------------------------------------- Class C (103,958) ---------------------------------------------------------------------------------------------------------------------- Class R (3,851) ---------------------------------------------------------------------------------------------------------------------- Investor Class (137,556) ---------------------------------------------------------------------------------------------------------------------- Decrease in net assets resulting from distributions (489,876) ---------------------------------------------------------------------------------------------------------------------- Share transactions-net: Class A 48,377,188 ---------------------------------------------------------------------------------------------------------------------- Class B 19,285,145 ---------------------------------------------------------------------------------------------------------------------- Class C 27,251,240 ---------------------------------------------------------------------------------------------------------------------- Class R 1,849,400 ---------------------------------------------------------------------------------------------------------------------- Investor Class (11,435,203) ---------------------------------------------------------------------------------------------------------------------- Institutional Class 15,561,946 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from share transactions 100,889,716 ---------------------------------------------------------------------------------------------------------------------- Net increase in net assets 131,653,208 ---------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of year 52,133,964 ---------------------------------------------------------------------------------------------------------------------- End of year (including undistributed net investment income of $1,050,690 and $358,215, respectively) $183,787,172 ----------------------------------------------------------------------------------------------------------------------
2003 -------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 346,947 -------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) from investment securities and foreign currencies (1,779,390) -------------------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities and foreign currencies 10,787,945 -------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 9,355,502 -------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from net investment income: Class A (6,568) -------------------------------------------------------------------------------------------------------------------- Class B (990) -------------------------------------------------------------------------------------------------------------------- Class C -- -------------------------------------------------------------------------------------------------------------------- Class R -- -------------------------------------------------------------------------------------------------------------------- Investor Class (111,474) -------------------------------------------------------------------------------------------------------------------- Decrease in net assets resulting from distributions (119,032) -------------------------------------------------------------------------------------------------------------------- Share transactions-net: Class A (1,891,150) -------------------------------------------------------------------------------------------------------------------- Class B 419,499 -------------------------------------------------------------------------------------------------------------------- Class C 905,563 -------------------------------------------------------------------------------------------------------------------- Class R -- -------------------------------------------------------------------------------------------------------------------- Investor Class (1,299,347) -------------------------------------------------------------------------------------------------------------------- Institutional Class -- -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from share transactions (1,865,435) -------------------------------------------------------------------------------------------------------------------- Net increase in net assets 7,371,035 -------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of year 44,762,929 -------------------------------------------------------------------------------------------------------------------- End of year (including undistributed net investment income of $1,050,690 and $358,215, respectively) $52,133,964 --------------------------------------------------------------------------------------------------------------------
See accompanying notes which are an integral part of the financial statements. F-5 NOTES TO FINANCIAL STATEMENTS October 31, 2004 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM International Core Equity Fund, formerly INVESCO International Core Equity Fund, (the "Fund") is a series portfolio of AIM International Mutual Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. On November 25, 2003, the Fund was restructured from a separate series of AIM International Funds, Inc. II, formerly known as INVESCO International Funds, Inc., to a new series portfolio of the Trust. The Fund's investment objective is to seek total return. Companies are listed in the Schedule of Investments based on the country in which they are organized. Under the Trust's organizational documents, the Fund's officers, trustees, employees and agents are 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. However, the Fund has not had prior claims or losses pursuant to these contracts. 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. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally will be 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 valued at amortized cost which approximates market 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 market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market 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, domestic and foreign index futures and exchange-traded funds. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. F-6 B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. D. 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. E. EXPENSES -- Until March 31, 2004, each class bore expenses incurred specifically on its behalf (including 12b-1 plan fees) and in addition, each class bore a portion of general expenses, based on relative net assets of each class. Effective April 1, 2004, fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. F. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements. Collateral on repurchase agreements, including the Fund's pro-rata interest in joint repurchase agreements, is taken into possession by the Fund upon entering into the repurchase agreement. Eligible securities for collateral are U.S. Government Securities, U.S. Government Agency Securities and/or Investment Grade Debt Securities. Collateral consisting of U.S. Government Securities and U.S. Government Agency Securities is marked to market daily to ensure its market value is at least 102% of the sales price of the repurchase agreement. Collateral consisting of Investment Grade Debt Securities is marked to market daily to ensure its market value is at least 105% of the sales price of the repurchase agreement. The investments in some repurchase agreements, pursuant to an exemptive order from the Securities and Exchange Commission, are through participation with other mutual funds, private accounts and certain non-registered investment companies managed by the investment advisor or its affiliates ("Joint repurchase agreements"). If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, the Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying security and loss of income. G. REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on certain share classes that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is accounted for as an addition to shares of beneficial interest by the Fund and is allocated among the share classes based on the relative net assets of each class. H. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. I. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. F-7 NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee based on the annual rate of the Fund's average net assets as follows:
AVERAGE NET ASSETS RATE -------------------------------------- First $500 million 0.75% -------------------------------------- From $500 million to $1 billion 0.65% -------------------------------------- From $1 billion to $2 billion 0.55% -------------------------------------- From $2 billion to $4 billion 0.45% -------------------------------------- From $4 billion to $6 billion 0.40% -------------------------------------- From $6 billion to $8 billion 0.375% -------------------------------------- Over $8 billion 0.35% --------------------------------------
For the period November 25, 2003 through October 31, 2004, the Fund paid advisory fees to AIM of $1,235,550. Prior to November 25, 2003, INVESCO Funds Group, Inc. ("IFG") served as investment advisor to the Fund under a prior investment advisory agreement. For the period November 1, 2003 through November 24, 2003, the Fund paid advisory fees under similar terms to IFG of $28,860. AIM has entered into a sub-advisory agreement with INVESCO Global Asset Management (N.A.) ("IGAM") whereby AIM pays INVESCO 40% of the fee paid by the Fund to AIM. AIM has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Total Annual Operating Expenses (excluding certain items discussed below) of Class A, Class B, Class C, Class R and Institutional Class shares to 2.10%, 2.75%, 2.75%, 2.25% and 1.75% of average daily net assets, respectively through October 31, 2004. Additionally, the advisor has agreed to further limit the Total Annual Fund Operating Expenses of Class B shares to 2.68% through November 23, 2004. In determining the advisor's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Fund Operating Expenses to exceed the caps stated above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to-day operations), or items designated as such by the Fund's Board of Trustees; (v) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the only expense offset arrangements from which the Fund benefits are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2004, AIM waived fees of $1,544. For the period November 25, 2003 through October 31, 2004, AIM reimbursed class-specific expenses of the Fund of $561, $657, $1,818, $0, $0 and $0 for Class A, Class B, Class C, Class R, Investor Class and Institutional Class shares, respectively. Prior to November 25, 2003, IFG reimbursed class-specific expenses of the Fund of $2,245, $3,512, $7,901, $0, $85 and $0 for Class A, Class B, Class C, Class R, Investor Class and Institutional Class shares, respectively. For the year ended October 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $25,854 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the period November 25, 2003 through October 31, 2004, AIM was paid $70,562 for such services. Prior to November 25, 2003, the Trust had an administrative services agreement with IFG. For the period November 1, 2003 through November 24, 2003, under similar terms, IFG was paid $2,387 for such services. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the year ended October 31, 2004, the Fund paid AISI $816,337 for Class A, Class B, Class C and Class R shares and $2,395 for Institutional Class shares and reimbursed fees for the Institutional Class shares of $0. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R, Investor Class and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C, Class R and Investor Class shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.50% of the average daily net assets of Class R shares and 0.25% of the average daily net assets of Investor Class shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, the Class A, Class B, Class C, Class R and F-8 Investor Class shares paid AIM Distributors $196,657, $223,210, $360,934, $7,603, and $122,109, respectively. AIM has reimbursed $15,826 of Investor Class expenses related to an overpayment of prior period Rule 12-b1 fees paid to INVESCO Distributors, Inc., the prior distributor and an AIM affiliate. Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. For the year ended October 31, 2004, AIM Distributors advised the Fund that it retained $19,919 in front-end sales commissions from the sale of Class A shares and $9,001, $1,609, $2,485 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of AIM, AISI, IGAM and/or AIM Distributors. NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2004. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME GAIN (LOSS) ------------------------------------------------------------------------------------------------------- Premier Portfolio $1,745,802 49,424,525 (47,676,048) -- 3,494,279 31,900 -- -------------------------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 10/31/04 INCOME* GAIN (LOSS) ----------------------------------------------------------------------------------------------------------- Premier Portfolio 982,871 195,949,610 (157,987,372) -- 38,945,109 133,106 -- ----------------------------------------------------------------------------------------------------------- Total $2,728,673 $245,374,135 $(205,663,420) $-- $42,439,388 $165,006 $-- -----------------------------------------------------------------------------------------------------------
* Dividend income is net of income rebate paid to security lending counterparties. NOTE 4--EXPENSE OFFSET ARRANGEMENT The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the year ended October 31, 2004, the Fund received credits in transfer agency fees of $648 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $648. NOTE 5--TRUSTEES' FEES Trustees' fees represent remuneration paid to each Trustee of the Trust who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2004, the Fund paid legal fees of $3,163 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 6--BORROWINGS Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan. The Fund did not borrow or lend under the facility during the year ended October 31, 2004. Effective December 9, 2003, the Fund became a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM F-9 which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan. The Fund did not borrow under the facility during the year ended October 31, 2004. The Fund had available a committed Redemption Line of Credit Facility ("LOC"), from a consortium of national banks, to be used for temporary or emergency purposes to meet redemption needs. The LOC permitted borrowings to a maximum of 10% of the net assets at value of the Fund. Each fund agreed to pay annual fees and interest on the unpaid principal balance based on prevailing market rates as defined in the agreement. The funds which were party to the LOC were charged a commitment fee of 0.10% on the unused balance of the committed line. The Fund did not borrow under the LOC during the period until its expiration date on December 3, 2003. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated at an amount equal to the Federal Funds rate plus 100 basis points. NOTE 7--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At October 31, 2004, securities with an aggregate value of $37,763,490 were on loan to brokers. The loans were secured by cash collateral of $38,945,109 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $133,106 for securities lending transactions. NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS DISTRIBUTIONS TO SHAREHOLDERS: The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003 --------------------------------------------------------- Distributions paid from ordinary income $489,876 $119,032 ---------------------------------------------------------
TAX COMPONENTS OF NET ASSETS: As of October 31, 2004, the components of net assets on a tax basis were as follows:
2004 ---------------------------------------------------- Undistributed ordinary income $ 1,097,793 ---------------------------------------------------- Unrealized appreciation -- investments 32,757,810 ---------------------------------------------------- Temporary book/tax differences (47,091) ---------------------------------------------------- Capital loss carryforward (5,165,268) ---------------------------------------------------- Shares of beneficial interest 155,143,928 ---------------------------------------------------- Total net assets $183,787,172 ----------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to tax deferral of losses on wash sales, the recognition for tax purposes of unrealized gains on passive foreign investment companies and the treatment of certain corporate actions. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $7,621. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan expenses. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited as of October 31, 2004 to utilizing $3,316,378 of capital loss carryforward in the fiscal year ended October 31, 2005. F-10 The Fund utilized $9,363,187 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2004 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* --------------------------------------------- October 31, 2008 $1,116,331 --------------------------------------------- October 31, 2009 3,338,725 --------------------------------------------- October 31, 2010 710,212 --------------------------------------------- Total capital loss carryforward $5,165,268 ---------------------------------------------
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. To the extent that unrealized gains as of November 24, 2003, the date of the reorganization of AIM International Core Equity Fund into the AIM International Core Equity Fund (formerly known as the INVESCO International Core Equity Fund), are realized on securities held in each fund at such date, the capital loss carryforward may be further limited for up to five years from the date of the reorganization. NOTE 9--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 year ended October 31, 2004 was $48,829,366 and $56,888,867, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $39,161,687 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (6,411,498) ------------------------------------------------------------------------------ Net unrealized appreciation of investment securities $32,750,189 ------------------------------------------------------------------------------
Cost of investments for tax purposes is $189,880,722. NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions, passive foreign investment company reclassifications and reorganization transaction, on October 31, 2004, undistributed net investment income (loss) was decreased by $41,348, undistributed net realized gain (loss) was increased by $37,421 and shares of beneficial interest increased by $3,927. Further, as a result of tax deferrals acquired in the reorganization of AIM International Core Equity Fund into the Fund, undistributed net investment income (loss) was decreased by $24,069, undistributed net realized gain (loss) was decreased by $11,477,811 and shares of beneficial interest increased by $11,501,880. This reclassification had no effect on the net assets of the Fund. F-11 NOTE 11--SHARE INFORMATION The Fund currently offers six different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares, Investor Class shares and Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R, Investor Class and Institutional Class shares are sold at net asset value. Under some circumstances, Class A and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING /(a)/ -------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------- 2004 2003 ------------------------ ------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------------------------------------------------- Sold: Class A 2,187,817 $ 21,070,438 11,803,712 $ 91,708,713 -------------------------------------------------------------------------------------------------------------- Class B 726,386 6,786,146 94,870 745,286 -------------------------------------------------------------------------------------------------------------- Class C 607,932 5,844,662 5,685,940 41,466,394 -------------------------------------------------------------------------------------------------------------- Class R/(b)/ 111,406 1,094,858 -- -- -------------------------------------------------------------------------------------------------------------- Investor Class 1,427,600 14,079,460 2,285,934 17,798,452 -------------------------------------------------------------------------------------------------------------- Institutional Class/(c)/ 1,571,660 15,727,981 -- -- -------------------------------------------------------------------------------------------------------------- Issued as reinvestment of dividends: Class A 17,683 156,851 735 6,423 -------------------------------------------------------------------------------------------------------------- Class B 5,564 49,244 113 988 -------------------------------------------------------------------------------------------------------------- Class C 6,021 52,143 -- -- -------------------------------------------------------------------------------------------------------------- Class R/(b)/ 422 3,742 -- -- -------------------------------------------------------------------------------------------------------------- Investor Class 11,868 106,340 9,937 87,741 -------------------------------------------------------------------------------------------------------------- Issued in connection with acquisitions:/(d)/ Class A 5,517,421 48,731,245 -- -- -------------------------------------------------------------------------------------------------------------- Class B 2,132,563 18,784,595 -- -- -------------------------------------------------------------------------------------------------------------- Class C 4,224,998 36,433,079 -- -- -------------------------------------------------------------------------------------------------------------- Class R/(b)/ 127,020 1,121,998 -- -- -------------------------------------------------------------------------------------------------------------- Automatic conversion of Class B shares to Class A shares: Class A 169,160 1,680,849 -- -- -------------------------------------------------------------------------------------------------------------- Class B (170,086) (1,680,849) -- -- -------------------------------------------------------------------------------------------------------------- Reacquired:/(e)/ Class A (2,363,667) (23,262,195) (11,974,236) (93,606,286) -------------------------------------------------------------------------------------------------------------- Class B (477,775) (4,653,991) (40,820) (326,775) -------------------------------------------------------------------------------------------------------------- Class C (1,576,001) (15,078,644) (5,535,854) (40,560,831) -------------------------------------------------------------------------------------------------------------- Class R/(b)/ (37,343) (371,198) -- -- -------------------------------------------------------------------------------------------------------------- Investor Class (2,585,961) (25,621,003) (2,506,238) (19,185,540) -------------------------------------------------------------------------------------------------------------- Institutional Class/(c)/ (16,410) (166,035) -- -- -------------------------------------------------------------------------------------------------------------- 11,618,278 $100,889,716 (175,907) $ (1,865,435) --------------------------------------------------------------------------------------------------------------
/(a)/There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and in the aggregate it owns 13% of the outstanding shares of the Fund. AIM Distributors 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 shareholder is also owned beneficially. 5% of the outstanding shares of the Fund are owned by affiliated mutual funds. Affiliated mutual funds are mutual funds that are advised by AIM. /(b)/Class R shares commenced sales on November 24, 2003. /(c)/Institutional Class shares commenced sales on April 30, 2004. /(d)/As of the opening of business on November 24, 2003, the AIM International Core Equity Fund (formerly INVESCO International Core Equity Fund) acquired all of the net assets of AIM International Core Equity Fund pursuant to a plan of reorganization approved by the Trustees of the Fund on June 9, 2003 and AIM International Core Equity Fund shareholders on October 28, 2003. The acquisition was accomplished by a tax-free exchange of 12,002,001 shares of the Fund for 7,980,438 shares of AIM International Core Equity Fund outstanding as of the close of business November 21, 2003. AIM International Core Equity Fund net assets at that date of $105,070,917 including $15,892,958 of unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $59,505,921. /(e)/Amount is net of redemption fees of $1,154, $454, $725, $32, $1,030 and $86 for Class A, Class B, Class C, Class R, Investor Class and Institutional Class shares for 2004 and $406, $46, $317 and $6,084 for Class A, Class B, Class C and Investor Class shares for 2003, respectively. F-12 NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A --------------------------------------- MARCH 28, 2002 YEAR ENDED (DATE SALES OCTOBER 31, COMMENCED) TO ----------------------------- OCTOBER 31, 2004 2003 2002 ---------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.74 $ 7.31 $ 8.96 ---------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.09/(a)/ 0.07/(a)/ 0.01 ---------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.72 1.39 (1.66) ---------------------------------------------------------------------------------------------------------------- Total from investment operations 1.81 1.46 (1.65) ---------------------------------------------------------------------------------------------------------------- Less dividends from net investment income (0.03) (0.03) -- ---------------------------------------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interests 0.00 0.00 0.00 ---------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.52 $ 8.74 $ 7.31 ---------------------------------------------------------------------------------------------------------------- Total return/(b)/ 20.78% 19.96% (18.42)% ---------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $60,603 $2,033 $ 2,944 ---------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 1.84%/(c)(d)/ 1.87% 1.48%/(e)/ ---------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 0.94%/(c)/ 0.91% 0.47%/(e)/ ---------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(f)/ 69% 51% 44% ----------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. /(c)/Ratios are based on average daily net assets of $56,187,616. /(d)/After fee waivers and/or expense reimbursements. Ratio of expense to average net assets prior to fee waivers and/or expense reimbursements was 1.86%. /(e)/Annualized. /(f)/Not annualized for periods less than one year. F-13 NOTE 12--FINANCIAL HIGHLIGHTS (continued)
CLASS B ------------------------------------ MARCH 28, 2002 YEAR ENDED (DATE SALES OCTOBER 31, COMMENCED) TO ------------------------- OCTOBER 31, 2004 2003 2002 -------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.72 $ 7.31 $ 8.96 -------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.02/(a)/ 0.00/(a)/ (0.01)/(a)/ -------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.71 1.43 (1.64) -------------------------------------------------------------------------------------------------------------- Total from investment operations 1.73 1.43 (1.65) -------------------------------------------------------------------------------------------------------------- Less dividends from net investment income (0.02) (0.02) -- -------------------------------------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interests 0.00 0.00 0.00 -------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.43 $ 8.72 $ 7.31 -------------------------------------------------------------------------------------------------------------- Total return/(b)/ 19.92% 19.50% (18.42)% -------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $23,812 $ 573 $ 84 -------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.53%/(c)/ 2.75% 2.60%/(d)/ -------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.57%/(c)/ 4.13% 2.60%/(d)/ -------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.25%/(c)/ 0.03% (0.14)%/(d)/ -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(e)/ 69% 51% 44% --------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. /(c)/Ratios are based on average daily net assets of $22,321,022. /(d)/Annualized. /(e)/Not annualized for periods less than one year. F-14 NOTE 12--FINANCIAL HIGHLIGHTS (continued)
CLASS C --------------------------------------------------------------- FEBRUARY 14, 2000 (DATE SALES YEAR ENDED OCTOBER 31, COMMENCED) TO ------------------------------------------- OCTOBER 31, 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.53 $ 7.16 $ 8.06 $ 11.14 $12.06 ----------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.04/(a)/ 0.00/(a)/ (0.02) (0.02) (0.04)/(a)/ ----------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.67 1.37 (0.88) (2.12) (0.88) ----------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.71 1.37 (0.90) (2.14) (0.92) ----------------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.02) -- -- (0.00) -- ----------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- -- (0.94) -- ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.02) -- -- (0.94) -- ----------------------------------------------------------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interests 0.00 0.00 0.00 0.00 0.00 ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.22 $ 8.53 $ 7.16 $ 8.06 $11.14 ----------------------------------------------------------------------------------------------------------------------------------- Total return/(b)/ 20.13% 19.13% (11.17)% (20.75)% (7.63)% ----------------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $36,490 $2,608 $ 1,115 $ 1,272 $1,082 ----------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.41%/(c)/ 2.75% 2.75% 2.76% 2.47%/(d)/ ----------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.46%/(c)/ 4.14% 3.52% 3.02% 2.47%/(d)/ ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.37%/(c)/ 0.03% (0.43)% (0.62)% (0.56)%/(d)/ ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate/(e)/ 69% 51% 44% 54% 59% -----------------------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. /(c)/Ratios are based on average daily net assets of $36,093,446. /(d)/Annualized. /(e)/Not annualized for periods less than one year. F-15 NOTE 12--FINANCIAL HIGHLIGHTS (continued)
INVESTOR CLASS ------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------ 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.83 $ 7.35 $ 8.17 $ 11.16 $ 11.23 --------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.09/(a)/ 0.06/(a)/ 0.05 0.03 (0.01) --------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.75 1.44 (0.87) (2.07) 0.27 --------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.84 1.50 (0.82) (2.04) 0.26 --------------------------------------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.03) (0.02) -- (0.01) (0.05) --------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- -- (0.94) (0.28) --------------------------------------------------------------------------------------------------------------------------- Total distributions (0.03) (0.02) -- (0.95) (0.33) --------------------------------------------------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interests 0.00 0.00 0.00 0.00 0.00 --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.64 $ 8.83 $ 7.35 $ 8.17 $ 11.16 --------------------------------------------------------------------------------------------------------------------------- Total return/(b)/ 20.84% 20.42% (10.04)% (19.74)% 2.66% --------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $44,345 $46,920 $40,620 $46,562 $61,708 --------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.84%/(c)/ 2.00% 1.99% 1.89% 2.04% --------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.89%/(c)/ 2.26% 1.99% 1.89% 2.04% --------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.94%/(c)/ 0.78% 0.42% 0.12% (0.37)% --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 69% 51% 44% 54% 59% ---------------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. /(c)/Ratios are based on average daily net assets of $48,843,698. F-16 NOTE 12--FINANCIAL HIGHLIGHTS (continued)
CLASS R ---------------- NOVEMBER 24, 2003 (DATE SALES COMMENCED) TO OCTOBER 31, 2004 --------------------------------------------------------------------------- Net asset value, beginning of period $ 8.90 --------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.08/(a)/ --------------------------------------------------------------------------- Net gains on securities (both realized and unrealized) 1.56 --------------------------------------------------------------------------- Total from investment operations 1.64 --------------------------------------------------------------------------- Less dividends from net investment income (0.03) --------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 --------------------------------------------------------------------------- Net asset value, end of period $10.51 --------------------------------------------------------------------------- Total return/(b)/ 18.49% --------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $2,118 --------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.91%/(c)/ --------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.93%/(c)/ --------------------------------------------------------------------------- Ratio of net investment income to average net assets 0.87%/(c)/ --------------------------------------------------------------------------- Portfolio turnover rate/(d)/ 69% ---------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(c)/Ratios are annualized and based on average daily net assets of $1,622,463. /(d)/Not annualized for periods less than one year.
INSTITUTIONAL CLASS ------------------- APRIL 30, 2004 (DATE SALES COMMENCED) TO OCTOBER 31, 2004 ----------------------------------------------------------------------------- Net asset value, beginning of period $ 9.78 ----------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.09/(a)/ ----------------------------------------------------------------------------- Net gains on securities (both realized and unrealized) 0.69 ----------------------------------------------------------------------------- Total from investment operations 0.78 ----------------------------------------------------------------------------- Less dividends from net investment income -- ----------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 ----------------------------------------------------------------------------- Net asset value, end of period $ 10.56 ----------------------------------------------------------------------------- Total return/(b)/ 7.97% ----------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $16,421 ----------------------------------------------------------------------------- Ratio of expenses to average net assets 1.07%/(c)/ ----------------------------------------------------------------------------- Ratio of net investment income to average net assets 1.71%/(c)/ ----------------------------------------------------------------------------- Portfolio turnover rate/(d)/ 69% -----------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Not annualized for periods less than one year. /(c)/Ratios are annualized and based on average daily net assets of $7,165,000. /(d)/Not annualized for periods less than one year. F-17 NOTE 13--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. The mutual fund industry as a whole is currently subject to regulatory inquiries and litigation related to a wide range of issues. These issues include, among others, market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the distributor of the retail AIM Funds and a wholly owned subsidiary of AIM, reached final settlements with the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), the Colorado Division of Securities ("CODS") and the Secretary of State of the State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. In addition, as described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. Additional regulatory inquiries related to the above or other issues also may be received by the AIM Funds, IFG, AIM and/or related entities and individuals in the future. As a result of the matters discussed below, investors in the AIM Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds. Settled Enforcement Actions and Investigations Related to Market Timing On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, announced that final settlements had been reached with the SEC, the NYAG, the COAG and the Secretary of State of Georgia to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. A final settlement also has been reached with the Colorado Division of Securities ("CODS") with respect to this matter. In their enforcement actions and investigations, these regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that IFG and AIM had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG, AIM and ADI breached various Federal and state securities, business and consumer protection laws. Under the terms of the settlements, IFG, AIM and ADI consent to the entry of settlement orders or assurances of discontinuance, as applicable, by the regulators containing certain terms, some of which are described below, without admitting or denying any wrongdoing. Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of the $325 million total payment, half will be paid on or before December 31, 2004 and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties. The entire $50 million payment by AIM and ADI has been paid. The entire $325 million IFG settlement payment will be available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant to be appointed under the settlements. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees. IFG will also pay $1.5 million to the COAG to be used for investor education purposes and to reimburse the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the Secretary of State of Georgia to be used for investor education purposes and to reimburse the Secretary of State for actual costs. None of the costs of the settlements will be borne by the AIM Funds or by Fund shareholders. Under the terms of the settlements, AIM will make certain governance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant, a corporate ombudsman and, as stated above, an independent distribution consultant. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected. On October 8, 2004, the SEC announced that it had settled a market timing enforcement action against Raymond R. Cunningham, the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG. As part of the settlement, the SEC ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from associating with an investment advisor, broker, dealer or investment company for a period of two years and further prohibited him from serving as an officer or director of an investment advisor, broker, dealer or investment company for a period of five years. On August 31, 2004, the SEC announced that it had settled market timing enforcement actions against Timothy J. Miller, the former chief investment officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former national sales manager of IFG, and Michael D. Legoski, a former assistant vice president in IFG's F-18 NOTE 13--LEGAL PROCEEDINGS (continued) sales department. As part of the settlements, the SEC ordered Messrs. Miller, Kolbe and Legoski to pay $1 in restitution each and civil penalties in the amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC prohibited each of them from associating with an investment advisor or investment company for a period of one year, prohibited Messrs. Miller and Kolbe from serving as an officer or director of an investment advisor or investment company for three years and two years, respectively, and prohibited Mr. Legoski from associating with a broker or dealer for a period of one year. As referenced by the SEC in the SEC's settlement order, one former officer of ADI and one current officer of AIM (who has taken a voluntary leave of absence) have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to market timing activity in the AIM Funds. At the request of the trustees of the AIM Funds, AMVESCAP has agreed to pay all of the expenses incurred by such Funds related to the market timing investigations, including expenses incurred in connection with the regulatory complaints against IFG alleging market timing and the market timing investigations with respect to IFG and AIM. The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on the AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the ongoing matters described below may have on AIM, ADI or the Fund. Ongoing Regulatory Inquiries Concerning IFG and AIM IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more such Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, and investments in securities of other registered investment companies. These regulators include the SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. IFG and certain of these other parties also have received more limited inquiries from the United States Department of Labor ("DOL") and the United States Attorney's Office for the Southern District of New York, some of which concern one or more of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries. AIM, certain related entities, certain of their current and former officers and/or certain of the AIM Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the SEC, the NASD, the DOL, the Internal Revenue Service, the New York Stock Exchange, the United States Attorney's Office for the Southern District of New York, the United States Attorney's Office for the Central District of California, the United States Attorney's Office for the District of Massachusetts, the Massachusetts Securities Division and the U.S. Postal Inspection Service, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries. Private Civil Actions Alleging Market Timing Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal and state securities laws; (ii) violation of various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act purportedly brought on behalf of F-19 NOTE 13--LEGAL PROCEEDINGS (continued) participants in AMVESCAP's 401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. Private Civil Actions Alleging Improper Use of Fair Value Pricing Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM) alleging that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc., ADI and/or INVESCO Distributors, Inc.) alleging that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. Private Civil Actions Alleging Improper Charging of Distribution Fees on Closed Funds or Share Classes Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) alleging that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees. Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. F-20 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of AIM International Core Equity Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM International Core Equity Fund (formerly known as INVESCO International Core Equity Fund, hereafter referred to as the "Fund") at October 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP December 20, 2004 Houston, Texas F-21 REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED) For the fiscal year ended October 31, 2004, the amount of income received by the fund from sources within foreign countries and possessions of the United States was $0.2782 (representing a total of $5,050,420). Of the foreign source income, $0.1736 per share is considered qualified dividend income. Foreign source income with the required adjustments for qualified dividends is $0.1793 per share. The amount of taxes paid by the fund to such countries for the fiscal year ended October 31, 2004 was $0.0336 per share (representing a total of $609,059). The following table provides a breakdown by country of ordinary income received and foreign taxes paid by the Fund during the fiscal year ended October 31, 2004. The per share amount is based on shareholders of record on December 16, 2004.
ADJUSTED FOREIGN FOREIGN FOREIGN FOREIGN SOURCE TAX QUALIFIED SOURCE COUNTRY INCOME % PAID % DIVIDEND % INCOME % ------- -------- ------- ---------- -------- Australia 3.56% 3.55% 2.43% 4.18% ---------------------------------------------------- Canada 0.60% 0.58% 0.18% 0.83% ---------------------------------------------------- Denmark 3.70% 4.61% 1.63% 4.85% ---------------------------------------------------- Finland 5.41% 6.72% 0.14% 8.31% ---------------------------------------------------- France 6.16% 6.23% 3.90% 7.40% ---------------------------------------------------- Germany 2.99% 3.73% 3.59% 2.66% ---------------------------------------------------- Hong Kong 1.16% 0.00% 0.00% 1.80% ---------------------------------------------------- Italy 2.93% 3.65% 0.00% 4.55% ---------------------------------------------------- Japan 8.85% 5.45% 14.07% 5.96% ---------------------------------------------------- Mexico 2.06% 0.00% 3.31% 1.38% ---------------------------------------------------- The Netherlands 13.41% 16.88% 12.69% 13.81% ---------------------------------------------------- Norway 1.43% 1.78% 0.00% 2.22% ---------------------------------------------------- Portugal 0.98% 1.01% 1.57% 0.65% ---------------------------------------------------- South Korea 4.90% 6.91% 2.71% 6.10% ---------------------------------------------------- Spain 3.92% 4.84% 5.57% 3.01% ---------------------------------------------------- Sweden 6.77% 8.42% 7.99% 6.10% ---------------------------------------------------- Switzerland 6.55% 2.02% 6.00% 6.85% ---------------------------------------------------- United Kingdom 24.62% 23.62% 34.22% 19.34% ---------------------------------------------------- Total 100.00% 100.00% 100.00% 100.00% ----------------------------------------------------
OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any. NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ Interested Persons ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ Robert H. Graham/1/ -- 1946 1991 Director and Chairman, A I M Management Group Inc. None Trustee and President (financial services holding company); and Director and Vice Chairman, AMVESCAP PLC and Chairman, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: President and Chief Executive Officer, A I M Management Group Inc.; Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director and Chairman, A I M Capital Management, Inc. (registered investment advisor), A I M Distributors, Inc. (registered broker dealer), AIM Investment Services, Inc., (registered transfer agent), and Fund Management Company (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- Managed Products ------------------------------------------------------------------------------------------------------------------------------------ Mark H. Williamson/2/ -- 1951 2003 Director, President and Chief Executive Officer, None Trustee and Executive Vice A I M Management Group Inc. (financial services President holding company); Director, Chairman and President, A I M Advisors, Inc. (registered investment advisor); Director, A I M Capital Management, Inc. (registered investment advisor) and A I M Distributors, Inc. (registered broker dealer); Director and Chairman, AIM Investment Services, Inc. (registered transfer agent), Fund Management Company (registered broker dealer) and INVESCO Distributors Inc. (registered broker dealer); and Chief Executive Officer, AMVESCAP PLC -- AIM Division (parent of AIM and a global investment management firm) Formerly: Director, Chairman, President and Chief Executive Officer, INVESCO Funds Group, Inc.; President and Chief Executive Officer, INVESCO Distributors, Inc.; Chief Executive Officer, AMVESCAP PLC -- Managed Products; Chairman and Chief Executive Officer of NationsBanc Advisors, Inc.; and Chairman of NationsBanc Investments, Inc. ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ Independent Trustees ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ Bruce L. Crockett/3/-- 1944 1992 Chairman, Crockett Technology Associates ACE Limited (insurance Trustee and Chair (technology consulting company) company); and Captaris, Inc.(unified messaging provider) ------------------------------------------------------------------------------------------------------------------------------------ Bob R. Baker -- 1936 2003 Retired None Trustee Formerly: President and Chief Executive Officer, AMC Cancer Research Center; and Chairman and Chief Executive Officer, First Columbia Financial Corporation ------------------------------------------------------------------------------------------------------------------------------------ Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. Trustee Formerly: Partner, law firm of Baker & McKenzie (registered investment company) ------------------------------------------------------------------------------------------------------------------------------------ James T. Bunch -- 1942 2003 Co-President and Founder, Green, Manning & Bunch None Trustee Ltd., (investment banking firm); and Director, Policy Studies, Inc. and Van Gilder Insurance Corporation ------------------------------------------------------------------------------------------------------------------------------------ Albert R. Dowden -- 1941 2000 Director of a number of public and private Cortland Trust, Inc. Trustee business corporations, including the Boss Group (Chairman)(registered Ltd. (private investment and management) and investment company); Magellan Insurance Company Annuity and Life Re Formerly: Director, President and Chief Executive (Holdings), Ltd. Officer, Volvo Group North America, Inc.; Senior (insurance company) Vice President, AB Volvo; and director of various affiliated Volvo companies ------------------------------------------------------------------------------------------------------------------------------------ Edward K. Dunn, Jr. -- 1935 1998 Retired None Trustee Formerly: Chairman, Mercantile Mortgage Corp.; President and Chief Operating Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares Corp. ------------------------------------------------------------------------------------------------------------------------------------ Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Administaff, and Trustee Group, Inc. (government affairs company) Discovery Global and Texana Timber LP (sustainable forestry company) Education Fund (non-profit) ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------
/1/ Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to October 4, 2004, Mr. Graham served as Chairman of the Board of Trustees of the Trust. /2/ Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. /3/ Mr. Crockett was elected Chair of the Board of Trustees of the Trust effective October 4, 2004. TRUSTEES AND OFFICERS (continued) As of October 31, 2004 The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any. NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS HELD BY TRUSTEE ----------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Naftalis and Cortland Trust, Inc. Trustee Frankel LLP (registered investment company) ---------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services (California) General Chemical Group, Trustee Formerly: Associate Justice of the California Inc. Court of Appeals ----------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None Trustee ----------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee ---------------------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee ----------------------------------------------------------------------------------------------------------------------------------- Louis S. Sklar -- 1939 1991 Executive Vice President, Development and None Trustee Operations Hines Interests Limited Partnership (real estate development company) ----------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee ----------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- Other Officers ----------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley/4/ -- 1959 2004 Senior Vice President, A I M Management Group Inc. N/A Senior Vice President and (financial services holding company); Senior Vice Chief Compliance Officer President and Chief Compliance Officer, A I M Advisors, Inc.; Vice President and Chief Compliance Officer, A I M Capital Management, Inc. and A I M Distributors, Inc.; and Vice President, AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds. ----------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 Director, Senior Vice President, Secretary and N/A Senior Vice President, Secretary and General Counsel, A I M Management Group Inc. Chief Legal Officer (financial services holding company) and A I M Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., and AIM Investment Services, Inc.; Director, Vice President and General Counsel, Fund Management Company and Senior Vice President, A I M Distributors, Inc. Formerly: Senior Vice President and General Counsel, Liberty Financial Companies, Inc.; and Senior Vice President and General Counsel, Liberty Funds Group, LLC and Vice President A I M Distributors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Robert G. Alley -- 1948 1994 Managing Director, Chief Fixed Income Officer and N/A Vice President Senior Investment Officer, A I M Capital Management, Inc., and Vice President, A I M Advisors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Stuart W. Coco -- 1955 2002 Managing Director and Director of Money Market N/A Vice President Research and Special Projects, A I M Capital Management, Inc.; and Vice President, A I M Advisors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M Advisors, N/A Vice President and Treasurer Inc. Formerly, Senior Vice President, AIM Investment Services, Inc.; and Vice President, AIM Distributors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Director of Cash Management, Managing Director and N/A Vice President Chief Cash Management Officer, A I M Capital Management, Inc.; Director and President, Fund Management Company; and Vice President, A I M Advisors, Inc. ----------------------------------------------------------------------------------------------------------------------------------- Edgar M. Larsen -- 1940 1999 Executive Vice President, A I M Management Group, N/A Vice President Inc.; Senior Vice President, A I M Advisors, Inc., and President, Director of Investments, Chief Executive Officer and Chief Investment Officer, A I M Capital Management, Inc. Formerly: Director of AIM Advisors, Inc. and A I M Management Group Inc., A I M Advisors, Inc.; and Director and Chairman, A I M Capital Management, Inc. ----------------------------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------------------------
/4/ Ms. Brinkley was elected Senior Vice President and Chief Compliance Officer of the Trust effective September 20, 2004. The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246.
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza. A I M Advisors, Inc A I M Distributors, Inc. PricewaterhouseCoopers LLP Suite 100 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street Houston, TX 77046-1173 Suite 100 Suite 100 Suite 2900 Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE DIRECTORS TRANSFER AGENT CUSTODIAN Ballard Spahr Kramer, Levin, Naftalis & AIM Investment Services, State Street Bank and Trust Inc. Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Company 1735 Market Street, 51st Floor 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street Philadelphia, PA 19103-7599 New York, NY 10022-3852 Boston, MA 02110-2801
SUB-ADVISOR INVESCO Global Asset Management (N.A.), Inc. One Midtown Plaza 1360 Peachtree Street, N.E Suite 100 Atlanta, GA 30309
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED) Of ordinary dividends paid to shareholders during the Fund's tax year ended October 31, 2004, 0% is eligible for the dividends received deduction for corporations. For its tax year ended October 31, 2004, the Fund designates 0%, or the maximum allowable, of its dividend distribution as qualified dividend income. Your actual amount of qualified dividend income for the calendar year will be reported on Form 1099-DIV. You should consult your tax advisor regarding treatment of these amounts. DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund TAXABLE AIM Balanced Fund* AIM Developing Markets Fund AIM Floating Rate Fund AIM Basic Balanced Fund* AIM European Growth Fund AIM High Yield Fund AIM Basic Value Fund AIM European Small Company Fund/5/ AIM Income Fund AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Intermediate Government Fund AIM Capital Development Fund AIM Global Equity Fund/6/ AIM Limited Maturity Treasury Fund AIM Charter Fund AIM Global Growth Fund AIM Money Market Fund AIM Constellation Fund AIM Global Value Fund AIM Short Term Bond Fund AIM Core Stock Fund/1/ AIM International Core Equity Fund/1/ AIM Total Return Bond Fund AIM Dent Demographic Trends Fund AIM International Emerging Growth Fund/7/ Premier U.S. Government Money Portfolio/1/ AIM Diversified Dividend Fund AIM International Growth Fund AIM Dynamics Fund/1/ AIM Trimark Fund TAX-FREE AIM Emerging Growth Fund AIM High Income Municipal Fund AIM Large Cap Basic Value Fund SECTOR EQUITY AIM Municipal Bond Fund AIM Large Cap Growth Fund AIM Advantage Health Sciences Fund/1/ AIM Tax-Exempt Cash Fund AIM Libra Fund AIM Energy Fund/1/ AIM Tax-Free Intermediate Fund AIM Mid Cap Basic Value Fund AIM Financial Services Fund/1/ AIM Mid Cap Core Equity Fund/2/ AIM Global Health Care Fund AIM ALLOCATION SOLUTIONS AIM Mid Cap Growth Fund AIM Gold & Precious Metals Fund/1/ AIM Aggressive Allocation Fund AIM Mid Cap Stock Fund/1/ AIM Health Sciences Fund/1/ AIM Conservative Allocation Fund AIM Opportunities I Fund AIM Leisure Fund/1/ AIM Moderate Allocation Fund AIM Opportunities II Fund AIM Multi-Sector Fund/1/ AIM Opportunities III Fund AIM Real Estate Fund AIM Premier Equity Fund AIM Technology Fund/1/ AIM S&P 500 Index Fund/1/ AIM Utilities Fund/1/ AIM Select Equity Fund AIM Small Cap Equity Fund/3/ ==================================================================================== AIM Small Cap Growth Fund/4/ CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. AIM Small Company Growth Fund/1/ FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR AIM Total Return Fund*/1/ FINANCIAL ADVISOR AND READ IT THOROUGHLY BEFORE INVESTING. AIM Trimark Endeavor Fund ==================================================================================== AIM Trimark Small Companies Fund AIM Weingarten Fund
* Domestic equity and income fund (1) The following name changes became effective October 15, 2004: INVESCO Advantage Health Sciences Fund to AIM Advantage Health Sciences Fund, INVESCO Core Equity Fund to AIM Core Stock Fund, INVESCO Dynamics Fund to AIM Dynamics Fund, INVESCO Energy Fund to AIM Energy Fund, INVESCO Financial Services Fund to AIM Financial Services Fund, INVESCO Gold & Precious Metals Fund to AIM Gold & Precious Metals Fund, INVESCO Health Sciences Fund to AIM Health Sciences Fund, INVESCO International Core Equity Fund to AIM International Core Equity Fund, INVESCO Leisure Fund to AIM Leisure Fund, INVESCO Mid-Cap Growth Fund to AIM Mid Cap Stock Fund, INVESCO Multi-Sector Fund to AIM Multi-Sector Fund, INVESCO S&P 500 Index Fund to AIM S&P 500 Index Fund, INVESCO Small Company Growth Fund to AIM Small Company Growth Fund, INVESCO Technology Fund to AIM Technology Fund, INVESCO Total Return Fund to AIM Total Return Fund, INVESCO U.S. Government Money Fund to Premier U.S. Government Money Portfolio, INVESCO Utilities Fund to AIM Utilities Fund. (2) As of the close of business on February 27, 2004, AIM Mid Cap Core Equity Fund is available to new investors on a limited basis. For information on who may continue to invest in AIM Mid Cap Core Equity Fund, please contact your financial advisor. (3) Effective December 13, 2004, AIM Small Cap Equity Fund is open to all investors. (4) AIM Small Cap Growth Fund was closed to most investors on March 18, 2002. For information on who may continue to invest in AIM Small Cap Growth Fund, please contact your financial advisor. (5) AIM European Small Company Fund will close to new investors when net assets reach $500 million. (6) Effective March 31, 2004, AIM Global Trends Fund was renamed AIM Global Equity Fund. (7) AIM International Emerging Growth Fund will close to new investors when net assets reach $500 million. If used after January 20, 2005, this report must be accompanied by a fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. AIM Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $132 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $363 billion in assets under management. Data as of September 30, 2004. AIMinvestments.com I-ICE-AR-1 A I M Distributors, Inc. [Your goals. Our solutions.] - Registered Trademark - Mutual Retirement Annuities College Separately Offshore Alternative Cash Funds Products Savings Managed Products Investments Management Plans Accounts [AIM Investments Logo] - Registered Trademark - ITEM 2. CODE OF ETHICS. As of the end of the period covered by this report, the Registrant had adopted a code of ethics (the "Code") that applies to the Registrant's principal executive officer ("PEO") and principal financial officer ("PFO"). There were no amendments to the Code during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report. . ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees has determined that the Registrant has at least one audit committee financial expert serving on its Audit Committee. The Audit Committee financial expert is Prema Mathai-Davis. Dr. Mathai-Davis is "independent" within the meaning of that term as used in Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. FEES BILLED BY PWC RELATED TO THE REGISTRANT PWC billed the Registrant aggregate fees for services rendered to the Registrant for the last two fiscal years as follows:
Percentage of Fees Percentage of Fees Billed Applicable to Billed Applicable to Non-Audit Services Non-Audit Services Provided for fiscal Provided for fiscal Fees Billed for year end 2004 Fees Billed for Services year end 2003 Pursuant Services Rendered to Pursuant to Waiver of Rendered to the to Waiver of the Registrant for Pre-Approval Registrant for fiscal Pre-Approval fiscal year end 2004 Requirement(1) year end 2003 Requirement(1)(2) -------------------- ------------------- --------------------- ------------------- Audit Fees $ 213,253 N/A $ 229,726 N/A Audit-Related Fees $ 0 0% $ 0 0% Tax Fees(3) $ 50,567 0% $ 49,317 0% All Other Fees $ 0 0% $ 0 0% -------------------- --------------------- Total Fees $ 263,820 0% $ 279,043 0%
PWC billed the Registrant aggregate non-audit fees of $50,567 for the fiscal year ended 2004, and $49,317 for the fiscal year ended 2003, for non-audit services rendered to the Registrant. -------------------------------------------------------------------------------- (1) With respect to the provision of non-audit services, the pre-approval requirement is waived pursuant to a de minimis exception if (i) such services were not recognized as non-audit services by the Registrant at the time of engagement, (ii) the aggregate amount of all such services provided is no more than 5% of the aggregate audit and non-audit fees paid by the Registrant to PWC during a fiscal year; and (iii) such services are promptly approved by the Registrant's Audit Committee prior to the completion of the audit by the Audit Committee. (2) Prior to May 6, 2003, the Registrant's Audit Committee was not required to pre-approve non-audit services. Therefore, the percentage of fees shown in this column only represents fees billed for non-audit services rendered after May 6, 2003, pursuant to a waiver of the pre-approval requirement. (3) Tax fees for the fiscal year end October 31, 2004 includes fees billed for reviewing tax returns and consultation services. Tax fees for fiscal year end October 31, 2003 includes fees billed for reviewing tax returns. FEES BILLED BY PWC RELATED TO AIM AND AIM AFFILIATES PWC billed AIM Advisors, Inc. ("AIM"), the Registrant's adviser, and any entity controlling, controlled by or under common control with AIM that provides ongoing services to the Registrant ("AIM Affiliates") aggregate fees for pre-approved non-audit services rendered to AIM and AIM Affiliates for the last two fiscal years as follows:
Fees Billed for Non- Fees Billed for Non- Audit Services Percentage of Fees Audit Services Percentage of Fees Rendered to AIM and Billed Applicable to Rendered to AIM and Billed Applicable to AIM Affiliates for Non-Audit Services AIM Affiliates for Non-Audit Services fiscal year end 2004 Provided for fiscal year fiscal year end 2003 Provided for fiscal year That Were Required end 2004 Pursuant to That Were Required end 2003 Pursuant to to be Pre-Approved Waiver of Pre- to be Pre-Approved Waiver of Pre- by the Registrant's Approval by the Registrant's Approval Audit Committee Requirement(1) Audit Committee(2) Requirement(1)(3) -------------------- -------------------- -------------------- -------------------- Audit-Related Fees $ 0 0% $ 0 0% Tax Fees $ 0 0% $ 0 0% All Other Fees $ 0 0% $ 0 0% -------------------- -------------------- Total Fees(4) $ 0 0% $ 0 0%
-------------------------------------------------------------------------------- (1) With respect to the provision of non-audit services, the pre-approval requirement is waived pursuant to a de minimis exception if (i) such services were not recognized as non-audit services by the Registrant at the time of engagement, (ii) the aggregate amount of all such services provided is no more than 5% of the aggregate audit and non-audit fees paid by the Registrant, AIM and AIM Affiliates to PWC during a fiscal year; and (iii) such services are promptly approved by the Registrant's Audit Committee prior to the completion of the audit by the Audit Committee. (2) Prior to May 6, 2003, the Registrant's Audit Committee was not required to pre-approve non-audit services. Therefore, the fees billed for non-audit services shown in this column only represents fees for pre-approved non-audit services rendered after May 6, 2003, to AIM and AIM Affiliates. (3) Prior to May 6, 2003, the Registrant's Audit Committee was not required to pre-approve non-audit services. Therefore, the percentage of fees shown in this column only represents fees billed for non-audit services rendered after May 6, 2003, pursuant to a waiver of the pre-approval requirement. (4) Including the fees for services not required to be pre-approved by the registrant's audit committee, PWC billed AIM and AIM Affiliates aggregate non-audit fees of $0 for the fiscal year ended 2004, and $0 for the fiscal year ended 2003, for non-audit services rendered to AIM and AIM Affiliates. The Audit Committee also has considered whether the provision of non-audit services that were rendered to AIM and AIM Affiliates that were not required to be pre-approved pursuant to SEC regulations, if any, is compatible with maintaining PWC's independence. To the extent that such services were provided, the Audit Committee determined that the provision of such services is compatible with PWC maintaining independence with respect to the Registrant. PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICIES AND PROCEDURES As adopted by the Audit Committees of the AIM Funds and the INVESCO Funds (the "Funds") Last Amended September 14, 2004 STATEMENT OF PRINCIPLES Under the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and Exchange Commission ("SEC") ("Rules"), the Audit Committees of the Funds' (the "Audit Committee") Board of Directors/Trustees (the "Board") are responsible for the appointment, compensation and oversight of the work of independent accountants (an "Auditor"). As part of this responsibility and to assure that the Auditor's independence is not impaired, the Audit Committees pre-approve the audit and non-audit services provided to the Funds by each Auditor, as well as all non-audit services provided by the Auditor to the Funds' investment adviser and to affiliates of the adviser that provide ongoing services to the Funds ("Service Affiliates") if the services directly impact the Funds' operations or financial reporting. The SEC Rules also specify the types of services that an Auditor may not provide to its audit client. The following policies and procedures comply with the requirements for pre-approval and provide a mechanism by which management of the Funds may request and secure pre-approval of audit and non-audit services in an orderly manner with minimal disruption to normal business operations. Proposed services either may be pre-approved without consideration of specific case-by-case services by the Audit Committees ("general pre-approval") or require the specific pre-approval of the Audit Committees ("specific pre-approval"). As set forth in these policies and procedures, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committees. Additionally, any fees exceeding 110% of general pre-approved fee levels will also require specific pre-approval by the Audit Committees. The Audit Committees will annually review and generally pre-approve the services that may be provided by each Auditor without obtaining specific pre-approval from the Audit Committee. The term of any general pre-approval runs from the date of such pre-approval through September 30th of the following year, unless the Audit Committees consider a different period and states otherwise. The Audit Committees will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. The purpose of these policies and procedures is to set forth the guidelines to assist the Audit Committees in fulfilling their responsibilities. DELEGATION The Audit Committees may from time to time delegate pre-approval authority to one or more of its members who are Independent Directors. All decisions to pre-approve a service by a delegated member shall be reported to the Audit Committee at its next quarterly meeting. AUDIT SERVICES The annual audit services engagement terms (including fees) will be subject to specific pre-approval of the Audit Committees. Audit services include the annual financial statement audit and other procedures such as tax provision work that is required to be performed by the independent auditor to be able to form an opinion on the Funds' financial statements. The Audit Committee will obtain, review and consider sufficient information concerning the proposed Auditor to make a reasonable evaluation of the Auditor's qualifications and independence. In addition to the annual Audit services engagement, the Audit Committees may grant general pre-approval for other audit services, which are those services that only the independent auditor reasonably can provide. Other Audit services may include services such as issuing consents for the inclusion of audited financial statements with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. GENERAL PRE-APPROVAL OF NON-AUDIT SERVICES The Audit Committees may provide general pre-approval of types of non-audit services described in this Section IV to the Funds and its Service Affiliates if the Audit Committees believe that the provision of the service will not impair the independence of the Auditor, is consistent with the SEC's Rules on auditor independence, and otherwise conforms to the Audit Committee's general principles and policies as set forth herein. AUDIT-RELATED SERVICES "Audit-related services" are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements or that are traditionally performed by the independent auditor. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; and agreed-upon procedures related to mergers. TAX SERVICES "Tax services" include, but are not limited to, the review and signing of the Funds' federal tax returns, the review of required distributions by the Funds and consultations regarding tax matters such as the tax treatment of new investments or the impact of new regulations. The Audit Committee will scrutinize carefully the retention of the Auditor in connection with a transaction initially recommended by the Auditor, the major business purpose of which may be tax avoidance or the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with the Funds' Treasurer (or his or her designee) and may consult with outside counsel or advisors as necessary to ensure the consistency of Tax services rendered by the Auditor with the foregoing policy. No Auditor shall represent any Fund or any Service Provider before a tax court, district court or federal court of claims. ALL OTHER SERVICES The Audit Committees may pre-approve non-audit services classified as "All other services" that are not categorically prohibited by the SEC, as listed in Exhibit 1 to this policy. SPECIFIC PRE-APPROVAL OF NON-AUDIT SERVICES The Audit Committees may provide specific pre-approval of any non-audit services to the Funds and its Service Affiliates if the Audit Committees believe that the provision of the service will not impair the independence of the auditor, is consistent with the SEC Rules on auditor independence, and otherwise conforms to the Audit Committees' general principles and policies as set forth herein. PRE-APPROVAL FEE LEVELS OR ESTABLISHED AMOUNTS Pre-approval of fees or established amounts for services to be provided by the Auditor under general pre-approval policies will be set periodically by the Audit Committees. Any proposed fees exceeding 110% of the maximum such amounts will be reported to the Audit Committees at the quarterly Audit Committees meeting and will require specific pre-approval by the Audit Committees. The Audit Committee will always factor in the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. PROCEDURES On an annual basis, A I M Advisors, Inc. ("AIM") will submit to the Audit Committees for general pre-approval, a list of non-audit services that the Funds or Service Affiliates of the Funds may request from the Auditor. The list will describe the non-audit services in reasonable detail and will include an estimated range of fees where possible and such other information as the Audit Committee may request. Each request for services to be provided by the Auditor under the general pre-approval of the Audit Committees will be submitted to the Funds' Treasurer (or his or her designee) and must include a detailed description of the services to be rendered. The Treasurer or his or her designee will ensure that such services are included within the list of services that have received the general pre-approval of the Audit Committees. The Audit Committees will be informed at the next quarterly scheduled Audit Committees meeting of any such services for which the Auditor rendered an invoice and whether such services and fees had been pre-approved and if so, by what means. Each request to provide services that require specific approval by the Audit Committees shall be submitted to the Audit Committees jointly by the Fund's Treasurer or his or her designee and the Auditor, and must include a joint statement that, in their view, such request is consistent with the policies and procedures and the SEC Rules. Non-audit services pursuant to the de minimis exception provided by the SEC Rules will be promptly brought to the attention of the Audit Committees for approval, including documentation that each of the conditions for this exception, as set forth in the SEC Rules, has been satisfied. On at least an annual basis, the Auditor will prepare a summary of all the services provided to any entity in the investment company complex as defined in section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of the engagement and the fees associated with those services. The Audit Committees have designated the Funds' Treasurer to monitor the performance of all services provided by the Auditor and to ensure such services are in compliance with these policies and procedures. The Funds' Treasurer will report to the Audit Committee on a periodic basis as to the results of such monitoring. Both the Funds' Treasurer and management of AIM will immediately report to the chairman of the Audit Committee any breach of these policies and procedures that comes to the attention of the Funds' Treasurer or senior management of AIM. EXHIBIT 1 TO PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICIES AND PROCEDURES Conditionally Prohibited Non-Audit Services (not prohibited if the Fund can reasonably conclude that the results of the service would not be subject to audit procedures in connection with the audit of the Fund's financial statements) o Bookkeeping or other services related to the accounting records or financial statements of the audit client o Financial information systems design and implementation Appraisal or valuation services, fairness opinions, or contribution-in-kind reports o Actuarial services o Internal audit outsourcing services Categorically Prohibited Non-Audit Services o Management functions o Human resources o Broker-dealer, investment adviser, or investment banking services o Legal services o Expert services unrelated to the audit o Any other service that the Public Company Oversight Board determines by regulation is impermissible ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Investments in securities of unaffiliated issuers is included as part of the reports to stockholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 11. CONTROLS AND PROCEDURES. (a) As of December 16, 2004, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the PEO and PFO, to assess the effectiveness of the Registrant's disclosure controls and procedures, as that term is defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act"), as amended. Based on that evaluation, the Registrant's officers, including the PEO and PFO, concluded that, as of December 16, 2004, the Registrant's disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that material information relating to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. (b) There have been no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. However, on September 20, 2004, the Registrant appointed a Chief Compliance Officer ("Registrant CCO") who reports to the Registrant's Board of Trustees. The Registrant CCO also serves as Chief Compliance Officer of A I M Advisors, Inc. ("AIM"), the investment advisor for the series portfolios of the Registrant. The Registrant CCO is a member of the Disclosure Controls Committee ("DCC") for the Registrant, which reports to the Registrant's PEO and PFO. The DCC is made up of employees of AIM some of whom are officers of the Registrant. Among other things, the DCC assists the PEO and PFO in their responsibilities related to internal control over financial reporting. The addition of the Registrant CCO is expected to enhance the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. 12(a)(1) Code of Ethics. 12(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. 12(a)(3) Not applicable. 12(b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: AIM International Mutual Funds By: /s/ ROBERT H. GRAHAM -------------------------------------------- Robert H. Graham Principal Executive Officer Date: January 5, 2005 ------------------------- 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: January 5, 2005 ------------------------- By: /s/ SIDNEY M. DILGREN -------------------------------------------- Sidney M. Dilgren Principal Financial Officer Date: January 5, 2005 ------------------------- EXHIBIT INDEX 12(a)(1) Code of Ethics. 12(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. 12(a)(3) Not applicable. 12(b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940.