-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Thfbv2o1d9LnIogZBlg2Vcpd9Jmn2E6KXh2NdOnrEHFOjBAeEirEgguxtQL9W77z X3clKMNDHF639eEHExjgJw== 0000950129-06-000106.txt : 20060106 0000950129-06-000106.hdr.sgml : 20060106 20060106170414 ACCESSION NUMBER: 0000950129-06-000106 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051031 FILED AS OF DATE: 20060106 DATE AS OF CHANGE: 20060106 EFFECTIVENESS DATE: 20060106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIM INTERNATIONAL MUTUAL FUNDS CENTRAL INDEX KEY: 0000880859 IRS NUMBER: 760352823 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06463 FILM NUMBER: 06517181 BUSINESS ADDRESS: STREET 1: 11 GREENWAY PLAZA STE 100 CITY: HOUSTON STATE: TX ZIP: 77046 BUSINESS PHONE: 7136261919 MAIL ADDRESS: STREET 1: AIM INTERNATIONAL FUNDS INC STREET 2: 11 GREENWAY PLAZA SUITE 100 CITY: HOUSTON STATE: TX ZIP: 77046 FORMER COMPANY: FORMER CONFORMED NAME: AIM INTERNATIONAL FUNDS INC /MD/ DATE OF NAME CHANGE: 20000620 FORMER COMPANY: FORMER CONFORMED NAME: AIM INTERNATIONAL MUTUAL FUNDS DATE OF NAME CHANGE: 20000323 FORMER COMPANY: FORMER CONFORMED NAME: AIM INTERNATIONAL FUNDS INC DATE OF NAME CHANGE: 19920909 N-CSR 1 h31759nvcsr.txt AIM INTERNATIONAL MUTUAL FUNDS - 10/31/2005 --------------------------- OMB APPROVAL --------------------------- OMB Number: 3235-0570 Expires: September 30, 2007 Estimated average burden hours per response: 19.4 --------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-06463 -------------------------------------------------------------------------- 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: 10/31/05 ------------------ Item 1. Schedule of Investments. AIM ASIA PACIFIC GROWTH FUND Annual Report to Shareholders o October 31,2005 [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 GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of October 31, 2005, and is based on total net assets. ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION o Class B shares are not available as an o The unmanaged MSCI Europe, Australasia o The returns shown in management's investment for retirement plans maintained and the Far East Index (the MSCI EAFE discussion of Fund performance are based pursuant to Section 401 of the Internal --Registered Trademark-- INDEX) is a group on net asset values calculated for Revenue Code, including 401(k) plans, of foreign securities tracked by Morgan shareholder transactions. Generally money purchase pension plans and profit Stanley Capital International. accepted accounting principles require sharing plans. Plans that had existing adjustments to be made to the net assets accounts invested in Class B shares prior o The MSCI ALL COUNTRY (AC) ASIA PACIFIC of the Fund at period end for financial to September 30, 2003, will continue to be EX-JAPAN INDEX is a group of developed and reporting purposes, and as such, the net allowed to make additional purchases. emerging Asian and Asia-Pacific markets asset values for shareholder transactions (except Japan) covered by Morgan Stanley and the returns based on those net asset PRINCIPAL RISKS OF INVESTING IN THE FUND Capital International. The index values may differ from the net asset represents investable opportunities for values and returns reported in the o Investing in emerging markets involves global investors, taking into account the Financial Highlights. greater risk and potential reward than local market restrictions on share investing in more established markets. ownership by foreign investors. o Industry classifications used in this report are generally according to the o International investing presents certain o The unmanaged LIPPER PACIFIC EX-JAPAN Global Industry Classification Standard, risks not associated with investing solely FUND INDEX represents an average of the which was developed by and is the in the United States. These include risks largest Pacific ex-Japan funds tracked by exclusive property and a service mark of relating to fluctuations in the value of Lipper, Inc., an independent mutual fund Morgan Stanley Capital International Inc. the U.S. dollar relative to the values of performance monitor, and is considered and Standard & Poor's. other currencies, the custody arrangements representative of Pacific ex-Japan stocks. made for the Fund's foreign holdings, The Fund provides a complete list of its differences in accounting, political risks o The unmanaged Standard & Poor's holdings four times in each fiscal year, and the lesser degree of public Composite Index of 500 Stocks (the S&P 500 at the quarter-ends. For the second and information required to be provided by --Registered Trademark-- INDEX) is an fourth quarters, the lists appear in the non-U.S. companies. index of common stocks frequently used as Fund's semiannual and annual reports to a general measure of U.S. stock market shareholders. For the first and third o Investing in a single-sector or performance. quarters, the Fund files the lists with single-region mutual fund involves greater the Securities and Exchange Commission risk and potential reward than investing o The unmanaged MSCI WORLD INDEX is a (SEC) on Form N-Q. The most recent list of in a more diversified fund. group of global securities tracked by portfolio holdings is available at Morgan Stanley Capital International. AIMinvestments.com. From our home page, o Investing in smaller companies involves click on Products & Performance, then greater risk than investing in more o The Fund is not managed to track the Mutual Funds, then Fund Overview. Select established companies, such as business performance of any particular index, your Fund from the drop-down menu and risk, significant stock price fluctuations including the indexes defined here, and click on Complete Quarterly Holdings. and illiquidity. consequently, the performance of the Fund Shareholders can also look up the Fund's may deviate significantly from the Forms N-Q on the SEC's Web site at o Although the fund's return during performance of the indexes. sec.gov. And copies of the Fund's Forms certain periods was positively impacted by N-Q may be reviewed and copied at the its investments in initial public o A direct investment cannot be made in an SEC's Public Reference Room at 450 Fifth offerings (IPOs), there can be no index. Unless otherwise indicated, index Street,N.W., Washington, D.C. 20549-0102. assurance that the fund will have results include reinvested dividends, and You can obtain information on the favorable IPO investment opportunities in they do not reflect sales charges. operation of the Public Reference Room, the future. Performance of an index of funds reflects including information about duplicating fund expenses; performance of a market fee charges, by calling 202-942-8090 or index does not. 800-732-0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-06463 and 33-44611. Continued on Page 7 ========================================== FUND NASDAQ SYMBOLS Class A Shares ASIAX Class B Shares ASIBX Class C Shares ASICX ======================================================================================= ========================================== THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. =======================================================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE AIMINVESTMENTS.COM AIM ASIA PACIFIC GROWTH FUND DEAR FELLOW AIM FUNDS SHAREHOLDERS: The fiscal year covered by this report was quite good to equity investors. Domestically, the broad-based S&P 500 Index returned 8.72%. Globally, Morgan Stanley's MSCI World [GRAHAM Index rose 13.27%. Much of this good performance, though, PHOTO] was attained early in the fiscal year as virtually every equity index declined during October of 2005. Concern about the inflationary potential of rising energy costs was frequently cited as a major cause of market weakness. Within the indexes, there was considerable variability in the performance of different sectors and markets. Domestically, energy sector performance far outpaced that of ROBERT H. GRAHAM the other sectors in the S&P 500 Index, reflecting rising oil and gas prices. Overseas, emerging markets produced more attractive results than did developed markets, at least in part because emerging markets tend to be more closely tied to the performance of natural resources and commodities. One could make a strong argument for global diversification of a stock portfolio using the performance data for the fiscal year ended October 31, 2005. Of course, your financial advisor is the person most qualified to help you decide whether such diversification is appropriate for you. For a discussion of the specific market conditions that [WILLIAMSON affected your Fund and how your Fund was managed during the PHOTO] fiscal year, please turn to Page 3. NEW INFORMATION IN THIS REPORT We would like to call your attention to two new elements in this report. First, on Page 2, is a message from Bruce Crockett, the independent Chair of the Board of Trustees of the AIM Funds. We first introduced you to Mr. Crockett in MARK H. WILLIAMSON the annual report on your Fund dated October 31, 2004. Mr. Crockett has been on our Funds' Board since 1992; he assumed his responsibilities as Chair in October 2004. Mr. Crockett plans to keep AIM shareholders informed of the work of the Board regularly via letters in the Fund reports. We certainly think this is a valuable addition to the reports. The Board is charged with looking out for the interests of shareholders, and Mr. Crockett's letter provides insight into some of the many issues the Board addresses in governing your Fund. One of the most important decisions the Board makes each year is whether to approve the advisory agreement your Fund has with AIM. Essentially, this agreement hires AIM to manage the assets in your Fund. A discussion of the factors the Board considered in reviewing the agreement is the second new element in the report, and we encourage you to read it. It appears on Pages 8 and 9. Further information about the markets, your Fund, and investing in general is always available on our widely acclaimed Web site, AIMinvestments.com. We invite you to visit it frequently. We at AIM remain committed to building solutions to help you meet your investment goals. We thank you for your continued participation in AIM Investments--Registered Trademark--. If you have any questions, please contact our award-winning Client Service representatives at 800-959-4246. We are happy to be of help. Sincerely, /S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, President, A I M Advisors, Inc. AIM Funds December 15, 2005 AIM Investments is a registered service mark of A I M Management Group Inc. A I M Advisors, Inc. and A I M Capital Management, Inc. are the investment advisors. A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments. 1 AIM ASIA PACIFIC GROWTH FUND DEAR AIM FUNDS SHAREHOLDERS: As independent Chair of the Board of Trustees of the AIM [CROCKETT Funds, I'm writing to report on the work being done by your PHOTO] Board. At our most recent meeting in June 2005, your Board approved voluntary fee reductions from A I M Advisors, Inc. (AIM) that save shareholders approximately $20.8 million annually, based on asset levels as of March 31, 2005. The majority of these expense reductions, which took effect July 1, 2005, will be achieved by a permanent reduction to 0.25% BRUCE L. CROCKETT of the Rule 12b-1 fees on Class A and Class A3 shares of those AIM Funds that previously charged these fees at a higher rate. Our June meeting, which was the culmination of more than two and one-half months of review and discussions, took place over a three-day period. The meeting included your Board's annual comprehensive evaluation of each fund's advisory agreement with AIM. After this evaluation, in which questions about fees, performance and operations were addressed by AIM, your Board approved all advisory agreements for the year beginning July 1, 2005. You can find information on the factors considered and conclusions reached by your Board in its evaluation of each fund's advisory agreement at AIMinvestments.com. (Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals.") The advisory agreement information about your Fund is also included in this annual report on Pages 8 and 9. I encourage you to review it. Together with monitoring fund expenses, fund performance is your Board's priority. Our initial goal is to work with AIM to bring about improvement in every AIM Fund that has been underperforming its category. Your Board has a well-defined process and structure for monitoring all funds and identifying and assisting AIM in improving underperforming funds. Our Investments Committee--which functions along with Audit, Governance, Valuation and Compliance Committees--is the only one of these five standing committees to include all 14 independent Board members. Further, our Investments Committee is divided into three underlying subcommittees, each responsible for, among other things, reviewing the performance, fees and expenses of the funds that have been assigned to it. At subcommittee meetings, held throughout the year, the performance of every AIM Fund is evaluated. If a fund has underperformed its peer group for a meaningful period, we work closely with AIM to discover the causes and help develop the right responses. In some cases, AIM may determine that a change in portfolio management strategy or portfolio managers is required. In other cases, where a fund no longer seems viable, it may be merged with a similar fund, being careful to consider the needs of all shareholders affected by the decision. Following AIM's recommendation and your Board's approval, eight funds were recently merged. Be assured that your Board is working closely with the management of AIM to help you reach your investment goals. Should you or your advisor have questions or comments about the governance of AIM Funds, I invite you to write to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100, Houston, TX 77046. Your Board looks forward to keeping you informed about the governance of your funds. Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair On Behalf of the Board of Trustees AIM Funds December 15, 2005 2 AIM ASIA PACIFIC GROWTH FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE We seek to minimize stock-specific risk by building a diversified portfolio with the top 10 holdings making up about 25% of ======================================================================================= total net assets. PERFORMANCE SUMMARY ========================================== We believe disciplined sell decisions are a key determinant of successful During the fiscal year, international FUND VS. INDEXES investing. We consider selling a stock for stocks outperformed U.S. equities with any one of the following reasons: emerging market equities the best Total returns,10/31/04-10/31/05,excluding performers worldwide. applicable sales charges. If sales charges o a company's fundamentals deteriorate or were included, returns would be lower. it posts disappointing earnings As the table indicates, we are pleased to once again reward our shareholders with Class A Shares 19.53% o a stock's price seems overvalued positive returns for the fiscal year. Turn Class B Shares 18.72 to Pages 6 and 7 for long-term Class C Shares 18.79 o a more attractive opportunity is performance. The strength of emerging MSCI EAFE Index presented Asian equities enabled us to outperform (Broad Market Index) 18.09 our broad market index which is composed MSCI AC Asia Pacific ex-Japan MARKET CONDITIONS AND YOUR FUND of stocks from developed nations. We Index (Style-specific Index) 21.69 modestly underperformed our style-specific Lipper Pacific ex-Japan Fund Index Asian markets moved higher during the benchmark due to our relative underweight (Peer Group Index) 27.33 fiscal year with all Pacific Rim position to the countries-- represented by the MSCI All SOURCE: LIPPER, INC. Country Asia Pacific ex Japan Index--posting positive returns both in ========================================== local and U.S. dollar terms. Returns varied, however, by country. outperforming Australian market and materials sector. In India, markets were buoyed by exports. Korean markets have been aided by ======================================================================================= the country's low interest rates, which have helped lift domestic consumption by HOW WE INVEST o high return on invested capital reducing household debt. In China, GDP growth continued to exceed expectations. We believe that earnings drive stock o reasonable prices with low valuations Recently, China allowed its currency to prices and that companies generating float in a narrow band against a basket of substantial, repeatable, above average We use a systematic, stock-by stock currencies. Although unlikely to prevent earnings growth should provide long-term approach, focusing on strengths of further growth in China's trade surplus, growth of capital. individual companies, rather than sector the decision improved political pressures or country trends. Our goal is a from the country's trading partners. Therefore, when selecting stocks for well-diversified, reasonably priced, Meanwhile, Australian markets moved higher your Fund we look for companies in the quality portfolio. We adhere to our on the back of rising energy prices Asia Pacific region (excluding Japan) with investment process regardless of the (Australia is a net oil exporter) and its the following attributes: macroeconomic environment. buoyant mining industry. o accelerating earnings and revenues We do not hedge currencies because we believe currency exposure increases the o strong cash flow generation (dividends, diversification benefit of international share buybacks) investing. (continued) ========================================== ========================================== ========================================== PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. South Korea 20.4% 1. Esprit Holdings Ltd. (Hong Kong) 2.5% 2. Hong Kong 19.9 2. Samsung Electronics Co., Ltd. [PIE CHART] 3. Australia 13.0 (South Korea) 2.3 4. India 8.5 3. Hyundai Department Store Co., Ltd. Consumer Discretionary 20.5% 5. China 8.3 (South Korea) 2.3 Information Technology 17.1% 4. BHP Billiton Ltd. (Australia) 2.2 Industrials 10.9% TOTAL NET ASSETS $218.6 MILLION 5. Philippine Long Distance Consumer Staples 9.6% Telephone Co. (Philippines) 2.2 Energy 1.8% TOTAL NUMBER OF HOLDINGS* 101 6. Cheung Kong (Holdings) Ltd. Telecommunications Services 3.8% (Hong Kong) 2.1 Health Care 3.4% 7. Infosys Technologies Ltd. (India) 2.0 Materials 2.8% 8. CSL Ltd. (Australia) 2.0 Money Market Funds Plus 9. Keppel Corp. Ltd. (Singapore) 1.6 Other Assets Less Liabilities 7.5% 10. Computershare Ltd. (Australia) 1.6 Financials 22.6% 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. ========================================== ========================================== ==========================================
3 AIM ASIA PACIFIC GROWTH FUND Fund performance was broadly based position in a few sectors hurt comparative SHUXIN CAO, Chartered across countries. SHANGHAI ELECTRIC GROUP, results. We had less exposure to materials [CAO Financial Analyst, sometimes referred to as the "The G.E. of and energy--two sectors that did well PHOTO] portfolio manager is China" was a top contributor. The company, given rising commodity prices--as some of co-manager of AIM Asia a manufacturer of power generation the stocks in these sectors did not fit Pacific Growth Fund. equipment, is well positioned to benefit our investment criteria. He joined AIM in 1997. Mr. Cao graduated from strong power demand being witnessed from Tianjin Foreign Language Institute in China. We believe stable sales from Given our performance during the fiscal with a B.A. in English. He also received four years of pre-placed orders and year, we had few stocks that detracted an M.B.A. from Texas A&M University and is sophisticated technological capabilities from performance. One stock that proved a a Certified Public Accountant. provide the company with a strong outlook. drag on performance was Korea-based KIRYUNG ELECTRONIC CO. Ltd., a BARRETT K. SIDES, Indian stocks were also top manufacturer and supplier of satellite [SIDES senior portfolio contributors. Long-time Fund holding radio systems to a large U.S. satellite PHOTO] manager, is co- INFOSYS TECHNOLOGIES LTD., a top radio company. During the fiscal year, manager of AIM Asia outsourcing company continued to post Kiryung's stock declined amid increased Pacific Growth Fund. strong results, as did HOTEL LEELAVENTURE competition from Taiwanese competitors He joined AIM in 1990. Mr. Sides graduated LTD., a hotel group based in India. Rising which led to disappointing earnings. with a B.S. in economics from Bucknell tourism in India coupled with increased Despite a rebound in the stock, the University. He also received a master's in occupancy rates has given Hotel increased competitive atmosphere international business from the University Leelaventure more pricing power for their surrounding the company led us to trim the of St. Thomas. rooms. position. Assisted by Asia Pacific/Latin America Despite an underperforming Taiwanese IN CLOSING Team market, our bottom-up stock selection process which focuses on the strengths of Asian economies have made considerable individual companies and not country strides in the years since the Asian macroeconomic conditions, allowed us to Crisis by improving economic fundamentals. produce double-digit gains in Taiwan. One In general, interest rates across the standout holding was CATCHER TECHNOLOGY region are relatively low and what were CO. Ltd, a small-cap tech firm in Taiwan once trade deficits for most countries that specializes in making alloy-based have turned into surpluses. In addition, casings for notebook computers and inflation for the most part is benign and handsets. Robust sales have led to economies are striving toward capitalism. extremely strong top- and bottom-line Also, the sheer size of the consumer pool growth. Technological expertise and a in Asia--nearly 50% of the world's competitive cost base have earned this population live in China and India--make a company the business of several key global compelling case for Asian investments. We wireless companies. Taking profits, we are pleased to report these trends to you trimmed the position somewhat during the and thank you for your continued fiscal year, but continue to own it given participation in AIM Asia Pacific Growth its strong current fundamentals. Fund. Our underweight position to an The views and opinions expressed in outperforming Australian market hurt management's discussion of Fund comparative performance, although we performance are those of A I M Advisors, actually produced a higher return in Inc. These views and opinions are subject Australia than our benchmark. to change at any time based on factors such as market and economic conditions. On a sector basis, every sector we These views and opinions may not be relied invested in during the fiscal year upon as investment advice or produced double-digit returns. We recommendations, or as an offer for a continued to overweight the consumer particular security. The information is sectors due to demographic trends and we not a complete analysis of every aspect of have found stocks here which have higher any market, country, industry, security or growth profiles. Also, many consumer the Fund. Statements of fact are from stocks are smaller-cap companies and are sources considered reliable, but A I M often overlooked by the market and Advisors, Inc. makes no representation or international investors. warranty as to their completeness or accuracy. Although historical performance Although performance was strong in all is no guarantee of future results, these sectors on an absolute basis, our insights may help you understand our underweight investment management philosophy. See important Fund and index disclosures inside front cover.
[RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE, PLEASE SEE PAGES 6 AND 7. 4 AIM ASIA PACIFIC GROWTH FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE to estimate the expenses that you paid The hypothetical account values and over the period. Simply divide your expenses may not be used to estimate the As a shareholder of the Fund, you incur account value by $1,000 (for example, an actual ending account balance or expenses two types of costs: (1) transaction costs, $8,600 account value divided by $1,000 = you paid for the period. You may use this which may include sales charges (loads) on 8.6), then multiply the result by the information to compare the ongoing costs purchase payments; contingent deferred number in the table under the heading of investing in the Fund and other funds. sales charges on redemptions; and entitled "Actual Expenses Paid During To do so, compare this 5% hypothetical redemption fees, if any; and (2) ongoing Period" to estimate the expenses you paid example with the 5% hypothetical examples costs, including management fees; on your account during this period. that appear in the shareholder reports of distribution and/or service fees (12b-1); the other funds. and other Fund expenses. This example is HYPOTHETICAL EXAMPLE FOR intended to help you understand your COMPARISON PURPOSES Please note that the expenses shown in ongoing costs (in dollars) of investing in the table are meant to highlight your the Fund and to compare these costs with The table below also provides information ongoing costs only and do not reflect any ongoing costs of investing in other mutual about hypothetical account values and transactional costs, such as sales charges funds. The example is based on an hypothetical expenses based on the Fund's (loads) on purchase payments, contingent investment of $1,000 invested at the actual expense ratio and an assumed rate deferred sales charges on redemptions, and beginning of the period and held for the of return of 5% per year before expenses, redemption fees, if any. Therefore, the entire period May 1, 2005, through October which is not the Fund's actual return. The hypothetical information is useful in 31, 2005. Fund's actual cumulative total returns at comparing ongoing costs only, and will not net asset value after expenses for the six help you determine the relative total ACTUAL EXPENSES months ended October 31, 2005, appear in costs of owning different funds. In the table "Cumulative Total Returns" on addition, if these transactional costs The table below provides information about Page 7. were included, your costs would have been actual account values and actual expenses. higher. You may use the information in this table, together with the amount you invested, ==================================================================================================================================== ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (5/01/05) (10/31/05)(1) PERIOD(2,3) (10/31/05) PERIOD(2,4) RATIO A $1,000.00 $1,064.90 $10.15 $1,015.38 $9.91 1.95% B 1,000.00 1,061.20 13.87 1,011.75 13.54 2.67 C 1,000.00 1,061.40 13.87 1,011.75 13.54 2.67 (1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31, 2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Return" on Page 7. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half-year. Effective on July 1, 2005, the distributor contractually agreed to reduce rule 12b-1 plan fees for Class A shares to 0.25%. The annualized expense ratio restated as if the agreement had been in effect throughout the entire most recent half year is 1.92% for the Class A shares. (3) The actual expenses paid restated as if the change discussed above had been in effect throughout the most recent fiscal half year are $9.99 for the Class A shares. (4) The hypothetical expenses paid restated as if the change discussed above had been in effect throughout the most recent fiscal year are $9.75 for the Class A shares. ====================================================================================================================================
[ARROW BUTTON For More Information Visit IMAGE] AIMINVESTMENTS.COM 5 AIM ASIA PACIFIC GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE RESULTS OF A $10,000 INVESTMENT Fund data from 11/3/97, index data from 10/31/97 [MOUNTAIN CHART] ==================================================================================================================================== DATE AIM ASIA PACIFIC AIM ASIA PACIFIC AIM ASIA PACIFIC LIPPER PACIFIC GROWTH FUND- GROWTH FUND- GROWTH FUND- EX-JAPAN MSCI EAFE CLASS A SHARES CLASS B SHARES CLASS C SHARES FUND INDEX INDEX 10/31/97 $ 9450 $10000 $10000 $10000 $10000 11/97 8401 8890 8890 9650 9898 12/97 8174 8650 8650 9400 9984 1/98 7834 8280 8290 8511 10441 2/98 9346 9879 9880 9823 11111 3/98 9167 9690 9690 9751 11453 4/98 8713 9199 9200 9170 11544 5/98 7759 8189 8190 8065 11488 6/98 6814 7189 7180 7196 11575 7/98 6682 7039 7030 7014 11692 8/98 5633 5939 5920 6164 10244 9/98 6474 6809 6800 6787 9929 10/98 7267 7629 7610 7760 10965 11/98 7475 7848 7820 8133 11526 12/98 7477 7848 7820 8185 11981 1/99 7305 7668 7640 7981 11946 2/99 7201 7558 7540 7790 11661 3/99 7714 8078 8061 8516 12148 4/99 9138 9580 9553 9786 12640 5/99 9395 9841 9813 9562 11989 6/99 10867 11372 11345 11093 12456 7/99 10459 10932 10914 11082 12827 8/99 10440 10902 10884 11339 12873 9/99 9946 10371 10353 10767 13003 10/99 10232 10662 10642 11026 13490 11/99 11628 12114 12085 12606 13959 12/99 12560 13074 13045 14314 15212 1/00 12085 12574 12544 14151 14245 2/00 13282 13815 13786 14382 14628 3/00 15126 15707 15689 14927 15196 4/00 13502 14016 14007 13032 14396 5/00 12447 12914 12906 12199 14044 6/00 13321 13805 13798 13150 14594 7/00 12456 12915 12906 12397 13982 8/00 12419 12864 12856 12459 14103 9/00 11183 11573 11564 11173 13416 10/00 10167 10511 10502 10169 13099 11/00 9872 10211 10202 9678 12608 12/00 9743 10065 10065 9617 13056 1/01 10810 11160 11160 10806 13050 2/01 10201 10527 10528 10249 12071 3/01 9123 9402 9402 9082 11267 4/01 9685 9985 9985 9401 12050 5/01 9772 10076 10066 9401 11624 6/01 9600 9885 9885 9206 11149 7/01 9285 9554 9554 8850 10946 8/01 8731 8982 8981 8553 10669 9/01 7797 8017 8017 7334 9588 10/01 8188 8419 8409 7669 9834 11/01 8712 8951 8951 8605 10196 12/01 9179 9422 9413 9174 10257 1/02 9407 9653 9645 9537 9712 2/02 9465 9713 9695 9645 9780 3/02 9931 10185 10167 10286 10356 4/02 9969 10225 10208 10359 10377 5/02 9921 10165 10147 10308 10509 6/02 9502 9733 9715 9790 10090 7/02 9092 9311 9294 9352 9094 8/02 8882 9080 9062 9127 9074 9/02 8044 8227 8208 8124 8099 10/02 8130 8307 8289 8344 8534 11/02 8454 8629 8611 8887 8922 12/02 8187 8358 8339 8377 8622 1/03 8339 8508 8490 8437 8262 2/03 8177 8337 8320 8091 8072 3/03 7796 7945 7928 7714 7914 4/03 8063 8216 8199 8117 8689 5/03 8654 8819 8792 8842 9216 6/03 9178 9341 9304 9389 9439 7/03 9712 9883 9847 10064 9667 8/03 10493 10667 10640 10776 9900 9/03 10646 10828 10791 10912 10206 10/03 11513 11692 11656 11793 10842 11/03 11522 11703 11666 11701 11083 12/03 12266 12446 12409 12571 11949 1/04 12627 12808 12761 13080 12118 2/04 13066 13250 13202 13489 12397 3/04 12913 13079 13041 13228 12467 4/04 12236 12396 12358 12622 12185 5/04 12112 12266 12217 12390 12211 6/04 11807 11945 11905 12276 12494 7/04 11655 11784 11745 12003 12088 8/04 12207 12336 12297 12503 12142 9/04 12731 12858 12809 13012 12459 10/04 13074 13200 13151 13201 12884 11/04 14036 14165 14106 14339 13764 12/04 14493 14617 14569 14826 14368 1/05 14550 14667 14620 14904 14104 2/05 15321 15440 15383 15702 14714 3/05 14749 14847 14800 15051 14344 4/05 14673 14766 14720 14930 14007 5/05 14768 14857 14801 15403 14014 6/05 15226 15308 15263 15738 14200 7/05 15960 16041 15986 16837 14635 8/05 16046 16112 16056 16743 15005 9/05 16723 16786 16729 17792 15673 10/05 $15634 $15672 $15622 $16809 $15215 ==================================================================================================================================== SOURCE: LIPPER, INC. The data shown in the chart include This chart, which is a logarithmic reinvested distributions, applicable sales chart, presents the fluctuations in the charges, Fund expenses and management value of the Fund and its indexes. We fees. Results for Class B shares are believe that a logarithmic chart is more calculated as if a hypothetical effective than other types of charts in shareholder had liquidated his entire illustrating changes in value during the investment in the Fund at the close of the early years shown in the chart. The reporting period and paid the applicable vertical axis, the one that indicates the contingent deferred sales charges. Index dollar value of an investment, is results include reinvested dividends, but constructed with each segment representing they do not reflect sales charges. a percent change in the value of the Performance of an index of funds reflects investment. In this chart, each segment fund expenses and management fees; represents a doubling, or 100% change, in performance of a market index does not. the value of the investment. In other Performance shown in the chart and words, the space between $5,000 and table(s) does not reflect deduction of $10,000 is the same size as the space taxes a shareholder would pay on Fund between $10,000 and $20,000. distributions or sale of Fund shares. Performance of the indexes does not reflect the effects of taxes.
6 AIM ASIA PACIFIC GROWTH FUND ========================================== ========================================== ========================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS As of 10/31/05, including applicable sales As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding charges quarter-end, including applicable sales applicable sales charges charges CLASS A SHARES Class A Shares 6.49% Inception (11/3/97) 5.75% CLASS A SHARES Class B Shares 6.12 5 Years 7.77 Inception (11/3/97) 6.73% Class C Shares 6.14 1 Year 12.95 5 Years 7.16 1 Year 24.12 ========================================== CLASS B SHARES Inception (11/3/97) 5.78% CLASS B SHARES 5 Years 8.02 Inception (11/3/97) 6.77% 1 Year 13.72 5 Years 7.42 1 Year 25.55 CLASS C SHARES Inception (11/3/97) 5.74% CLASS C SHARES 5 Years 8.26 Inception (11/3/97) 6.72% 1 Year 17.79 5 Years 7.66 1 Year 29.59 ========================================== ========================================== THE PERFORMANCE DATA QUOTED REPRESENT PAST CLASS A SHARE PERFORMANCE REFLECTS THE A REDEMPTION FEE OF 2% WILL BE IMPOSED PERFORMANCE AND CANNOT GUARANTEE MAXIMUM 5.50% SALES CHARGE, AND CLASS B ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF COMPARABLE FUTURE RESULTS; CURRENT AND CLASS C SHARE PERFORMANCE REFLECTS THE THE FUND WITHIN 30 DAYS OF PURCHASE. PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE APPLICABLE CONTINGENT DEFERRED SALES EXCEPTIONS TO THE REDEMPTION FEE ARE VISIT AIMINVESTMENTS.COM FOR THE MOST CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE LISTED IN THE FUND'S PROSPECTUS. RECENT MONTH-END PERFORMANCE. PERFORMANCE CDSC ON CLASS B SHARES DECLINES FROM 5% FIGURES REFLECT REINVESTED DISTRIBUTIONS, BEGINNING AT THE TIME OF PURCHASE TO 0% AT HAD THE ADVISOR NOT WAIVED FEES AND/OR CHANGES IN NET ASSET VALUE AND THE EFFECT THE BEGINNING OF THE SEVENTH YEAR. THE REIMBURSED EXPENSES IN THE PAST, OF THE MAXIMUM SALES CHARGE UNLESS CDSC ON CLASS C SHARES IS 1% FOR THE FIRST PERFORMANCE WOULD HAVE BEEN LOWER. OTHERWISE STATED. INVESTMENT RETURN AND YEAR AFTER PURCHASE. PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL THE PERFORMANCE OF THE FUND'S SHARE SHARES. CLASSES WILL DIFFER DUE TO DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES. Continued from inside front cover procedures that the Fund uses to Information regarding how the Fund voted determine how to vote proxies relating proxies related to its portfolioA to portfolio securities is available description of the policies and without charge, upon request, from our securities during the 12 months ended Client Services department at June 30, 2005, is available at our Web 800-959-4246 or on the AIM Web site, site. Go to AIMinvestments.com, access AIMinvestments.com. On the home page, the About Us tab, click on Required scroll down and click on AIM Funds Proxy Notices and then click on Proxy Voting Policy. The information is also Activity. Next, select the Fund from the available on the Securities and Exchange drop-down menu. The information is also Commission's Web site, sec.gov. available on the Securities and Exchange Commission's Web site, sec.gov.
AIM ASIA PACIFIC GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION The Board of Trustees of AIM International o The quality of services to be provided o Fees relative to those of comparable Mutual Funds (the "Board") oversees the by AIM. The Board reviewed the credentials funds with other advisors. The Board management of AIM Asia Pacific Growth Fund and experience of the officers and reviewed the advisory fee rate for the (the "Fund") and, as required by law, employees of AIM who will provide Fund under the Advisory Agreement. The determines annually whether to approve the investment advisory services to the Fund. Board compared effective contractual continuance of the Fund's advisory In reviewing the qualifications of AIM to advisory fee rates at a common asset level agreement with A I M Advisors, Inc. provide investment advisory services, the and noted that the Fund's rate was below ("AIM"). Based upon the recommendation of Board reviewed the qualifications of AIM's the median rate of the funds advised by the Investments Committee of the Board, investment personnel and considered such other advisors with investment strategies which is comprised solely of independent issues as AIM's portfolio and product comparable to those of the Fund that the trustees, at a meeting held on June 30, review process, various back office Board reviewed. The Board noted that AIM 2005, the Board, including all of the support functions provided by AIM and has agreed to waive advisory fees of the independent trustees, approved the AIM's equity and fixed income trading Fund and to limit the Fund's total continuance of the advisory agreement (the operations. Based on the review of these operating expenses, as discussed below. "Advisory Agreement") between the Fund and and other factors, the Board concluded Based on this review, the Board concluded AIM for another year, effective July 1, that the quality of services to be that the advisory fee rate for the Fund 2005. provided by AIM was appropriate and that under the Advisory Agreement was fair and AIM currently is providing satisfactory reasonable. The Board considered the factors services in accordance with the terms of discussed below in evaluating the fairness the Advisory Agreement. o Expense limitations and fee waivers. The and reasonableness of the Advisory Board noted that AIM has contractually Agreement at the meeting on June 30, 2005 o The performance of the Fund relative to agreed to waive advisory fees of the Fund and as part of the Board's ongoing comparable funds. The Board reviewed the through June 30, 2006 to the extent oversight of the Fund. In their performance of the Fund during the past necessary so that the advisory fees deliberations, the Board and the one, three and five calendar years against payable by the Fund do not exceed a independent trustees did not identify any the performance of funds advised by other specified maximum advisory fee rate, which particular factor that was controlling, advisors with investment strategies maximum rate includes breakpoints and is and each trustee attributed different comparable to those of the Fund. The Board based on net asset levels. The Board weights to the various factors. noted that the Fund's performance in such considered the contractual nature of this periods was at or above the median fee waiver and noted that it remains in One of the responsibilities of the performance of such comparable funds. effect until June 30, 2006. The Board also Senior of the Fund, who is independent of Based on this review, the Board concluded noted that AIM has voluntarily agreed to AIM and AIM's affiliates, is to manage the that no changes should be made to the Fund waive fees and/or limit expenses of the process by which the Fund's proposed and that it was not necessary to change Fund in an amount necessary to limit total management fees are negotiated to ensure the Fund's portfolio management team at annual operating expenses to a specified that they are negotiated in a manner which this time. percentage of average daily net assets for is at arm's length and reasonable. To that each class of the Fund. The Board end, the Senior Officer must either o The performance of the Fund relative to considered the voluntary nature of this supervise a competitive bidding process or indices. The Board reviewed the fee waiver/expense limitation and noted prepare an independent written evaluation. performance of the Fund during the past that it can be terminated at any time by The Senior Officer has recommended an one, three and five calendar years against AIM without further notice to investors. independent written evaluation in lieu of the performance of the Lipper Pacific-Ex The Board considered the effect these fee a competitive bidding process and, upon Japan Fund Index. The Board noted that the waivers/expense limitations would have on the direction of the Board, has prepared Fund's performance for the one and three the Fund's estimated expenses and such an independent written evaluation. year periods was comparable to the Index concluded that the levels of fee Such written evaluation also considered performance and above such Index for the waivers/expense limitations for the Fund certain of the factors discussed below. In five year period. Based on this review, were fair and reasonable. addition, as discussed below, the Senior the Board concluded that no changes should Officer made certain recommendations to be made to the Fund and that it was not o Breakpoints and economies of scale. The the Board in connection with such written necessary to change the Fund's portfolio Board reviewed the structure of the Fund's evaluation. management team at this time. advisory fee under the Advisory Agreement, noting that it includes one breakpoint. The discussion below serves as a o Meeting with the Fund's portfolio The Board reviewed the level of the Fund's summary of the Senior Officer's managers and investment personnel. With advisory fees, and noted that such fees, independent written evaluation and respect to the Fund, the Board is meeting as a percentage of the Fund's net recommendations to the Board in connection periodically with such Fund's portfolio assets, would decrease as net assets therewith, as well as a discussion of managers and/or other investment personnel increase because the Advisory Agreement the material factors and the conclusions and believes that such individuals are includes a breakpoint. The Board noted with respect thereto that formed the basis competent and able to continue to carry that, due to the Fund's current asset for the Board's approval of the Advisory out their responsibilities under the levels and the way in which the advisory Agreement. After consideration of all of Advisory Agreement. fee breakpoints have been structured, the the factors below and based on its Fund has yet to benefit from the informed business judgment, the Board o Overall performance of AIM. The Board breakpoint. The Board noted that AIM has determined that the Advisory Agreement is considered the overall performance of AIM contractually agreed to waive advisory in the best interests of the Fund and its in providing investment advisory and fees of the Fund through June 30, 2006 to shareholders and that the compensation to portfolio administrative services to the the extent necessary so that the advisory AIM under the Advisory Agreement is fair Fund and concluded that such performance fees payable by the Fund do not exceed a and reasonable and would have been was satisfactory. specified maximum advisory fee rate, which obtained through arm's length maximum rate includes breakpoints and is negotiations. o Fees relative to those of clients of AIM based on net asset levels. The Board with comparable investment strategies. The concluded that the Fund's fee levels under o The nature and extent of the advisory Board noted that AIM does not serve as an the Advisory Agreement therefore would services to be provided by AIM. The Board advisor to other mutual funds or other reflect economies of scale at higher asset reviewed the services to be provided by clients with investment strategies levels and that it was not necessary to AIM under the Advisory Agreement. Based on comparable to those of the Fund. change the advisory fee breakpoints in such review, the Board concluded that the the Fund's advisory fee schedule. range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement. (continued)
8 AIM ASIA PACIFIC GROWTH FUND o Investments in affiliated money market o Benefits of soft dollars to AIM. The funds. The Board also took into account Board considered the benefits realized by the fact that uninvested cash and cash AIM as a result of brokerage collateral from securities lending transactions executed through "soft arrangements (collectively, "cash dollar" arrangements. Under these balances") of the Fund may be invested in arrangements, brokerage commissions paid money market funds advised by AIM pursuant by the Fund and/or other funds advised by to the terms of an SEC exemptive order. AIM are used to pay for research and The Board found that the Fund may realize execution services. This research is used certain benefits upon investing cash by AIM in making investment decisions for balances in AIM advised money market the Fund. The Board concluded that such funds, including a higher net return, arrangements were appropriate. increased liquidity, increased diversification or decreased transaction o AIM's financial soundness in light of costs. The Board also found that the Fund the Fund's needs. The Board considered will not receive reduced services if it whether AIM is financially sound and has invests its cash balances in such money the resources necessary to perform its market funds. The Board noted that, to the obligations under the Advisory Agreement, extent the Fund invests in affiliated and concluded that AIM has the financial money market funds, AIM has voluntarily resources necessary to fulfill its agreed to waive a portion of the advisory obligations under the Advisory Agreement. fees it receives from the Fund attributable to such investment. The Board o Historical relationship between the Fund further determined that the proposed and AIM. In determining whether to securities lending program and related continue the Advisory Agreement for the procedures with respect to the lending Fund, the Board also considered the prior Fund is in the best interests of the relationship between AIM and the Fund, as lending Fund and its respective well as the Board's knowledge of AIM's shareholders. The Board therefore operations, and concluded that it was concluded that the investment of cash beneficial to maintain the current collateral received in connection with the relationship, in part, because of such securities lending program in the money knowledge. The Board also reviewed the market funds according to the procedures general nature of the non-investment is in the best interests of the lending advisory services currently performed by Fund and its respective shareholders. AIM and its affiliates, such as administrative, transfer agency and o Independent written evaluation and distribution services, and the fees recommendations of the Fund's Senior received by AIM and its affiliates for Officer. The Board noted that, upon their performing such services. In addition to direction, the Senior Officer of the Fund, reviewing such services, the trustees also who is independent of AIM and AIM's considered the organizational structure affiliates, had prepared an independent employed by AIM and its affiliates to written evaluation in order to assist the provide those services. Based on the Board in determining the reasonableness of review of these and other factors, the the proposed management fees of the AIM Board concluded that AIM and its Funds, including the Fund. The Board noted affiliates were qualified to continue to that the Senior Officer's written provide non-investment advisory services evaluation had been relied upon by the to the Fund, including administrative, Board in this regard in lieu of a transfer agency and distribution services, competitive bidding process. In and that AIM and its affiliates currently determining whether to continue the are providing satisfactory non-investment Advisory Agreement for the Fund, the Board advisory services. considered the Senior Officer's written evaluation and the recommendation made by o Other factors and current trends. In the Senior Officer to the Board that the determining whether to continue the Board consider implementing a process to Advisory Agreement for the Fund, the Board assist them in more closely monitoring the considered the fact that AIM, along with performance of the AIM Funds. The Board others in the mutual fund industry, is concluded that it would be advisable to subject to regulatory inquiries and implement such a process as soon as litigation related to a wide range of reasonably practicable. issues. The Board also considered the governance and compliance reforms being o Profitability of AIM and its affiliates. undertaken by AIM and its affiliates, The Board reviewed information concerning including maintaining an internal controls the profitability of AIM's (and its committee and retaining an independent affiliates') investment advisory and other compliance consultant, and the fact that activities and its financial condition. AIM has undertaken to cause the Fund to The Board considered the overall operate in accordance with certain profitability of AIM, as well as the governance policies and practices. The profitability of AIM in connection with Board concluded that these actions managing the Fund. The Board noted that indicated a good faith effort on the part AIM's operations remain profitable, of AIM to adhere to the highest ethical although increased expenses in recent standards, and determined that the current years have reduced AIM's profitability. regulatory and litigation environment to Based on the review of the profitability which AIM is subject should not prevent of AIM's and its affiliates' investment the Board from continuing the Advisory advisory and other activities and its Agreement for the Fund. financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
9 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2005
SHARES VALUE - ------------------------------------------------------------------------ FOREIGN STOCKS & OTHER EQUITY INTERESTS-92.53% AUSTRALIA-13.01% BHP Billiton Ltd. (Diversified Metals & Mining)(a) 315,700 $ 4,899,180 - ------------------------------------------------------------------------ Brambles Industries Ltd. (Diversified Commercial & Professional Services)(a)(b) 452,000 2,864,864 - ------------------------------------------------------------------------ Coca-Cola Amatil Ltd. (Soft Drinks)(a) 231,000 1,321,846 - ------------------------------------------------------------------------ Commonwealth Bank of Australia (Diversified Banks)(a) 42,500 1,237,392 - ------------------------------------------------------------------------ Computershare Ltd. (Data Processing & Outsourced Services) 714,600 3,499,941 - ------------------------------------------------------------------------ CSL Ltd. (Biotechnology)(a)(b) 155,100 4,361,578 - ------------------------------------------------------------------------ QBE Insurance Group Ltd. (Property & Casualty Insurance)(a)(b) 175,000 2,337,468 - ------------------------------------------------------------------------ Ramsay Health Care Ltd. (Health Care Facilities)(a)(b) 338,700 2,239,103 - ------------------------------------------------------------------------ St. George Bank Ltd. (Diversified Banks)(a) 47,100 962,243 - ------------------------------------------------------------------------ Toll Holdings Ltd. (Trucking)(a) 302,300 2,832,862 - ------------------------------------------------------------------------ Woolworths Ltd. (Food Retail)(a)(b) 154,000 1,882,724 ======================================================================== 28,439,201 ======================================================================== CHINA-8.32% China Mengniu Dairy Co. Ltd. (Packaged Foods & Meats)(a) 2,474,000 1,949,797 - ------------------------------------------------------------------------ China Petroleum and Chemical Corp. (Sinopec)- Class H (Integrated Oil & Gas)(a) 4,016,000 1,613,233 - ------------------------------------------------------------------------ Focus Media Holding Ltd.-ADR (Advertising)(c) 45,500 1,194,830 - ------------------------------------------------------------------------ FU JI Food & Catering Services (Restaurants)(a) 625,000 711,630 - ------------------------------------------------------------------------ Global Bio-chem Technology Group Co. Ltd. (Agricultural Products)(a) 2,538,000 1,009,501 - ------------------------------------------------------------------------ Norstar Founders Group Ltd. (Auto Parts & Equipment)(a) 6,164,000 1,674,391 - ------------------------------------------------------------------------ Ping An Insurance (Group) Co. of China, Ltd.- Class H (Life & Health Insurance)(a) 1,942,000 3,150,965 - ------------------------------------------------------------------------ Shanghai Electric Group Co. Ltd.-Class H (Heavy Electrical Equipment) (Acquired 04/22/05; Cost $1,654,441)(a)(c)(d) 7,514,000 2,378,068 - ------------------------------------------------------------------------ Shanghai Forte Land Co. Ltd.-Class H (Real Estate Management & Development)(a) 4,262,000 1,310,686 - ------------------------------------------------------------------------ Weiqiao Textile Co. Ltd.-Class H (Textiles)(a) 958,000 1,162,248 - ------------------------------------------------------------------------ Wumart Stores, Inc.-Class H (Hypermarkets & Super Centers)(a) 707,000 1,461,942 - ------------------------------------------------------------------------ Yantai North Andre Juice Co. Ltd.-Class H (Packaged Foods & Meats)(a) 9,565,000 575,549 ======================================================================== 18,192,840 ========================================================================
SHARES VALUE - ------------------------------------------------------------------------
HONG KONG-19.87% AAC Acoustic Technology Holdings Inc. (Communications Equipment) (Acquired 08/03/05-08/26/05; Cost $736,168)(c)(d) 1,949,400 $ 980,723 - ------------------------------------------------------------------------ ASM Pacific Technology Ltd. (Semiconductor Equipment)(a) 207,000 960,676 - ------------------------------------------------------------------------ Cheung Kong (Holdings) Ltd. (Real Estate Management & Development)(a) 433,000 4,517,634 - ------------------------------------------------------------------------ China Construction Bank-Class H (Diversified Banks)(c) 5,205,000 1,577,863 - ------------------------------------------------------------------------ China Yurun Food Group Ltd. (Agricultural Products) (Acquired 09/23/05; Cost $1,047,054)(c)(d) 2,174,181 960,587 - ------------------------------------------------------------------------ CNOOC Ltd.-ADR (Oil & Gas Exploration & Production) 16,100 1,057,770 - ------------------------------------------------------------------------ COFCO International Ltd. (Packaged Foods & Meats)(a) 3,357,000 1,247,550 - ------------------------------------------------------------------------ Dickson Concepts (International) Ltd. (Trading Companies & Distributors)(a) 1,051,000 1,373,019 - ------------------------------------------------------------------------ Dynasty Fine Wines Group Ltd. (Distillers & Vintners)(a) 1,022,000 357,109 - ------------------------------------------------------------------------ Esprit Holdings Ltd. (Apparel Retail)(a) 782,000 5,522,890 - ------------------------------------------------------------------------ Hengan International Group Co. Ltd. (Personal Products)(a) 2,570,000 2,390,382 - ------------------------------------------------------------------------ Hutchison Whampoa Ltd. (Industrial Conglomerates)(a) 337,000 3,198,612 - ------------------------------------------------------------------------ Joyce Boutique Holdings Ltd. (Apparel Retail)(a) 8,606,000 501,260 - ------------------------------------------------------------------------ Luen Thai Holdings Ltd. (Footwear)(a) 1,974,000 523,214 - ------------------------------------------------------------------------ Li & Fung Ltd. (Distributors)(a) 1,080,000 2,311,591 - ------------------------------------------------------------------------ Midland Holdings Ltd. (Real Estate Management & Development)(a) 2,780,000 1,351,143 - ------------------------------------------------------------------------ Paliburg Holdings Ltd. (Hotels, Resorts & Cruise Lines)(a)(c) 37,586,000 773,062 - ------------------------------------------------------------------------ Regal Hotels International Holdings Ltd. (Hotels, Resorts & Cruise Lines)(a) 31,418,000 2,115,528 - ------------------------------------------------------------------------ Solomon Systech International Ltd. (Semiconductors)(a) 6,926,000 2,552,198 - ------------------------------------------------------------------------ Sun Hung Kai Properties Ltd. (Real Estate Management & Development)(a) 300,000 2,843,748 - ------------------------------------------------------------------------ Techtronic Industries Co. Ltd. (Household Appliances)(a) 1,069,500 2,638,779 - ------------------------------------------------------------------------ Top Form International Ltd. (Apparel, Accessories & Luxury Goods)(a) 2,996,000 668,230 - ------------------------------------------------------------------------ Wing Hang Bank Ltd. (Diversified Banks)(a) 391,000 2,673,785 - ------------------------------------------------------------------------ Xinyi Glass Holding Co. Ltd. (Auto Parts & Equipment)(a) 1,422,000 335,824 ======================================================================== 43,433,177 ========================================================================
F-1
SHARES VALUE - ------------------------------------------------------------------------ INDIA-8.47% Bharat Forge Ltd. (Auto Parts & Equipment) 370,125 $ 2,648,032 - ------------------------------------------------------------------------ HDFC Bank Ltd. (Diversified Banks)(a) 196,400 2,648,338 - ------------------------------------------------------------------------ HDFC Bank Ltd.-ADR (Diversified Banks) 17,500 773,325 - ------------------------------------------------------------------------ Hotel Leelaventure Ltd. (Hotels, Resorts & Cruise Lines) 319,000 1,669,318 - ------------------------------------------------------------------------ Housing Development Finance Corp. Ltd. (Thrifts & Mortgage Finance)(a) 99,300 2,137,681 - ------------------------------------------------------------------------ Infosys Technologies Ltd. (IT Consulting & Other Services)(a) 79,528 4,459,999 - ------------------------------------------------------------------------ Maruti Udyog Ltd. (Automobile Manufacturers) 203,000 2,475,906 - ------------------------------------------------------------------------ Tata Motors Ltd. (Construction & Farm Machinery & Heavy Trucks)(a) 76,000 798,705 - ------------------------------------------------------------------------ Wockhardt Ltd. (Pharmaceuticals)(a) 106,000 916,116 ======================================================================== 18,527,420 ======================================================================== INDONESIA-0.92% PT Telekomunikasi Indonesia-Series B (Integrated Telecommunication Services)(a) 4,016,000 2,011,444 ======================================================================== MALAYSIA-2.31% IOI Corp. Berhad (Agricultural Products)(a) 695,000 2,409,779 - ------------------------------------------------------------------------ Public Bank Berhad (Diversified Banks)(a) 598,000 1,044,785 - ------------------------------------------------------------------------ SP Setia Berhad (Real Estate Management & Development)(a) 1,647,000 1,606,652 ======================================================================== 5,061,216 ======================================================================== PHILIPPINES-2.64% Philippine Long Distance Telephone Co. (Integrated Telecommunication Services)(a) 161,000 4,891,837 - ------------------------------------------------------------------------ SM Prime Holdings (Real Estate Management & Development) 6,078,900 874,423 ======================================================================== 5,766,260 ======================================================================== SINGAPORE-5.05% Citiraya Industries Ltd. (Environmental & Facilities Services)(c)(e)(f) 2,178,000 0 - ------------------------------------------------------------------------ DBS Group Holdings Ltd. (Diversified Banks)(a) 335,000 3,031,264 - ------------------------------------------------------------------------ Keppel Corp. Ltd. (Industrial Conglomerates)(a) 510,000 3,502,222 - ------------------------------------------------------------------------ Keppel Land Ltd. (Real Estate Management & Development)(a) 681,000 1,539,689 - ------------------------------------------------------------------------ Singapore Airlines Ltd. (Airlines)(a) 317,000 2,103,781 - ------------------------------------------------------------------------ United Overseas Bank Ltd. (Diversified Banks)(a) 103,000 841,511 - ------------------------------------------------------------------------ United Overseas Land Ltd. (Real Estate Management & Development)(a) 10,300 14,250 ======================================================================== 11,032,717 ======================================================================== SOUTH KOREA-20.43% Cheil Communications Inc. (Advertising)(a) 11,170 2,063,577 - ------------------------------------------------------------------------ CJ Corp. (Packaged Foods & Meats)(a) 33,230 2,359,297 - ------------------------------------------------------------------------ Core Logic Inc. (Semiconductors)(a) 19,090 671,713 - ------------------------------------------------------------------------
SHARES VALUE - ------------------------------------------------------------------------
SOUTH KOREA-(CONTINUED) Daekyo Co., Ltd. (Publishing)(a) 10,800 $ 809,719 - ------------------------------------------------------------------------ Daewoo Shipbuilding & Marine Engineering Co., Ltd. (Construction & Farm Machinery & Heavy Trucks)(a) 68,000 1,365,416 - ------------------------------------------------------------------------ DS LCD Co., Ltd. (Semiconductor Equipment)(a) 140,000 1,252,176 - ------------------------------------------------------------------------ Gravity Co. Ltd.-ADR (Home Entertainment Software)(c) 320,063 2,259,645 - ------------------------------------------------------------------------ Hana Bank (Diversified Banks)(a) 88,780 3,231,098 - ------------------------------------------------------------------------ Hankook Tire Co. Ltd. (Tires & Rubber)(a) 147,100 1,770,565 - ------------------------------------------------------------------------ Hyundai Department Store Co., Ltd. (Department Stores)(a) 74,400 4,965,967 - ------------------------------------------------------------------------ Hyundai Mipo Dockyard Co., Ltd. (Construction & Farm Machinery & Heavy Trucks)(a) 30,940 1,923,822 - ------------------------------------------------------------------------ Hyundai Motor Co. (Automobile Manufacturers)(a) 27,530 2,034,676 - ------------------------------------------------------------------------ Kookmin Bank (Diversified Banks)(a) 35,030 2,013,745 - ------------------------------------------------------------------------ KT Freetel Co., Ltd. (Wireless Telecommunication Services)(a) 62,200 1,342,165 - ------------------------------------------------------------------------ LG.Philips LCD Co., Ltd.-ADR (Electronic Equipment Manufacturers)(b)(c) 109,100 2,073,991 - ------------------------------------------------------------------------ NHN Corp. (Internet Software & Services)(a)(c) 9,000 1,505,217 - ------------------------------------------------------------------------ Nong Shim Holdings Co., Ltd. (Packaged Foods & Meats)(a) 18,200 1,529,511 - ------------------------------------------------------------------------ Samsung Electronics Co., Ltd. (Electric Equipment Manufacturers)(a) 9,350 4,994,665 - ------------------------------------------------------------------------ Shinsegae Co., Ltd. (Hypermarkets & Super Centers)(a) 4,100 1,475,275 - ------------------------------------------------------------------------ STX Shipbuilding Co., Ltd. (Construction & Farm Machinery & Heavy Trucks)(a) 81,130 1,434,889 - ------------------------------------------------------------------------ Techno Semichem Co., Ltd. (Commodity Chemicals)(a) 107,505 1,160,871 - ------------------------------------------------------------------------ Woongjin Coway Co., Ltd. (Housewares & Specialties)(a) 138,900 2,417,453 ======================================================================== 44,655,453 ======================================================================== TAIWAN-8.05% Asia Optical Co., Inc. (Photographic Products)(a) 486,922 2,817,604 - ------------------------------------------------------------------------ Catcher Technology Co., Ltd. (Computer Storage & Peripherals)(a) 575,819 3,439,733 - ------------------------------------------------------------------------ Chinatrust Financial Holding Co. Ltd. (Diversified Banks)(a) 1,824,040 1,419,602 - ------------------------------------------------------------------------ Hon Hai Precision Industry Co., Ltd. (Electronic Manufacturing Services)(a) 768,734 3,335,627 - ------------------------------------------------------------------------ Hotai Motor Co. Ltd. (Automobile Manufacturers)(a) 454,000 1,125,792 - ------------------------------------------------------------------------ Novatek Microelectronics Corp., Ltd. (Semiconductors)(a) 460,818 2,021,082 - ------------------------------------------------------------------------ Taiwan Semiconductor Manufacturing Co. Ltd. (Semiconductors)(a) 2,204,238 3,447,788 ======================================================================== 17,607,228 ========================================================================
F-2
SHARES VALUE - ------------------------------------------------------------------------ THAILAND-3.46% Kasikornbank PCL (Diversified Banks)(a) 2,063,000 $ 3,192,979 - ------------------------------------------------------------------------ Siam Commercial Bank PCL (Diversified Banks)(a) 2,667,000 3,093,344 - ------------------------------------------------------------------------ Thai Oil PCL (Oil & Gas Refining & Marketing)(a) 738,000 1,269,263 ======================================================================== 7,555,586 ======================================================================== Total Foreign Stocks & Other Equity Interests (Cost $145,988,199) 202,282,542 ======================================================================== MONEY MARKET FUNDS-6.26% Liquid Assets Portfolio-Institutional Class(g) 6,845,216 6,845,216 - ------------------------------------------------------------------------ STIC Prime Portfolio-Institutional Class(g) 6,845,216 6,845,216 ======================================================================== Total Money Market Funds (Cost $13,690,432) 13,690,432 ======================================================================== TOTAL INVESTMENTS-98.79% (excluding investments purchased with cash collateral from securities loaned) (Cost $159,678,631) 215,972,974 ========================================================================
SHARES VALUE - ------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-3.73% Liquid Assets Portfolio-Institutional Class(g)(h) 4,073,251 $ 4,073,251 - ------------------------------------------------------------------------ STIC Prime Portfolio-Institutional Class(g)(h) 4,073,250 4,073,250 ======================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $8,146,501) 8,146,501 ======================================================================== TOTAL INVESTMENTS-102.52% (Cost $167,825,132) 224,119,475 ======================================================================== OTHER ASSETS LESS LIABILITIES-(2.52%) (5,514,516) ======================================================================== NET ASSETS-100.00% $218,604,959 ________________________________________________________________________ ========================================================================
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 value of these securities at October 31, 2005 was $180,236,188, which represented 82.45% of the Fund's Net Assets. See Note 1A. (b) All or a portion of this security has been pledged as collateral for securities lending transactions at October 31, 2005. (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 value of these securities at October 31, 2005 was $4,319,378, which represented 1.98% of the Fund's Net Assets. Unless otherwise indicated, these securities are not considered to be illiquid. (e) Security considered to be illiquid. The Fund is limited to investing 15% of net assets in illiquid securities at the time of purchase. The market value of this security considered illiquid at October 31, 2005 represented 0% 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 value of this security at October 31, 2005 represented 0% of the Fund's Net Assets. See Note 1A. (g) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (h) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 8. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2005 ASSETS: Investments, at value (cost $145,988,199)* $202,282,542 - ----------------------------------------------------------- Investments in affiliated money market funds (cost $21,836,933) 21,836,933 =========================================================== Total investments (cost $167,825,132) 224,119,475 =========================================================== Foreign currencies, at value (cost $3,324,474) 3,199,562 - ----------------------------------------------------------- Receivables for: Fund shares sold 1,464,041 - ----------------------------------------------------------- Dividends 124,214 - ----------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 32,183 - ----------------------------------------------------------- Other assets 31,665 =========================================================== Total assets 228,971,140 ___________________________________________________________ =========================================================== LIABILITIES: Payables for: Investments purchased 1,211,076 - ----------------------------------------------------------- Fund shares reacquired 509,312 - ----------------------------------------------------------- Trustee deferred compensation and retirement plans 39,095 - ----------------------------------------------------------- Collateral upon return of securities loaned 8,146,501 - ----------------------------------------------------------- Accrued distribution fees 85,285 - ----------------------------------------------------------- Accrued trustees' and officer's fees and benefits 1,647 - ----------------------------------------------------------- Accrued transfer agent fees 73,339 - ----------------------------------------------------------- Accrued operating expenses 299,926 =========================================================== Total liabilities 10,366,181 =========================================================== Net assets applicable to shares outstanding $218,604,959 ___________________________________________________________ =========================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $190,594,910 - ----------------------------------------------------------- Undistributed net investment income 1,277,076 - ----------------------------------------------------------- Undistributed net realized gain (loss) from investment securities and foreign currencies (29,437,063) - ----------------------------------------------------------- Unrealized appreciation of investment securities and foreign currencies 56,170,036 =========================================================== $218,604,959 ___________________________________________________________ =========================================================== NET ASSETS: Class A $156,379,486 ___________________________________________________________ =========================================================== Class B $ 35,599,625 ___________________________________________________________ =========================================================== Class C $ 26,625,848 ___________________________________________________________ =========================================================== SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 9,532,170 ___________________________________________________________ =========================================================== Class B 2,281,271 ___________________________________________________________ =========================================================== Class C 1,712,579 ___________________________________________________________ =========================================================== Class A: Net asset value per share $ 16.41 - ----------------------------------------------------------- Offering price per share: (Net asset value of $16.41 divided by 94.50%) $ 17.37 ___________________________________________________________ =========================================================== Class B: Net asset value and offering price per share $ 15.61 ___________________________________________________________ =========================================================== Class C: Net asset value and offering price per share $ 15.55 ___________________________________________________________ ===========================================================
* At October 31, 2005, securities with an aggregate value of $7,800,808 were on loan to brokers. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2005 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $481,221) $ 5,065,976 - ------------------------------------------------------------------------- Dividends from affiliated money market funds (includes securities lending income of $40,568, after compensation to counterparties of $152,773) 270,891 - ------------------------------------------------------------------------- Interest 6,890 ========================================================================= Total investment income 5,343,757 ========================================================================= EXPENSES: Advisory fees 1,774,292 - ------------------------------------------------------------------------- Administrative services fees 50,000 - ------------------------------------------------------------------------- Custodian fees 442,469 - ------------------------------------------------------------------------- Distribution fees: Class A 416,769 - ------------------------------------------------------------------------- Class B 334,662 - ------------------------------------------------------------------------- Class C 197,114 - ------------------------------------------------------------------------- Transfer agent fees 678,109 - ------------------------------------------------------------------------- Trustees' and officer's fees and benefits 20,942 - ------------------------------------------------------------------------- Other 231,223 ========================================================================= Total expenses 4,145,580 ========================================================================= Less: Fees waived, expenses reimbursed and expense offset arrangement (38,835) ========================================================================= Net expenses 4,106,745 ========================================================================= Net investment income 1,237,012 ========================================================================= REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain from: Investment securities (Net of tax on the sale of foreign investments of $37,321 -- Note 1H) 13,801,231 - ------------------------------------------------------------------------- Foreign currencies 111,129 ========================================================================= 13,912,360 ========================================================================= Change in net unrealized appreciation (depreciation) of: Investment securities (Net of change in estimated tax on foreign investments held of $(68,589) -- Note 1H) 13,667,752 - ------------------------------------------------------------------------- Foreign currencies (185,737) ========================================================================= 13,482,015 ========================================================================= Net gain from investment securities and foreign currencies 27,394,375 ========================================================================= Net increase in net assets resulting from operations $28,631,387 _________________________________________________________________________ =========================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2005 and 2004
2005 2004 ========================================================================================== OPERATIONS: Net investment income (loss) $ 1,237,012 $ (389,741) - ------------------------------------------------------------------------------------------ Net realized gain from investment securities and foreign currencies 13,912,360 11,337,475 - ------------------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities and foreign currencies 13,482,015 5,453,611 ========================================================================================== Net increase in net assets resulting from operations 28,631,387 16,401,345 ========================================================================================== Share transactions-net: Class A 29,437,413 (3,558,053) - ------------------------------------------------------------------------------------------ Class B 1,071,326 1,546,688 - ------------------------------------------------------------------------------------------ Class C 12,941,688 1,579,175 ========================================================================================== Net increase (decrease) in net assets resulting from share transactions 43,450,427 (432,190) ========================================================================================== Net increase in net assets 72,081,814 15,969,155 ========================================================================================== NET ASSETS: Beginning of year 146,523,145 130,553,990 ========================================================================================== End of year (including undistributed net investment income (loss) of $1,277,076 and $(35,257), respectively) $218,604,959 $146,523,145 __________________________________________________________________________________________ ==========================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-6 NOTES TO FINANCIAL STATEMENTS October 31, 2005 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. The Fund's investment objective is long-term growth of capital. Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services, which may be considered fair valued, or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are 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 and domestic and foreign index futures. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of F-7 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. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is 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 -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. 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-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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE - ------------------------------------------------------------------- First $500 million 0.95% - ------------------------------------------------------------------- Over $500 million 0.90% __________________________________________________________________ ===================================================================
Effective January 1, 2005 through June 30, 2006, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE - -------------------------------------------------------------------- First $250 million 0.935% - -------------------------------------------------------------------- Next $250 million 0.91% - -------------------------------------------------------------------- Next $500 million 0.885% - -------------------------------------------------------------------- Next $1.5 billion 0.86% - -------------------------------------------------------------------- Next $2.5 billion 0.835% - -------------------------------------------------------------------- Next $2.5 billion 0.81% - -------------------------------------------------------------------- Next $2.5 billion 0.785% - -------------------------------------------------------------------- Over $10 billion 0.76% ___________________________________________________________________ ====================================================================
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 2.15%, 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 numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, in addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more fully below, the expense offset arrangements from which the Fund may benefit are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. AIM did not waive fees and/or reimburse expenses during the period under this expense limitation. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2005, AIM waived fees of $25,386. At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $7,998. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the year ended October 31, 2005, AIM was paid $50,000. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the year ended October 31, 2005, the Fund paid AISI $678,109. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B 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 ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Prior to July 1, 2005, the Fund paid ADI 0.35% of the average daily net assets of Class A 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. National Association of Securities Dealers ("NASD") Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2005, the Class A, Class B and Class C shares paid $416,769, $334,662 and $197,114, respectively. F-9 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, 2005, ADI advised the Fund that it retained $93,321 in front-end sales commissions from the sale of Class A shares and $1,029, $19,476 and $4,297 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 ADI. NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2005. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME - ----------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $1,749,008 $ 36,326,406 $ (31,230,198) $ -- $ 6,845,216 $114,858 - ----------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 1,749,008 36,326,406 (31,230,198) -- 6,845,216 115,465 ======================================================================================================================= Subtotal $3,498,016 $ 72,652,812 $ (62,460,396) $ -- $13,690,432 $230,323 ======================================================================================================================= REALIZED FUND GAIN (LOSS) - --------------------------------------- Liquid Assets Portfolio- Institutional Class $ -- - --------------------------------------- STIC Prime Portfolio- Institutional Class -- ======================================= Subtotal $ -- =======================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* - ----------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $2,664,115 $ 34,652,429 $ (33,243,293) $ -- $ 4,073,251 $20,229 - ----------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 2,664,115 34,845,557 (33,436,422) -- 4,073,250 20,339 ======================================================================================================================= Subtotal $5,328,230 $ 69,497,986 $ (66,679,715) $ -- $ 8,146,501 $40,568 ======================================================================================================================= Total $8,826,246 $142,150,798 $(129,140,111) $ -- $21,836,933 $270,891 _______________________________________________________________________________________________________________________ ======================================================================================================================= REALIZED FUND GAIN (LOSS) - --------------------------------------- Liquid Assets Portfolio- Institutional Class $ -- - --------------------------------------- STIC Prime Portfolio- Institutional Class -- ======================================= Subtotal $ -- ======================================= Total $ -- _______________________________________ =======================================
* Net of compensation to counterparties. NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2005, the Fund engaged in securities purchases of $555,300 and sales of $0, which resulted in net realized gains (losses) of $0. 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, 2005, the Fund received credits from this arrangement, which resulted in the reduction of the Fund's total expenses of $5,451. F-10 NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2005, the Fund paid legal fees of $3,337 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, 2005, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the rate contractually agreed upon. NOTE 8--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At October 31, 2005, securities with an aggregate value of $7,800,808 were on loan to brokers. The loans were secured by cash collateral of $8,146,501 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2005, the Fund received dividends on cash collateral of $40,568 for securities lending transactions, which are net of compensation to counterparties. F-11 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, 2005 and 2004. TAX COMPONENTS OF NET ASSETS: As of October 31, 2005, the components of net assets on a tax basis were as follows:
2005 - -------------------------------------------------------------------------- Undistributed ordinary income $ 1,312,180 - -------------------------------------------------------------------------- Unrealized appreciation -- investments 55,668,462 - -------------------------------------------------------------------------- Temporary book/tax differences (35,104) - -------------------------------------------------------------------------- Capital loss carryforward (28,935,489) - -------------------------------------------------------------------------- Shares of beneficial interest 190,594,910 ========================================================================== Total net assets $218,604,959 __________________________________________________________________________ ==========================================================================
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 (depreciation) on foreign currencies of $(124,307). 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 $13,641,659 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, 2005 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* - ----------------------------------------------------------------------------- October 31, 2009 $27,317,937 - ----------------------------------------------------------------------------- October 31, 2010 1,617,552 ============================================================================= Total capital loss carryforward $28,935,489 _____________________________________________________________________________ =============================================================================
* 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, 2005 was $99,339,017 and $63,782,220, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $62,036,248 - ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (6,243,479) =============================================================================== Net unrealized appreciation of investment securities $55,792,769 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $168,326,706.
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of capital loss carryforward limitations and foreign currencies, on October 31, 2005, undistributed net investment income was increased by $75,321, undistributed net realized gain (loss) was increased by $17,623,546 and shares of beneficial interest decreased by $17,698,867. This reclassification had no effect on the net assets of the Fund. F-12 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 - ---------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------- 2005(A) 2004 -------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT - ---------------------------------------------------------------------------------------------------------------------- Sold: Class A 4,405,997 $ 70,360,970 3,833,128 $ 49,414,797 - ---------------------------------------------------------------------------------------------------------------------- Class B 754,546 11,491,560 980,158 12,296,597 - ---------------------------------------------------------------------------------------------------------------------- Class C 1,693,546 25,384,096 1,722,011 21,531,254 ====================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 187,193 2,986,955 184,570 2,390,898 - ---------------------------------------------------------------------------------------------------------------------- Class B (196,169) (2,986,955) (192,392) (2,390,898) ====================================================================================================================== Reacquired:(b) Class A (2,798,484) (43,910,512) (4,329,566) (55,363,748) - ---------------------------------------------------------------------------------------------------------------------- Class B (497,986) (7,433,279) (680,316) (8,359,011) - ---------------------------------------------------------------------------------------------------------------------- Class C (838,123) (12,442,408) (1,620,319) (19,952,079) ====================================================================================================================== 2,710,520 $ 43,450,427 (102,726) $ (432,190) ______________________________________________________________________________________________________________________ ======================================================================================================================
(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. ADI has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. (b) Amount is net of redemption fees of $21,867, $5,526 and $3,201 for Class A, Class B and Class C shares, respectively, for the year ended October 31, 2005 and $7,403, $2,065 and $805 for Class A, Class B and Class C shares, respectively, for the year ended October 31, 2004. 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, ----------------------------------------------------------------- 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.72 $ 12.07 $ 8.53 $ 8.59 $ 10.70 - ------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.14(a) (0.01)(a) (0.01)(a) (0.04)(a) (0.01)(a) - ------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.55 1.66 3.55 (0.02) (2.06) =============================================================================================================================== Total from investment operations 2.69 1.65 3.54 (0.06) (2.07) =============================================================================================================================== Less distributions from net realized gains -- -- -- -- (0.04) =============================================================================================================================== Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- -- =============================================================================================================================== Net asset value, end of period $ 16.41 $ 13.72 $ 12.07 $ 8.53 $ 8.59 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Total return(b) 19.61% 13.67% 41.50% (0.70)% (19.46)% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $156,379 $106,129 $97,192 $62,806 $61,729 _______________________________________________________________________________________________________________________________ =============================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.01%(c) 2.23% 2.26% 2.25% 2.02% - ------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.03%(c) 2.25% 2.41% 2.49% 2.37% =============================================================================================================================== Ratio of net investment income (loss) to average net assets 0.85%(c) (0.09)% (0.11)% (0.41)% (0.06)% _______________________________________________________________________________________________________________________________ =============================================================================================================================== Portfolio turnover rate 36% 68% 100% 114% 73% _______________________________________________________________________________________________________________________________ ===============================================================================================================================
(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 $133,589,952. F-14 NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B --------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------------- 2005 2004 2003 2002 2001 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.14 $ 11.64 $ 8.27 $ 8.38 $ 10.50 - ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.03(a) (0.09)(a) (0.07)(a) (0.10)(a) (0.07)(a) - ----------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.44 1.59 3.44 (0.01) (2.01) ============================================================================================================================= Total from investment operations 2.47 1.50 3.37 (0.11) (2.08) ============================================================================================================================= Less distributions from net realized gains -- -- -- -- (0.04) ============================================================================================================================= Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- -- ============================================================================================================================= Net asset value, end of period $ 15.61 $ 13.14 $ 11.64 $ 8.27 $ 8.38 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Total return(b) 18.80% 12.89% 40.75% (1.31)% (19.92)% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $35,600 $29,174 $24,599 $19,916 $25,479 _____________________________________________________________________________________________________________________________ ============================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.69%(c) 2.88% 2.91% 2.90% 2.67% - ----------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.71%(c) 2.90% 3.06% 3.14% 3.02% ============================================================================================================================= Ratio of net investment income (loss) to average net assets 0.17%(c) (0.74)% (0.76)% (1.06)% (0.72)% _____________________________________________________________________________________________________________________________ ============================================================================================================================= Portfolio turnover rate 36% 68% 100% 114% 73% _____________________________________________________________________________________________________________________________ =============================================================================================================================
(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 $33,466,222.
CLASS C ------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------- 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 13.09 $ 11.60 $ 8.25 $ 8.37 $ 10.49 - --------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.03(a) (0.09)(a) (0.07)(a) (0.10)(a) (0.07)(a) - --------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.43 1.58 3.42 (0.02) (2.01) =============================================================================================================== Total from investment operations 2.46 1.49 3.35 (0.12) (2.08) =============================================================================================================== Less distributions from net realized gains -- -- -- -- (0.04) =============================================================================================================== Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- -- =============================================================================================================== Net asset value, end of period $ 15.55 $ 13.09 $11.60 $ 8.25 $ 8.37 _______________________________________________________________________________________________________________ =============================================================================================================== Total return(b) 18.79% 12.84% 40.61% (1.43)% (19.94)% _______________________________________________________________________________________________________________ =============================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $26,626 $11,220 $8,763 $6,019 $ 4,692 _______________________________________________________________________________________________________________ =============================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.69%(c) 2.88% 2.91% 2.90% 2.67% - --------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.71%(c) 2.90% 3.06% 3.14% 3.02% =============================================================================================================== Ratio of net investment income (loss) to average net assets 0.17%(c) (0.74)% (0.76)% (1.06)% (0.72)% _______________________________________________________________________________________________________________ =============================================================================================================== Portfolio turnover rate 36% 68% 100% 114% 73% _______________________________________________________________________________________________________________ ===============================================================================================================
(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 $19,711,405. F-15 NOTE 14--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Half of this amount has already been paid to the fair fund pursuant to the terms of the settlement with the remainder due December 31, 2005. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. REGULATORY INQUIRIES AND PENDING LITIGATION IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, 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. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On June 13, 2005, the MDL Court (as defined below) issued a Conditional Transfer Order transferring this lawsuit to the MDL Court, which Conditional Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. AIM and ADI have the right to contest the WVASC's findings and conclusions, which they intend to do. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; - that certain AIM Funds inadequately employed fair value pricing; - that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; F-16 NOTE 14--LEGAL PROCEEDINGS--(CONTINUED) - that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees; - 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; and - that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate (this lawsuit was dismissed by the Court on August 12, 2005). These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. All lawsuits based on allegations of market timing, late trading and related activity have been transferred to the United States District Court for the District of Maryland. On August 25, 2005, the Court issued rulings on the common issues of law presented in defendants' motions to dismiss the shareholder class and derivative complaints. These rulings were issued in the context of the Janus lawsuits, but the Court's legal determinations apply at the omnibus level to all cases within his track, including the AIM and IFG cases. The Court dismissed for failure to make pre-suit demand on the fund board all derivative causes of action but one: the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"), as to which the demand requirement does not apply. The Court dismissed all claims asserted in the class complaint but two: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on the 36(b) claim to fees attributable to timing assets, as opposed to all fees on funds in which any timing occurred. The question whether the duplicative Section 36(b) claim properly belongs in the derivative complaint or in the class action complaint will be decided at a later date. The Court will subsequently issue an order applying his legal rulings to the allegations in the AIM and IFG complaints. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds. F-17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of AIM International Mutual Funds 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 AIM Asia Pacific Growth Fund (one of the funds constituting AIM International Mutual Funds, hereafter referred to as the "Fund") at October 31, 2005, 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /S/ PRICEWATERHOUSECOOPERS LLP December 19, 2005 Houston, Texas F-18 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2005 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 109 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, Vice Chair, Group Inc. (financial services holding Principal Executive Officer company); Director and Vice Chairman, and President 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 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; and Chairman, AIM Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 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 - ------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered Trustee investment company (2 portfolios)) 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 None Trustee private business corporations, including the Boss Group Ltd. (private investment and management); Cortland Trust, Inc. (Chairman) (registered investment company (3 portfolios)); Annuity and Life Re (Holdings), Ltd. (insurance company); and CompuDyne Corporation (provider of products and services to the public security market) 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 - ------------------------------------------------------------------------------------------------------------------------------- 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 Owner, Dos Angelos Ranch, L.P. Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) - ------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered Trustee Naftalis and Frankel LLP investment company (3 portfolios)) - ------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc. Trustee (San Diego, California) - ------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None Trustee of the USA - -------------------------------------------------------------------------------------------------------------------------------
(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. (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. TRUSTEES AND OFFICERS--(CONTINUED) As of October 31, 2005 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 109 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 - ------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, 2005 Retired None Jr.(3) -- 1944 Trustee Formerly: Partner, Deloitte & Touche - ------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 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 Vice President, A I M Distributors, Inc., AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds and Chief Compliance Officer, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A Senior Vice President and Assistant General Counsel, ICON Senior Officer Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------- 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. and A I M Officer Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., AIM Investment Services, Inc. and 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; Vice President, A I M Distributors, Inc.; and Director and General Counsel, Fund Management Company - ------------------------------------------------------------------------------------------------------------------------------- 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. - ------------------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A Vice President, Principal Advisors, Inc. Financial Officer and Treasurer Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief Vice President Investment Officer, A I M Advisors Inc.; Director, Chairman, Chief Executive Officer, President and Chief Investment Officer, A I M Capital Management, Inc.; Executive Vice President, A I M Management Group Inc. Formerly: Senior Vice President, AIM Private Asset Management, Inc.; and Chief Equity Officer, and Senior Investment Officer, A I M Capital Management, 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. - -------------------------------------------------------------------------------------------------------------------------------
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005. 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, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company 1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED) The percentage of qualifying assets are not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005 and October 31, 2005 are 99.66%, 99.84%, 99.57% and 99.58%, respectively. DOMESTIC EQUITY SECTOR EQUITY AIM ALLOCATION SOLUTIONS AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund AIM Basic Balanced Fund* AIM Energy Fund AIM Growth Allocation Fund(2) AIM Basic Value Fund AIM Financial Services Fund AIM Moderate Allocation Fund AIM Blue Chip Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund AIM Capital Development Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation AIM Charter Fund AIM Gold & Precious Metals Fund Fund AIM Constellation Fund AIM Leisure Fund AIM Diversified Dividend Fund AIM Multi-Sector Fund DIVERSIFIED PORTFOLIOS AIM Dynamics Fund AIM Real Estate Fund(1) AIM Large Cap Basic Value Fund AIM Technology Fund AIM Income Allocation Fund AIM Large Cap Growth Fund AIM Utilities Fund AIM International Allocation Fund AIM Mid Cap Basic Value Fund AIM Mid Cap Core Equity Fund1 FIXED INCOME AIM Mid Cap Growth Fund AIM Opportunities I Fund TAXABLE AIM Opportunities II Fund AIM Opportunities III Fund AIM Floating Rate Fund AIM Premier Equity Fund AIM High Yield Fund AIM S&P 500 Index Fund AIM Income Fund AIM Select Equity Fund AIM Intermediate Government Fund AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund AIM Small Cap Growth Fund(1) AIM Money Market Fund AIM Small Company Growth Fund AIM Short Term Bond Fund AIM Summit Fund AIM Total Return Bond Fund AIM Trimark Endeavor Fund Premier Portfolio AIM Trimark Small Companies Fund Premier U.S. Government Money Portfolio AIM Weingarten Fund TAX-FREE INTERNATIONAL/GLOBAL EQUITY AIM High Income Municipal Fund(1) AIM Asia Pacific Growth Fund AIM Municipal Bond Fund AIM Developing Markets Fund AIM Tax-Exempt Cash Fund AIM European Growth Fund AIM Tax-Free Intermediate Fund AIM European Small Company Fund(1) Premier Tax-Exempt Portfolio AIM Global Aggressive Growth Fund AIM Global Equity Fund ======================================================================================= AIM Global Growth Fund CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AIM Global Value Fund AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AIM International Core Equity Fund AND READ IT CAREFULLY BEFORE INVESTING. AIM International Growth Fund ======================================================================================= AIM International Small Company Fund(1) AIM Trimark Fund
*Domestic equity and income fund (1) This fund has limited public sales of its shares to certain investors. For more information on who may continue to invest in the fund, please see the appropriate prospectus. (2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM Growth Allocation Fund. If used after January 20, 2006, this report must be accompanied by a Fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $129 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $381 billion in assets under management. Data as of September 30, 2005. AIMinvestments.com APG-AR-1 A I M Distributors, Inc. YOUR GOALS. OUR SOLUTIONS. --Registered Trademark-- - --------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Management --Registered Trademark-- Plans Accounts - ---------------------------------------------------------------------------------------
AIM EUROPEAN GROWTH FUND Annual Report to Shareholders o October 31,2005 [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 October 31, 2005, and is based on total net assets. ABOUT SHARE CLASSES Capital International. net asset values for shareholder transactions and the returns based on o Class B shares are not available as an o The unmanaged MSCI EUROPE INDEX is a those net asset values may differ from the investment for retirement plans maintained group of European securities tracked by net asset values and returns reported in pursuant to Section 401 of the Internal Morgan Stanley Capital International. the Financial Highlights. Revenue Code, including 401(k) plans, money purchase pension plans and profit o The unmanaged MSCI EUROPE GROWTH INDEX o Industry classifications used in this sharing plans. Plans that had existing is a subset of the unmanaged MSCI Europe report are generally according to the accounts invested in Class B shares prior Index. The growth portion measures Global Industry Classification Standard, to September 30, 2003, will continue to be performance of companies with higher which was developed by and is the allowed to make additional purchases. price/earnings ratios and higher exclusive property and a service mark of forecasted growth values. Morgan Stanley Capital International Inc. o Class R shares are available only to and Standard & Poor's. certain retirement plans. Please see the o The unmanaged LIPPER EUROPEAN FUND INDEX prospectus for more information. represents an average of the 30 largest The Fund provides a complete list of its European funds tracked by Lipper, Inc., an holdings four times in each fiscal year, o Investor Class shares are closed to most independent mutual fund performance at the quarter-ends. For the second and investors. For more information on who may monitor. fourth quarters, the lists appear in the continue to invest in the Investor Class Fund's semiannual and annual reports to shares, please see the prospectus. o The unmanaged Standard & Poor's shareholders. For the first and third Composite Index of 500 Stocks (the S&P 500 quarters, the Fund files the lists with PRINCIPAL RISKS OF INVESTING IN THE FUND --Registered Trademark-- INDEX) is an index the Securities and Exchange Commission of common stocks frequently used as a (SEC) on Form N-Q. The most recent list of o International investing presents certain general measure of U.S. stock market portfolio holdings is available at risks not associated with investing solely performance. AIMinvestments.com. From our home page, in the United States. These include risks click on Products & Performance, then relating to fluctuations in the value of o The unmanaged MSCI WORLD INDEX is a Mutual Funds, then Fund Overview. Select the U.S. dollar relative to the values of group of global securities tracked by your Fund from the drop-down menu and other currencies, the custody arrangements Morgan Stanley Capital International. click on Complete Quarterly Holdings. made for the Fund's foreign holdings, Shareholders can also look up the Fund's differences in accounting, political risks o The Fund is not managed to track the Forms N-Q on the SEC's Web site at and the lesser degree of public performance of any particular index, sec.gov. And copies of the Fund's Forms information required to be provided by including the indexes defined here, and N-Q may be reviewed and copied at the non U.S. companies. consequently, the performance of the Fund SEC's Public Reference Room at 450 Fifth may deviate significantly from the Street, N.W., Washington, D.C. 20549-0102. o Investing in a single-sector or performance of the indexes. You can obtain information on the single-region mutual fund involves greater operation of the Public Reference risk and potential reward than investing o A direct investment cannot be made in an Room, including information about in a more diversified fund. index. Unless otherwise indicated, index duplicating fee charges, by calling results include reinvested dividends, and 202-942-8090 or 800-732-0330, or by o Although the fund's return during they do not reflect sales charges. electronic request at the following e-mail certain periods was positively impacted by Performance of an index of funds reflects address: publicinfo@sec.gov. The SEC file its investments in initial public fund expenses; performance of market index numbers for the Fund are 811-06463 and offerings (IPO's), there can be no does not. 33-44611. assurance that the fund will have favorable IPO investment opportunities in OTHER INFORMATION A description of the policies and the future. procedures that the Fund uses to determine o The returns shown in management's how to vote proxies relating to portfolio ABOUT INDEXES USED IN THIS REPORT discussion of Fund performance are based securities is available without charge, on net asset values calculated for upon request, from our Client Services o The unmanaged MSCI Europe, Australasia shareholder transactions. Generally department at 800-959-4246 or on the AIM and the Far East Index (the MSCI EAFE accepted accounting principles require Web site, AIMinvestments.com. On the home - --Registered Trademark-- INDEX) is a group adjustments to be made to the net assets page, scroll down and click on AIM Funds of foreign securities tracked by Morgan of the Fund at period end for financial Proxy Policy. The information is also Stanley reporting purposes, and as such, the 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 June 30, 2005, is available at our Web site. Go to AIMinvestments.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the Securities and Exchange Commission's Web site, sec.gov. ======================================================================================= ========================================== THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, Fund NASDAQ Symbols WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares AEDAX Class B Shares AEDBX ======================================================================================= Class C Shares AEDCX Class R Shares AEDRX Investor Class Shares EGINX ==========================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE AIMinvestments.com AIM EUROPEAN GROWTH FUND DEAR FELLOW AIM FUNDS SHAREHOLDERS: The fiscal year covered by this report was quite good to equity investors. Domestically, the broad-based S&P 500 Index returned 8.72%. Globally, Morgan Stanley's MSCI World Index rose 13.27%. Much of this good performance, though, [GRAHAM was attained early in the fiscal year as virtually every PHOTO] equity index declined during October of 2005. Concern about the inflationary potential of rising energy costs was frequently cited as a major cause of market weakness. Within the indexes, there was considerable variability in the performance of different sectors and markets. Domestically, energy sector performance far outpaced that of ROBERT H. GRAHAM the other sectors in the S&P 500 Index, reflecting rising oil and gas prices. Overseas, emerging markets produced more attractive results than did developed markets, at least in part because emerging markets tend to be more closely tied to the performance of natural resources and commodities. One could make a strong argument for global diversification of a stock portfolio using the performance data for the fiscal year ended October 31, 2005. Of course, your financial advisor is the person most qualified to help you decide whether such diversification is appropriate for you. For a discussion of the specific market conditions that [WILLIAMSON affected your Fund and how your Fund was managed during the PHOTO] fiscal year, please turn to Page 3. NEW INFORMATION IN THIS REPORT We would like to call your attention to two new elements in this report. First, on Page 2, is a message from Bruce Crockett, the independent Chair of the Board of Trustees of MARK H. WILLIAMSON the AIM Funds. We first introduced you to Mr. Crockett in the annual report on your Fund dated October 31, 2004. Mr. Crockett has been on our Funds' Board since 1992; he assumed his responsibilities as Chair in October 2004. Mr. Crockett plans to keep AIM shareholders informed of the work of the Board regularly via letters in the Fund reports. We certainly think this is a valuable addition to the reports. The Board is charged with looking out for the interests of shareholders, and Mr. Crockett's letter provides insight into some of the many issues the Board addresses in governing your Fund. One of the most important decisions the Board makes each year is whether to approve the advisory agreement your Fund has with AIM. Essentially, this agreement hires AIM to manage the assets in your Fund. A discussion of the factors the Board considered in reviewing the agreement is the second new element in the report, and we encourage you to read it. It appears on Pages 8 and 9. Further information about the markets, your Fund, and investing in general is always available on our widely acclaimed Web site, AIMinvestments.com. We invite you to visit it frequently. We at AIM remain committed to building solutions to help you meet your investment goals. We thank you for your continued participation in AIM Investments --Registered Trademark--. If you have any questions, please contact our award-winning Client Service representatives at 800-959-4246. We are happy to be of help. Sincerely, /S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, President, A I M Advisors, Inc. AIM Funds December 15, 2005 AIM Investments is a registered service mark of A I M Management Group Inc. A I M Advisors, Inc. and A I M Capital Management, Inc. are the investment advisors. A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments. 1 AIM EUROPEAN GROWTH FUND Dear AIM Funds Shareholders: As independent Chair of the Board of Trustees of the AIM Funds, I'm writing to report on the work being done by your Board. At our most recent meeting in June 2005, your Board approved voluntary fee reductions from A I M Advisors, Inc. [CROCKETT (AIM) that save shareholders approximately $20.8 million PHOTO] annually, based on asset levels as of March 31, 2005. The majority of these expense reductions, which took effect July 1, 2005, will be achieved by a permanent reduction to 0.25% of the Rule 12b-1 fees on Class A and Class A3 shares of those AIM Funds that previously charged these fees at a higher rate. Our June meeting, which was the culmination of more than two and one-half months of review and discussions, took place over a three-day period. The meeting included your BRUCE L. CROCKETT Board's annual comprehensive evaluation of each fund's advisory agreement with AIM. After this evaluation, in which questions about fees, performance and operations were addressed by AIM, your Board approved all advisory agreements for the year beginning July 1, 2005. You can find information on the factors considered and conclusions reached by your Board in its evaluation of each fund's advisory agreement at AIMinvestments.com. (Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals.") The advisory agreement information about your Fund is also included in this annual report on Pages 8 and 9. I encourage you to review it. Together with monitoring fund expenses, fund performance is your Board's priority. Our initial goal is to work with AIM to bring about improvement in every AIM Fund that has been underperforming its category. Your Board has a well-defined process and structure for monitoring all funds and identifying and assisting AIM in improving underperforming funds. Our Investments Committee--which functions along with Audit, Governance, Valuation and Compliance Committees--is the only one of these five standing committees to include all 14 independent Board members. Further, our Investments Committee is divided into three underlying subcommittees, each responsible for, among other things, reviewing the performance, fees and expenses of the funds that have been assigned to it. At subcommittee meetings, held throughout the year, the performance of every AIM Fund is evaluated. If a fund has underperformed its peer group for a meaningful period, we work closely with AIM to discover the causes and help develop the right responses. In some cases, AIM may determine that a change in portfolio management strategy or portfolio managers is required. In other cases, where a fund no longer seems viable, it may be merged with a similar fund, being careful to consider the needs of all shareholders affected by the decision. Following AIM's recommendation and your Board's approval, eight funds were recently merged. Be assured that your Board is working closely with the management of AIM to help you reach your investment goals. Should you or your advisor have questions or comments about the governance of AIM Funds, I invite you to write to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100, Houston, TX 77046. Your Board looks forward to keeping you informed about the governance of your funds. Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair On Behalf of the Board of Trustees AIM Funds December 15, 2005 2 AIM EUROPEAN GROWTH FUND MANAGEMENT'S DISCUSSION investment process regardless of the OF FUND PERFORMANCE macroeconomic environment. ======================================================================================= We do not hedge currencies because we believe currency exposure increases the PERFORMANCE SUMMARY ========================================== diversification benefit of international investing. Despite higher oil prices, most world FUND VS. INDEXES equity markets posted positive returns for We seek to minimize stock-specific risk the fiscal year. European markets rallied Total returns, 10/31/04-10/31/05, excluding by building a portfolio that holds a amid a low interest rate environment in applicable sales charges. If sales charges variety of companies. the euro zone and increased corporate were included, returns would be lower. profits buoyed by restructuring and cost We believe disciplined sell decisions cutting measures. Class A Shares 18.74% are a key determinant of successful Class B Shares 17.93 investing. We consider selling a stock for As indicated in the table, we are Class C Shares 17.92 any one of the following reasons: pleased to once again reward our Class R Shares 18.56 shareholders with double-digit Fund Investor Class Shares 18.82 o a company's fundamentals deteriorate or performance. Turn to Pages 6 and 7 for MSCI EAFE Index it posts disappointing earnings long-term Fund performance. During the (Broad Market Index) 18.09 fiscal year, we tracked the performance of MSCI Europe Growth Index o a stock's price seems overvalued our broad market index, while we (Style-specific Index) 14.98 significantly outperformed our Lipper European Fund Index o a more attractive opportunity is style-specific index. We attribute our (Peer Group Index) 19.99 presented comparative success to strong stock selection and our sizeable position in Source: Lipper,Inc. MARKET CONDITIONS AND YOUR FUND small- and ========================================== During the fiscal year, European equities continued to underscore the importance of mid-cap European stocks which outperformed diversification by once again during the fiscal year. significantly outperforming U.S. equities. Although returns varied, all countries ======================================================================================= represented in the MSCI Europe Index--considered representative of HOW WE INVEST o strong cash flow generation (dividends, European stocks--posted gains for the share buybacks) fiscal year in local currencies. We believe that earnings drive stock prices and that companies generating o high return on invested capital Norway, an oil exporting country, was substantial, repeatable, above average one of the best performing European earnings growth should provide long-term o reasonable prices with low valuations markets driven by higher energy prices. growth of capital. Despite an indecisive election result, We use a systematic, stock-by stock German markets posted positive returns as Therefore, when selecting stocks for approach, focusing on strengths of German companies have become more your Fund we look for European companies individual companies, rather than sector aggressive in their restructuring efforts with the following attributes: or country trends. Our goal is a and negotiations with labor unions. well-diversified, reasonably priced, o accelerating earnings and revenues quality portfolio. We adhere to our (continued) ========================================== ========================================== ========================================== PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. United Kingdom 20.6% 1. Anglo Irish Bank Corp. PLC [PIE CHART] 2. France 16.3 (Ireland) 2.7% 3. Germany 8.4 2. OTP Bank Rt. (Hungary) 2.3 Financials 18.7% 4. Switzerland 7.8 3. Puma A.G. Rudolf Dassler Sport Industrials 15.6% 5. Spain 6.0 (Germany) 2.2 Consumer Staples 11.0% 4. Eni S.p.A. (Italy) 2.1 Energy 10.0% TOTAL NET ASSETS $911.4 million 5. Total S.A. (France) 2.0 Health Care 7.1% 6. Imperial Tobacco Group PLC Materials 4.1% TOTAL NUMBER OF HOLDINGS* 94 (United Kingdom) 2.0 Utilities 3.7% 7. Enterprise Inns PLC Telecommunication Services 2.0% (United Kingdom) 1.9 Information Technology 1.1% 8. Roche Holding A.G. (Switzerland) 1.8 Money Market Funds Plus 9. BNP Paribas S.A. (France) 1.7 Other Assets Less Liabilities 5.1% 10. Grupo Ferrovial,S.A. (Spain) 1.7 Consumer Discretionary 21.6% 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. ========================================== ========================================== ==========================================
3 AIM EUROPEAN GROWTH FUND Economic growth remained muted outperformed large-cap stocks during the JASON T. HOLZER, throughout the region. The European fiscal year. Approximately 65% of our [HOLZER Chartered Financial Central Bank (ECB) kept overnight interest portfolio was in small- and mid-cap stocks PHOTO] Analyst, senior rates at 2.0%. Meanwhile the Bank of as of the close of the reporting period. portfolio manager, is England which raised rates in 2004, cut lead manager of AIM rates by 25 basis points (100 basis points Given strong Fund performance we have European Growth Fund with respect to the = 1 percent) in August citing subdued few detractors to report. Although overall Fund's small and mid-cap investments. Mr. consumer spending and investment growth. Fund holdings in the U.K. produced Holzer joined AIM in 1996. He received a Both the euro and British pound positive returns, NEXT PLC, a long-time B.A. in quantitative economics and an M.S. depreciated against the U.S. dollar during Fund holding, proved a detractor. The in engineering-economic systems from the fiscal year--good news for European stock declined due to slower retail growth Stanford University. exporters but a detriment to U.S.-based in the U.K. as consumers responded to rate investors whose stock returns were reduced hikes by the Bank of England last year. CLAS G. OLSSON, senior when translated back into U.S. dollars. The downdraft in consumer spending finally [OLSSON portfolio manager and caught up to the stock and although we PHOTO] head of AIM's During the fiscal year, Fund still believe this is a top European International performance was broadly based with company, we sold our position during the Investment Management investments in many countries contributing fiscal year Unit, is lead manager of AIM European to returns. In France, Spain and the Growth Fund with respect to the Fund's Netherlands, hybrid industrial companies-- Foreign exchange was another detractor. large cap investments. Mr. Olsson joined Vinci S.A., Grupo Ferrovial S.A. and BAM As mentioned earlier, both the euro and AIM in 1994. Mr. Olsson became a Groep N.V.--were top performers. We find pound depreciated during the fiscal year commissioned naval officer at the Royal these companies attractive as we believe as the U.S. dollar gained strength. As we Swedish Naval Academy in 1988. He also the market has underpriced them in the do not hedge currencies--we buy stocks in received a B.B.A. from The University of past, because many analysts view these their local currency and then translate Texas at Austin. companies on a simplistic PE that value back into dollars for the (price-to-earnings) manner, while ignoring Fund--foreign currency depreciation proved MATTHEW W. DENNIS, long-term concession activities whose a drag on Fund performance. [DENNIS Chartered Financial earnings are back-end loaded. PHOTO] Analyst, portfolio IN CLOSING manager, is manager of Not surprisingly, energy was the best AIM European Growth performing sector world-wide. We believed European markets once again outperformed Fund. He has been in the investment there were a variety of themes in the U.S. markets. In our opinion, low interest business since 1994. Mr. Dennis received a energy arena and we therefore owned a rates in the euro zone, structured reform B.A. in economics from The University of variety of different types of efforts throughout Europe and increased Texas at Austin. He also earned an M.S. in energy-related companies including: private equity takeovers continue to finance from Texas A&M University. integrated oil and gas, oil and gas support European markets and make Europe a equipment and services, and refining and compelling investment arena. We are BORGE ENDRESEN, drilling. In addition, we believe some oil pleased to provide shareholders with [ENDERSEN Chartered Financial companies have underlying drivers beyond positive Fund returns for the fiscal year PHOTO] Analyst, portfolio rising commodity prices. For instance, and thank you for your continued support manager, is manager Total S.A. (France) and Eni S.p.A. (Italy) in AIM European Growth Fund. of AIM European Growth are companies that have strong production Fund. He joined AIM in 1999 and graduated growth relative to peers as well as The views and opinions expressed in summa cum laude from the University of attractive valuations--characteristics we management's discussion of Fund Oregon with a B.S. in finance. He also believe can lead to strong long-term performance are those of A I M Advisors, earned an M.B.A. from The University of performance. Inc. These views and opinions are subject Texas at Austin. to change at any time based on factors Our largest sector weights are in such as market and economic conditions. RICHARD NIELD, consumer discretionary and financials. These views and opinions may not be relied [NIELD Chartered Financial Consumer stocks contributed the most to upon as investment advice or PHOTO] Analyst, portfolio Fund performance, while financials also recommendations, or as an offer for a manager, is manager of did well with long-time Fund holding Anglo particular security. The information is AIM European Growth Irish Bank and Hungary-based OTP Bank Rt., not a complete analysis of every aspect of Fund. Mr. Nield joined AIM in 2000. He both top five contributors. any market, country, industry, security or earned a bachelor of commerce degree in the Fund. Statements of fact are from finance and international business from We believe a strong competitive sources considered reliable, but A I M McGill University in Montreal, Canada. advantage we have is our flexibility to Advisors, Inc. makes no representation or choose stocks among market warranty as to their completeness or Assisted by Europe/Canada Team capitalizations. European small- and accuracy. Although historical performance mid-cap stocks significantly is no guarantee of future results, these [RIGHT ARROW GRAPHIC] insights may help you understand our investment management philosophy. FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE, PLEASE SEE PAGES 6 See important Fund and index AND 7. disclosures inside front cover.
AIM EUROPEAN GROWTH FUND Calculating your ongoing Fund expenses EXAMPLE estimate the expenses that you paid over The hypothetical account values and the period. Simply divide your account expenses may not be used to estimate the As a shareholder of the Fund, you incur value by $1,000 (for example, an $8,600 actual ending account balance or expenses two types of costs: (1) transaction costs, account value divided by $1,000 = 8.6), you paid for the period. You may use this which may include sales charges (loads) on then multiply the result by the number in information to compare the ongoing costs purchase payments; contingent deferred the table under the heading entitled of investing in the Fund and other funds. sales charges on redemptions; and "Actual Expenses Paid During Period" to To do so, compare this 5% hypothetical redemption fees, if any; and (2) ongoing estimate the expenses you paid on your example with the 5% hypothetical examples costs, including management fees; account during this period. that appear in the shareholder reports of distribution and/or service fees (12b-1); the other funds. and other Fund expenses. This example is HYPOTHETICAL EXAMPLE FOR intended to help you understand your COMPARISON PURPOSES Please note that the expenses shown in ongoing costs (in dollars) of investing in the table are meant to highlight your the Fund and to compare these costs with The table below also provides information ongoing costs only and do not reflect any ongoing costs of investing in other mutual about hypothetical account values and transactional costs, such as sales charges funds. The example is based on an hypothetical expenses based on the Fund's (loads) on purchase payments, contingent investment of $1,000 invested at the actual expense ratio and an assumed rate deferred sales charges on redemptions, and beginning of the period and held for the of return of 5% per year before expenses, redemption fees, if any. Therefore, the entire period May 1, 2005, through October which is not the Fund's actual return. The hypothetical information is useful in 31, 2005. Fund's actual cumulative total returns at comparing ongoing costs only, and will not net asset value after expenses for the six help you determine the relative total ACTUAL EXPENSES months ended October 31, 2005, appear in costs of owning different funds. In the table "Cumulative Total Returns" on addition, if these transactional costs The table below provides information about Page 7. were included, your costs would have been actual account values and actual expenses. higher. You may use the information in this table, together with the amount you invested, to ==================================================================================================================================== ACTUAL HYPOTHETICAL (5% annual return before expenses) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (5/01/05) (10/31/05)(1) PERIOD(2,3) (10/31/05) PERIOD(2,4) RATIO A $1,000.00 $1,063.60 $ 8.74 $1,016.74 $ 8.54 1.68% B 1,000.00 1,059.60 12.46 1,013.11 12.18 2.40 C 1,000.00 1,059.50 12.46 1,013.11 12.18 2.40 R 1,000.00 1,062.40 9.88 1,015.63 9.65 1.90 Investor 1,000.00 1,063.70 8.58 1,016.89 8.39 1.65 (1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31, 2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. Effective on July 1, 2005, the distributor contractually agreed to reduce rule 12b-1 plan fees for Class A shares to 0.25%. The annualized expense ratio restated as if this agreement had been in effect throughout the entire most recent fiscal half year is 1.65% for the Class A shares. (3) The actual expenses paid restated as if the change discussed above had been in effect throughout the entire most recent fiscal half year are $8.58 for the Class A shares. (4) The hypothetical expenses paid restated as if the change discussed above had been in effect throughout the entire most recent fiscal half year are $8.39 for the Class A shares. ==================================================================================================================================== [ARROW BUTTON For More Information Visit IMAGE] AIMinvestments.com
5 AIM EUROPEAN GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE RESULTS OF A $10,000 INVESTMENT Fund data from 11/3/97, index data from 10/31/97 [MOUNTAIN CHART] AIM EUROPEAN GROWTH AIM EUROPEAN GROWTH AIM EUROPEAN GROWTH LIPPER EUROPEAN MSCI EAFE MSCI EUROPE DATE FUND-CLASS A SHARES FUND-CLASS B SHARES FUND-CLASS C SHARES FUND INDEX INDEX GROWTH INDEX 10/31/97 $ 9450 $10000 $10000 $10000 $10000 $10000 11/97 9233 9770 9770 10075 9898 10139 12/97 9592 10150 10150 10309 9984 10508 1/98 10026 10600 10600 10694 10441 10964 2/98 10972 11590 11590 11575 11111 11898 3/98 12172 12850 12850 12451 11453 12431 4/98 12910 13609 13609 12738 11544 12652 5/98 13789 14529 14538 13058 11488 12882 6/98 13855 14599 14608 13097 11575 13172 7/98 14535 15298 15308 13346 11692 13270 8/98 12551 13197 13198 11419 10244 11889 9/98 11842 12457 12458 10779 9929 11415 10/98 12248 12867 12878 11533 10965 12436 11/98 12900 13546 13558 12190 11526 13065 12/98 13489 14156 14168 12758 11981 13940 1/99 14322 15025 15038 12985 11946 14004 2/99 13593 14245 14257 12605 11661 13455 3/99 13063 13685 13697 12640 12148 13166 4/99 13195 13815 13818 13002 12640 13029 5/99 12797 13386 13388 12530 11989 12536 6/99 13185 13786 13788 12849 12456 12737 7/99 13904 14526 14538 13065 12827 12607 8/99 14244 14876 14878 13171 12873 12802 9/99 14528 15167 15169 13027 13003 12748 10/99 15530 16196 16209 13468 13490 13456 11/99 18594 19385 19399 14404 13959 14279 12/99 22473 23404 23419 16266 15212 16049 1/00 23676 24644 24669 15741 14245 15279 2/00 29521 30712 30728 17911 14628 16493 3/00 26852 27914 27929 17924 15196 16722 4/00 24130 25064 25088 16952 14396 15939 5/00 23307 24194 24218 16609 14044 15194 6/00 24043 24944 24968 17002 14594 15410 7/00 24375 25284 25308 16872 13982 14788 8/00 25038 25954 25979 16936 14103 14519 9/00 23921 24775 24799 16062 13416 13709 10/00 22323 23115 23140 15574 13099 13389 11/00 20082 20785 20810 14740 12608 12682 12/00 21737 22475 22500 15847 13056 13378 1/01 21528 22246 22270 15799 13050 13230 2/01 19164 19805 19821 14466 12071 11777 3/01 17064 17617 17640 13196 11267 10773 4/01 18001 18577 18600 14070 12050 11602 5/01 17841 18397 18419 13528 11624 10917 6/01 17377 17917 17939 12977 11149 10446 7/01 16970 17487 17508 12845 10946 10416 8/01 17036 17537 17559 12516 10669 9959 9/01 15135 15568 15589 11112 9588 9054 10/01 15627 16068 16089 11501 9834 9453 11/01 15996 16437 16450 11999 10196 9896 12/01 16365 16807 16830 12254 10257 10142 1/02 15958 16377 16400 11717 9712 9665 2/02 16148 16577 16591 11725 9780 9735 3/02 16753 17187 17201 12312 10356 10079 4/02 17028 17446 17471 12279 10377 9962 5/02 17350 17776 17791 12286 10509 9777 6/02 17350 17765 17780 11957 10090 9601 7/02 15401 15767 15780 10708 9094 8467 8/02 15515 15866 15879 10636 9074 8406 9/02 14001 14306 14320 9318 8099 7581 10/02 14759 15076 15091 10032 8534 8263 11/02 14863 15176 15190 10506 8922 8450 12/02 14779 15075 15090 10119 8622 8261 1/03 14211 14486 14500 9677 8262 7833 2/03 14097 14366 14369 9308 8072 7599 3/03 14286 14555 14569 9194 7914 7546 4/03 15459 15734 15739 10350 8689 8457 5/03 16793 17084 17099 11112 9216 8895 6/03 16728 17014 17029 11201 9439 8915 7/03 16842 17115 17129 11415 9667 8938 8/03 16870 17144 17158 11502 9900 8856 9/03 17825 18094 18109 11758 10206 9132 10/03 18952 19223 19248 12502 10842 9681 11/03 19725 20003 20018 13052 11083 10123 12/03 21163 21453 21467 13979 11949 10853 1/04 22062 22352 22367 14387 12118 11049 2/04 23095 23383 23398 14835 12397 11363 3/04 22838 23111 23129 14357 12467 10971 4/04 22489 22742 22759 14128 12185 10820 5/04 22754 23001 23018 14274 12211 10965 6/04 23218 23461 23478 14549 12494 11060 7/04 22508 22722 22748 14040 12088 10689 8/04 22963 23172 23199 14079 12142 10638 9/04 24079 24291 24308 14696 12459 11047 10/04 24825 25029 25047 15216 12884 11424 11/04 26709 26909 26925 16309 13764 12224 12/04 28133 28327 28355 17067 14368 12696 1/05 28029 28208 28224 16871 14104 12401 2/05 29470 29647 29664 17829 14714 12973 3/05 28618 28766 28795 17313 14344 12678 4/05 27719 27857 27873 16867 14007 12468 5/05 27747 27868 27884 16857 14014 12532 6/05 28324 28429 28453 17232 14200 12608 7/05 29650 29748 29773 18074 14635 13076 8/05 30625 30708 30723 18663 15005 13283 9/05 30824 30877 30901 19068 15673 13540 10/05 29475 29530 29540 18258 15215 13135 ==================================================================================================================================== Source: Lipper,Inc. The data shown in the chart include This chart, which is a logarithmic reinvested distributions, applicable sales chart, presents the fluctuations in the charges, Fund expenses and management value of the Fund and its indexes. We fees. Results for Class B shares are believe that a logarithmic chart is more calculated as if a hypothetical effective than other types of charts in shareholder had liquidated his entire illustrating changes in value during the investment in the Fund at the close of the early years shown in the chart. The reporting period and paid the applicable vertical axis, the one that indicates the contingent deferred sales charges. Index dollar value of an investment, is results include reinvested dividends, but constructed with each segment representing they do not reflect sales charges. a percent change in the value of the Performance of an index of funds reflects investment. In this chart, each segment fund expenses and management fees; represents a doubling, or 100% change, in performance of a market index does not. the value of the investment. In other Performance shown in the chart and words, the space between $5,000 and table(s) does not reflect deduction of $10,000 is the same size as the space taxes a shareholder would pay on Fund between $10,000 and $20,000 and is the distributions or sale of Fund shares. same as that between $20,000 and $40,000. Performance of the indexes does not reflect the effects of taxes.
6 AIM EUROPEAN GROWTH FUND ========================================== ========================================== ========================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS As of 10/31/05, including applicable sales As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding charges quarter-end, including applicable sales applicable sales charges charges CLASS A SHARES Class A Shares 6.36% Inception (11/3/97) 14.48% CLASS A SHARES Class B Shares 5.96 5 Years 4.53 Inception (11/3/97) 15.30% Class C Shares 5.95 1 Year 12.20 5 Years 4.01 Class R Shares 6.24 1 Year 20.98 Investor Class Shares 6.37 CLASS B SHARES Inception (11/3/97) 14.51% CLASS B SHARES 5 Years 4.69 Inception (11/3/97) 15.33% ========================================== 1 Year 12.93 5 Years 4.17 1 Year 22.12 CLASS C SHARES Inception (11/3/97) 14.51% CLASS C SHARES 5 Years 5.00 Inception (11/3/97) 15.34% 1 Year 16.92 5 Years 4.50 1 Year 26.15 CLASS R SHARES Inception 15.11% CLASS R SHARES 5 Years 5.54 Inception 15.94% 1 Year 18.56 5 Years 5.02 1 Year 27.72 INVESTOR CLASS SHARES Inception 15.31% INVESTOR CLASS SHARES 5 Years 5.74 Inception 16.14% 1 Year 18.82 5 Years 5.22 1 Year 28.11 ========================================== ========================================== CLASS R SHARES' INCEPTION DATE IS JUNE 3, THE PERFORMANCE DATA QUOTED REPRESENT THE SEVENTH YEAR. THE CDSC ON CLASS C 2002. RETURNS SINCE THAT DATE ARE PAST PERFORMANCE AND CANNOT GUARANTEE SHARES IS 1% FOR THE FIRST YEAR AFTER HISTORICAL RETURNS. ALL OTHER RETURNS ARE COMPARABLE FUTURE RESULTS; CURRENT PURCHASE. BLENDED RETURNS OF HISTORICAL CLASS R PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE SHARE PERFORMANCE AND RESTATED CLASS A VISIT AIMINVESTMENTS.COM FOR THE MOST CLASS R SHARES DO NOT HAVE A FRONT-END SHARE PERFORMANCE (FOR PERIODS PRIOR TO RECENT MONTH-END PERFORMANCE. PERFORMANCE SALES CHARGE; RETURNS SHOWN ARE NET ASSET THE INCEPTION DATE OF CLASS R SHARES) AT FIGURES REFLECT REINVESTED DISTRIBUTIONS, VALUE AND DO NOT REFLECT A 0.75% CDSC NET ASSET VALUE, ADJUSTED TO REFLECT THE CHANGES IN NET ASSET VALUE AND THE EFFECT THAT MAY BEIMPOSED ON TOTAL REDEMPTION OF HIGHER RULE 12b-1 FEES APPLICABLE TO CLASS OF THE MAXIMUM SALES CHARGE UNLESS RETIREMENT PLAN ASSETS WITHIN THE FIRST R SHARES. CLASS A SHARES' INCEPTION DATE OTHERWISE STATED. INVESTMENT RETURN AND YEAR. INVESTOR CLASS SHARES DO NOT HAVE A IS NOVEMBER 3, 1997. PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU FRONT-END SALES CHARGE OR A CDSC; MAY HAVE A GAIN OR LOSS WHEN YOU SELL THEREFORE, PERFORMANCE IS AT NET ASSET INVESTOR CLASS SHARES' INCEPTION DATE SHARES. VALUE. IS SEPTEMBER 30, 2003. RETURNS SINCE THAT DATE ARE HISTORICAL RETURNS. ALL OTHER CLASS A SHARE PERFORMANCE REFLECTS THE THE PERFORMANCE OF THE FUND'S SHARE RETURNS ARE BLENDED RETURNS OF HISTORICAL MAXIMUM 5.50% SALES CHARGE, AND CLASS B CLASSES WILL DIFFER DUE TO DIFFERENT SALES INVESTOR CLASS SHARE PERFORMANCE AND AND CLASS C SHARE PERFORMANCE REFLECTS THE CHARGE STRUCTURES AND CLASS EXPENSES. RESTATED CLASS A SHARE PERFORMANCE (FOR APPLICABLE CONTINGENT DEFERRED SALES PERIODS PRIOR TO THE INCEPTION DATE OF CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE A REDEMPTION FEE OF 2% WILL BE IMPOSED INVESTOR CLASS SHARES) AT NET ASSET VALUE CDSC ON CLASS B SHARES DECLINES FROM 5% ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF AND REFLECT THE HIGHER RULE 12b-1 FEES BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE FUND WITHIN 30 DAYS OF PURCHASE. APPLICABLE TO CLASS A SHARES. CLASS A THE BEGINNING OF EXCEPTIONS TO THE REDEMPTION FEE ARE SHARES' INCEPTION DATE IS NOVEMBER 3, LISTED IN THE FUND'S PROSPECTUS. 1997.
7 AIM EUROPEAN GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION The Board of Trustees of AIM International o The quality of services to be provided fee rate for the Fund under the Advisory Mutual Funds (the "Board") oversees the by AIM. The Board reviewed the credentials Agreement was fair and reasonable. management of AIM European Growth Fund and experience of the officers and (the "Fund") and, as required by law, employees of AIM who will provide determines annually whether to approve the investment advisory services to the Fund. o Fees relative to those of comparable continuance of the Fund's advisory In reviewing the qualifications of AIM to funds with other advisors. The Board agreement with A I M Advisors, Inc. provide investment advisory services, the reviewed the advisory fee rate for the ("AIM"). Based upon the recommendation of Board reviewed the qualifications of AIM's Fund under the Advisory Agreement. The the Investments Committee of the Board, investment personnel and considered such Board compared effective contractual which is comprised solely of independent issues as AIM's portfolio and product advisory fee rates at a common asset level trustees, at a meeting held on June 30, review process, various back office and noted that the Fund's rate was above 2005, the Board, including all of the support functions provided by AIM and the median rate of the funds advised by independent trustees, approved the AIM's equity and fixed income trading other advisors with investment strategies continuance of the advisory agreement (the operations. Based on the review of these comparable to those of the Fund that the "Advisory Agreement") between the Fund and and other factors, the Board concluded Board reviewed. The Board noted that AIM AIM for another year, effective July 1, that the quality of services to be has agreed to waive advisory fees of the 2005. provided by AIM was appropriate and that Fund, as discussed below. Based on this AIM currently is providing satisfactory review, the Board concluded that the The Board considered the factors services in accordance with the terms of advisory fee rate for the Fund under the discussed below in evaluating the fairness the Advisory Agreement. Advisory Agreement was fair and and reasonableness of the Advisory reasonable. Agreement at the meeting on June 30, 2005 o The performance of the Fund relative to and as part of the Board's ongoing comparable funds. The Board reviewed the o Expense limitations and fee waivers. The oversight of the Fund. In their performance of the Fund during the past Board noted that AIM has contractually deliberations, the Board and the one, three and five calendar years against agreed to waive advisory fees of the Fund independent trustees did not identify any the performance of funds advised by other through December 31, 2009 to the extent particular factor that was controlling, advisors with investment strategies necessary so that the advisory fees and each trustee attributed different comparable to those of the Fund. The Board payable by the Fund do not exceed a weights to the various factors. noted that the Fund's performance in such specified maximum advisory fee rate, which periods was above the median performance maximum rate includes breakpoints and is One of the responsibilities of the of such comparable funds. Based on this based on net asset levels. The Board Senior Officer of the Fund, who is review, the Board concluded that no considered the contractual nature of this independent of AIM and AIM's affiliates, changes should be made to the Fund and fee waiver and noted that it remains in is to manage the process by which the that it was not necessary to change the effect until December 31, 2009. The Board Fund's proposed management fees are Fund's portfolio management team at this considered the effect this fee waiver negotiated to ensure that they are time. would have on the Fund's estimated negotiated in a manner which is at arm's expenses and concluded that the levels of length and reasonable. To that end, the o The performance of the Fund relative to fee waivers/expense limitations for the Senior Officer must either supervise a indices. The Board reviewed the Fund were fair and reasonable. competitive bidding process or prepare an performance of the Fund during the past independent written evaluation. The Senior one, three and five calendar years against o Breakpoints and economies of scale. The Officer has recommended an independent the performance of the Lipper European Board reviewed the structure of the Fund's written evaluation in lieu of a Fund Index. The Board noted that the advisory fee under the Advisory Agreement, competitive bidding process and, upon the Fund's performance in such periods was noting that it includes one breakpoint. direction of the Board, has prepared such above the performance of such Index. Based The Board reviewed the level of the Fund's an independent written evaluation. Such on this review, the Board concluded that advisory fees, and noted that such fees, written evaluation also considered certain no changes should be made to the Fund and as a percentage of the Fund's net assets, of the factors discussed below. In that it was not necessary to change the have decreased as net assets increased addition, as discussed below, the Senior Fund's portfolio management team at this because the Advisory Agreement includes a Officer made certain recommendations to time. breakpoint. The Board noted that AIM has the Board in connection with such written contractually agreed to waive advisory evaluation. o Meeting with the Fund's portfolio fees of the Fund through December 31, 2009 managers and investment personnel. With to the extent necessary so that the The discussion below serves as a respect to the Fund, the Board is meeting advisory fees payable by the Fund do not summary of the Senior Officer's periodically with such Fund's portfolio exceed a specified maximum advisory fee independent written evaluation and managers and/or other investment personnel rate, which maximum rate includes recommendations to the Board in connection and believes that such individuals are breakpoints and is based on net asset therewith, as well as a discussion of the competent and able to continue to carry levels. The Board concluded that the material factors and the conclusions with out their responsibilities under the Fund's fee levels under the Advisory respect thereto that formed the basis for Advisory Agreement. Agreement therefore reflect economies of the Board's approval of the Advisory scale and that it was not necessary to Agreement. After consideration of all of o Overall performance of AIM. The Board change the advisory fee breakpoints in the the factors below and based on its considered the overall performance of AIM Fund's advisory fee schedule. informed business judgment, the Board in providing investment advisory and determined that the Advisory Agreement is portfolio administrative services to the o Investments in affiliated money market in the best interests of the Fund and its Fund and concluded that such performance funds. The Board also took into account shareholders and that the compensation to was satisfactory. the fact that uninvested cash and cash AIM under the Advisory Agreement is fair collateral from securities lending and reasonable and would have been o Fees relative to those of clients of AIM arrangements (collectively, "cash obtained through arm's length with comparable investment strategies. The balances") of the Fund may be invested in negotiations. Board reviewed the advisory fee rate for money market funds advised by AIM pursuant the Fund under the Advisory Agreement. The to the terms of an SEC exemptive order. o The nature and extent of the advisory Board noted that this rate was lower than The Board found that the Fund may realize services to be provided by AIM. The Board the advisory fee rates for one offshore certain benefits upon investing cash reviewed the services to be provided by fund for which an AIM affiliate serves as balances in AIM advised money market AIM under the Advisory Agreement. Based on advisor with investment strategies funds, including a higher net return, such review, the Board concluded that the comparable to those of the Fund. The Board increased liquidity, increased range of services to be provided by AIM noted that AIM has agreed to waive diversification or decreased transaction under the Advisory Agreement was advisory fees of the Fund, as discussed costs. The Board also found that appropriate and that AIM currently is below. Based on this review, the Board providing services in accordance with the concluded that the advisory terms of the Advisory Agreement. (continued)
8 AIM EUROPEAN GROWTH FUND the Fund will not receive reduced services o AIM's financial soundness in light of if it invests its cash balances in such the Fund's needs. The Board considered money market funds. The Board noted that, whether AIM is financially sound and has to the extent the Fund invests in the resources necessary to perform its affiliated money market funds, AIM has obligations under the Advisory Agreement, voluntarily agreed to waive a portion of and concluded that AIM has the financial the advisory fees it receives from the resources necessary to fulfill its Fund attributable to such investment. The obligations under the Advisory Agreement. Board further determined that the proposed securities lending program and related o Historical relationship between the Fund procedures with respect to the lending and AIM. In determining whether to Fund is in the best interests of the continue the Advisory Agreement for the lending Fund and its respective Fund, the Board also considered the prior shareholders. The Board therefore relationship between AIM and the Fund, as concluded that the investment of cash well as the Board's knowledge of AIM's collateral received in connection with the operations, and concluded that it was securities lending program in the money beneficial to maintain the current market funds according to the procedures relationship, in part, because of such is in the best interests of the lending knowledge. The Board also reviewed the Fund and its respective shareholders. general nature of the non-investment advisory services currently performed by o Independent written evaluation and AIM and its affiliates, such as recommendations of the Fund's Senior administrative, transfer agency and Officer. The Board noted that, upon their distribution services, and the fees direction, the Senior Officer of the Fund, received by AIM and its affiliates for who is independent of AIM and AIM's performing such services. In addition to affiliates, had prepared an independent reviewing such services, the trustees also written evaluation in order to assist the considered the organizational structure Board in determining the reasonableness of employed by AIM and its affiliates to the proposed management fees of the AIM provide those services. Based on the Funds, including the Fund. The Board noted review of these and other factors, the that the Senior Officer's written Board concluded that AIM and its evaluation had been relied upon by the affiliates were qualified to continue to Board in this regard in lieu of a provide non-investment advisory services competitive bidding process. In to the Fund, including administrative, determining whether to continue the transfer agency and distribution services, Advisory Agreement for the Fund, the Board and that AIM and its affiliates currently considered the Senior Officer's written are providing satisfactory non-investment evaluation and the recommendation made by advisory services. the Senior Officer to the Board that the Board consider implementing a process to o Other factors and current trends. In assist them in more closely monitoring the determining whether to continue the performance of the AIM Funds. The Board Advisory Agreement for the Fund, the Board concluded that it would be advisable to considered the fact that AIM, along with implement such a process as soon as others in the mutual fund industry, is reasonably practicable. subject to regulatory inquiries and litigation related to a wide range of o Profitability of AIM and its affiliates. issues. The Board also considered the The Board reviewed information concerning governance and compliance reforms being the profitability of AIM's (and its undertaken by AIM and its affiliates, affiliates') investment advisory and other including maintaining an internal controls activities and its financial condition. committee and retaining an independent The Board considered the overall compliance consultant, and the fact that profitability of AIM, as well as the AIM has undertaken to cause the Fund to profitability of AIM in connection with operate in accordance with certain managing the Fund. The Board noted that governance policies and practices. The AIM's operations remain profitable, Board concluded that these actions although increased expenses in recent indicated a good faith effort on the part years have reduced AIM's profitability. of AIM to adhere to the highest ethical Based on the review of the profitability standards, and determined that the current of AIM's and its affiliates' investment regulatory and litigation environment to advisory and other activities and its which AIM is subject should not prevent financial condition, the Board concluded the Board from continuing the Advisory that the compensation to be paid by the Agreement for the Fund. Fund to AIM under its Advisory Agreement was not excessive. o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
9 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2005
SHARES VALUE - ------------------------------------------------------------------------ FOREIGN STOCKS & OTHER EQUITY INTERESTS-94.88% BELGIUM-3.33% Colruyt N.V. (Food Retail) 68,300 $ 8,842,091 - ------------------------------------------------------------------------ InBev N.V. (Brewers) 237,800 9,506,446 - ------------------------------------------------------------------------ KBC Groep N.V. (Diversified Banks)(a) 146,855 11,965,945 ======================================================================== 30,314,482 ======================================================================== DENMARK-0.74% DSV A.S. (Trucking)(a) 69,200 6,745,634 ======================================================================== FRANCE-16.32% Axa (Multi-Line Insurance)(a) 264,300 7,655,815 - ------------------------------------------------------------------------ BNP Paribas S.A. (Diversified Banks)(a) 208,547 15,814,226 - ------------------------------------------------------------------------ Eiffage S.A. (Construction & Engineering)(a) 99,750 8,609,907 - ------------------------------------------------------------------------ Eiffage S.A. (Construction & Engineering) (Acquired 03/03/04; Cost $2,591,265)(a)(b) 57,000 4,919,947 - ------------------------------------------------------------------------ Elior (Restaurants)(a) 734,300 9,574,605 - ------------------------------------------------------------------------ Euler Hermes S.A. (Property & Casualty Insurance) 63,700 5,421,361 - ------------------------------------------------------------------------ Neopost S.A. (Office Electronics) 104,800 10,112,713 - ------------------------------------------------------------------------ Pernod Ricard S.A. (Distillers & Vintners) 45,978 8,041,108 - ------------------------------------------------------------------------ Sanofi-Aventis (Pharmaceuticals)(a) 118,800 9,514,223 - ------------------------------------------------------------------------ Societe Generale (Diversified Banks)(a) 67,790 7,741,342 - ------------------------------------------------------------------------ Technip S.A. (Oil & Gas Equipment & Services)(a) 153,800 8,375,825 - ------------------------------------------------------------------------ Total S.A. (Integrated Oil & Gas)(a) 73,573 18,530,314 - ------------------------------------------------------------------------ Veolia Environnement (Multi-Utilities)(a) 166,900 6,960,029 - ------------------------------------------------------------------------ Vinci S.A. (Construction & Engineering) 197,700 15,451,291 - ------------------------------------------------------------------------ Vivendi Universal S.A. (Movies & Entertainment)(a) 381,700 11,996,355 ======================================================================== 148,719,061 ======================================================================== GERMANY-8.36% Adidas-Salomon A.G. (Apparel, Accessories & Luxury Goods) 40,400 6,779,363 - ------------------------------------------------------------------------ Celesio A.G. (Health Care Distributors) 89,200 7,710,293 - ------------------------------------------------------------------------ Continental A.G. (Tires & Rubber)(a) 107,625 8,227,897 - ------------------------------------------------------------------------ Deutsche Boerse A.G. (Specialized Finance)(a) 92,500 8,704,992 - ------------------------------------------------------------------------ Henkel KGaA-Pfd. (Household Products)(a) 48,300 4,163,263 - ------------------------------------------------------------------------ MAN A.G. (Industrial Machinery)(a) 105,100 4,880,404 - ------------------------------------------------------------------------ Merck KGaA (Pharmaceuticals)(a) 94,700 7,836,848 - ------------------------------------------------------------------------ Porsche A.G.-Pfd. (Automobile Manufacturers) 10,330 7,448,116 - ------------------------------------------------------------------------ Puma A.G. Rudolf Dassler Sport (Footwear) 80,839 20,470,486 ======================================================================== 76,221,662 ========================================================================
SHARES VALUE - ------------------------------------------------------------------------
GREECE-4.99% EFG Eurobank Ergasias (Diversified Banks) 151,700 $ 4,564,254 - ------------------------------------------------------------------------ Germanos S.A. (Computer & Electronics Retail) 579,800 8,631,978 - ------------------------------------------------------------------------ OPAP S.A. (Casinos & Gaming)(a) 372,600 10,767,924 - ------------------------------------------------------------------------ OPAP S.A. (Casinos & Gaming) (Acquired 07/14/03; Cost $1,109,094)(a)(b) 104,000 3,005,540 - ------------------------------------------------------------------------ Piraeus Bank S.A. (Diversified Banks)(a) 378,700 7,683,952 - ------------------------------------------------------------------------ Titan Cement Co. S.A. (Construction Materials) 317,300 10,847,511 ======================================================================== 45,501,159 ======================================================================== HUNGARY-3.23% MOL Magyar Olaj-es Gazipari Rt. (Integrated Oil & Gas)(a) 90,500 8,441,891 - ------------------------------------------------------------------------ OTP Bank Rt. (Diversified Banks)(a) 581,900 21,021,737 ======================================================================== 29,463,628 ======================================================================== IRELAND-5.21% Anglo Irish Bank Corp. PLC (Diversified Banks)(a) 1,828,944 24,761,995 - ------------------------------------------------------------------------ CRH PLC (Construction Materials)(a) 266,341 6,668,655 - ------------------------------------------------------------------------ FBD Holdings PLC (Multi-Line Insurance)(a) 126,600 4,658,896 - ------------------------------------------------------------------------ IAWS Group PLC (Packaged Foods & Meats) 373,500 5,148,716 - ------------------------------------------------------------------------ Independent News & Media PLC (Publishing) 2,289,800 6,203,210 ======================================================================== 47,441,472 ======================================================================== ITALY-4.77% Davide Campari-Milano S.p.A. (Distillers & Vintners) 1,264,000 8,575,787 - ------------------------------------------------------------------------ Eni S.p.A. (Integrated Oil & Gas)(a)(c) 725,414 19,406,630 - ------------------------------------------------------------------------ Lottomatica S.p.A. (Casinos & Gaming)(a) 288,000 10,459,436 - ------------------------------------------------------------------------ Mediaset S.p.A. (Broadcasting & Cable TV)(a) 454,800 4,995,439 ======================================================================== 43,437,292 ======================================================================== NETHERLANDS-3.03% Aalberts Industries N.V. (Industrial Conglomerates)(a) 252,436 12,282,118 - ------------------------------------------------------------------------ Koninklijke BAM Groep N.V. (Construction & Engineering)(a) 101,135 8,212,370 - ------------------------------------------------------------------------ Nutreco Holding N.V. (Agricultural Products)(a) 177,617 7,148,365 ======================================================================== 27,642,853 ======================================================================== NORWAY-4.75% Aktiv Kapital A.S.A. (Specialized Finance)(a) 357,300 4,832,831 - ------------------------------------------------------------------------ Petroleum Geo-Services A.S.A. (Oil & Gas Equipment & Services)(a)(c)(d) 331,410 8,385,172 - ------------------------------------------------------------------------ Schibsted A.S.A. (Publishing)(a)(c) 296,200 8,526,594 - ------------------------------------------------------------------------ Smedvig A.S.A.-Class A (Oil & Gas Drilling)(a)(c) 202,678 4,256,773 - ------------------------------------------------------------------------
F-1
SHARES VALUE - ------------------------------------------------------------------------ NORWAY-(CONTINUED) TGS Nopec Geophysical Co. A.S.A. (Oil & Gas Equipment & Services)(a)(d) 209,000 $ 7,780,287 - ------------------------------------------------------------------------ Tomra Systems A.S.A. (Environmental & Facilities Services)(a)(c) 1,389,700 9,522,141 ======================================================================== 43,303,798 ======================================================================== RUSSIA-1.46% AO VimpelCom-ADR (Wireless Telecommunication Services)(d) 210,400 8,416,000 - ------------------------------------------------------------------------ OAO LUKOIL-ADR (Integrated Oil & Gas)(a) 89,000 4,908,897 ======================================================================== 13,324,897 ======================================================================== SPAIN-6.00% Banco Santander Central Hispano S.A. (Diversified Banks)(a) 597,300 7,619,009 - ------------------------------------------------------------------------ Corporacion Mapfre S.A. (Multi-Line Insurance)(a) 721,763 12,642,225 - ------------------------------------------------------------------------ Enagas (Gas Utilities) 287,360 5,080,762 - ------------------------------------------------------------------------ Enagas (Gas Utilities) (Acquired 06/25/02; Cost $1,895,584)(b) 300,400 5,311,320 - ------------------------------------------------------------------------ Grupo Ferrovial, S.A. (Construction & Engineering)(a) 213,748 15,787,602 - ------------------------------------------------------------------------ Industria de Diseno Textil, S.A. (Apparel Retail)(a) 278,750 8,250,229 ======================================================================== 54,691,147 ======================================================================== SWEDEN-2.43% Atlas Copco A.B.-Class A (Industrial Machinery) 252,600 4,616,553 - ------------------------------------------------------------------------ Gambro A.B.-Class A (Health Care Services)(a)(c)(d) 382,100 5,399,803 - ------------------------------------------------------------------------ Swedish Match A.B. (Tobacco)(a) 556,500 6,326,695 - ------------------------------------------------------------------------ Volvo A.B.-Class B (Construction & Farm Machinery & Heavy Trucks)(a)(c) 141,340 5,815,201 ======================================================================== 22,158,252 ======================================================================== SWITZERLAND-7.76% Compagnie Financiere Richemont A.G.-Class A (Apparel, Accessories & Luxury Goods)(a)(e) 367,230 13,978,420 - ------------------------------------------------------------------------ Nestle S.A. (Packaged Foods & Meats)(a) 22,100 6,579,674 - ------------------------------------------------------------------------ Rieter Holding A.G. (Auto Parts & Equipment)(a) 15,700 4,480,895 - ------------------------------------------------------------------------ Roche Holding A.G. (Pharmaceuticals) 108,450 16,203,770 - ------------------------------------------------------------------------ Serono S.A.-Class B (Biotechnology)(a) 7,010 4,540,344 - ------------------------------------------------------------------------ Syngenta A.G. (Fertilizers & Agricultural Chemicals)(a)(d) 136,930 14,681,834 - ------------------------------------------------------------------------ UBS A.G. (Diversified Capital Markets)(a) 121,140 10,285,442 ======================================================================== 70,750,379 ======================================================================== TURKEY-1.86% Akbank T.A.S. (Diversified Banks)(a) 920,600 5,726,575 - ------------------------------------------------------------------------ Tupras-Turkiye Petrol Rafinerileri A.S. (Oil & Gas Refining, Marketing & Transportation) 656,918 11,228,121 ======================================================================== 16,954,696 ========================================================================
SHARES VALUE - ------------------------------------------------------------------------
UNITED KINGDOM-20.64% Aviva PLC (Multi-Line Insurance) 574,000 $ 6,778,309 - ------------------------------------------------------------------------ Balfour Beatty PLC (Construction & Engineering) 1,766,700 9,532,135 - ------------------------------------------------------------------------ British Energy Group PLC (Electric Utilities)(a)(d) 952,000 7,480,105 - ------------------------------------------------------------------------ Bunzl PLC (Trading Companies & Distributors)(a) 887,988 8,877,838 - ------------------------------------------------------------------------ Capita Group PLC (Human Resource & Employment Services) 1,273,300 8,791,825 - ------------------------------------------------------------------------ Enterprise Inns PLC (Restaurants)(a) 1,258,580 17,356,587 - ------------------------------------------------------------------------ Filtrona PLC (Commodity Chemicals)(a) 1,101,418 5,258,220 - ------------------------------------------------------------------------ Homeserve PLC (Diversified Commercial & Professional Services) 276,000 4,935,306 - ------------------------------------------------------------------------ Imperial Tobacco Group PLC (Tobacco) 645,580 18,516,067 - ------------------------------------------------------------------------ Inchcape PLC (Distributors)(a) 228,530 8,331,104 - ------------------------------------------------------------------------ Informa PLC (Publishing) 1,713,866 11,355,920 - ------------------------------------------------------------------------ International Power PLC (Independent Power Producers & Energy Traders)(a) 2,078,000 8,536,540 - ------------------------------------------------------------------------ Intertek Group PLC (Diversified Commercial & Professional Services) 350,800 4,425,151 - ------------------------------------------------------------------------ NETeller PLC (Specialized Finance)(a)(d) 243,000 2,964,660 - ------------------------------------------------------------------------ Punch Taverns PLC (Restaurants) 678,000 8,774,669 - ------------------------------------------------------------------------ Reckitt Benckiser PLC (Household Products)(a) 257,245 7,775,602 - ------------------------------------------------------------------------ Shire Pharmaceuticals Group PLC (Pharmaceuticals)(a) 1,105,300 13,061,594 - ------------------------------------------------------------------------ Sportingbet PLC (Casinos & Gaming)(a)(d) 798,661 4,234,678 - ------------------------------------------------------------------------ Tesco PLC (Food Retail)(a) 1,736,235 9,245,694 - ------------------------------------------------------------------------ Ultra Electronics Holdings PLC (Aerospace & Defense) 547,110 8,523,952 - ------------------------------------------------------------------------ Vodafone Group PLC (Wireless Telecommunication Services)(a) 3,880,946 10,187,949 - ------------------------------------------------------------------------ William Hill PLC (Casinos & Gaming)(a) 332,590 3,145,426 ======================================================================== 188,089,331 ======================================================================== Total Foreign Stocks & Other Equity Interests (Cost $596,543,011) 864,759,743 ======================================================================== MONEY MARKET FUNDS-3.26% Liquid Assets Portfolio-Institutional Class(f) 14,835,210 14,835,210 - ------------------------------------------------------------------------ STIC Prime Portfolio-Institutional Class(f) 14,835,210 14,835,210 ======================================================================== Total Money Market Funds (Cost $29,670,420) 29,670,420 ======================================================================== TOTAL INVESTMENTS-98.14% (excluding investments purchased with cash collateral from securities loaned) (Cost $626,213,431) 894,430,163 ========================================================================
F-2
SHARES VALUE - ------------------------------------------------------------------------ INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-3.77% Liquid Assets Portfolio-Institutional Class(f)(g) 34,397,412 $ 34,397,412 ======================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $34,397,412) 34,397,412 ======================================================================== TOTAL INVESTMENTS-101.91% (Cost $660,610,843) 928,827,575 ======================================================================== OTHER ASSETS LESS LIABILITIES-(1.91%) (17,392,131) ======================================================================== NET ASSETS-100.00% $911,435,444 ________________________________________________________________________ ========================================================================
Investment Abbreviations: ADR - American Depositary Receipt Pfd. - Preferred
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 value of these securities at October 31, 2005 was $588,515,159, which represented 64.57% of the Fund's Total Net Assets. 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 value of these securities at October 31, 2005 was $13,236,807, which represented 1.45% of the Fund's Net Assets. Unless otherwise indicated, these securities are not considered to be illiquid. (c) All or a portion of this security has been pledged as collateral for securities lending transactions at October 31, 2005. (d) Non-income producing security. (e) Each unit represents one A bearer share in the company and one bearer share participation certificate in Richemont S.A. (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 to Financial Statements which are an integral part of the financial statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2005 ASSETS: Investments, at value (cost $596,543,011)* $864,759,743 - ----------------------------------------------------------- Investments in affiliated money market funds (cost $64,067,832) 64,067,832 =========================================================== Total investments (cost $660,610,843) 928,827,575 =========================================================== Foreign currencies, at value (cost $4,626,443) 4,608,516 - ----------------------------------------------------------- Receivables for: Investments sold 12,495,085 - ----------------------------------------------------------- Fund shares sold 1,557,722 - ----------------------------------------------------------- Dividends and interest 914,186 - ----------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 99,199 - ----------------------------------------------------------- Other assets 39,902 =========================================================== Total assets 948,542,185 ___________________________________________________________ =========================================================== LIABILITIES: Payables for: Fund shares reacquired 1,715,836 - ----------------------------------------------------------- Trustee deferred compensation and retirement plans 144,584 - ----------------------------------------------------------- Collateral upon return of securities loaned 34,397,412 - ----------------------------------------------------------- Accrued distribution fees 330,165 - ----------------------------------------------------------- Accrued trustees' and officer's fees and benefits 2,552 - ----------------------------------------------------------- Accrued transfer agent fees 293,839 - ----------------------------------------------------------- Accrued operating expenses 222,353 =========================================================== Total liabilities 37,106,741 =========================================================== Net assets applicable to shares outstanding $911,435,444 ___________________________________________________________ =========================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $656,564,597 - ----------------------------------------------------------- Undistributed net investment income 4,834,314 - ----------------------------------------------------------- Undistributed net realized gain (loss) from investment securities and foreign currencies (18,144,321) - ----------------------------------------------------------- Unrealized appreciation of investment securities and foreign currencies 268,180,854 =========================================================== $911,435,444 ___________________________________________________________ =========================================================== NET ASSETS: Class A $496,328,468 ___________________________________________________________ =========================================================== Class B $144,210,898 ___________________________________________________________ =========================================================== Class C $ 63,806,019 ___________________________________________________________ =========================================================== Class R $ 4,767,391 ___________________________________________________________ =========================================================== Investor Class $202,322,668 ___________________________________________________________ =========================================================== SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 15,955,474 ___________________________________________________________ =========================================================== Class B 4,884,173 ___________________________________________________________ =========================================================== Class C 2,159,872 ___________________________________________________________ =========================================================== Class R 153,976 ___________________________________________________________ =========================================================== Investor Class 6,509,882 ___________________________________________________________ =========================================================== Class A: Net asset value per share $ 31.11 - ----------------------------------------------------------- Offering price per share: (Net asset value of $31.11 divided by 94.50%) $ 32.92 ___________________________________________________________ =========================================================== Class B: Net asset value and offering price per share $ 29.53 ___________________________________________________________ =========================================================== Class C: Net asset value and offering price per share $ 29.54 ___________________________________________________________ =========================================================== Class R: Net asset value and offering price per share $ 30.96 ___________________________________________________________ =========================================================== Investor Class: Net asset value and offering price per share $ 31.08 ___________________________________________________________ ===========================================================
* At October 31, 2005, securities with an aggregate value of $33,085,288 were on loan to brokers. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2005 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $1,760,786) $ 19,785,370 - -------------------------------------------------------------------------- Dividends from affiliated money market funds (includes securities lending income of $583,315, after compensation to counterparties of $822,042) 2,025,334 - -------------------------------------------------------------------------- Interest 55,432 ========================================================================== Total investment income 21,866,136 ========================================================================== EXPENSES: Advisory fees 8,429,581 - -------------------------------------------------------------------------- Administrative services fees 249,034 - -------------------------------------------------------------------------- Custodian fees 1,007,879 - -------------------------------------------------------------------------- Distribution fee: Class A 1,537,791 - -------------------------------------------------------------------------- Class B 1,483,680 - -------------------------------------------------------------------------- Class C 602,101 - -------------------------------------------------------------------------- Class R 18,956 - -------------------------------------------------------------------------- Investor Class 504,254 - -------------------------------------------------------------------------- Transfer agent fees 2,587,926 - -------------------------------------------------------------------------- Trustees' and officer's fees and benefits 45,570 - -------------------------------------------------------------------------- Other 494,225 ========================================================================== Total expenses 16,960,997 ========================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangement (238,837) ========================================================================== Net expenses 16,722,160 ========================================================================== Net investment income 5,143,976 ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain (loss) from: Investment securities 134,302,290 - -------------------------------------------------------------------------- Foreign currencies (205,042) ========================================================================== 134,097,248 ========================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities 5,701,450 - -------------------------------------------------------------------------- Foreign currencies (167,462) ========================================================================== 5,533,988 ========================================================================== Net gain from investment securities and foreign currencies 139,631,236 ========================================================================== Net increase in net assets resulting from operations $144,775,212 __________________________________________________________________________ ==========================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2005 and 2004
2005 2004 - ------------------------------------------------------------------------------------------ OPERATIONS: Net investment income $ 5,143,976 $ 593,975 - ------------------------------------------------------------------------------------------ Net realized gain from investment securities and foreign currencies 134,097,248 67,086,371 - ------------------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities and foreign currencies 5,533,988 113,461,421 ========================================================================================== Net increase in net assets resulting from operations 144,775,212 181,141,767 ========================================================================================== Distributions to shareholders from net investment income: Class A (528,401) (106,111) - ------------------------------------------------------------------------------------------ Class R (715) -- - ------------------------------------------------------------------------------------------ Investor Class (486,652) (212,530) ========================================================================================== Decrease in net assets resulting from distributions (1,015,768) (318,641) ========================================================================================== Share transactions-net: Class A 11,635,750 12,387,787 - ------------------------------------------------------------------------------------------ Class B (10,160,016) (8,714,512) - ------------------------------------------------------------------------------------------ Class C 9,944,523 4,006,947 - ------------------------------------------------------------------------------------------ Class R 2,163,148 1,093,306 - ------------------------------------------------------------------------------------------ Investor Class (16,521,258) 139,066,257 ========================================================================================== Net increase (decrease) in net assets resulting from share transactions (2,937,853) 147,839,785 ========================================================================================== Net increase in net assets 140,821,591 328,662,911 ========================================================================================== NET ASSETS: Beginning of year 770,613,853 441,950,942 ========================================================================================== End of year (including undistributed net investment income of $4,834,314 and $911,149, respectively) $911,435,444 $770,613,853 __________________________________________________________________________________________ ==========================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-6 NOTES TO FINANCIAL STATEMENTS October 31, 2005 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 consists of multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is long-term growth of capital. Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services, which may be considered fair valued, or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are 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 and domestic and foreign index futures. 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. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is 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 -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. 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-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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE - ------------------------------------------------------------------- First $500 million 0.95% - ------------------------------------------------------------------- Over $500 million 0.90% __________________________________________________________________ ===================================================================
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE - -------------------------------------------------------------------- First $250 million 0.935% - -------------------------------------------------------------------- Next $250 million 0.91% - -------------------------------------------------------------------- Next $500 million 0.885% - -------------------------------------------------------------------- Next $1.5 billion 0.86% - -------------------------------------------------------------------- Next $2.5 billion 0.835% - -------------------------------------------------------------------- Next $2.5 billion 0.81% - -------------------------------------------------------------------- Next $2.5 billion 0.785% - -------------------------------------------------------------------- Over $10 billion 0.76% ___________________________________________________________________ ====================================================================
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2005, AIM waived fees of $179,839. At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $32,550. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the year ended October 31, 2005, AIM was paid $249,034. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the year ended October 31, 2005, the Fund paid AISI $2,587,926. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B, Class C, Class 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 ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. The Fund, pursuant to the Investor Class Plan, pays ADI for its allocated share of expenses incurred pursuant to the Investor Class Plan for the period, up to a maximum annual rate of 0.25% of the average daily net assets of the Investor Class shares. Prior to July 1, 2005, the Fund paid ADI 0.35% of the average daily net assets of Class A shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. National Association of Securities Dealers ("NASD") Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $1,537,791, $1,483,680, $602,101, $18,956 and $504,254, 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, 2005, ADI advised the Fund it retained $159,110 in front-end sales commissions from the sale of Class A shares and $1,096, $35,987, $8,900 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 ADI. 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, 2005. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS) - ----------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $26,427,712 $106,874,355 $(118,466,857) $ -- $14,835,210 $ 717,974 $ -- - ----------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 26,427,712 106,874,355 (118,466,857) -- 14,835,210 724,045 -- =================================================================================================================================== Subtotal $52,855,424 $213,748,710 $(236,933,714) $ -- $29,670,420 $1,442,019 $ -- ===================================================================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS) - ----------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ -- $128,057,627 $ (93,660,215) $ -- $34,397,412 $ 100,399 $ -- - ----------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 11,605,133 348,824,869 (360,430,002) -- -- 482,916 -- =================================================================================================================================== Subtotal $11,605,133 $476,882,496 $(454,090,217) $ -- $34,397,412 $ 583,315 $ -- =================================================================================================================================== Total $64,460,557 $690,631,206 $(691,023,931) $ -- $64,067,832 $2,025,334 $ -- ___________________________________________________________________________________________________________________________________ ===================================================================================================================================
* Net of compensation to 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, 2005, the Fund received credits from this arrangement which resulted in the reduction of the Fund's total expenses of $26,448. NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2005, the Fund paid legal fees of $5,259 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 F-10 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, 2005, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the rate contractually agreed upon. NOTE 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, 2005, securities with an aggregate value of $33,085,392 were on loan to brokers. The loans were secured by cash collateral of $34,397,412 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2005, the Fund received dividends on cash collateral of $583,315 for securities lending transactions, which are net of compensation to counterparties. 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, 2005 and 2004 was as follows:
2005 2004 - ------------------------------------------------------------------------------------ Distributions paid from ordinary income $1,015,768 $318,641 ____________________________________________________________________________________ ====================================================================================
TAX COMPONENTS OF NET ASSETS: As of October 31, 2005, the components of net assets on a tax basis were as follows:
2005 - -------------------------------------------------------------------------- Undistributed ordinary income $ 4,946,764 - -------------------------------------------------------------------------- Undistributed long-term gain 60,635,080 - -------------------------------------------------------------------------- Unrealized appreciation -- investments 267,869,177 - -------------------------------------------------------------------------- Temporary book/tax differences (112,450) - -------------------------------------------------------------------------- Capital loss carryforward (78,467,724) - -------------------------------------------------------------------------- Shares of beneficial interest 656,564,597 ========================================================================== Total net assets $911,435,444 __________________________________________________________________________ ==========================================================================
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 deferral of losses on wash sales. The tax-basis unrealized appreciation (depreciation) on investments amount includes appreciation (depreciation) on foreign currencies of $(35,878). 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, 2005 to utilizing $15,589,322 of capital loss carryforward in the fiscal year ended October 31, 2006. F-11 The Fund utilized $73,030,987 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, 2005 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* - ----------------------------------------------------------------------------- October 31, 2008 $13,477,659 - ----------------------------------------------------------------------------- October 31, 2009 64,990,065 ============================================================================= Total capital loss carryforward $78,467,724 _____________________________________________________________________________ =============================================================================
* 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 INVESCO European Growth Fund into the Fund, are realized on securities held on 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, 2005 was $425,257,561 and $403,123,855, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $272,168,990 - ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (4,263,935) ============================================================================== Net unrealized appreciation of investment securities $267,905,055 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $660,922,520.
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES As a result of differing book/tax treatment of foreign currency transactions, on October 31, 2005, undistributed net investment income (loss) was decreased by $205,043 and undistributed net realized gain (loss) was increased by $205,043. This reclassification had no effect on the net assets of the Fund. F-12 NOTE 11--SHARE INFORMATION The Fund currently consists of 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. Investor Class shares of the Fund are offered only to certain grandfathered investors.
CHANGES IN SHARES OUTSTANDING - ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------- 2005(A) 2004 --------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------------------------------------- Sold: Class A 4,313,933 $ 128,881,535 4,125,663 $ 97,941,773 - ----------------------------------------------------------------------------------------------------------------------- Class B 935,289 26,603,825 860,401 19,605,645 - ----------------------------------------------------------------------------------------------------------------------- Class C 865,525 24,612,056 748,539 17,048,651 - ----------------------------------------------------------------------------------------------------------------------- Class R 122,192 3,670,884 74,842 1,721,074 - ----------------------------------------------------------------------------------------------------------------------- Investor Class 794,722 23,632,443 780,496 18,487,554 ======================================================================================================================= Issued as reinvestment of dividends: Class A 15,791 454,301 4,447 91,218 - ----------------------------------------------------------------------------------------------------------------------- Class R 24 704 -- -- - ----------------------------------------------------------------------------------------------------------------------- Investor Class 16,214 465,660 9,940 203,374 ======================================================================================================================= Issued in connection with acquisitions:(b) Class A -- -- 22,379 452,046 - ----------------------------------------------------------------------------------------------------------------------- Class B -- -- 5,121 99,255 - ----------------------------------------------------------------------------------------------------------------------- Class C -- -- 53,300 1,033,743 - ----------------------------------------------------------------------------------------------------------------------- Investor Class -- -- 7,999,868 161,401,679 ======================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 265,583 8,009,256 283,516 6,765,403 - ----------------------------------------------------------------------------------------------------------------------- Class B (278,801) (8,009,256) (296,150) (6,765,403) ======================================================================================================================= Reacquired:(c) Class A (4,180,070) (125,709,342) (3,960,360) (92,862,653) - ----------------------------------------------------------------------------------------------------------------------- Class B (999,545) (28,754,585) (955,724) (21,654,009) - ----------------------------------------------------------------------------------------------------------------------- Class C (511,006) (14,667,533) (633,985) (14,075,447) - ----------------------------------------------------------------------------------------------------------------------- Class R (49,790) (1,508,440) (26,338) (627,768) - ----------------------------------------------------------------------------------------------------------------------- Investor Class (1,351,519) (40,619,361) (1,747,995) (41,026,350) ======================================================================================================================= (41,458) $ (2,937,853) 7,347,960 $147,839,785 _______________________________________________________________________________________________________________________ =======================================================================================================================
(a) There are three entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they owns 20% of the outstanding shares of the Fund. ADI has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. (b) 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. (c) Amount is net of redemption fees of $9,574, $2,938, $1,171, $70 and $4,128 for Class A, Class B, Class C, Class R and Investor Class shares, respectively, for the year ended October 31, 2005 and $4,825, $1,632, $518, $20 and $2,335 for Class A, Class B, Class C, Class R and Investor Class shares, respectively, for the year ended October 31, 2004. 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, -------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 26.23 $ 20.02 $ 15.60 $ 16.52 $ 23.59 - -------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.21(a) 0.05(a) (0.01)(a) (0.07)(a) (0.06)(a) - -------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 4.70 6.17 4.43 (0.85) (7.01) ================================================================================================================================ Total from investment operations 4.91 6.22 4.42 (0.92) (7.07) ================================================================================================================================ Less dividends from net investment income (0.03) (0.01) -- -- -- ================================================================================================================================ Redemption fees added to beneficial interest 0.00 0.00 -- -- -- ================================================================================================================================ Net asset value, end of period $ 31.11 $ 26.23 $ 20.02 $ 15.60 $ 16.52 ________________________________________________________________________________________________________________________________ ================================================================================================================================ Total return(b) 18.74% 31.06% 28.33% (5.57)% (29.97)% ________________________________________________________________________________________________________________________________ ================================================================================================================================ Ratios/supplemental data: Net assets, end of period (000s omitted) $496,328 $407,566 $301,659 $283,812 $157,651 ________________________________________________________________________________________________________________________________ ================================================================================================================================ Ratio of expenses to average net assets With fee waivers and/or expense reimbursements 1.70%(c) 1.87% 2.01% 1.93% 1.83% - -------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.72%(c) 1.87% 2.02% 1.93% 1.83% ================================================================================================================================ Ratio of net investment income (loss) to average net assets 0.71%(c) 0.19% (0.04)% (0.42)% (0.32)% ________________________________________________________________________________________________________________________________ ================================================================================================================================ Portfolio turnover rate 48% 60% 81% 94% 99% ________________________________________________________________________________________________________________________________ ================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $488,094,970.
CLASS B -------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 25.03 $ 19.23 $ 15.08 $ 16.07 $ 23.11 - -------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.01(a) (0.10)(a) (0.11)(a) (0.18)(a) (0.19)(a) - -------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 4.49 5.90 4.26 (0.81) (6.85) ================================================================================================================================ Total from investment operations 4.50 5.80 4.15 (0.99) (7.04) ================================================================================================================================ Redemption fees added to beneficial interest 0.00 0.00 -- -- -- ================================================================================================================================ Net asset value, end of period $ 29.53 $ 25.03 $ 19.23 $ 15.08 $ 16.07 ________________________________________________________________________________________________________________________________ ================================================================================================================================ Total return(b) 17.98% 30.16% 27.52% (6.16)% (30.46)% ________________________________________________________________________________________________________________________________ ================================================================================================================================ Ratios/supplemental data: Net assets, end of period (000s omitted) $144,211 $130,863 $107,959 $97,436 $105,324 ________________________________________________________________________________________________________________________________ ================================================================================================================================ Ratio of expenses to average net assets With fee waivers and/or expense reimbursements 2.39%(c) 2.52% 2.66% 2.58% 2.50% - -------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.41%(c) 2.52% 2.67% 2.58% 2.50% ================================================================================================================================ Ratio of net investment income (loss) to average net assets 0.02%(c) (0.46)% (0.69)% (1.07)% (0.98)% ________________________________________________________________________________________________________________________________ ================================================================================================================================ Portfolio turnover rate 48% 60% 81% 94% 99% ________________________________________________________________________________________________________________________________ ================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $148,368,059. F-14 NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C ---------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ---------------------------------------------------------------------- 2005 2004 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 25.05 $ 19.24 $ 15.09 $ 16.09 $ 23.13 - -------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.01(a) (0.10)(a) (0.11)(a) (0.18)(a) (0.19)(a) - -------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 4.48 5.91 4.26 (0.82) (6.85) ================================================================================================================================ Total from investment operations 4.49 5.81 4.15 (1.00) (7.04) ================================================================================================================================ Redemption fees added to beneficial interest 0.00 0.00 -- -- -- ================================================================================================================================ Net asset value, end of period $ 29.54 $ 25.05 $ 19.24 $ 15.09 $ 16.09 ________________________________________________________________________________________________________________________________ ================================================================================================================================ Total return(b) 17.92% 30.20% 27.50% (6.22)% (30.44)% ________________________________________________________________________________________________________________________________ ================================================================================================================================ Ratios/supplemental data: Net assets, end of period (000s omitted) $63,806 $45,222 $31,509 $27,323 $32,604 ________________________________________________________________________________________________________________________________ ================================================================================================================================ Ratio of expenses to average net assets With fee waivers and/or expense reimbursements 2.39%(c) 2.52% 2.66% 2.58% 2.50% - -------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.41%(c) 2.52% 2.67% 2.58% 2.50% ================================================================================================================================ Ratio of net investment income (loss) to average net assets 0.02%(c) (0.46)% (0.69)% (1.07)% (0.98)% ________________________________________________________________________________________________________________________________ ================================================================================================================================ Portfolio turnover rate 48% 60% 81% 94% 99% ________________________________________________________________________________________________________________________________ ================================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. (c) Ratios are based on average daily net assets of $60,210,078.
CLASS R --------------------------------------------------------- JUNE 3, 2002 (DATE SALES YEAR ENDED OCTOBER 31, COMMENCED) TO ----------------------------------- OCTOBER 31, 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $26.13 $19.98 $15.59 $ 18.35 - ----------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.16(a) 0.01(a) (0.03)(a) (0.04)(a) - ----------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 4.68 6.14 4.42 (2.72) ======================================================================================================================= Total from investment operations 4.84 6.15 4.39 (2.76) ======================================================================================================================= Less dividends from net investment income (0.01) -- -- -- ======================================================================================================================= Redemption fees added to beneficial interest 0.00 0.00 -- -- ======================================================================================================================= Net asset value, end of period $30.96 $26.13 $19.98 $ 15.59 _______________________________________________________________________________________________________________________ ======================================================================================================================= Total return(b) 18.52% 30.78% 28.16% (15.04)% _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $4,767 $2,131 $ 660 $ 15 _______________________________________________________________________________________________________________________ ======================================================================================================================= Ratio of expenses to average net assets With fee waivers and/or expense reimbursements 1.89%(c) 2.02% 2.16% 2.08%(d) - ----------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.91%(c) 2.02% 2.17% 2.08%(d) ======================================================================================================================= Ratio of net investment income (loss) to average net assets 0.52%(c) 0.04% (0.19)% (0.57)%(d) _______________________________________________________________________________________________________________________ ======================================================================================================================= Portfolio turnover rate 48% 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 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 $3,791,182. (d) Annualized. F-15 NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INVESTOR CLASS ---------------------------------------------------- SEPTEMBER 30, 2003 YEAR ENDED (DATE SALES OCTOBER 31, COMMENCED) TO ------------------------- OCTOBER 31, 2005 2004 2003 - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 26.22 $ 20.01 $18.84 - ------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) 0.24(a) 0.09(a) 0.00(a) - ------------------------------------------------------------------------------------------------------------------ Net gains on securities (both realized and unrealized) 4.69 6.15 1.17 ================================================================================================================== Total from investment operations 4.93 6.24 1.17 ================================================================================================================== Less dividends from net investment income (0.07) (0.03) -- ================================================================================================================== Redemption fees added to beneficial interest 0.00 0.00 -- ================================================================================================================== Net asset value, end of period $ 31.08 $ 26.22 $20.01 __________________________________________________________________________________________________________________ ================================================================================================================== Total return(b) 18.82% 31.20% 6.21% __________________________________________________________________________________________________________________ ================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $202,323 $184,832 $ 163 __________________________________________________________________________________________________________________ ================================================================================================================== Ratio of expenses to average net assets With fee waivers and/or expense reimbursements 1.63%(c) 1.71% 1.79%(d) - ------------------------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 1.65%(c) 1.74% 1.79%(d) ================================================================================================================== Ratio of net investment income to average net assets 0.78%(c) 0.35% 0.18%(d) __________________________________________________________________________________________________________________ ================================================================================================================== Portfolio turnover rate 48% 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 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 $208,378,016. (d) Annualized. NOTE 13--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Half of this amount has already been paid to the fair fund pursuant to the terms of the settlement with the remainder due December 31, 2005. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. REGULATORY INQUIRIES AND PENDING LITIGATION IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, 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. IFG, AIM and ADI are providing full cooperation with respect to these F-16 NOTE 13--LEGAL PROCEEDINGS--(CONTINUED) inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On June 13, 2005, the MDL Court (as defined below) issued a Conditional Transfer Order transferring this lawsuit to the MDL Court, which Conditional Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. AIM and ADI have the right to contest the WVASC's findings and conclusions, which they intend to do. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; - that certain AIM Funds inadequately employed fair value pricing; - that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; - that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees; - 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; and - that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate (this lawsuit was dismissed by the Court on August 12, 2005). These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. All lawsuits based on allegations of market timing, late trading and related activity have been transferred to the United States District Court for the District of Maryland. On August 25, 2005, the Court issued rulings on the common issues of law presented in defendants' motions to dismiss the shareholder class and derivative complaints. These rulings were issued in the context of the Janus lawsuits, but the Court's legal determinations apply at the omnibus level to all cases within his track, including the AIM and IFG cases. The Court dismissed for failure to make pre-suit demand on the fund board all derivative causes of action but one: the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"), as to which the demand requirement does not apply. The Court dismissed all claims asserted in the class complaint but two: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on the 36(b) claim to fees attributable to timing assets, as opposed to all fees on funds in which any timing occurred. The question whether the duplicative Section 36(b) claim properly belongs in the derivative complaint or in the class action complaint will be decided at a later date. The Court will subsequently issue an order applying his legal rulings to the allegations in the AIM and IFG complaints. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds. F-17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of AIM International Mutual Funds 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 AIM European Growth Fund (one of the funds constituting AIM International Mutual Funds, hereafter referred to as the "Fund") at October 31, 2005, 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP December 19, 2005 Houston, Texas F-18 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2005 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 109 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, Vice Chair, Group Inc. (financial services holding Principal Executive Officer company); Director and Vice Chairman, and President 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 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; and Chairman, AIM Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 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 - ------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered Trustee investment company (2 portfolios)) 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 None Trustee private business corporations, including the Boss Group Ltd. (private investment and management); Cortland Trust, Inc. (Chairman) (registered investment company (3 portfolios)); Annuity and Life Re (Holdings), Ltd. (insurance company); and CompuDyne Corporation (provider of products and services to the public security market) 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 - ------------------------------------------------------------------------------------------------------------------------------- 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 Owner, Dos Angelos Ranch, L.P. Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) - ------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered Trustee Naftalis and Frankel LLP investment company (3 portfolios)) - ------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc. Trustee (San Diego, California) - ------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None Trustee of the USA - -------------------------------------------------------------------------------------------------------------------------------
(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. (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. TRUSTEES AND OFFICERS--(CONTINUED) As of October 31, 2005 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 109 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 - ------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, 2005 Retired None Jr.(3) -- 1944 Trustee Formerly: Partner, Deloitte & Touche - ------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 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 Vice President, A I M Distributors, Inc., AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds and Chief Compliance Officer, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A Senior Vice President and Assistant General Counsel, ICON Senior Officer Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------- 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. and A I M Officer Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., AIM Investment Services, Inc. and 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; Vice President, A I M Distributors, Inc.; and Director and General Counsel, Fund Management Company - ------------------------------------------------------------------------------------------------------------------------------- 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. - ------------------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A Vice President, Principal Advisors, Inc. Financial Officer and Treasurer Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A Vice President Investment Officer, A I M Advisors Inc.; Director, Chairman, Chief Executive Officer, President and Chief Investment Officer, A I M Capital Management, Inc.; Executive Vice President, A I M Management Group Inc. Formerly: Senior Vice President, AIM Private Asset Management, Inc.; and Chief Equity Officer, and Senior Investment Officer, A I M Capital Management, 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. - -------------------------------------------------------------------------------------------------------------------------------
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005. 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, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company 1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED) Of ordinary dividends paid to shareholders during the Fund's tax year ended October 31, 2005, 0% is eligible for the dividends received deduction for corporations. For its tax year ended October 31, 2005, 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. U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED) The percentage of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005, and October 31, 2005 are 99.88%, 99.88%, 99.94%, 98.62%, respectively. DOMESTIC EQUITY SECTOR EQUITY AIM ALLOCATION SOLUTIONS AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund AIM Basic Balanced Fund* AIM Energy Fund AIM Growth Allocation Fund(2) AIM Basic Value Fund AIM Financial Services Fund AIM Moderate Allocation Fund AIM Blue Chip Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund AIM Capital Development Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation AIM Charter Fund AIM Gold & Precious Metals Fund Fund AIM Constellation Fund AIM Leisure Fund AIM Diversified Dividend Fund AIM Multi-Sector Fund DIVERSIFIED PORTFOLIOS AIM Dynamics Fund AIM Real Estate Fund(1) AIM Large Cap Basic Value Fund AIM Technology Fund AIM Income Allocation Fund AIM Large Cap Growth Fund AIM Utilities Fund AIM International Allocation Fund AIM Mid Cap Basic Value Fund AIM Mid Cap Core Equity Fund(1) FIXED INCOME AIM Mid Cap Growth Fund AIM Opportunities I Fund TAXABLE AIM Opportunities II Fund AIM Opportunities III Fund AIM Floating Rate Fund AIM Premier Equity Fund AIM High Yield Fund AIM S&P 500 Index Fund AIM Income Fund AIM Select Equity Fund AIM Intermediate Government Fund AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund AIM Small Cap Growth Fund(1) AIM Money Market Fund AIM Small Company Growth Fund AIM Short Term Bond Fund AIM Summit Fund AIM Total Return Bond Fund AIM Trimark Endeavor Fund Premier Portfolio AIM Trimark Small Companies Fund Premier U.S.Government Money Portfolio AIM Weingarten Fund *Domestic equity and income fund TAX-FREE INTERNATIONAL/GLOBAL EQUITY AIM High Income Municipal Fund(1) AIM Asia Pacific Growth Fund AIM Municipal Bond Fund AIM Developing Markets Fund AIM Tax-Exempt Cash Fund AIM European Growth Fund AIM Tax-Free Intermediate Fund AIM European Small Company Fund(1) Premier Tax-Exempt Portfolio AIM Global Aggressive Growth Fund AIM Global Equity Fund ======================================================================================= AIM Global Growth Fund Consider the investment objectives,risks,and charges and expenses carefully. For this AIM Global Value Fund and other information about AIM Funds,obtain a prospectus from your financial advisor AIM International Core Equity Fund and read it carefully before investing. AIM International Growth Fund ======================================================================================= AIM International Small Company Fund(1) AIM Trimark Fund
(1) This fund has limited public sales of its shares to certain investors. For more information on who may continue to invest in the fund, please see the appropriate prospectus. (2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM Growth Allocation Fund. If used after January 20, 2006, this report must be accompanied by a Fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $129 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $381 billion in assets under management. Data as of September 30, 2005. AIMinvestments.com EGR-AR-1 A I M Distributors, Inc. YOUR GOALS. OUR SOLUTIONS. --Registered Trademark-- - --------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Cash [AIM INVESTMENTS LOGO] Funds Products Savings Managed Products Management --Registered Trademark-- Plans Accounts - ---------------------------------------------------------------------------------------
AIM GLOBAL AGGRESSIVE GROWTH FUND Annual Report to Shareholders o October 31, 2005 [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 October 31, 2005, and is based on total net assets. ABOUT SHARE CLASSES o The unmanaged LIPPER GLOBAL SMALL/ The Fund provides a complete list of its o Class B shares are not available as an MID-CAP GROWTH CATEGORY AVERAGE holdings four times in each fiscal year, investment for retirement plans represents the average performance of at the quarter-ends. For the second and maintained pursuant to Section 401 of funds in the Lipper Global Small/Mid Cap fourth quarters, the lists appear in the the Internal Revenue Code, including 401(k) Category, tracked by Lipper, Inc. an Fund's semiannual and annual reports to plans, money purchase pension plans independent mutual fund performance shareholders. For the first and third and profit sharing plans. Plans that had monitor. quarters, the Fund files the lists with existing accounts invested in Class B the Securities and Exchange Commission shares prior to September 30, 2003, will o The unmanaged Standard & Poor's (SEC) on Form N-Q. The most recent list continue to be allowed to make Composite Index of 500 Stocks (the S&P of portfolio holdings is available at additional purchases. 500--Registered Trademark-- INDEX) is AIMinvestments.com. From our home page, an index of common stocks frequently click on Products & Performance, then PRINCIPAL RISKS OF INVESTING IN THE FUND used as a general measure of U.S. stock Mutual Funds, then Fund Overview. Select market performance. your Fund from the drop-down menu and o International investing presents click on Complete Quarterly Holdings. certain risks not associated with o The Fund is not managed to track the Shareholders can also look up the Fund's investing solely in the United States. performance of any particular index, Forms N-Q on the SEC's Web site at These include risks relating to including the indexes defined here, and sec.gov. And copies of the Fund's Forms fluctuations in the value of the U.S. consequently, the performance of the N-Q may be reviewed and copied at the dollar relative to the values of other Fund may deviate significantly from the SEC's Public Reference Room at 450 Fifth currencies, the custody arrangements performance of the indexes. Street, N.W., Washington, D.C. made for the Fund's foreign holdings, 20549-0102. You can obtain information differences in accounting, political o A direct investment cannot be made in on the operation of the Public Reference risks and the lesser degree of public an index. Unless otherwise indicated, Room, including information about information required to be provided by index results include reinvested duplicating fee charges, by calling non-U.S. companies. dividends, and they do not reflect sales 202-942-8090 or 800-732-0330, or by charges. Performance of an index of electronic request at the following o Investing in emerging markets involves funds reflects fund expenses; e-mail address: publicinfo@sec.gov. The greater risk and potential reward than performance of a market index does not. SEC file numbers for the Fund are investing in more established markets. 811-06463 and 33-44611. OTHER INFORMATION o Investing in smaller companies A description of the policies and involves greater risk than investing in o The returns shown in management's procedures that the Fund uses to more established companies, such as discussion of Fund performance are based determine how to vote proxies relating business risk, significant stock price on net asset values calculated for to portfolio securities is available fluctuations and illiquidity. shareholder transactions. Generally without charge, upon request, from our accepted accounting principles require Client Services department at ABOUT INDEXES USED IN THIS REPORT adjustments to be made to the net assets 800-959-4246 or on the AIM Web site, of the Fund at period end for financial AIMinvestments.com. On the home page, o The unmanaged MSCI WORLD INDEX is a reporting purposes, and as such, the net scroll down and click on AIM Funds Proxy group of global securities tracked by asset values for shareholder Policy. The information is also Morgan Stanley Capital International. transactions and the returns based on available on the Securities and Exchange those net asset values may differ from Commission's Web site, sec.gov. o The unmanaged MSCI WORLD GROWTH INDEX the net asset values and returns is a subset of the MSCI World Index, a reported in the Financial Highlights. Information regarding how the Fund voted group of global securities tracked by proxies related to its portfolio Morgan Stanley Capital International; o Industry classifications used in this securities during the 12 months ended the Growth subset measures performance report are generally according to the June 30, 2005, is available at our Web of companies with higher price/earnings Global Industry Classification Standard, site. Go to AIMinvestments.com, access ratios and higher forecasted growth which was developed by and is the the About Us tab, click on Required values. exclusive property and a service mark of Notices and then click on Proxy Voting Morgan Stanley Capital International Activity. Next, select the Fund from the Inc. and Standard & Poor's. drop-down menu. The information is also available on the Securities and Exchange Commission's Web site, sec.gov. ====================================== Fund NASDAQ Symbols Class A Shares AGAAX Class B Shares AGABX Class C Shares AGACX ====================================== ===================================================================================== This report must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing ===================================================================================== ===================================================================================== Not FDIC Insured May Lose Value No Bank Guarantee ===================================================================================== AIMinvestments.com
AIM GLOBAL AGGRESSIVE GROWTH FUND DEAR FELLOW AIM FUNDS SHAREHOLDERS: The fiscal year covered by this report was quite good to equity investors. Domestically, the broad-based S&P 500 Index returned [PHOTO OF 8.72%. Globally, Morgan Stanley's MSCI World Index rose 13.27%. ROBERT H. Much of this good performance, though, was attained early in the GRAHAM] fiscal year as virtually every equity index declined during October of 2005. Concern about the inflationary potential of rising energy costs was frequently cited as a major cause of market weakness. Within the indexes, there was considerable variability in the performance of different sectors and markets. Domestically, energy sector performance far outpaced that of the other sectors in the ROBERT H. S&P 500 Index, reflecting rising oil and gas prices. Overseas, GRAHAM emerging markets produced more attractive results than did developed markets, at least in part because emerging markets tend to be more closely tied to the performance of natural resources and commodities. One could make a strong argument for global diversification of a stock portfolio using the performance data for the fiscal year ended October 31, 2005. Of course, your financial advisor is the person most qualified to help you decide whether such diversification is appropriate for you. [PHOTO OF For a discussion of the specific market conditions that affected MARK H. your Fund and how your Fund was managed during the fiscal year, WILLIAMSON] please turn to Page 3. NEW INFORMATION IN THIS REPORT MARK H. We would like to call your attention to two new elements in this WILLIAMSON report. First, on Page 2, is a message from Bruce Crockett, the independent Chair of the Board of Trustees of the AIM Funds. We first introduced you to Mr. Crockett in the annual report on your Fund dated October 31, 2004. Mr. Crockett has been on our Funds' Board since 1992; he assumed his responsibilities as Chair in October 2004. Mr. Crockett plans to keep AIM shareholders informed of the work of the Board regularly via letters in the Fund reports. We certainly think this is a valuable addition to the reports. The Board is charged with looking out for the interests of shareholders, and Mr. Crockett's letter provides insight into some of the many issues the Board addresses in governing your Fund. One of the most important decisions the Board makes each year is whether to approve the advisory agreement your Fund has with AIM. Essentially, this agreement hires AIM to manage the assets in your Fund. A discussion of the factors the Board considered in reviewing the agreement is the second new element in the report, and we encourage you to read it. It appears on Pages 8 and 9. Further information about the markets, your Fund, and investing in general is always available on our widely acclaimed Web site, AIMinvestments.com. We invite you to visit it frequently. We at AIM remain committed to building solutions to help you meet your investment goals. We thank you for your continued participation in AIM Investments--Registered Trademark--. If you have any questions, please contact our award-winning Client Service representatives at 800-959-4246. We are happy to be of help. Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, AIM Funds President, A I M Advisors, Inc. December 15, 2005 AIM Investments is a registered service mark of A I M Management Group Inc. A I M Advisors, Inc. and A I M Capital Management, Inc. are the investment advisors. A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments. AIM GLOBAL AGGRESSIVE GROWTH FUND DEAR AIM FUNDS SHAREHOLDERS: As independent Chair of the Board of Trustees of the AIM Funds, I'm writing to report on the work being done by your Board. At our most recent meeting in June 2005, your Board approved [PHOTO OF voluntary fee reductions from A I M Advisors, Inc. (AIM) that save BRUCE L. shareholders approximately $20.8 million annually, based on asset CROCKETT] levels as of March 31, 2005. The majority of these expense reductions, which took effect July 1, 2005, will be achieved by a permanent reduction to 0.25% of the Rule 12b-1 fees on Class A BRUCE L. and Class A3 shares of those AIM Funds that previously charged CROCKETT these fees at a higher rate. Our June meeting, which was the culmination of more than two and one-half months of review and discussions, took place over a three-day period. The meeting included your Board's annual comprehensive evaluation of each fund's advisory agreement with AIM. After this evaluation, in which questions about fees, performance and operations were addressed by AIM, your Board approved all advisory agreements for the year beginning July 1, 2005. You can find information on the factors considered and conclusions reached by your Board in its evaluation of each fund's advisory agreement at AIMinvestments.com. (Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals.") The advisory agreement information about your Fund is also included in this annual report on Pages 8 and 9. I encourage you to review it. Together with monitoring fund expenses, fund performance is your Board's priority. Our initial goal is to work with AIM to bring about improvement in every AIM Fund that has been underperforming its category. Your Board has a well-defined process and structure for monitoring all funds and identifying and assisting AIM in improving underperforming funds. Our Investments Committee--which functions along with Audit, Governance, Valuation and Compliance Committees--is the only one of these five standing committees to include all 14 independent Board members. Further, our Investments Committee is divided into three underlying subcommittees, each responsible for, among other things, reviewing the performance, fees and expenses of the funds that have been assigned to it. At subcommittee meetings, held throughout the year, the performance of every AIM Fund is evaluated. If a fund has underperformed its peer group for a meaningful period, we work closely with AIM to discover the causes and help develop the right responses. In some cases, AIM may determine that a change in portfolio management strategy or portfolio managers is required. In other cases, where a fund no longer seems viable, it may be merged with a similar fund, being careful to consider the needs of all shareholders affected by the decision. Following AIM's recommendation and your Board's approval, eight funds were recently merged. Be assured that your Board is working closely with the management of AIM to help you reach your investment goals. Should you or your advisor have questions or comments about the governance of AIM Funds, I invite you to write to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100, Houston, TX 77046. Your Board looks forward to keeping you informed about the governance of your funds. Sincerely, /s/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair On Behalf of the Board of Trustees AIM Funds December 15, 2005 2 AIM GLOBAL AGGRESSIVE GROWTH FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ===================================================================================== diversification benefit of international PERFORMANCE SUMMARY investing. ======================================== Despite higher oil prices, most world FUND VS. INDEXES We seek to minimize stock-specific risk equity markets posted positive returns by building a portfolio that holds a for the fiscal year. Given this TOTAL RETURNS, 10/31/04-10/31/05, variety of companies. environment, we are pleased to once EXCLUDING APPLICABLE SALES CHARGES. IF again reward shareholders with SALES CHARGES WERE INCLUDED, RETURNS We believe disciplined sell decisions double-digit Fund performance. As the WOULD BE LOWER. are a key determinant of successful table illustrates, your Fund investing. We consider selling a stock significantly outperformed its Class A Shares 21.25% for any one of the following reasons: style-specific and broad market indexes. Class B Shares 20.40 Turn to Pages 6 and 7 for long-term Class C Shares 20.39 o a company's fundamentals deteriorate performance. MSCI World Index or it posts disappointing earnings (Broad Market Index) 13.27 We attribute our comparative success MSCI World Growth Index o a stock's price seems overvalued to strong stock selection, an overweight (Style-specific Index) 11.68 position to European equities (compared Lipper Global Small/Mid-Cap Growth o a more attractive opportunity is to the MSCI World Growth Index) and Category Average presented exposure to select stocks in (Peer Group Index) 20.59 out-performing Latin American markets. SOURCE: LIPPER, INC. MARKET CONDITIONS AND YOUR FUND Our concentration in small- and mid-cap ======================================== global stocks, Despite historically high energy prices, which outperformed during the fiscal the majority of world markets rose year, was also a competitive advantage. during the fiscal year. For the third ===================================================================================== consecutive year, foreign markets outperformed U.S. markets. HOW WE INVEST o high return on invested capital o Latin American stocks were some of the We believe that earnings drive stock o reasonable prices with low valuations best performers in the world as the prices and that companies generating region's exporters benefited from rising substantial, repeatable, above average We use a systematic, stock-by stock commodity prices as well as increased earnings growth should provide long-term approach, focusing on strengths of domestic demand in some countries. growth of capital. individual companies, rather than sector or country trends. Our goal is a o In Europe, markets rallied amid a low Therefore, when selecting stocks for well-diversified, reasonably priced, interest rate environment (the European your Fund we look for companies, both in quality portfolio. We adhere to our Central Bank has kept rates at 2% for the U.S. and abroad, with the following investment process regardless of the several years) and increased corporate attributes: macroeconomic environment. profits buoyed by restructuring and cost cutting measures. o accelerating earnings and revenues We do not hedge currencies because we believe currency exposure increases the o In Asia, Japanese stocks climbed to o strong cash flow generation levels not witnessed in many years as Japanese corporate earnings continued to improve and Prime Minister Junichiro Koizumi's dramatic election victory resonated well with investors. (continued) ========================================= ======================================= ======================================== PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. United States 31.5% 1. OTP Bank Rt. (Hungary) 2.9% 2. United Kingdom 9.0 2. Anglo Irish Bank Corp. PLC [PIE CHART] 3. Japan 6.6 (Ireland) 2.5 4. Canada 6.4 3. Enterprise Inns PLC Consumer Discretionary 21.1% 5. Germany 4.8 (United Kingdom) 2.4 Financials 17.9% 4. Syngenta A.G. (Switzerland) 1.9 Industrials 12.5% TOTAL NET ASSETS $851.7 MILLION 5. Standard Bank Group Ltd. Information Technology 12.0% (South Africa) 1.6 Health Care 10.3% TOTAL NUMBER OF HOLDINGS* 126 6. Telkon South Africa Ltd. Energy 5.6% (South Africa) 1.5 Consumer Staples 5.4% 7. OPAP S.A. (Greece) 1.5 Money Market Funds Plus 8. Grupo Ferrovial, S.A. (Spain) 1.5 Other Assets Less Liabilities 4.2% 9. Amdocs Ltd. 1.4 Utilities 2.3% 10. Sherritt International Corp. Telecommunications Services 3.8% (Canada) 1.3 Materials 4.9% The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. *Excluding money market fund holdings. ========================================= ======================================= ========================================
3 AIM GLOBAL AGGRESSIVE GROWTH FUND o In the United States, equity markets competitors is our willingness to go off JAMES G. BIRDSALL, portfolio also posted positive returns for the the beaten path when it comes to stock [BIRDSALL manager, is lead manager fiscal year but gains were muted selection. The mid-to-small-cap focus of PHOTO] of AIM Global Aggressive compared to overseas markets. the Fund often enabled us to be exposed Growth Fund with respect to to relatively undiscovered companies the Fund's domestic portion Fund performance was broadly-based which many analysts don't follow. of the Fund's portfolio. He joined AIM with all regions reporting double-digit in 1995. Mr. Birdsall received his returns. We significantly outperformed Given strong Fund performance we had few B.B.A. with a concentration in finance our style-specific benchmark in North detractors to report. One stock that from Stephen F. Austin State University. America, Latin America and Europe. detracted was Korea-based KIRYUNG He also earned an M.B.A. with a ELECTRONIC CO. LTD., a manufacturer and concentration in finance and In North America, both U.S. and Canadian supplier of satellite radio systems to a international business at the University stocks contributed to performance. large U.S. satellite radio company. of St. Thomas. Canadian oil companies were among our During the fiscal year, Kiryung declined top performers for the fiscal year. We amid increased competition from JASON T. HOLZER, Chartered believe we can identify oil companies Taiwanese companies which subsequently [HOLZER Financial Analyst, senior with underlying drivers beyond rising led to disappointing earnings. Despite a PHOTO] portfolio manager, is lead commodity prices. For instance, CANADIAN rebound in the stock, the increased manager of AIM Global OIL SANDS TRUST is an oil company we competitive atmosphere surrounding the Aggressive Growth Fund believe has strong production growth company led us to trim the position. with respect to the Fund's investments relative to its peers as well as in Europe and Canada. Mr. Holzer joined attractive valuations--characteristics Foreign exchange also proved a drag on AIM in 1996. He received a B.A. in we believe can lead to strong long-term Fund performance. During the fiscal quantitative economics and an M.S. in performance. year, the U.S. dollar strengthened engineering-economic systems from against many foreign currencies, most Stanford University. We significantly notably against the euro, pound and yen. outperformed our style- Given our large allocation to foreign BARRETT K. SIDES, senior specific benchmark in holdings, foreign currency depreciation [SIDES portfolio manager, is lead North America, Latin had a negative impact on Fund returns. PHOTO] manager of AIM Global America and Europe. Aggressive Growth Fund with IN CLOSING respect to the Fund's investments in Asia Pacific and Latin While not a large weighting in the The performance of international markets America. He joined AIM in 1990. Mr. portfolio, Latin American holdings had over the last several years underscores Sides graduated with a B.S. in economics some of the strongest returns. Mexico's the investment opportunities beyond U.S. from Bucknell University. He also WAL-MART DE MEXICO S.A. DE C.V. borders. We believe our bottom-up received a master's in international (Wal-Mex) has been able to pioneer a investment process allows us to build a business from the University of St. centralized distribution system in strong portfolio based on world-class Thomas. After the close of the fiscal Mexico by leveraging off its parent companies from around the globe. We are year, he left the portfolio team for company's name (Wal-Mart) and know-how. pleased to once again provide this Fund. A market leader in the shareholders with positive Fund returns supermarket/hypermarket area, Wal-Mex for the fiscal year and thank you for SHUXIN CAO, Chartered continues to gain market share from its your continued participation in AIM [CAO Financial Analyst, less efficient competitors. Global Aggressive Growth Fund. PHOTO] portfolio manager, is manager of AIM Global Our largest regional allocation was in THE VIEWS AND OPINIONS EXPRESSED IN Aggressive Growth Fund. European stocks. We continue to find MANAGEMENT'S DISCUSSION OF FUND He joined AIM in 1997. Mr. Cao graduated many attractive opportunities in Europe PERFORMANCE ARE THOSE OF A I M ADVISORS, from Tianjin Foreign Language Institute particularly in financials. INC. THESE VIEWS AND OPINIONS ARE with a B.A. in English. He also received SUBJECT TO CHANGE AT ANY TIME BASED ON an M.B.A. from Texas A&M University and Based on strong stock selection, we were FACTORS SUCH AS MARKET AND ECONOMIC is a Certified Public Accountant. able to outperform our style-specific CONDITIONS. THESE VIEWS AND OPINIONS MAY benchmark in nearly all sectors. Sectors NOT BE RELIED UPON AS INVESTMENT ADVICE BORGE ENDRESEN, Chartered that contributed the most to Fund OR RECOMMENDATIONS, OR AS AN OFFER FOR A [ENDRESEN Financial Analyst, portfolio performance were financials, consumer PARTICULAR SECURITY. THE INFORMATION IS PHOTO] manager, is manager of AIM discretionary and industrials. Utilities NOT A COMPLETE ANALYSIS OF EVERY ASPECT Global Aggressive Growth and materials contributed the least due OF ANY MARKET, COUNTRY, INDUSTRY, Fund. He joined AIM in 1999 to smaller allocations in these sectors. SECURITY OR THE FUND. STATEMENTS OF FACT and graduated summa cum laude from the ARE FROM SOURCES CONSIDERED RELIABLE, University of Oregon with a B.S. in In our view, what differentiates our BUT A I M ADVISORS, INC. MAKES NO finance. He also earned an M.B.A. from Fund from its index benchmarks and many REPRESENTATION OR WARRANTY AS TO THEIR The University of Texas at Austin. of its COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE Assisted by Asia Pacific/Latin America OF FUTURE RESULTS, THESE INSIGHTS MAY Team, Europe/Canada Team and Large HELP YOU UNDERSTAND OUR INVESTMENT Multi-Cap Growth Team MANAGEMENT PHILOSOPHY. [RIGHT ARROW GRAPHIC] See important Fund and index disclosures inside front cover. FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE, PLEASE SEE PAGES 6 AND 7.
4 AIM GLOBAL AGGRESSIVE GROWTH FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE to estimate the expenses that you paid The hypothetical account values and over the period. Simply divide your expenses may not be used to estimate the As a shareholder of the Fund, you incur account value by $1,000 (for example, an actual ending account balance or two types of costs: (1) transaction $8,600 account value divided by $1,000 = expenses you paid for the period. You costs, which may include sales charges 8.6), then multiply the result by the may use this information to compare the (loads) on purchase payments; contingent number in the table under the heading ongoing costs of investing in the Fund deferred sales charges on redemptions; entitled "Actual Expenses Paid During and other funds. To do so, compare this and redemption fees, if any; and (2) Period" to estimate the expenses you 5% hypothetical example with the 5% ongoing costs, including management paid on your account during this period. hypothetical examples that appear in the fees; distribution and/or service fees shareholder reports of the other funds. (12b-1); and other Fund expenses. This HYPOTHETICAL EXAMPLE FOR example is intended to help you COMPARISON PURPOSES Please note that the expenses shown in understand your ongoing costs (in the table are meant to highlight your dollars) of investing in the Fund and to The table below also provides ongoing costs only and do not reflect compare these costs with ongoing costs information about hypothetical account any transactional costs, such as sales of investing in other mutual funds. The values and hypothetical expenses based charges (loads) on purchase payments, example is based on an investment of on the Fund's actual expense ratio and contingent deferred sales charges on $1,000 invested at the beginning of the an assumed rate of return of 5% per year redemptions, and redemption fees, if period and held for the entire period before expenses, which is not the Fund's any. Therefore, the hypothetical May 1, 2005, through October 31, 2005. actual return. The Fund's actual information is useful in comparing cumulative total returns at net asset ongoing costs only, and will not help value after expenses for the six months you determine the relative total costs ACTUAL EXPENSES ended October 31, 2005, appear in the of owning different funds. In addition, table "Cumulative Total Returns" on Page if these transactional costs were The table below provides information 7. included, your costs would have been about actual account values and actual higher. expenses. You may use the information in this table, together with the amount you invested, =================================================================================================================================== ACTUAL HYPOTHETICAL (5% ANNUAL BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (5/01/05) (10/31/05)(1) PERIOD(2,3) (10/31/05) PERIOD(2,4) RATIO A $1,000.00 $1,119.60 $8.44 $1,017.24 $8.03 1.58% B 1,000.00 1,115.80 12.27 1,013.61 11.67 2.30 C 1,000.00 1,115.70 12.27 1,013.61 11.67 2.30 (1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31, 2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half-year. Effective on July 1, 2005, the distributor contractually agreed to reduce Rule 12b-1 plan fees for Class A shares to 0.25%. Effective on October 1, 2005, the Board of Trustees approved an amendment to the transfer agency agreement. The annualized expense ratio restated as if the agreements had been in effect throughout the entire most recent fiscal half year is 1.63%, 2.38%, and 2.38% for Class A, B, and C shares, respectively. (3) The actual expenses paid restated as if the changes discussed above had been in effect throughout the most recent fiscal half year are $8.71, $12.69, and $12.69 for Class A, B, and C shares, respectively. (4) The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the most recent fiscal half year are $8.29, $12.08, and $12.08 for Class A, B, and C shares, respectively. =================================================================================================================================== [ARROW BUTTON For More Information Visit IMAGE] AIMinvestments.com
5 AIM GLOBAL AGGRESSIVE GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE RESULTS OF A $10,000 INVESTMENT FUND AND INDEX DATA FROM 10/31/95 [MOUNTAIN CHART] =================================================================================================================================== AIM Global AIM Global Aggressive Aggressive Lipper Global Small/ Growth Fund- Growth Fund- MSCI World MSCI World Mid-Cap Growth Fund Date Class A Shares Class B Shares Growth Index Index Category Average 10/31/95 $10000 $10000 $10000 $10000 $10000 11/95 10046 10038 10318 10345 10116 12/95 10167 10151 10553 10645 10228 1/96 10312 10298 10740 10836 10205 2/96 10834 10814 10817 10899 10612 3/96 11063 11030 10975 11079 10855 4/96 11791 11754 11203 11337 11495 5/96 12328 12286 11269 11344 11786 6/96 12083 12039 11346 11399 11540 7/96 11239 11191 10923 10994 10772 8/96 11821 11762 11013 11118 11196 9/96 12266 12202 11514 11551 11485 10/96 12082 12009 11548 11630 11271 11/96 12435 12363 12134 12279 11510 12/96 12558 12471 11896 12080 11594 1/97 12849 12757 12061 12224 11732 2/97 12511 12417 12194 12362 11371 3/97 12067 11970 11909 12115 10839 4/97 11898 11800 12455 12509 10775 5/97 13087 12972 13182 13278 11763 6/97 13808 13682 13908 13938 12323 7/97 14367 14221 14550 14578 12797 8/97 13715 13574 13467 13601 12546 9/97 14635 14475 14242 14337 13348 10/97 13248 13103 13331 13580 12500 11/97 12879 12725 13669 13818 12254 12/97 13063 12902 13793 13984 12373 1/98 12703 12547 14332 14372 12156 2/98 13945 13766 15344 15342 13315 3/98 14735 14528 15873 15987 14187 4/98 15017 14813 15964 16141 14519 5/98 14680 14466 15786 15936 14114 6/98 14511 14297 16459 16312 14165 7/98 14266 14050 16431 16283 13839 8/98 11498 11314 14505 14110 11272 9/98 11498 11314 14829 14357 11249 10/98 12165 11962 16117 15652 11690 11/98 12855 12633 17154 16580 12479 12/98 13575 13334 18405 17388 13342 1/99 13919 13664 19052 17766 13786 2/99 12977 12739 18292 17291 13026 3/99 13430 13179 18965 18008 13692 4/99 13982 13711 18932 18716 14382 5/99 13667 13394 18269 18029 14209 6/99 14763 14466 19390 18868 15575 7/99 14939 14628 19174 18809 15861 8/99 15100 14774 19408 18773 16163 9/99 15507 15167 19438 18588 16360 10/99 16825 16455 20708 19552 17284 11/99 19538 19098 21921 20099 20415 12/99 23155 22619 24428 21724 24326 1/00 23648 23092 22895 20477 24479 2/00 29719 29001 23688 20530 30315 3/00 27148 26487 25098 21946 28505 4/00 23923 23330 23413 21016 25210 5/00 21547 21001 22023 20481 23241 6/00 23381 22784 23367 21168 25744 7/00 22855 22263 22190 20570 24236 8/00 24827 24168 22975 21237 26470 9/00 22531 21921 20939 20105 25350 10/00 20906 20334 20058 19766 23211 11/00 17536 17054 18510 18563 20066 12/00 18064 17562 18159 18861 21268 1/01 19283 18730 18707 19224 21770 2/01 16215 15744 16320 17597 19251 3/01 14579 14154 14998 16438 17049 4/01 15829 15363 16207 17650 18696 5/01 15879 15404 15880 17420 18802 6/01 15544 15073 15325 16872 18405 7/01 14853 14392 15097 16646 17327 8/01 14019 13576 14166 15845 16530 9/01 12201 11810 12988 14447 14106 10/01 12781 12367 13541 14723 15004 11/01 13197 12770 14569 15591 16004 12/01 13441 12998 14640 15688 16629 1/02 13228 12780 14162 15211 16143 2/02 13024 12584 14199 15077 15604 3/02 13613 13152 14549 15771 16649 4/02 13542 13070 13926 15206 16455 5/02 13471 12998 13850 15232 16252 6/02 12863 12409 13049 14305 15310 7/02 11705 11282 12129 13098 13653 8/02 11664 11240 12125 13120 13553 9/02 10912 10506 10921 11676 12527 10/02 11176 10765 11771 12536 12772 11/02 11541 11106 12198 13210 13465 12/02 11216 10786 11727 12568 12813 1/03 10982 10559 11304 12185 12541 2/03 10769 10352 11181 11972 12193 3/03 10779 10352 11277 11932 12164 4/03 11460 11013 12082 12990 13236 5/03 12273 11778 12579 13729 14493 6/03 12537 12025 12755 13965 14970 7/03 12933 12407 13002 14247 15655 8/03 13410 12861 13262 14553 16599 9/03 13563 12995 13337 14641 16696 10/03 14508 13894 14131 15508 18016 11/03 14854 14225 14331 15742 18432 12/03 15616 14948 15020 16729 19089 1/04 16215 15505 15327 16997 19810 2/04 16744 16011 15513 17282 20169 3/04 16754 16020 15357 17167 20346 4/04 16266 15545 15051 16816 19772 5/04 16489 15751 15199 16956 19719 6/04 16763 15999 15406 17317 20157 7/04 15717 14997 14667 16752 19038 8/04 15899 15162 14621 16825 18964 9/04 16570 15793 14915 17144 19840 10/04 17261 16454 15280 17563 20401 11/04 18480 17601 16052 18486 21883 12/04 19424 18490 16657 19191 22909 1/05 19179 18254 16208 18759 22737 2/05 19962 18987 16621 19354 23549 3/05 19373 18429 16303 18980 22988 4/05 18693 17758 15945 18564 22057 5/05 19151 18181 16359 18894 22792 6/05 19689 18686 16435 19058 23521 7/05 20593 19533 17116 19724 24695 8/05 21130 20039 17268 19872 25031 9/05 21771 20628 17650 20388 25664 10/05 19945 20044 17275 19894 24607 =================================================================================================================================== Source: Lipper, Inc. The data shown in the chart include This chart, which is a logarithmic reinvested distributions, applicable chart, presents the fluctuations in the sales charges, Fund expenses and value of the Fund and its indexes. We management fees. Results for Class B believe that a logarithmic chart is more shares are calculated as if a effective than other types of charts in hypothetical shareholder had liquidated illustrating changes in value during the his entire investment in the Fund at the early years shown in the chart. The close of the reporting period and paid vertical axis, the one that indicates the applicable contingent deferred sales the dollar value of an investment, is charges. Index results include constructed with each segment reinvested dividends, but they do not representing a percent change in the reflect sales charges. Performance of an value of the investment. In this chart, index of funds reflects fund expenses each segment represents a doubling, or and management fees; performance of a 100% change, in the value of the market index does not. Performance shown investment. In other words, the space in the chart and table(s) does not between $5,000 and $10,000 is the same reflect deduction of taxes a shareholder size as the space between $10,000 and would pay on Fund distributions or sale $20,000, and is the same size as the of Fund shares. Performance of the space between $20,000 and $40,000. indexes does not reflect the effects of taxes. 6
AIM GLOBAL AGGRESSIVE GROWTH FUND ========================================= ======================================= ======================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS As of 10/31/05, including applicable sales charges As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding quarter-end, including applicable sales applicable sales charges CLASS A SHARES charges Inception (9/15/94) 9.01% Class A Shares 11.96% 10 Years 7.15 CLASS A SHARES Class B Shares 11.58 5 Years -0.95 Inception (9/15/94) 9.47% Class C Shares 11.57 1 Year 15.47 10 Years 7.39 5 Years -1.64 ======================================== CLASS B SHARES 1 Year 25.17 Inception (9/15/94) 9.06% 10 Years 7.20 CLASS B SHARES 5 Years -0.83 Inception (9/15/94) 9.52% 1 Year 15.40 10 Years 7.45 5 Years -1.52 CLASS C SHARES 1 Year 25.61 Inception (8/4/97) 4.15% 5 Years -0.52 CLASS C SHARES 1 Year 19.39 Inception (8/4/97) 4.71% 5 Years -1.21 1 Year 29.59 ========================================= ======================================= THE PERFORMANCE DATA QUOTED REPRESENT CLASS A SHARE PERFORMANCE REFLECTS THE THE PERFORMANCE OF THE FUND'S SHARE PAST PERFORMANCE AND CANNOT GUARANTEE MAXIMUM 4.75% SALES CHARGE, AND CLASS B CLASSES WILL DIFFER DUE TO DIFFERENT COMPARABLE FUTURE RESULTS; CURRENT AND CLASS C SHARE PERFORMANCE REFLECTS SALES CHARGE STRUCTURES AND CLASS PERFORMANCE MAY BE LOWER OR HIGHER. THE APPLICABLE CONTINGENT DEFERRED SALES EXPENSES. PLEASE VISIT AIMINVESTMENTS.COM FOR THE CHARGE (CDSC) FOR THE PERIOD INVOLVED. MOST RECENT MONTH-END PERFORMANCE. THE CDSC ON CLASS B SHARES DECLINES FROM A REDEMPTION FEE OF 2% WILL BE IMPOSED 5% BEGINNING AT THE TIME OF PURCHASE TO ON CERTAIN REDEMPTIONS OR EXCHANGES OUT PERFORMANCE FIGURES REFLECT REINVESTED 0% AT THE BEGINNING OF THE SEVENTH YEAR. OF THE FUND WITHIN 30 DAYS OF PURCHASE. DISTRIBUTIONS, CHANGES IN NET ASSET THE CDSC ON CLASS C SHARES IS 1% FOR THE EXCEPTIONS TO THE REDEMPTION FEE ARE VALUE AND THE EFFECT OF THE MAXIMUM FIRST YEAR AFTER PURCHASE. LISTED IN THE FUND'S PROSPECTUS. 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.
7 AIM GLOBAL AGGRESSIVE GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION The Board of Trustees of AIM o The quality of services to be provided o Fees relative to those of comparable International Mutual Funds (the "Board") by AIM. The Board reviewed the funds with other advisors. The Board oversees the management of AIM Global credentials and experience of the reviewed the advisory fee rate for the Aggressive Growth Fund (the "Fund") and, officers and employees of AIM who will Fund under the Advisory Agreement. The as required by law, determines annually provide investment advisory services to Board compared effective contractual whether to approve the continuance of the Fund. In reviewing the advisory fee rates at a common asset the Fund's advisory agreement with A I M qualifications of AIM to provide level and noted that the Fund's rate was Advisors, Inc. ("AIM"). Based upon the investment advisory services, the Board below the median rate of the funds recommendation of the Investments reviewed the qualifications of AIM's advised by other advisors with Committee of the Board, which is investment personnel and considered such investment strategies comparable to comprised solely of independent issues as AIM's portfolio and product those of the Fund that the Board trustees, at a meeting held on June 30, review process, various back office reviewed. The Board noted that AIM has 2005, the Board, including all of the support functions provided by AIM and agreed to waive advisory fees of the independent trustees, approved the AIM's equity and fixed income trading Fund, as discussed below. Based on this continuance of the advisory agreement operations. Based on the review of these review, the Board concluded that the (the "Advisory Agreement") between the and other factors, the Board concluded advisory fee rate for the Fund under the Fund and AIM for another year, effective that the quality of services to be Advisory Agreement was fair and July 1, 2005. provided by AIM was appropriate and that reasonable. AIM currently is providing satisfactory The Board considered the factors services in accordance with the terms of o Expense limitations and fee waivers. discussed below in evaluating the the Advisory Agreement. The Board noted that AIM has fairness and reasonableness of the contractually agreed to waive advisory Advisory Agreement at the meeting on o The performance of the Fund relative fees of the Fund through December 31, June 30, 2005 and as part of the Board's to comparable funds. The Board reviewed 2009 to the extent necessary so that the ongoing oversight of the Fund. In their the performance of the Fund during the advisory fees payable by the Fund do not deliberations, the Board and the past one, three and five calendar years exceed a specified maximum advisory fee independent trustees did not identify against the performance of funds advised rate, which maximum rate includes break any particular factor that was by other advisors with investment points and is based on net asset levels. controlling, and each trustee attributed strategies comparable to those of the The Board considered the contractual different weights to the various Fund. The Board noted that the Fund's nature of this fee waiver and noted that factors. performance for the one and three year it remains in effect until December 31, periods was above the median performance 2009. The Board considered the effect One of the responsibilities of the of such comparable funds and below such this fee waiver would have on the Fund's Senior Officer of the Fund, who is median performance for the five year estimated expenses and concluded that independent of AIM and AIM's affiliates, period. Based on this review, the Board the levels of fee waivers/expense is to manage the process by which the concluded that no changes should be limitations for the Fund were fair and Fund's proposed management fees are made to the Fund and that it was not reasonable. negotiated to ensure that they are necessary to change the Fund's portfolio negotiated in a manner which is at arm's management team at this time. o Breakpoints and economies of scale. length and reasonable. To that end, the The Board reviewed the structure of the Senior Officer must either supervise a o The performance of the Fund relative Fund's advisory fee under the Advisory competitive bidding process or prepare to indices. The Board reviewed the Agreement, noting that it includes one an independent written evaluation. The performance of the Fund during the past breakpoint. The Board reviewed the level Senior Officer has recommended an one, three and five calendar years of the Fund's advisory fees, and noted independent written evaluation in lieu against the performance of the MSCI that such fees, as a percentage of the of a competitive bidding process and, World Growth Index. The Board noted that Fund's net assets, would decrease as net upon the direction of the Board, has the Fund's performance for such periods assets increase because the Advisory prepared such an independent written was above the performance of such Index. Agreement includes a breakpoint. The evaluation. Such written evaluation also The Board noted that the performance of Board noted that AIM has contractually considered certain of the factors such Index does not reflect fees, while agreed to waive advisory fees of the discussed below. In addition, as the performance of the Fund does reflect Fund through December 31, 2009 to the discussed below, the Senior Officer made fees. Based on this review, the Board extent necessary so that the advisory certain recommendations to the Board in concluded that no changes should be made fees payable by the Fund do not exceed a connection with such written evaluation. to the Fund and that it was not specified maximum advisory fee rate, necessary to change the Fund's portfolio which maximum rate includes breakpoints The discussion below serves as a summary management team at this time. and is based on net asset levels. The of the Senior Officer's independent Board noted that, due to the Fund's written evaluation and recommendations o Meeting with the Fund's portfolio current asset levels and the way in to the Board in connection therewith, as managers and investment personnel. With which the advisory fee breakpoints have well as a discussion of the material respect to the Fund, the Board is been structured, the Fund has yet to factors and the conclusions with respect meeting periodically with such Fund's benefit from the breakpoint. The Board thereto that formed the basis for the portfolio managers and/or other concluded that the Fund's fee levels Board's approval of the Advisory investment personnel and believes that under the Advisory Agreement therefore Agreement. After consideration of all of such individuals are competent and able would reflect economies of scale at the factors below and based on its to continue to carry out their higher asset levels and that it was not informed business judgment, the Board responsibilities under the Advisory necessary to change the advisory fee determined that the Advisory Agreement Agreement. breakpoints in the Fund's advisory fee is in the best interests of the Fund and schedule. its shareholders and that the o Overall performance of AIM. The Board compensation to AIM under the Advisory considered the overall performance of o Investments in affiliated money market Agreement is fair and reasonable and AIM in providing investment advisory and funds. The Board also took into account would have been obtained through arm's portfolio administrative services to the the fact that uninvested cash and cash length negotiations. Fund and concluded that such performance collateral from securities lending was satisfactory. arrangements (collectively, "cash o The nature and extent of the advisory balances") of the Fund may be invested services to be provided by AIM. The o Fees relative to those of clients of in money market funds advised by AIM Board reviewed the services to be AIM with comparable investment pursuant to the terms of an SEC provided by AIM under the Advisory strategies. The Board noted that AIM exemptive order. The Board found that Agreement. Based on such review, the does not serve as an advisor to other the Fund may realize certain benefits Board concluded that the range of mutual funds or other clients with upon investing cash balances in AIM services to be provided by AIM under the investment strategies comparable to advised money market funds, including a Advisory Agreement was appropriate and those of the Fund. higher net that AIM currently is providing services in accordance with the terms of the Advisory Agreement. (continued)
8 AIM GLOBAL AGGRESSIVE GROWTH FUND return, increased liquidity, increased o AIM's financial soundness in light of diversification or decreased transaction the Fund's needs. The Board considered costs. The Board also found that the whether AIM is financially sound and Fund will not receive reduced services has the resources necessary to perform if it invests its cash balances in such its obligations under the Advisory money market funds. The Board noted Agreement, and concluded that AIM has that, to the extent the Fund invests in the financial resources necessary to affiliated money market funds, AIM has fulfill its obligations under the voluntarily agreed to waive a portion of Advisory Agreement. the advisory fees it receives from the Fund attributable to such investment. o Historical relationship between the The Board further determined that the Fund and AIM. In determining whether to proposed securities lending program and continue the Advisory Agreement for the related procedures with respect to the Fund, the Board also considered the lending Fund is in the best interests of prior relationship between AIM and the the lending Fund and its respective Fund, as well as the Board's knowledge shareholders. The Board therefore of AIM's operations, and concluded that concluded that the investment of cash it was beneficial to maintain the collateral received in connection with current relationship, in part, because of the securities lending program in the such knowledge. The Board also reviewed money market funds according to the the general nature of the non-investment procedures is in the best interests of advisory services currently performed by the lending Fund and its respective AIM and its affiliates, such as shareholders. administrative, transfer agency and distribution services, and the fees o Independent written evaluation and received by AIM and its affiliates for recommendations of the Fund's Senior performing such services. In addition to Officer. The Board noted that, upon reviewing such services, the trustees their direction, the Senior Officer of also considered the organizational the Fund, who is independent of AIM and structure employed by AIM and its AIM's affiliates, had prepared an affiliates to provide those services. independent written evaluation in order Based on the review of these and other to assist the Board in determining the factors, the Board concluded that AIM reasonableness of the proposed and its affiliates were qualified to management fees of the AIM Funds, continue to provide non-investment including the Fund. The Board noted that advisory services to the Fund, including the Senior Officer's written evaluation administrative, transfer agency and had been relied upon by the Board in distribution services, and that AIM and this regard in lieu of a competitive its affiliates currently are providing bidding process. In determining whether satisfactory non-investment advisory to continue the Advisory Agreement for services. the Fund, the Board considered the Senior Officer's written evaluation and o Other factors and current trends. In the recommendation made by the Senior determining whether to continue the Officer to the Board that the Board Advisory Agreement for the Fund, the consider implementing a process to Board considered the fact that AIM, assist them in more closely monitoring along with others in the mutual fund the performance of the AIM Funds. The industry, is subject to regulatory Board concluded that it would be inquiries and litigation related to a advisable to implement such a process as wide range of issues. The Board also soon as reasonably practicable. considered the governance and compliance reforms being undertaken by o Profitability of AIM and its AIM and its affiliates, including affiliates. The Board reviewed maintaining an internal controls information concerning the profitability committee and retaining an independent of AIM's (and its affiliates') compliance consultant, and the fact that investment advisory and other activities AIM has undertaken to cause the Fund to and its financial condition. The Board operate in accordance with certain considered the overall profitability of governance policies and practices. The AIM, as well as the profitability of AIM Board concluded that these actions in connection with managing the Fund. indicated a good faith effort on the The Board noted that AIM's operations part of AIM to adhere to the highest remain profitable, although increased ethical standards, and determined that expenses in recent years have reduced the current regulatory and litigation AIM's profitability. Based on the review environment to which AIM is subject of the profitability of AIM's and its should not prevent the Board from affiliates' investment advisory and continuing the Advisory Agreement for other activities and its financial the Fund. condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive. o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
9 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2005
SHARES VALUE - ------------------------------------------------------------------------ FOREIGN STOCKS & OTHER EQUITY INTERESTS-64.27% AUSTRALIA-1.86% Brambles Industries Ltd. (Diversified Commercial & Professional Services)(a)(b) 598,000 $ 3,790,240 - ------------------------------------------------------------------------ Computershare Ltd. (Data Processing & Outsourced Services) 1,254,000 6,141,794 - ------------------------------------------------------------------------ CSL Ltd. (Biotechnology)(a)(b) 208,800 5,871,680 ======================================================================== 15,803,714 ======================================================================== BRAZIL-1.37% Lojas Americanas S.A.-Pfd. (General Merchandise Stores) 225,300 4,702,505 - ------------------------------------------------------------------------ Perdigao S.A.-Pfd. (Packaged Foods & Meats) 257,300 6,970,113 ======================================================================== 11,672,618 ======================================================================== CANADA-6.35% Astral Media Inc. (Broadcasting & Cable TV) 173,900 4,630,757 - ------------------------------------------------------------------------ Brascan Corp.-Class A (Other Diversified Financial Services) 169,700 7,740,349 - ------------------------------------------------------------------------ Canadian Oil Sands Trust (Oil & Gas Exploration & Production) 70,000 6,578,892 - ------------------------------------------------------------------------ Power Financial Corp. (Other Diversified Financial Services) 263,200 6,977,513 - ------------------------------------------------------------------------ Precision Drilling Corp. (Oil & Gas Drilling)(c) 145,300 6,680,318 - ------------------------------------------------------------------------ Sherritt International Corp. (Diversified Metals & Mining) 1,282,300 10,965,861 - ------------------------------------------------------------------------ Shoppers Drug Mart Corp. (Drug Retail) (Acquired 05/16/03-11/18/03; Cost $5,546,847)(c)(d)(e) 316,500 10,553,126 ======================================================================== 54,126,816 ======================================================================== CHINA-0.67% Shanghai Electric Group Co. Ltd.-Class H (Heavy Electrical Equipment)(b)(c) 18,000,000 5,696,728 ======================================================================== DENMARK-0.64% DSV A.S. (Trucking)(b) 55,900 5,449,146 ======================================================================== FRANCE-2.38% Eiffage S.A. (Construction & Engineering)(b) 56,999 4,919,861 - ------------------------------------------------------------------------ Pernod Ricard S.A. (Distillers & Vintners)(a)(c) 49,000 8,569,626 - ------------------------------------------------------------------------ Technip S.A. (Oil & Gas Equipment & Services) (Acquired 08/03/04-11/09/04; Cost $4,530,854)(b)(e) 124,000 6,752,941 ======================================================================== 20,242,428 ========================================================================
SHARES VALUE - ------------------------------------------------------------------------ GERMANY-4.84% Adidas-Salomon A.G. (Apparel, Accessories & Luxury Goods) 50,000 $ 8,390,301 - ------------------------------------------------------------------------ Celesio A.G. (Health Care Distributors) 85,300 7,373,183 - ------------------------------------------------------------------------ Continental A.G. (Tires & Rubber)(b) 99,140 7,579,221 - ------------------------------------------------------------------------ Deutsche Boerse A.G. (Specialized Finance)(b)(c) 75,200 7,076,923 - ------------------------------------------------------------------------ Puma A.G. Rudolf Dassler Sport (Footwear) (Acquired 10/29/02-06/02/03; Cost $2,933,761)(a)(c)(e) 42,635 10,796,264 ======================================================================== 41,215,892 ======================================================================== GREECE-1.95% EFG Eurobank Ergasias (Diversified Banks) 139,520 4,197,790 - ------------------------------------------------------------------------ OPAP S.A. (Casinos & Gaming) (Acquired 07/14/03-01/30/04; Cost $5,368,735)(b)(e) 430,000 12,426,751 ======================================================================== 16,624,541 ======================================================================== HONG KONG-1.42% Esprit Holdings Ltd. (Apparel Retail)(b) 1,246,000 8,799,899 - ------------------------------------------------------------------------ Hongkong Land Holdings Ltd. (Real Estate Management & Development)(b) 1,152,000 3,306,238 ======================================================================== 12,106,137 ======================================================================== HUNGARY-2.89% OTP Bank Rt. (Diversified Banks)(b) 681,700 24,627,115 ======================================================================== INDIA-0.40% Maruti Udyog Ltd. (Automobile Manufacturers) 283,000 3,451,633 ======================================================================== IRELAND-3.10% Anglo Irish Bank Corp. PLC (Diversified Banks)(b) 1,554,172 21,041,868 - ------------------------------------------------------------------------ Independent News & Media PLC (Publishing) 1,970,400 5,337,936 ======================================================================== 26,379,804 ======================================================================== ISRAEL-0.62% Check Point Software Technologies Ltd. (Systems Software)(c) 235,000 5,254,600 ======================================================================== ITALY-0.54% Lottomatica S.p.A. (Casinos & Gaming)(a)(b) 127,900 4,645,006 ======================================================================== JAPAN-6.59% Daiwa House Industry Co., Ltd. (Homebuilding)(b) 335,000 4,499,406 - ------------------------------------------------------------------------ EXEDY Corp. (Auto Parts & Equipment)(b) 287,400 6,713,346 - ------------------------------------------------------------------------ FANUC Ltd. (Industrial Machinery)(b) 56,700 4,482,021 - ------------------------------------------------------------------------ JSR Corp. (Specialty Chemicals)(a)(b) 275,000 6,476,527 - ------------------------------------------------------------------------ Mars Engineering Corp. (Leisure Products)(a) 137,400 4,202,449 - ------------------------------------------------------------------------ NEOMAX Co., Ltd. (Electrical Components & Equipment)(a)(b) 199,000 6,038,101 - ------------------------------------------------------------------------
F-1
SHARES VALUE - ------------------------------------------------------------------------ JAPAN-(CONTINUED) Nidec Corp. (Electronic Equipment Manufacturers)(a)(b) 38,100 $ 2,230,281 - ------------------------------------------------------------------------ Nidec Corp. (Electronic Equipment Manufacturers)(a)(f) 53,100 2,942,523 - ------------------------------------------------------------------------ Nippon Electric Glass Co., Ltd. (Electronic Equipment Manufacturers)(a)(b) 325,000 6,219,647 - ------------------------------------------------------------------------ OMRON Corp. (Electronic Equipment Manufacturers)(b) 151,000 3,563,891 - ------------------------------------------------------------------------ Suzuki Motor Corp. (Automobile Manufacturers)(a)(b) 248,000 4,274,550 - ------------------------------------------------------------------------ Yamaha Motor Co., Ltd. (Motorcycle Manufacturers)(a)(b) 210,200 4,524,370 ======================================================================== 56,167,112 ======================================================================== MEXICO-2.45% America Movil S.A. de C.V.-Series L-ADR (Wireless Telecommunication Services)(a) 261,300 6,859,125 - ------------------------------------------------------------------------ Corporacion GEO, S.A. de C.V.-Series B (Homebuilding)(c) 1,350,200 4,168,520 - ------------------------------------------------------------------------ Wal-Mart de Mexico S.A. de C.V.-Series V (Hypermarkets & Super Centers)(a) 2,017,500 9,820,021 ======================================================================== 20,847,666 ======================================================================== NORWAY-0.96% Tomra Systems A.S.A. (Environmental & Facilities Services)(a)(b) 1,196,600 8,199,031 ======================================================================== RUSSIA-1.14% AO VimpelCom-ADR (Wireless Telecommunication Services)(c) 243,070 9,722,800 ======================================================================== SINGAPORE-0.00% Citiraya Industries Ltd. (Environmental & Facilities Services)(c)(d)(g) 5,946,000 35 ======================================================================== SOUTH AFRICA-3.10% Standard Bank Group Ltd. (Diversified Banks)(b) 1,338,442 13,794,459 - ------------------------------------------------------------------------ Telkom South Africa Ltd. (Integrated Telecommunication Services) (Acquired 11/25/03-05/10/05; Cost $8,154,102)(a)(e) 667,400 12,606,997 ======================================================================== 26,401,456 ======================================================================== SOUTH KOREA-2.20% Daewoo Shipbuilding & Marine Engineering Co., Ltd. (Construction & Farm Machinery & Heavy Trucks)(b) 175,000 3,513,938 - ------------------------------------------------------------------------ KT Freetel Co., Ltd. (Wireless Telecommunication Services)(b) 133,000 2,869,902 - ------------------------------------------------------------------------ NHN Corp. (Internet Software & Services)(b) 23,000 3,846,666 - ------------------------------------------------------------------------
SHARES VALUE - ------------------------------------------------------------------------ SOUTH KOREA-(CONTINUED) Shinsegae Co., Ltd. (Hypermarkets & Super Centers)(b) 12,000 $ 4,317,878 - ------------------------------------------------------------------------ Woongjin Coway Co., Ltd. (Housewares & Specialties)(b) 239,000 4,159,621 ======================================================================== 18,708,005 ======================================================================== SPAIN-4.09% Cintra Concesiones de Infraestructuras de Transporte S.A. (Highways & Railtracks) (Acquired 10/26/04-12/17/04; Cost $6,936,449)(b)(e) 665,400 7,889,793 - ------------------------------------------------------------------------ Corporacion Mapfre S.A. (Multi-Line Insurance)(b) 456,572 7,997,204 - ------------------------------------------------------------------------ Enagas (Gas Utilities) 373,000 6,594,948 - ------------------------------------------------------------------------ Grupo Ferrovial, S.A. (Construction & Engineering)(b) 167,600 12,379,073 ======================================================================== 34,861,018 ======================================================================== SWEDEN-1.30% Gambro A.B.-Class A (Health Care Services)(a)(b)(c) 359,100 5,074,769 - ------------------------------------------------------------------------ Swedish Match A.B. (Tobacco)(b) 527,700 5,999,276 ======================================================================== 11,074,045 ======================================================================== SWITZERLAND-2.28% Baloise Holding A.G.-Class R (Multi-Line Insurance)(b)(c) 70,300 3,583,410 - ------------------------------------------------------------------------ Syngenta A.G. (Fertilizers & Agricultural Chemicals)(b)(c) 147,600 15,825,887 ======================================================================== 19,409,297 ======================================================================== TAIWAN-0.43% Novatek Microelectronics Corp., Ltd. (Semiconductors)(b) 835,000 3,662,190 ======================================================================== THAILAND-0.49% Siam Commercial Bank PCL (Diversified Banks)(b) 3,565,000 4,134,897 ======================================================================== TURKEY-1.17% Koc Holding A.S. (Industrial Conglomerates)(b) 519,084 1,940,422 - ------------------------------------------------------------------------ Turkiye Petrol Rafinerileri A.S. (Oil & Gas Refining & Marketing) 469,743 8,028,904 ======================================================================== 9,969,326 ======================================================================== UNITED KINGDOM-9.04% British Energy Group PLC (Electric Utilities)(b)(c) 723,000 5,680,794 - ------------------------------------------------------------------------ Bunzl PLC (Trading Companies & Distributors)(b) 692,533 6,923,738 - ------------------------------------------------------------------------ Capita Group PLC (Human Resource & Employment Services) 885,000 6,110,708 - ------------------------------------------------------------------------ Enterprise Inns PLC (Restaurants)(b) 1,488,600 20,528,703 - ------------------------------------------------------------------------ Filtrona PLC (Commodity Chemicals)(b) 843,714 4,027,929 - ------------------------------------------------------------------------ Inchcape PLC (Distributors)(b) 200,100 7,294,683 - ------------------------------------------------------------------------ Informa PLC (Publishing) 1,081,752 7,167,590 - ------------------------------------------------------------------------ International Power PLC (Independent Power Producers & Energy Traders)(b) 1,690,000 6,942,615 - ------------------------------------------------------------------------
F-2
SHARES VALUE - ------------------------------------------------------------------------ UNITED KINGDOM-(CONTINUED) Shire Pharmaceuticals Group PLC (Pharmaceuticals)(b) 789,500 $ 9,329,710 - ------------------------------------------------------------------------ William Hill PLC (Casinos & Gaming)(b) 311,460 2,945,592 ======================================================================== 76,952,062 ======================================================================== Total Foreign Stocks & Other Equity Interests (Cost $351,708,849) 547,405,118 ======================================================================== DOMESTIC COMMON STOCKS-31.54% AEROSPACE & DEFENSE-1.73% Precision Castparts Corp. 180,000 8,524,800 - ------------------------------------------------------------------------ Rockwell Collins, Inc. 135,000 6,185,700 ======================================================================== 14,710,500 ======================================================================== APPLICATION SOFTWARE-2.05% Amdocs Ltd.(c) 450,000 11,911,500 - ------------------------------------------------------------------------ Citrix Systems, Inc.(a)(c) 200,000 5,514,000 ======================================================================== 17,425,500 ======================================================================== ASSET MANAGEMENT & CUSTODY BANKS-0.57% Legg Mason, Inc. 45,000 4,828,950 ======================================================================== AUTOMOTIVE RETAIL-0.53% Advance Auto Parts, Inc.(c) 120,000 4,500,000 ======================================================================== CASINOS & GAMING-1.00% GTECH Holdings Corp. 266,900 8,498,096 ======================================================================== COMMUNICATIONS EQUIPMENT-0.60% Scientific-Atlanta, Inc. 145,000 5,138,800 ======================================================================== CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS-0.61% Oshkosh Truck Corp. 120,000 5,227,200 ======================================================================== DATA PROCESSING & OUTSOURCED SERVICES-0.52% Alliance Data Systems Corp.(a)(c) 125,000 4,445,000 ======================================================================== DEPARTMENT STORES-0.81% Nordstrom, Inc. 200,000 6,930,000 ======================================================================== ELECTRONIC EQUIPMENT MANUFACTURERS-0.73% Amphenol Corp.-Class A 155,000 6,195,350 ======================================================================== ELECTRONIC MANUFACTURING SERVICES-0.53% Jabil Circuit, Inc.(c) 150,000 4,477,500 ======================================================================== HEALTH CARE DISTRIBUTORS-0.67% AmerisourceBergen Corp. 75,000 5,720,250 ========================================================================
SHARES VALUE - ------------------------------------------------------------------------ HEALTH CARE EQUIPMENT-1.25% Bard (C.R.), Inc. 80,000 4,990,400 - ------------------------------------------------------------------------ Varian Medical Systems, Inc.(a)(c) 125,000 5,695,000 ======================================================================== 10,685,400 ======================================================================== HEALTH CARE FACILITIES-0.46% LifePoint Hospitals, Inc.(c) 100,000 $ 3,910,000 ======================================================================== HEALTH CARE SERVICES-2.05% Express Scripts, Inc.(a)(c) 90,000 6,786,900 - ------------------------------------------------------------------------ Laboratory Corp. of America Holdings(c) 115,000 5,548,750 - ------------------------------------------------------------------------ Omnicare, Inc. 95,000 5,139,500 ======================================================================== 17,475,150 ======================================================================== HEALTH CARE SUPPLIES-0.52% Bausch & Lomb Inc. 60,000 4,451,400 ======================================================================== INDUSTRIAL CONGLOMERATES-0.89% Textron Inc. 105,000 7,564,200 ======================================================================== MANAGED HEALTH CARE-1.55% Health Net, Inc.(c) 125,000 5,855,000 - ------------------------------------------------------------------------ Humana Inc.(c) 165,000 7,324,350 ======================================================================== 13,179,350 ======================================================================== MULTI-LINE INSURANCE-1.40% Assurant, Inc. 130,000 4,966,000 - ------------------------------------------------------------------------ HCC Insurance Holdings, Inc. 232,500 6,975,000 ======================================================================== 11,941,000 ======================================================================== OIL & GAS EQUIPMENT & SERVICES-1.60% BJ Services Co. 212,000 7,367,000 - ------------------------------------------------------------------------ National-Oilwell Varco Inc.(c) 100,000 6,247,000 ======================================================================== 13,614,000 ======================================================================== OIL & GAS EXPLORATION & PRODUCTION-0.75% Newfield Exploration Co.(c) 140,000 6,346,200 ======================================================================== OTHER DIVERSIFIED FINANCIAL SERVICES-0.62% Alliance Capital Management Holding L.P. 100,000 5,293,000 ======================================================================== PHARMACEUTICALS-0.56% Barr Pharmaceuticals Inc.(c) 82,500 4,739,625 ======================================================================== PROPERTY & CASUALTY INSURANCE-0.75% Safeco Corp. 115,000 6,405,500 ======================================================================== REGIONAL BANKS-0.60% Bank of Hawaii Corp. 100,000 5,138,000 ========================================================================
F-3
SHARES VALUE - ------------------------------------------------------------------------ RESTAURANTS-1.30% Darden Restaurants, Inc. 170,000 $ 5,511,400 - ------------------------------------------------------------------------ YUM! Brands, Inc. 110,000 5,595,700 ======================================================================== 11,107,100 ======================================================================== SEMICONDUCTORS-2.04% Freescale Semiconductor Inc.-Class B(c) 200,000 4,776,000 - ------------------------------------------------------------------------ Microchip Technology Inc.(a) 225,000 6,788,250 - ------------------------------------------------------------------------ National Semiconductor Corp. 255,000 5,770,650 ======================================================================== 17,334,900 ======================================================================== SPECIALIZED FINANCE-0.54% Chicago Mercantile Exchange Holdings Inc.(a) 12,500 4,564,375 ======================================================================== SPECIALTY CHEMICALS-0.58% Ecolab Inc.(a) 150,000 4,962,000 ======================================================================== SPECIALTY STORES-0.86% Office Depot, Inc.(c) 265,000 7,295,450 ======================================================================== SYSTEMS SOFTWARE-0.48% McAfee Inc.(c) 136,000 4,084,080 ======================================================================== TECHNOLOGY DISTRIBUTORS-1.03% Arrow Electronics, Inc.(c) 145,000 4,278,950 - ------------------------------------------------------------------------ Ingram Micro Inc.-Class A(c) 250,000 4,525,000 ======================================================================== 8,803,950 ======================================================================== THRIFTS & MORTGAGE FINANCE-1.13% MGIC Investment Corp. 75,000 4,443,000 - ------------------------------------------------------------------------ Radian Group Inc. 100,000 5,210,000 ======================================================================== 9,653,000 ========================================================================
SHARES VALUE - ------------------------------------------------------------------------ TRADING COMPANIES & DISTRIBUTORS-0.23% WESCO International, Inc.(c) 50,000 $ 1,987,500 ======================================================================== Total Domestic Common Stocks (Cost $225,324,408) 268,632,326 ======================================================================== MONEY MARKET FUNDS-2.99% Liquid Assets Portfolio-Institutional Class(h) 12,714,164 12,714,164 - ------------------------------------------------------------------------ STIC Prime Portfolio-Institutional Class(h) 12,714,164 12,714,164 ======================================================================== Total Money Market Funds (Cost $25,428,328) 25,428,328 ======================================================================== TOTAL INVESTMENTS-98.80% (excluding investments purchased with cash collateral from securities loaned) (Cost $602,461,585) 841,465,772 ======================================================================== INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-8.56% Liquid Assets Portfolio-Institutional Class(h)(i) 36,454,453 36,454,453 - ------------------------------------------------------------------------ STIC Prime Portfolio-Institutional Class(h)(i) 36,454,454 36,454,454 ======================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $72,908,907) 72,908,907 ======================================================================== TOTAL INVESTMENTS-107.36% (Cost $675,370,492) 914,374,679 ======================================================================== OTHER ASSETS LESS LIABILITIES-(7.36%) (62,717,848) ======================================================================== NET ASSETS-100.00% $851,656,831 ________________________________________________________________________ ========================================================================
Investment Abbreviations: ADR - American Depositary Receipt Pfd. - Preferred
Notes to Schedule of Investments: (a) All or a portion of this security has been pledged as collateral for securities lending transactions at October 31, 2005. (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 value of these securities at October 31, 2005 was $343,867,937, which represented 40.38% of the Fund's Net Assets. See Note 1A. (c) Non-income producing security. (d) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The aggregate value of this security at October 31, 2005 represented 1.24% of the Fund's Net Assets. See Note 1A. (e) Security not registered under the Securities Act of 1933, as amended (e.g., the security was purchased in a Rule 144A transaction or a Regulation D transaction). The security may be resold only pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The Fund has no rights to demand registration of these securities. The aggregate value of these securities at October 31, 2005 was $61,025,872, which represented 7.17% of the Fund's Net Assets. Unless otherwise indicated, these securities are not considered to be illiquid. (f) Non-income producing security acquired through a corporate action. (g) Security considered to be illiquid. The Fund is limited to investing 15% of net assets in illiquid securities at the time of purchase. The value of this security considered illiquid at October 31, 2005 represented 0.00% of the Fund's Net Assets. (h) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (i) The security has been segregated to satisfy the forward commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 8. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-4 STATEMENT OF ASSETS AND LIABILITIES October 31, 2005 ASSETS: Investments, at value (cost $577,033,257)* $816,037,444 - ----------------------------------------------------------- Investments in affiliated money market funds (cost $98,337,235) 98,337,235 =========================================================== Total investments (cost $675,370,492) 914,374,679 =========================================================== Foreign currencies, at market value (cost $10,379,268) 10,514,128 - ----------------------------------------------------------- Receivables for: Investments sold 4,911,074 - ----------------------------------------------------------- Fund shares sold 553,274 - ----------------------------------------------------------- Dividends 564,645 - ----------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 79,196 - ----------------------------------------------------------- Other assets 30,069 =========================================================== Total assets 931,027,065 ___________________________________________________________ =========================================================== LIABILITIES: Payables for: Investments purchased 4,238,131 - ----------------------------------------------------------- Fund shares reacquired 1,079,073 - ----------------------------------------------------------- Trustee deferred compensation and retirement plans 166,297 - ----------------------------------------------------------- Collateral upon return of securities loaned 72,908,907 - ----------------------------------------------------------- Accrued distribution fees 263,637 - ----------------------------------------------------------- Accrued trustees' and officer's fees and benefits 2,606 - ----------------------------------------------------------- Accrued transfer agent fees 366,843 - ----------------------------------------------------------- Accrued operating expenses 344,740 =========================================================== Total liabilities 79,370,234 =========================================================== Net assets applicable to shares outstanding $851,656,831 ___________________________________________________________ =========================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $573,634,874 - ----------------------------------------------------------- Undistributed net investment income (loss) (149,711) - ----------------------------------------------------------- Undistributed net realized gain from investment securities and foreign currencies 39,210,782 - ----------------------------------------------------------- Unrealized appreciation of investment securities and foreign currencies 238,960,886 =========================================================== $851,656,831 ___________________________________________________________ =========================================================== NET ASSETS: Class A $676,290,779 ___________________________________________________________ =========================================================== Class B $152,877,599 ___________________________________________________________ =========================================================== Class C $ 22,488,453 ___________________________________________________________ =========================================================== SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 32,832,494 ___________________________________________________________ =========================================================== Class B 7,969,749 ___________________________________________________________ =========================================================== Class C 1,171,999 ___________________________________________________________ =========================================================== Class A: Net asset value per share $ 20.60 - ----------------------------------------------------------- Offering price per share: (Net asset value of $20.60 divided by 95.25%) $ 21.63 ___________________________________________________________ =========================================================== Class B: Net asset value and offering price per share $ 19.18 ___________________________________________________________ =========================================================== Class C: Net asset value and offering price per share $ 19.19 ___________________________________________________________ ===========================================================
* At October 31, 2005 securities with an aggregate value of $70,113,007 were on loan to brokers. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-5 STATEMENT OF OPERATIONS For the year ended October 31, 2005 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $653,792) $ 13,285,270 - -------------------------------------------------------------------------- Dividends from affiliated money market funds (includes securities lending income of $353,436 after compensation to counterparties of $2,590,020) 941,868 - -------------------------------------------------------------------------- Interest 29,850 ========================================================================== Total investment income 14,256,988 ========================================================================== EXPENSES: Advisory fees 7,895,094 - -------------------------------------------------------------------------- Administrative services fees 221,764 - -------------------------------------------------------------------------- Custodian fees 745,260 - -------------------------------------------------------------------------- Distribution fees: Class A 2,186,185 - -------------------------------------------------------------------------- Class B 2,077,701 - -------------------------------------------------------------------------- Class C 227,870 - -------------------------------------------------------------------------- Transfer agent fees 3,065,985 - -------------------------------------------------------------------------- Trustees' and officer's fees and benefits 46,057 - -------------------------------------------------------------------------- Other 491,736 ========================================================================== Total expenses 16,957,652 ========================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangements (969,218) ========================================================================== Net expenses 15,988,434 ========================================================================== Net investment income (loss) (1,731,446) ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain from: Investment securities (includes gains from securities sold to affiliates of $485,569) 190,123,662 - -------------------------------------------------------------------------- Foreign currencies 922,861 ========================================================================== 191,046,523 ========================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities (21,783,573) - -------------------------------------------------------------------------- Foreign currencies (531,466) ========================================================================== (22,315,039) ========================================================================== Net gain from investment securities and foreign currencies 168,731,484 ========================================================================== Net increase in net assets resulting from operations $167,000,038 __________________________________________________________________________ ==========================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-6 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2005 and 2004
2005 2004 - -------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (1,731,446) $ (8,818,644) - -------------------------------------------------------------------------------------------- Net realized gain from investment securities and foreign currencies 191,046,523 119,729,166 - -------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities and foreign currencies (22,315,039) 38,340,359 ============================================================================================ Net increase in net assets resulting from operations 167,000,038 149,250,881 ============================================================================================ Share transactions-net: Class A (10,578,408) 13,287,763 - -------------------------------------------------------------------------------------------- Class B (146,902,790) (175,103,307) - -------------------------------------------------------------------------------------------- Class C (2,724,516) (2,607,686) ============================================================================================ Net increase (decrease) in net assets resulting from share transactions (160,205,714) (164,423,230) ============================================================================================ Net increase (decrease) in net assets 6,794,324 (15,172,349) ============================================================================================ NET ASSETS: Beginning of year 844,862,507 860,034,856 ============================================================================================ End of year (including undistributed net investment income (loss) of $(149,711) and $(149,425), respectively) $ 851,656,831 $ 844,862,507 ____________________________________________________________________________________________ ============================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-7 NOTES TO FINANCIAL STATEMENTS October 31, 2005 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. The Fund's investment objective is above-average long-term growth of capital. Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services, which may be considered fair valued, or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are 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 and domestic and foreign index futures. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of F-8 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. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is 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 -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. 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-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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE - ------------------------------------------------------------------- First $1 billion 0.90% - ------------------------------------------------------------------- Over $1 billion 0.85% __________________________________________________________________ ===================================================================
Effective January 1, 2005, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE - ------------------------------------------------------------------- First $250 million 0.80% - ------------------------------------------------------------------- Next $250 million 0.78% - ------------------------------------------------------------------- Next $500 million 0.76% - ------------------------------------------------------------------- Next $1.5 billion 0.74% - ------------------------------------------------------------------- Next $2.5 billion 0.72% - ------------------------------------------------------------------- Next $2.5 billion 0.70% - ------------------------------------------------------------------- Next $2.5 billion 0.68% - ------------------------------------------------------------------- Over $10 billion 0.66% __________________________________________________________________ ===================================================================
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2005, AIM waived fees of $899,179. At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $43,356. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the year ended October 31, 2005, AIM was paid $221,764. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the year ended October 31, 2005, the Fund paid AISI $3,065,985. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B 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 ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Effective January 1, 2005 through June 30, 2005, the Fund paid ADI 0.35% of the average daily net assets of Class A shares. Prior to January 1, 2005, the Fund paid ADI 0.50% of the average daily net assets of Class A 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. National Association of Securities Dealers ("NASD") Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2005, the Class A, Class B and Class C shares paid $2,186,185, $2,077,701 and $227,870, 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, 2005, ADI advised the Fund that it retained $73,411 in front-end sales commissions for the sale of Class A shares and $279, $50,550 and $1,414 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 ADI. 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, 2005. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS) - ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ 1,521,179 $146,732,158 $(135,539,173) $ -- $12,714,164 $293,383 $ -- - ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 1,521,179 146,732,158 (135,539,173) -- 12,714,164 295,049 -- ================================================================================================================================== Subtotal $ 3,042,358 $293,464,316 $(271,078,346) $ -- $25,428,328 $588,432 $ -- ==================================================================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS) - ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ 76,343,445 $276,951,937 $(316,840,929) $ -- $36,454,453 $176,028 $ -- - ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 76,343,445 271,091,179 (310,980,170) -- 36,454,454 177,408 -- ================================================================================================================================== Subtotal $152,686,890 $548,043,116 $(627,821,099) $ -- $72,908,907 $353,436 $ -- ================================================================================================================================== Total $155,729,248 $841,507,432 $(898,899,445) $ -- $98,337,235 $941,868 $ -- __________________________________________________________________________________________________________________________________ ==================================================================================================================================
* Net of compensation to counterparties. NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2005, the Fund engaged in securities purchases of $5,002,309 and sales of $3,629,347, which resulted in net realized gains of $485,569. NOTE 5--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2005, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $26,683. NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2005, the Fund paid legal fees of $5,288 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, 2005, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the rate contractually agreed upon. NOTE 8--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested. At October 31, 2005, securities with an aggregate value of $70,113,007 were on loan to brokers. The loans were secured by cash collateral of $72,908,907 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2005, the Fund received dividends on cash collateral of $353,436 for securities lending transactions, which are net of compensation to counterparties. 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, 2005 and 2004. TAX COMPONENTS OF NET ASSETS: As of October 31, 2005, the components of net assets on a tax basis were as follows:
2005 - ---------------------------------------------------------------------------- Undistributed long-term gain $ 39,306,023 - ---------------------------------------------------------------------------- Unrealized appreciation -- investments 238,865,645 - ---------------------------------------------------------------------------- Temporary book/tax differences (149,711) - ---------------------------------------------------------------------------- Shares of beneficial interest 573,634,874 ============================================================================ Total net assets $851,656,831 ____________________________________________________________________________ ============================================================================
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. The tax-basis unrealized appreciation on investments includes appreciation (depreciation) on foreign currencies of $(43,302). 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 $148,732,311 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund did not have a capital loss carryforward as of October 31, 2005. 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, 2005 was $559,598,464 and $716,467,151, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $247,298,032 - ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (8,389,085) ============================================================================== Net unrealized appreciation of investment securities $238,908,947 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $675,465,732.
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, 2005, undistributed net investment income (loss) was increased by $1,731,160, undistributed net realized gain (loss) was decreased by $922,861 and shares of beneficial interest decreased by $808,299. 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 - ------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2005(a) 2004 --------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------------------- Sold: Class A 1,806,958 $ 34,695,693 4,622,748 $ 71,616,617 - ------------------------------------------------------------------------------------------------------------------------- Class B 702,915 12,661,037 775,098 11,562,193 - ------------------------------------------------------------------------------------------------------------------------- Class C 231,761 4,170,979 212,782 3,180,392 ========================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 5,877,678 113,101,296 6,909,424 111,234,847 - ------------------------------------------------------------------------------------------------------------------------- Class B (6,287,823) (113,101,296) (7,355,880) (111,234,847) ========================================================================================================================= Reacquired:(b) Class A (8,196,078) (158,375,397) (10,817,220) (169,563,701) - ------------------------------------------------------------------------------------------------------------------------- Class B (2,595,138) (46,462,531) (5,078,337) (75,430,653) - ------------------------------------------------------------------------------------------------------------------------- Class C (381,426) (6,895,495) (388,928) (5,788,078) ========================================================================================================================= (8,841,153) $(160,205,714) (11,120,313) $(164,423,230) _________________________________________________________________________________________________________________________ =========================================================================================================================
(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. ADI has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. (b) Amount is net of redemption fees of $7,020, $1,738 and $237 for Class A, Class B and Class C shares, respectively, for the year ended October 31, 2005 and $6,487, $3,766 and $255 for Class A, Class B and Class C shares, respectively, for the year ended October 31, 2004. 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, ----------------------------------------------------------- 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 16.99 $ 14.28 $ 11.00 $ 12.58 $ 25.87 - ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.00)(a) (0.13)(a) (0.13) (0.15)(a) (0.13) - ------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.61 2.84 3.41 (1.43) (8.42) ========================================================================================================================= Total from investment operations 3.61 2.71 3.28 (1.58) (8.55) ========================================================================================================================= Less distributions from net realized gains -- -- -- -- (4.74) ========================================================================================================================= Redemptions fees added to shares of beneficial interest 0.00 0.00 -- -- -- ========================================================================================================================= Net asset value, end of period $ 20.60 $ 16.99 $ 14.28 $ 11.00 $ 12.58 _________________________________________________________________________________________________________________________ ========================================================================================================================= Total return(b) 21.25% 18.98% 29.82% (12.56)% (38.87)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $676,291 $566,573 $465,855 $405,360 $563,828 _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.65%(c) 2.02% 2.10% 2.00% 1.87% - ------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.76%(c) 2.03% 2.11% 2.00% 1.87% ========================================================================================================================= Ratio of net investment income (loss) to average net assets (0.02)%(c) (0.81)% (0.97)% (1.19)% (0.75)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Portfolio turnover rate 67% 68% 64% 73% 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 $646,675,575.
CLASS B ----------------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2005 2004 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 15.93 $ 13.45 $ 10.42 $ 11.97 $ 24.98 - ------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.12)(a) (0.19)(a) (0.19) (0.20)(a) (0.21) - ------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.37 2.67 3.22 (1.35) (8.06) ========================================================================================================================= Total from investment operations 3.25 2.48 3.03 (1.55) (8.27) ========================================================================================================================= Less distributions from net realized gains -- -- -- -- (4.74) ========================================================================================================================= Redemptions fees added to shares of beneficial interest 0.00 0.00 -- -- -- ========================================================================================================================= Net asset value, end of period $ 19.18 $ 15.93 $ 13.45 $ 10.42 $ 11.97 _________________________________________________________________________________________________________________________ ========================================================================================================================= Total return(b) 20.40% 18.44% 29.08% (12.95)% (39.19)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $152,878 $257,230 $374,027 $388,101 $583,933 _________________________________________________________________________________________________________________________ ========================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.31%(c) 2.52% 2.60% 2.51% 2.39% - ------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.42%(c) 2.53% 2.61% 2.51% 2.39% ========================================================================================================================= Ratio of net investment income (loss) to average net assets (0.68)%(c) (1.31)% (1.47)% (1.70)% (1.27)% _________________________________________________________________________________________________________________________ ========================================================================================================================= Portfolio turnover rate 67% 68% 64% 73% 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 $207,770,065. F-14 NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C -------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------- 2005 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 15.93 $ 13.46 $ 10.42 $ 11.98 $ 24.99 - ---------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.12)(a) (0.19)(a) (0.19) (0.20)(a) (0.21) - ---------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.38 2.66 3.23 (1.36) (8.06) ====================================================================================================================== Total from investment operations 3.26 2.47 3.04 (1.56) (8.27) ====================================================================================================================== Less distributions from net realized gains -- -- -- -- (4.74) ====================================================================================================================== Redemptions fees added to shares of beneficial interest 0.00 0.00 -- -- -- ====================================================================================================================== Net asset value, end of period $ 19.19 $ 15.93 $ 13.46 $ 10.42 $ 11.98 ______________________________________________________________________________________________________________________ ====================================================================================================================== Total return(b) 20.47% 18.35% 29.17% (13.02)% (39.17)% ______________________________________________________________________________________________________________________ ====================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $ 22,488 $21,059 $20,153 $19,099 $ 28,260 ______________________________________________________________________________________________________________________ ====================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.31%(c) 2.52% 2.60% 2.51% 2.39% - ---------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.42%(c) 2.53% 2.61% 2.51% 2.39% ====================================================================================================================== Ratio of net investment income (loss) to average net assets (0.68)%(c) (1.31)% (1.47)% (1.70)% (1.28)% ______________________________________________________________________________________________________________________ ====================================================================================================================== Portfolio turnover rate 67% 68% 64% 73% 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 $22,787,018. NOTE 14--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Half of this amount has already been paid to the fair fund pursuant to the terms of the settlement with the remainder due December 31, 2005. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. REGULATORY INQUIRIES AND PENDING LITIGATION IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, 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. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits F-15 NOTE 14--LEGAL PROCEEDINGS--(CONTINUED) related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec.. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On June 13, 2005, the MDL Court (as defined below) issued a Conditional Transfer Order transferring this lawsuit to the MDL Court, which Conditional Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor-Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. AIM and ADI have the right to contest the WVASC's findings and conclusions, which they intend to do. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; - that certain AIM Funds inadequately employed fair value pricing; - that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; - that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees; - 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; and - that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate (this lawsuit was dismissed by the Court on August 12, 2005). These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. All lawsuits based on allegations of market timing, late trading and related activity have been transferred to the United States District Court for the District of Maryland. On August 25, 2005, the Court issued rulings on the common issues of law presented in defendants' motions to dismiss the shareholder class and derivative complaints. These rulings were issued in the context of the Janus lawsuits, but the Court's legal determinations apply at the omnibus level to all cases within his track, including the AIM and IFG cases. The Court dismissed for failure to make pre-suit demand on the fund board all derivative causes of action but one: the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"), as to which the demand requirement does not apply. The Court dismissed all claims asserted in the class complaint but two: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on the 36(b) claim to fees attributable to timing assets, as opposed to all fees on funds in which any timing occurred. The question whether the duplicative Section 36(b) claim properly belongs in the derivative complaint or in the class action complaint will be decided at a later date. The Court will subsequently issue an order applying his legal rulings to the allegations in the AIM and IFG complaints. F-16 NOTE 14--LEGAL PROCEEDINGS--(CONTINUED) At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds. F-17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of AIM International Mutual Funds 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 AIM Global Aggressive Growth Fund (one of the funds constituting AIM International Mutual Funds, hereafter referred to as the "Fund") at October 31, 2005, 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP December 19, 2005 Houston, Texas F-18 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2005 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 109 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, Vice Chair, Group Inc. (financial services holding Principal Executive Officer company); Director and Vice Chairman, and President 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 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; and Chairman, AIM Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 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 - ------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered Trustee investment company (2 portfolios)) 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 None Trustee private business corporations, including the Boss Group Ltd. (private investment and management); Cortland Trust, Inc. (Chairman) (registered investment company (3 portfolios)); Annuity and Life Re (Holdings), Ltd. (insurance company); and CompuDyne Corporation (provider of products and services to the public security market) 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 - ------------------------------------------------------------------------------------------------------------------------------- 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 Owner, Dos Angelos Ranch, L.P. Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) - ------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered Trustee Naftalis and Frankel LLP investment company (3 portfolios)) - ------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc. Trustee (San Diego, California) - ------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None Trustee of the USA - -------------------------------------------------------------------------------------------------------------------------------
(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. (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. TRUSTEES AND OFFICERS--(CONTINUED) As of October 31, 2005 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 109 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 - ------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, 2005 Retired None Jr.(3) -- 1944 Trustee Formerly: Partner, Deloitte & Touche - ------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 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 Vice President, A I M Distributors, Inc., AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds and Chief Compliance Officer, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A Senior Vice President and Assistant General Counsel, ICON Senior Officer Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------- 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. and A I M Officer Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., AIM Investment Services, Inc. and 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; Vice President, A I M Distributors, Inc.; and Director and General Counsel, Fund Management Company - ------------------------------------------------------------------------------------------------------------------------------- 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. - ------------------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A Vice President, Principal Advisors, Inc. Financial Officer and Treasurer Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A Vice President Investment Officer, A I M Advisors Inc.; Director, Chairman, Chief Executive Officer, President and Chief Investment Officer, A I M Capital Management, Inc.; Executive Vice President, A I M Management Group Inc. Formerly: Senior Vice President, AIM Private Asset Management, Inc.; and Chief Equity Officer, and Senior Investment Officer, A I M Capital Management, 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. - -------------------------------------------------------------------------------------------------------------------------------
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005. 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, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company 1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
U.S. ESTATE TAX FOR NON-RESIDENT ALLEN SHAREHOLDERS (UNAUDITED) The percentage of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005 and October 31, 2005 are 70.18%, 68.94%, 67.50% and 68.63%, respectively. DOMESTIC EQUITY SECTOR EQUITY AIM ALLOCATION SOLUTIONS AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund AIM Basic Balanced Fund* AIM Energy Fund AIM Growth Allocation Fund(2) AIM Basic Value Fund AIM Financial Services Fund AIM Moderate Allocation Fund AIM Blue Chip Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund AIM Capital Development Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation Fund AIM Charter Fund AIM Gold & Precious Metals Fund AIM Constellation Fund AIM Leisure Fund DIVERSIFIED PORTFOLIOS AIM Diversified Dividend Fund AIM Multi-Sector Fund AIM Dynamics Fund AIM Real Estate Fund(1) AIM Income Allocation Fund AIM Large Cap Basic Value Fund AIM Technology Fund AIM International Allocation Fund AIM Large Cap Growth Fund AIM Utilities Fund AIM Mid Cap Basic Value Fund AIM Mid Cap Core Equity Fund(1) FIXED INCOME AIM Mid Cap Growth Fund AIM Opportunities I Fund TAXABLE AIM Opportunities II Fund AIM Opportunities III Fund AIM Floating Rate Fund AIM Premier Equity Fund AIM High Yield Fund AIM S&P 500 Index Fund AIM Income Fund AIM Select Equity Fund AIM Intermediate Government Fund AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund AIM Small Cap Growth Fund(1) AIM Money Market Fund AIM Small Company Growth Fund AIM Short Term Bond Fund AIM Summit Fund AIM Total Return Bond Fund AIM Trimark Endeavor Fund Premier Portfolio AIM Trimark Small Companies Fund Premier U.S. Government Money Portfolio AIM Weingarten Fund TAX-FREE *Domestic equity and income fund AIM High Income Municipal Fund(1) AIM Municipal Bond Fund INTERNATIONAL/GLOBAL EQUITY AIM Tax-Exempt Cash Fund AIM Tax-Free Intermediate Fund AIM Asia Pacific Growth Fund Premier Tax-Exempt Portfolio AIM Developing Markets Fund AIM European Growth Fund ========================================================================================== AIM European Small Company Fund(1) CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AIM Global Aggressive Growth Fund AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AIM Global Equity Fund AND READ IT CAREFULLY BEFORE INVESTING. AIM Global Growth Fund ========================================================================================== AIM Global Value Fund AIM International Core Equity Fund AIM International Growth Fund AIM International Small Company Fund(1) AIM Trimark Fund
(1) This fund has limited public sales of its shares to certain investors. For more information on who may continue to invest in the fund, please see the appropriate prospectus. (2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM Growth Allocation Fund. If used after January 20, 2006, this report must be accompanied by a Fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $129 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $381 billion in assets under management. Data as of September 30, 2005. AIMinvestments.com GLA-AR-1 A I M Distributors, Inc. YOUR GOALS. OUR SOLUTIONS.--Registered Trademark-- - ----------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Management --Registered Trademark-- Plans Accounts - -----------------------------------------------------------------------------------
AIM GLOBAL GROWTH FUND Annual Report to Shareholders o October 31, 2005 [COVER IMAGE] [YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO] - -- Registered Trademark -- -- Registered Trademark -- AIM GLOBAL GROWTH FUND SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of October 31, 2005, and is based on total net assets. ABOUT SHARE CLASSES o The unmanaged MSCI EUROPE INDEX is a The Fund provides a complete list of its group of European securities tracked by holdings four times in each fiscal year, o Class B shares are not available as an Morgan Stanley Capital International. at the quarter-ends. For the second and investment for retirement plans maintained fourth quarters, the lists appear in the pursuant to Section 401 of the Internal o The unmanaged Standard & Poor's Fund's semiannual and annual reports to Revenue Code, including 401(k) plans, Composite Index of 500 Stocks (the S&P 500 shareholders. For the first and third money purchase pension plans and profit --Registered Trademark-- Index) is an quarters, the Fund files the lists with sharing plans. Plans that had existing index of common stocks frequently used as the Securities and Exchange Commission accounts invested in Class B shares prior a general measure of U.S. stock market (SEC) on Form N-Q. The most recent list of to September 30, 2003, will continue to be performance. portfolio holdings is available at allowed to make additional purchases. AIMinvestments.com. From our home page, o The Fund is not managed to track the click on Products & Performance, then PRINCIPAL RISKS OF INVESTING IN THE FUND performance of any particular index, Mutual Funds, then Fund Overview. Select including the indexes defined here, and your Fund from the drop-down menu and o International investing presents certain consequently, the performance of the Fund click on Complete Quarterly Holdings. risks not associated with investing solely may deviate significantly from the Shareholders can also look up the Fund's in the United States. These include risks performance of the indexes. Forms N-Q on the SEC's Web site at relating to fluctuations in the value of sec.gov. And copies of the Fund's Forms the U.S. dollar relative to the values of o A direct investment cannot be made in an N-Q may be reviewed and copied at the other currencies, the custody arrangements index. Unless otherwise indicated, index SEC's Public Reference Room at 450 Fifth made for the Fund's foreign holdings, results include reinvested dividends, and Street, N.W., Washington, D.C. 20549-0102. differences in accounting, political risks they do not reflect sales charges. You can obtain information on the and the lesser degree of public Performance of an index of funds reflects operation of the Public Reference Room, information required to be provided by fund expenses; performance of a market including information about duplicating non-U.S. companies. index does not. fee charges, by calling 202-942-8090 or 800-732-0330,or by electronic request at o Investing in emerging markets involves OTHER INFORMATION the following e-mail address: greater risk and potential reward than publicinfo@sec.gov. The SEC file numbers investing in more established markets. o The returns shown in management's for the Fund are 811-06463 and 33-44611. discussion of Fund performance are based ABOUT INDEXES USED IN THIS REPORT on net asset values calculated for A description of the policies and shareholder transactions. Generally procedures that the Fund uses to determine o The unmanaged MSCI WORLD INDEX is a accepted accounting principles require how to vote proxies relating to portfolio group of global securities tracked by adjustments to be made to the net assets securities is available without charge, Morgan Stanley Capital International. of the Fund at period end for financial upon request, from our Client Services reporting purposes, and as such, the net department at 800-959-4246 or on the AIM o The unmanaged MSCI WORLD GROWTH INDEX is asset values for shareholder transactions Web site, AIMinvestments.com. On the home a subset of the MSCI World Index, a group and the returns based on those net asset page, scroll down and click on AIM Funds of global securities tracked by Morgan values may differ from the net asset Proxy Policy. The information is also Stanley Capital International; the Growth values and returns reported in the available on the Securities and Exchange subset measures performance of companies Financial Highlights. Commission's Web site, sec.gov. with higher price/earnings ratios and higher forecasted growth values. o Industry classifications used in this Information regarding how the Fund voted report are generally according to the proxies related to its portfolio o The unmanaged LIPPER GLOBAL LARGE-CAP Global Industry Classification Standard, securities during the 12 months ended June GROWTH FUND INDEX represents an average of which was developed by and is the 30, 2005, is available at our Web site. Go the performance of the largest global exclusive property and a service mark of to AIMinvestments.com, access the About Us large-capitalization growth equity funds Morgan Stanley Capital International Inc. tab, click on Required Notices and then tracked by Lipper, Inc., an independent and Standard & Poor's. click on Proxy Voting Activity. Next, mutual fund performance monitor. select the Fund from the drop-down menu. The information is also available on the Securities and Exchange Commission's Web site, sec.gov. ========================================== FUND NASDAQ SYMBOLS Class A Shares AGGAX Class B Shares AGGBX Class C Shares AGGCX ===================================================================================== ========================================== THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. =====================================================================================
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE AIMINVESTMENTS.COM AIM GLOBAL GROWTH FUND Dear Fellow AIM Funds Shareholders: The fiscal year covered by this report was quite good to equity investors. Domestically, the broad-based S&P 500 [GRAHAM Index returned 8.72%. Globally, Morgan Stanley's MSCI World PHOTO] Index rose 13.27%. Much of this good performance, though, was attained early in the fiscal year as virtually every equity index declined during October of 2005. Concern about the inflationary potential of rising energy costs was frequently cited as a major cause of market weakness. Within the indexes, there was considerable variability in the performance of different sectors and markets. Domestically, energy sector performance far outpaced that of ROBERT H. GRAHAM the other sectors in the S&P 500 Index, reflecting rising oil and gas prices. Overseas, emerging markets produced more attractive results than did developed markets, at least in part because emerging markets tend to be more closely tied to the performance of natural resources and commodities. One could make a strong argument for global diversification of a stock portfolio using the performance data for the fiscal year ended October 31, 2005. Of course, your financial advisor is the person most qualified to help you decide whether such diversification is appropriate for you. [WILLIAMSON PHOTO] For a discussion of the specific market conditions that affected your Fund and how your Fund was managed during the fiscal year, please turn to Page 3. NEW INFORMATION IN THIS REPORT We would like to call your attention to two new elements in this report. First, on Page 2, is a message from Bruce MARK H. WILLIAMSON Crockett, the independent Chair of the Board of Trustees of the AIM Funds. We first introduced you to Mr. Crockett in the annual report on your Fund dated October 31, 2004. Mr. Crockett has been on our Funds' Board since 1992; he assumed his responsibilities as Chair in October 2004. Mr. Crockett plans to keep AIM shareholders informed of the work of the Board regularly via letters in the Fund reports. We certainly think this is a valuable addition to the reports. The Board is charged with looking out for the interests of shareholders, and Mr. Crockett's letter provides insight into some of the many issues the Board addresses in governing your Fund. One of the most important decisions the Board makes each year is whether to approve the advisory agreement your Fund has with AIM. Essentially, this agreement hires AIM to manage the assets in your Fund. A discussion of the factors the Board considered in reviewing the agreement is the second new element in the report, and we encourage you to read it. It appears on Pages 8 and 9. Further information about the markets, your Fund, and investing in general is always available on our widely acclaimed Web site, AIMinvestments.com. We invite you to visit it frequently. We at AIM remain committed to building solutions to help you meet your investment goals. We thank you for your continued participation in AIM Investments--Registered Trademark--. If you have any questions, please contact our award-winning Client Service representatives at 800-959-4246. We are happy to be of help. Sincerely, /S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, President, A I M Advisors, Inc. AIM Funds December 15, 2005 AIM Investments is a registered service mark of A I M Management Group Inc. A I M Advisors, Inc. and A I M Capital Management, Inc. are the investment advisors. A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments. 1 AIM GLOBAL GROWTH FUND DEAR AIM FUNDS SHAREHOLDERS: As independent Chair of the Board of Trustees of the AIM Funds, I'm writing to report on the work being done by your Board. [CROCKETT PHOTO] At our most recent meeting in June 2005, your Board approved voluntary fee reductions from A I M Advisors, Inc. (AIM) that save shareholders approximately $20.8 million annually, based on asset levels as of March 31, 2005. The majority of these expense reductions, which took effect July 1, 2005, will be achieved by a permanent reduction to 0.25% of the Rule 12b-1 fees on Class A and Class A3 shares of those AIM Funds that previously charged these fees at a higher rate. BRUCE L. CROCKETT Our June meeting, which was the culmination of more than two and one-half months of review and discussions, took place over a three-day period. The meeting included your Board's annual comprehensive evaluation of each fund's advisory agreement with AIM. After this evaluation, in which questions about fees, performance and operations were addressed by AIM, your Board approved all advisory agreements for the year beginning July 1, 2005. You can find information on the factors considered and conclusions reached by your Board in its evaluation of each fund's advisory agreement at AIMinvestments.com. (Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals.") The advisory agreement information about your Fund is also included in this annual report on Pages 8 and 9. I encourage you to review it. Together with monitoring fund expenses, fund performance is your Board's priority. Our initial goal is to work with AIM to bring about improvement in every AIM Fund that has been underperforming its category. Your Board has a well-defined process and structure for monitoring all funds and identifying and assisting AIM in improving underperforming funds. Our Investments Committee--which functions along with Audit, Governance, Valuation and Compliance Committees--is the only one of these five standing committees to include all 14 independent Board members. Further, our Investments Committee is divided into three underlying subcommittees, each responsible for, among other things, reviewing the performance, fees and expenses of the funds that have been assigned to it. At subcommittee meetings, held throughout the year, the performance of every AIM Fund is evaluated. If a fund has underperformed its peer group for a meaningful period, we work closely with AIM to discover the causes and help develop the right responses. In some cases, AIM may determine that a change in portfolio management strategy or portfolio managers is required. In other cases, where a fund no longer seems viable, it may be merged with a similar fund, being careful to consider the needs of all shareholders affected by the decision. Following AIM's recommendation and your Board's approval, eight funds were recently merged. Be assured that your Board is working closely with the management of AIM to help you reach your investment goals. Should you or your advisor have questions or comments about the governance of AIM Funds, I invite you to write to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100, Houston, TX 77046. Your Board looks forward to keeping you informed about the governance of your funds. Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair On Behalf of the Board of Trustees AIM Funds December 15, 2005 2 AIM GLOBAL GROWTH FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ======================================================================================= We consider selling a stock for any one of PERFORMANCE SUMMARY the following reasons: ========================================== Despite higher oil prices, most world FUND VS. INDEXES o a stock's price seems overvalued equity markets posted positive returns for the fiscal year. Given this environment, Total returns,10/31/04-10/31/05,excluding o a more attractive opportunity is we are pleased to once again reward applicable sales charges. If sales charges presented shareholders with double-digit Fund were included, returns would be lower. performance. Turn to Pages 6 and 7 for MARKET CONDITIONS AND YOUR FUND long-term performance. Class A Shares 14.17% Class B Shares 13.39 Despite widespread concern about the As the table illustrates, your Fund Class C Shares 13.38 potential impact of rising short-term modestly outperformed all of its benchmark MSCI World Index interest rates in some countries and indexes. We attribute our comparative (Broad Market Index) 13.27 historically high energy prices, the success to strong stock selection, an MSCI World Growth Index majority of world markets rose during the overweight position to European equities (Style-specific Index) 11.68 fiscal year. For the third consecutive and exposure to select stocks in Lipper Global Large-Cap Growth year, foreign markets outperformed U.S. out-performing Latin American markets. Fund Index (Peer Group Index) 13.93 markets, with Latin American markets (many of which are exporters of materials and SOURCE: LIPPER, INC. oil) the top performers. ========================================== ======================================================================================= o In Europe, markets rallied amid a low interest rate environment (the European HOW WE INVEST companies, rather than sector or country Central Bank has kept rates at 2% for trends. Our goal is a well-diversified, several years) and corporate profits We believe that earnings drive stock reasonably priced, quality portfolio. We buoyed by restructuring and cost cutting prices and that companies generating adhere to our investment process measures. substantial, repeatable, above-average regardless of the macroeconomic earnings growth should provide long-term environment. o In Asia, Japanese stocks climbed to growth for companies, both in the U.S. and levels not witnessed in many years as abroad, with the following attributes: We do not hedge currencies because we corporate earnings continued to improve believe currency exposure increases the and Prime Minister Junichiro Koizumi's o accelerating earnings and revenues diversification benefit of international dramatic election victory resonated well investing. with investors. o strong cash flow generation (dividends, share buybacks) We seek to minimize stock-specific risk o In the United States, equity markets by building a portfolio that holds a also posted positive returns for the o high return on invested capital variety of companies. fiscal year but gains were muted compared to overseas markets. There was wide o reasonable prices with low valuations We believe disciplined sell decisions variance in U.S. corporate profits during are a key determinant of successful the year. We use a systematic, stock-by-stock investing. approach, focusing on strengths of During the fiscal year, our largest individual regional allocation was to European stocks. We continued (continued) ========================================== ========================================== ========================================== PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. United States 28.3% 1. Eni S.p.A. (Italy) 2.1% [PIE CHART] 2. France 12.9 2. Total S.A. (France) 2.0 3. Switzerland 9.0 3. Imperial Tobacco Group PLC Financials 21.0% 4. United Kingdom 7.9 (United Kingdom) 2.0 Health Care 14.8% 5. Japan 7.2 4. Vinci S.A. (France) 2.0 Consumer Discretionary 13.7% 5. BNP Paribas S.A. (France) 1.8 Information Technology 12.7% TOTAL NET ASSETS $413.1 MILLION 6. Johnson & Johnson 1.8 Consumer Staples 10.7% 7. Syngenta A.G. (Switzerland) 1.8 Energy 8.5% TOTAL NUMBER OF HOLDINGS* 116 8. Roche Holding A.G. (Switzerland) 1.7 Industrials 7.2% 9. Anglo Irish Bank Corp. PLC Materials 5.5% (Ireland) 1.6 Telecommunications Services 3.2% 10. UBS A.G. (Switzerland) 1.6 Money Market Funds and Other Assets Less Liabilities 2.2% Utilities 0.5% The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. *Excluding money market fund holdings. ========================================== ========================================== ==========================================
AIM GLOBAL GROWTH FUND to significantly overweight the region since 2000. The company emphasized market KIRK L. ANDERSON, compared to our style-specific benchmark share over profitability in its consumer [ANDERSON portfolio manager, is as we believed European stocks, in pricing strategy and subsequently missed PHOTO] lead manager of AIM general, offered more attractive its revenue estimates. While the shortfall Global Growth Fund valuations than their U.S. counterparts. was slight, the impact on the stock was with respect to the Valuation measures including price/ deep. While, this has shaken our domestic portion of the Fund's portfolio. earnings, price/book and price/cash flow confidence in Dell's management, we still He joined AIM in 1994. Mr. Anderson earned were lower for European stocks (MSCI believe in Dell's long-term prospects. a B.A. in political science from Texas A&M Europe Index) than U.S. stocks (S&P 500 Accordingly, we reduced our position to University. He also received an M.S. in Index) as of the close of the fiscal year. reflect our reduced expectations. finance from the University of Houston. Although European stocks contributed Foreign currency exchange also proved a MATTHEW W. DENNIS, the most to Fund performance during the drag on Fund performance. During the [DENNIS Chartered Financial fiscal year, all regions posted fiscal year, the U.S. dollar strengthened PHOTO] Analyst, portfolio double-digit gains. While not a large against many foreign currencies, most manager, is lead weighting in the portfolio, Latin American notably against European currencies and manager of AIM Global holdings had some of the strongest the Japanese yen. Given our large Growth Fund with respect to the Fund's returns. Mexico's WAL-MART DE MEXICO S.A. allocation to foreign holdings, foreign investments in Europe and Canada. He has DE C.V. (Wal-Mex) has been able to pioneer currency depreciation had a negative been in the investment business since a centralized distribution system in impact on Fund returns. 1994. Mr. Dennis received a B.A. in Mexico by leveraging off its parent economics from The University of Texas at company's name (Wal-Mart) and know-how. A IN CLOSING Austin. He also earned an M.S. in finance market leader in the from Texas A&M University. supermarket/hypermarket area, Wal-Mex The performance of global markets over the continues to gain market share from its last several years underscores the BARRETT K. SIDES, less efficient competitors. investment opportunities beyond U.S. [SIDES senior portfolio borders. We believe our bottom-up PHOTO] manager, is lead On a world-wide basis, energy was the investment process allows us to build a manager of AIM Global top performing sector. As oil prices strong portfolio based on world class Growth Fund with approached $70 per barrel, energy companies from around the world. Given our respect to the Fund's investments in Asia companies benefited from rising commodity global reach, we believe we can provide Pacific and Latin America. He joined AIM prices. Our energy exposure is diversified investors diversification opportunities by in 1990. Mr. Sides graduated with a B.S. worldwide including TOTAL S.A. (France), including both U.S. and international in economics from Bucknell University. He ENI S.P.A. (Italy), SUNCOR ENERGY (Canada) equities in our portfolio. We are pleased also received a master's in international and VALERO ENERGY CORP. (U.S.). We find to once again provide shareholders with business from the University of St. these companies attractive as they have positive Fund returns for the fiscal year Thomas. strong earnings growth and underlying and thank you for your continued return on capital coupled with attractive participation in AIM Global Growth Fund. SHUXIN CAO, Chartered valuations characteristics which we [CAO Financial Analyst, believe can lead to strong long-term THE VIEWS AND OPINIONS EXPRESSED IN PHOTO] portfolio manager, is performance. MANAGEMENT'S DISCUSSION OF FUND manager of AIM Global PERFORMANCE ARE THOSE OF A I M ADVISORS, Growth Fund. He joined Our largest sector exposure was in INC. THESE VIEWS AND OPINIONS ARE SUBJECT AIM in 1997. Mr. Cao graduated from financials. We continue to find attractive TO CHANGE AT ANY TIME BASED ON FACTORS Tianjin Foreign Language Institute with a opportunities here particularly in SUCH AS MARKET AND ECONOMIC CONDITIONS. B.A. in English. He also received an European banks. Two holdings that continue THESE VIEWS AND OPINIONS MAY NOT BE RELIED M.B.A. from Texas A&M University and is a to perform well for the Fund include UPON AS INVESTMENT ADVICE OR Certified Public Accountant. He left the long-time holding ANGLO IRISH BANK and BNP RECOMMENDATIONS, OR AS AN OFFER FOR A management team after the close of the PARIBAS, a French bank specializing in PARTICULAR SECURITY. THE INFORMATION IS fiscal year. corporate, retail and investment banking. NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF Our overweight position in financials ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR CLAS G. OLSSON, senior proved beneficial to Fund performance, THE FUND. STATEMENTS OF FACT ARE FROM [OLSSON portfolio manager and however our sector return slightly lagged SOURCES CONSIDERED RELIABLE, BUT A I M PHOTO] head of AIM's our benchmark as we did not own select ADVISORS, INC. MAKES NO REPRESENTATION OR International Japanese banks that performed well during WARRANTY AS TO THEIR COMPLETENESS OR Investment Management the fiscal year. ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE Unit, is manager of AIM Global Growth IS NO GUARANTEE OF FUTURE RESULTS, THESE Fund. Mr. Olsson joined AIM in 1994. Mr. Given the Fund's strong performance, we INSIGHTS MAY HELP YOU UNDERSTAND OUR Olsson became a commissioned naval officer have few detractors to report. Information INVESTMENT MANAGEMENT PHILOSOPHY. at the Royal Swedish Naval Academy in technology was the only Fund sector to 1988. He also received a B.B.A. from The post a negative return, albeit very See important Fund and index disclosures University of Texas at Austin. slight. During the fiscal year, DELL INC., inside front cover. a well-known U.S. computer company, had Assisted by Asia Pacific/Latin America its first misstep Team, Europe/Canada Team and Large Multi-Cap Growth Team [RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE,PLEASE SEE PAGES 6 AND 7.
4 AIM GLOBAL GROWTH FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE to estimate the expenses that you paid The hypothetical account values and over the period. Simply divide your expenses may not be used to estimate the As a shareholder of the Fund, you incur account value by $1,000 (for example, an actual ending account balance or expenses two types of costs: (1) transaction costs, $8,600 account value divided by $1,000 = you paid for the period. You may use this which may include sales charges (loads) on 8.6), then multiply the result by the information to compare the ongoing costs purchase payments; contingent deferred number in the table under the heading of investing in the Fund and other funds. sales charges on redemptions; and entitled "Actual Expenses Paid During To do so, compare this 5% hypothetical redemption fees, if any; and (2) ongoing Period" to estimate the expenses you paid example with the 5% hypothetical examples costs, including management fees; on your account during this period. that appear in the shareholder reports of distribution and/or service fees (12b-1); the other funds. and other Fund expenses. This example is HYPOTHETICAL EXAMPLE FOR COMPARISON intended to help you understand your PURPOSES Please note that the expenses shown in ongoing costs (in dollars) of investing in the table are meant to highlight your the Fund and to compare these costs with The table below also provides information ongoing costs only and do not reflect any ongoing costs of investing in other mutual about hypothetical account values and transactional costs, such as sales charges funds. The example is based on an hypothetical expenses based on the Fund's (loads) on purchase payments, contingent investment of $1,000 invested at the actual expense ratio and an assumed rate deferred sales charges on redemptions, and beginning of the period and held for the of return of 5% per year before expenses, redemption fees, if any. Therefore, the entire period May 1, 2005, through October which is not the Fund's actual return. The hypothetical information is useful in 31, 2005. Fund's actual cumulative total returns at comparing ongoing costs only, and will not net asset value after expenses for the six help you determine the relative total ACTUAL EXPENSES months ended October 31, 2005, appear in costs of owning different funds. In the table "Cumulative Total Returns" on addition, if these transactional costs The table below provides information about Page 7. were included, your costs would have been actual account values and actual expenses. higher. You may use the information in this table, together with the amount you invested, ==================================================================================================================================== HYPOTHETICAL ACTUAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (5/01/05) (10/31/05)(1) PERIOD(2,3) (10/31/05) PERIOD(2,4) RATIO A $1,000.00 $1,085.00 $9.03 $1,016.54 $8.74 1.72% B 1,000.00 1,081.10 12.77 1,012.93 12.35 2.44 C 1,000.00 1,081.00 12.78 1,012.93 12.36 2.44 (1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31, 2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. Effective on July 1, 2005, the distributor contractually agreed to reduce rule 12b-1 plan fees for Class A shares to 0.25%. The annualized expense ratio restated as if this agreement had been in effect throughout the entire most recent fiscal half year is 1.69% for Class A shares. (3) The actual expenses paid restated as if the change discussed above had been in effect throughout the entire most recent fiscal half year are $8.86 for Class A shares. (4) The hypothetical expenses paid restated as if the change discussed above had been in effect throughout the entire most recent fiscal half year are $8.57 for Class A shares. ====================================================================================================================================
[ARROW BUTTON For More Information Visit IMAGE] AIMinvestments.com 5 AIM GLOBAL GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE RESULTS OF A $10,000 INVESTMENT FUND DATA FROM 9/15/94, INDEX DATA FROM 8/31/94 [MOUNTAIN CHART] ==================================================================================================================== DATE AIM GLOBAL GROWTH FUND- AIM GLOBAL GROWTH FUND- MSCI WORLD MSCI WORLD CLASS A SHARES CLASS B SHARES GROWTH INDEX INDEX 8/31/94 $9525 $10000 $10000 $10000 9/94 9363 9830 9770 9735 10/94 9744 10220 10004 10010 11/94 9335 9790 9605 9573 12/94 9300 9750 9749 9664 1/95 9062 9490 9600 9516 2/95 9406 9849 9747 9653 3/95 9787 10239 10222 10116 4/95 10092 10549 10601 10466 5/95 10369 10840 10685 10553 6/95 10835 11330 10698 10548 7/95 11578 12109 11222 11073 8/95 11474 11989 10906 10824 9/95 11751 12270 11288 11137 10/95 11741 12260 11165 10959 11/95 11970 12490 11520 11337 12/95 12101 12616 11782 11666 1/96 12314 12840 11991 11875 2/96 12576 13104 12077 11945 3/96 12799 13339 12253 12141 4/96 13245 13796 12508 12424 5/96 13497 14050 12581 12432 6/96 13536 14081 12667 12493 7/96 12847 13359 12195 12049 8/96 13197 13715 12296 12185 9/96 13720 14254 12856 12659 10/96 13768 14296 12894 12745 11/96 14467 15018 13547 13457 12/96 14506 15048 13281 13239 1/97 14797 15343 13466 13396 2/97 14807 15343 13615 13547 3/97 14439 14967 13296 13277 4/97 14632 15149 13906 13708 5/97 15582 16127 14717 14552 6/97 16319 16880 15528 15275 7/97 17327 17918 16245 15976 8/97 16222 16767 15036 14905 9/97 17424 18008 15901 15712 10/97 16143 16676 14884 14883 11/97 16327 16859 15261 15144 12/97 16513 17044 15400 15326 1/98 16712 17232 16002 15750 2/98 17975 18538 17131 16813 3/98 18921 19498 17722 17520 4/98 19180 19760 17824 17689 5/98 19090 19655 17624 17465 6/98 19437 19999 18377 17876 7/98 19686 20249 18345 17845 8/98 16772 17242 16195 15463 9/98 17031 17502 16556 15734 10/98 17826 18306 17994 17153 11/98 18842 19340 19152 18171 12/98 20161 20682 20549 19055 1/99 20969 21509 21271 19470 2/99 20162 20673 20423 18949 3/99 20827 21338 21175 19735 4/99 21073 21575 21137 20511 5/99 20338 20814 20398 19758 6/99 21709 22210 21649 20677 7/99 21761 22252 21407 20612 8/99 21791 22275 21668 20573 9/99 22231 22716 21702 20371 10/99 23970 24476 23121 21427 11/99 26424 26968 24474 22027 12/99 30692 31310 27274 23807 1/00 29077 29657 25562 22441 2/00 32026 32646 26448 22499 3/00 31875 32476 28022 24051 4/00 29357 29894 26140 23031 5/00 27355 27847 24588 22445 6/00 29508 30019 26089 23198 7/00 28626 29100 24775 22543 8/00 31059 31568 25652 23273 9/00 28767 29225 23378 22033 10/00 26721 27142 22395 21661 11/00 22793 23135 20666 20343 12/00 23894 24237 20275 20670 1/01 23603 23931 20887 21068 2/01 19614 19882 18221 19285 3/01 17705 17944 16745 18015 4/01 19032 19282 18095 19343 5/01 18837 19078 17730 19091 6/01 18461 18692 17110 18490 7/01 17986 18193 16856 18243 8/01 17177 17366 15816 17365 9/01 15183 15358 14501 15832 10/01 15722 15880 15118 16134 11/01 16509 16674 16266 17086 12/01 16714 16868 16345 17192 1/02 16239 16380 15811 16670 2/02 16056 16198 15853 16523 3/02 16833 16970 16244 17284 4/02 16510 16628 15548 16664 5/02 16348 16470 15464 16692 6/02 15691 15802 14570 15677 7/02 14246 14339 13542 14354 8/02 14181 14271 13538 14378 9/02 12909 12978 12194 12795 10/02 13653 13727 13142 13738 11/02 13912 13977 13619 14477 12/02 13395 13455 13093 13773 1/03 12996 13046 12620 13354 2/03 12877 12921 12484 13120 3/03 12888 12921 12591 13077 4/03 13631 13669 13489 14235 5/03 14419 14453 14044 15046 6/03 14657 14691 14241 15304 7/03 14818 14838 14516 15613 8/03 15045 15065 14807 15949 9/03 15153 15167 14891 16045 10/03 16081 16087 15777 16995 11/03 16372 16370 16000 17252 12/03 16997 16982 16769 18333 1/04 17256 17243 17112 18627 2/04 17525 17504 17320 18939 3/04 17525 17493 17146 18814 4/04 17265 17220 16804 18428 5/04 17481 17436 16970 18582 6/04 17784 17730 17200 18978 7/04 16985 16925 16376 18358 8/04 16975 16903 16324 18439 9/04 17547 17471 16652 18788 10/04 17968 17880 17060 19248 11/04 19014 18924 17922 20259 12/04 19651 19549 18597 21032 1/05 19230 19117 18096 20558 2/05 19921 19786 18557 21210 3/05 19500 19366 18202 20800 4/05 18908 18754 17802 20345 5/05 19187 19026 18264 20706 6/05 19587 19413 18349 20885 7/05 20384 20195 19110 21615 8/05 20620 20411 19280 21778 9/05 20977 20752 19706 22344 10/05 $20498 $20619 $19287 $21801 ==================================================================================================================== SOURCE: LIPPER,INC. The data shown in the chart include This chart, which is a logarithmic chart, reinvested distributions, applicable sales presents the fluctuations in the value of charges, Fund expenses and management the Fund and its indexes. We believe that fees. Results for Class B shares are a logarithmic chart is more effective than calculated as if a hypothetical other types of charts in illustrating shareholder had liquidated his entire changes in value during the early years investment in the Fund at the close of the shown in the chart. The vertical axis, the reporting period and paid the applicable one that indicates the dollar value of an contingent deferred sales charges. Index investment, is constructed with each results include reinvested dividends, but segment representing a percent change in they do not reflect sales charges. the value of the investment. In this Performance of an index of funds reflects chart, each segment represents a doubling, fund expenses and management fees; or 100% change, in the value of the performance of a market index does not. investment. In other words, the space Performance shown in the chart and between $5,000 and $10,000 is the same table(s) does not reflect deduction of size as the space between $10,000 and taxes a shareholder would pay on Fund $20,000, is the same space between $20,000 distributions or sale of Fund shares. and $40,000. Performance of the indexes does not reflect the effects of taxes.
AIM GLOBAL GROWTH FUND ========================================== ========================================== ========================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS As of 10/31/05, including applicable sales As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding charges quarter-end, including applicable sales applicable sales charges charges CLASS A SHARES Class A Shares 8.50% Inception (9/15/94) 6.66% CLASS A SHARES Class B Shares 8.11 10 Years 5.22 Inception (9/15/94) 6.93% Class C Shares 8.10 5 Years -6.07 10 Years 5.45 1 Year 8.75 5 Years -7.03 ========================================== 1 Year 13.88 CLASS B SHARES Inception (9/15/94) 6.72% CLASS B SHARES 10 Years 5.28 Inception (9/15/94) 6.99% 5 Years -6.05 10 Years 5.52 1 Year 8.39 5 Years -7.00 1 Year 13.77 CLASS C SHARES Inception (8/4/97) 1.67% CLASS C SHARES 5 Years -5.66 Inception (8/4/97) 1.98% 1 Year 12.38 5 Years -6.62 1 Year 17.75 ========================================== ========================================== THE PERFORMANCE DATA QUOTED REPRESENT PAST WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN CDSC ON CLASS C SHARES IS 1% FOR THE FIRST PERFORMANCE AND CANNOT GUARANTEE OR LOSS WHEN YOU SELL SHARES. YEAR AFTER PURCHASE. COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CLASS A SHARE PERFORMANCE REFLECTS THE THE PERFORMANCE OF THE FUND'S SHARE VISIT AIMINVESTMENTS.COM FOR THE MOST MAXIMUM 4.75% SALES CHARGE, AND CLASS B CLASSES WILL DIFFER DUE TO DIFFERENT SALES RECENT MONTH-END PERFORMANCE. PERFORMANCE AND CLASS C SHARE PERFORMANCE REFLECTS THE CHARGE STRUCTURES AND CLASS EXPENSES. FIGURES REFLECT REINVESTED DISTRIBUTIONS, APPLICABLE CONTINGENT DEFERRED SALES CHANGES IN NET ASSET VALUE AND THE EFFECT CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE A REDEMPTION FEE OF 2% WILL BE IMPOSED OF THE MAXIMUM SALES CHARGE UNLESS CDSC ON CLASS B SHARES DECLINES FROM 5% ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF OTHERWISE STATED. INVESTMENT RETURN AND BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE FUND WITHIN 30 DAYS OF PURCHASE. PRINCIPAL VALUE THE BEGINNING OF THE SEVENTH YEAR. THE EXCEPTIONS TO THE REDEMPTION FEE ARE LISTED IN THE FUND'S PROSPECTUS.
7 AIM GLOBAL GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION The Board of Trustees of AIM International o The quality of services to be provided o Fees relative to those of comparable Mutual Funds (the "Board") oversees the by AIM. The Board reviewed the credentials funds with other advisors. The Board management of AIM Global Growth Fund (the and experience of the officers and reviewed the advisory fee rate for the "Fund") and, as required by law, employees of AIM who will provide Fund under the Advisory Agreement. The determines annually whether to approve the investment advisory services to the Fund. Board compared effective contractual continuance of the Fund's advisory In reviewing the qualifications of AIM to advisory fee rates at a common asset level agreement with A I M Advisors, Inc. provide investment advisory services, the and noted that the Fund's rate was below ("AIM"). Based upon the recommendation of Board reviewed the qualifications of AIM's the median rate of the funds advised by the Investments Committee of the Board, investment personnel and considered such other advisors with investment strategies which is comprised solely of independent issues as AIM's portfolio and product comparable to those of the Fund that the trustees, at a meeting held on June 30, review process, various back office Board reviewed. The Board noted that AIM 2005, the Board, including all of the support functions provided by AIM and has agreed to waive advisory fees of the independent trustees, approved the AIM's equity and fixed income trading Fund, as discussed below. Based on this continuance of the advisory agreement (the operations. Based on the review of these review, the Board concluded that the "Advisory Agreement") between the Fund and and other factors, the Board concluded advisory fee rate for the Fund under the AIM for another year, effective July 1, that the quality of services to be Advisory Agreement was fair and 2005. provided by AIM was appropriate and that reasonable. AIM currently is providing satisfactory The Board considered the factors services in accordance with the terms of o Expense limitations and fee waivers. The discussed below in evaluating the fairness the Advisory Agreement. Board noted that AIM has contractually and reasonableness of the Advisory agreed to waive advisory fees of the Fund Agreement at the meeting on June 30, 2005 o The performance of the Fund relative to through December 31, 2009 to the extent and as part of the Board's ongoing comparable funds. The Board reviewed the necessary so that the advisory fees oversight of the Fund. In their performance of the Fund during the past payable by the Fund do not exceed a deliberations, the Board and the one, three and five calendar years against specified maximum advisory fee rate, which independent trustees did not identify any the performance of funds advised by other maximum rate includes breakpoints and is particular factor that was controlling, advisors with investment strategies based on net asset levels. The Board and each trustee attributed different comparable to those of the Fund. The Board considered the contractual nature of this weights to the various factors. noted that the Fund's performance for the fee waiver and noted that it remains in one and three year periods was above the effect until December 31, 2009. The Board One of the responsibilities of the median performance of such comparable considered the effect this fee waiver Senior Officer of the Fund, who is funds and below such median performance would have on the Fund's estimated independent of AIM and AIM's affiliates, for the five year period. Based on this expenses and concluded that the levels of is to manage the process by which the review, the Board concluded that no fee waivers/expense limitations for the Fund's proposed management fees are changes should be made to the Fund and Fund were fair and reasonable. negotiated to ensure that they are that it was not necessary to change the negotiated in a manner which is at arm's Fund's portfolio management team at this o Breakpoints and economies of scale. The length and reasonable. To that end, the time. Board reviewed the structure of the Fund's Senior Officer must either supervise a advisory fee under the Advisory Agreement, competitive bidding process or prepare an o The performance of the Fund relative to noting that it includes one breakpoint. independent written evaluation. The Senior indices. The Board reviewed the The Board reviewed the level of the Fund's Officer has recommended an independent performance of the Fund during the past advisory fees, and noted that such fees, written evaluation in lieu of a one, three and five calendar years against as a percentage of the Fund's net assets, competitive bidding process and, upon the the performance of the Lipper Global would decrease as net assets increase direction of the Board, has prepared such Large-Cap Growth Index. The Board noted because the Advisory Agreement includes a an independent written evaluation. Such that the Fund's performance for the one breakpoint. The Board noted that, due to written evaluation also considered certain and three year periods was above the the Fund's current asset levels and the of the factors discussed below. In performance of such Index and below such way in which the advisory fee breakpoints addition, as discussed below, the Senior Index for the five year period. Based on have been structured, the Fund has yet to Officer made certain recommendations to this review, the Board concluded that no benefit from the breakpoint. The Board the Board in connection with such written changes should be made to the Fund and noted that AIM has contractually agreed to evaluation. that it was not necessary to change the waive advisory fees of the Fund through Fund's portfolio management team at this December 31, 2009 to the extent necessary The discussion below serves as a time. so that the advisory fees payable by the summary of the Senior Officer's Fund do not exceed a specified maximum independent written evaluation and o Meeting with the Fund's portfolio advisory fee rate, which maximum rate recommendations to the Board in connection managers and investment personnel. With includes breakpoints and is based on net therewith, as well as a discussion of the respect to the Fund, the Board is meeting asset levels. The Board concluded that the material factors and the conclusions with periodically with such Fund's portfolio Fund's fee levels under the Advisory respect thereto that formed the basis for managers and/or other investment personnel Agreement therefore would reflect the Board's approval of the Advisory and believes that such individuals are economies of scale at higher asset levels Agreement. After consideration of all of competent and able to continue to carry and that it was not necessary to change the factors below and based on its out their responsibilities under the the advisory fee breakpoints in the Fund's informed business judgment, the Board Advisory Agreement. advisory fee schedule. determined that the Advisory Agreement is in the best interests of the Fund and its o Overall performance of AIM. The Board o Investments in affiliated money market shareholders and that the compensation to considered the overall performance of AIM funds. The Board also took into account AIM under the Advisory Agreement is fair in providing investment advisory and the fact that uninvested cash and cash and reasonable and would have been portfolio administrative services to the collateral from securities lending obtained through arm's length Fund and concluded that such performance arrangements (collectively, "cash negotiations. was satisfactory. balances") of the Fund may be invested in money market funds advised by AIM pursuant o The nature and extent of the advisory o Fees relative to those of clients of AIM to the terms of an SEC exemptive order. services to be provided by AIM. The Board with comparable investment strategies. The The Board found that the Fund may realize reviewed the services to be provided by Board noted that AIM does not serve as an certain benefits upon investing cash AIM under the Advisory Agreement. Based on advisor to other mutual funds or other balances in AIM advised money market such review, the Board concluded that the clients with investment strategies funds, including a higher net range of services to be provided by AIM comparable to those of the Fund. under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
8 AIM GLOBAL GROWTH FUND return, increased liquidity, increased o AIM's financial soundness in light of diversification or decreased transaction the Fund's needs. The Board considered costs. The Board also found that the Fund whether AIM is financially sound and has will not receive reduced services if it the resources necessary to perform its invests its cash balances in such money obligations under the Advisory Agreement, market funds. The Board noted that, to the and concluded that AIM has the financial extent the Fund invests in affiliated resources necessary to fulfill its money market funds, AIM has voluntarily obligations under the Advisory Agreement. agreed to waive a portion of the advisory fees it receives from the Fund o Historical relationship between the Fund attributable to such investment. The Board and AIM. In determining whether to further determined that the proposed continue the Advisory Agreement for the securities lending program and related Fund, the Board also considered the prior procedures with respect to the lending relationship between AIM and the Fund, as Fund is in the best interests of the well as the Board's knowledge of AIM's lending Fund and its respective operations, and concluded that it was shareholders. The Board therefore beneficial to maintain the current concluded that the investment of cash relationship, in part, because of such collateral received in connection with the knowledge. The Board also reviewed the securities lending program in the money general nature of the non-investment market funds according to the procedures advisory services currently performed by is in the best interests of the lending AIM and its affiliates, such as Fund and its respective shareholders. administrative, transfer agency and distribution services, and the fees o Independent written evaluation and received by AIM and its affiliates for recommendations of the Fund's Senior performing such services. In addition to Officer. The Board noted that, upon their reviewing such services, the trustees also direction, the Senior Officer of the Fund, considered the organizational structure who is independent of AIM and AIM's employed by AIM and its affiliates to affiliates, had prepared an independent provide those services. Based on the written evaluation in order to assist the review of these and other factors, the Board in determining the reasonableness of Board concluded that AIM and its the proposed management fees of the AIM affiliates were qualified to continue to Funds, including the Fund. The Board noted provide non-investment advisory services that the Senior Officer's written to the Fund, including administrative, evaluation had been relied upon by the transfer agency and distribution services, Board in this regard in lieu of a and that AIM and its affiliates currently competitive bidding process. In are providing satisfactory non-investment determining whether to continue the advisory services. Advisory Agreement for the Fund, the Board considered the Senior Officer's written o Other factors and current trends. In evaluation and the recommendation made by determining whether to continue the the Senior Officer to the Board that the Advisory Agreement for the Fund, the Board Board consider implementing a process to considered the fact that AIM, along with assist them in more closely monitoring the others in the mutual fund industry, is performance of the AIM Funds. The Board subject to regulatory inquiries and concluded that it would be advisable to litigation related to a wide range of implement such a process as soon as issues. The Board also considered the reasonably practicable. governance and compliance reforms being undertaken by AIM and its affiliates, o Profitability of AIM and its affiliates. including maintaining an internal controls The Board reviewed information concerning committee and retaining an independent the profitability of AIM's (and its compliance consultant, and the fact that affiliates') investment advisory and other AIM has undertaken to cause the Fund to activities and its financial condition. operate in accordance with certain The Board considered the overall governance policies and practices. The profitability of AIM, as well as the Board concluded that these actions profitability of AIM in connection with indicated a good faith effort on the part managing the Fund. The Board noted that of AIM to adhere to the highest ethical AIM's operations remain profitable, standards, and determined that the current although increased expenses in recent regulatory and litigation environment to years have reduced AIM's profitability. which AIM is subject should not prevent Based on the review of the profitability the Board from continuing the Advisory of AIM's and its affiliates' investment Agreement for the Fund. advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive. o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
9 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2005
SHARES VALUE - ------------------------------------------------------------------------ FOREIGN STOCKS & OTHER EQUITY INTERESTS-69.57% AUSTRALIA-1.65% BHP Billiton Ltd. (Diversified Metals & Mining)(a) 246,900 $ 3,831,509 - ------------------------------------------------------------------------ QBE Insurance Group Ltd. (Property & Casualty Insurance)(a)(b) 224,300 2,995,966 ======================================================================== 6,827,475 ======================================================================== BELGIUM-2.11% InBev N.V. (Brewers) 118,900 4,753,223 - ------------------------------------------------------------------------ KBC Group N.V. (Diversified Banks)(a)(b) 48,450 3,947,772 ======================================================================== 8,700,995 ======================================================================== BRAZIL-0.90% Companhia de Bebidas das Americas-Pfd.-ADR (Brewers)(b) 105,300 3,738,150 ======================================================================== CANADA-2.87% Manulife Financial Corp. (Life & Health Insurance)(b) 101,100 5,261,942 - ------------------------------------------------------------------------ Power Corp. of Canada (Other Diversified Financial Services) 110,000 2,722,408 - ------------------------------------------------------------------------ Suncor Energy, Inc. (Integrated Oil & Gas) 72,300 3,868,896 ======================================================================== 11,853,246 ======================================================================== FRANCE-12.90% Axa (Multi-Line Insurance)(a)(b) 115,800 3,354,307 - ------------------------------------------------------------------------ BNP Paribas S.A. (Diversified Banks)(a)(b) 100,630 7,630,824 - ------------------------------------------------------------------------ Bouygues S.A. (Wireless Telecommunication Services)(b) 93,600 4,619,205 - ------------------------------------------------------------------------ Pernod Ricard S.A. (Distillers & Vintners)(b) 21,870 3,824,851 - ------------------------------------------------------------------------ Sanofi-Aventis (Pharmaceuticals)(a)(b) 53,600 4,292,612 - ------------------------------------------------------------------------ Societe Generale (Diversified Banks)(a)(b) 47,370 5,409,461 - ------------------------------------------------------------------------ Total S.A. (Integrated Oil & Gas)(a)(b) 32,659 8,225,593 - ------------------------------------------------------------------------ Veolia Environnement (Multi-Utilities)(a)(b) 53,400 2,226,876 - ------------------------------------------------------------------------ Vinci S.A. (Construction & Engineering)(b) 104,260 8,148,465 - ------------------------------------------------------------------------ Vivendi Universal S.A. (Movies & Entertainment)(a)(b) 176,400 5,544,032 ======================================================================== 53,276,226 ======================================================================== GERMANY-3.58% Adidas-Salomon A.G. (Apparel, Accessories & Luxury Goods)(b) 24,150 4,052,515 - ------------------------------------------------------------------------ Henkel KGaA-Pfd. (Household Products)(a)(b) 22,200 1,913,550 - ------------------------------------------------------------------------ MAN A.G. (Industrial Machinery)(a) 47,100 2,187,127 - ------------------------------------------------------------------------ Merck KGaA (Pharmaceuticals)(a) 40,700 3,368,107 - ------------------------------------------------------------------------ Porsche A.G.-Pfd. (Automobile Manufacturers) 4,540 3,273,422 ======================================================================== 14,794,721 ========================================================================
SHARES VALUE - ------------------------------------------------------------------------ GREECE-1.33% OPAP S.A. (Casinos & Gaming)(a) 190,400 $ 5,502,450 ======================================================================== HONG KONG-1.31% Cheung Kong (Holdings) Ltd. (Real Estate Management & Development)(a) 323,000 3,369,967 - ------------------------------------------------------------------------ China Construction Bank-Class H (Diversified Banks)(c) 6,731,000 2,040,460 ======================================================================== 5,410,427 ======================================================================== HUNGARY-0.53% OTP Bank Rt. (Diversified Banks)(a) 60,600 2,189,237 ======================================================================== INDIA-0.97% Infosys Technologies Ltd.-ADR (IT Consulting & Other Services) 58,700 3,991,600 ======================================================================== IRELAND-3.18% Allied Irish Banks PLC (Diversified Banks)(a) 137,300 2,895,933 - ------------------------------------------------------------------------ Anglo Irish Bank Corp. PLC (Diversified Banks)(a) 502,260 6,800,077 - ------------------------------------------------------------------------ CRH PLC (Construction Materials)(a) 138,134 3,458,604 ======================================================================== 13,154,614 ======================================================================== ISRAEL-0.86% Teva Pharmaceutical Industries Ltd.-ADR (Pharmaceuticals)(b) 93,260 3,555,071 ======================================================================== ITALY-2.95% Eni S.p.A. (Integrated Oil & Gas)(a)(b) 324,600 8,683,858 - ------------------------------------------------------------------------ Mediaset S.p.A. (Broadcasting & Cable TV)(a)(b) 320,000 3,514,821 ======================================================================== 12,198,679 ======================================================================== JAPAN-7.16% Canon Inc. (Office Electronics)(a) 40,100 2,122,307 - ------------------------------------------------------------------------ Hoya Corp. (Electronic Equipment Manufacturers)(a)(b) 12,600 442,933 - ------------------------------------------------------------------------ Hoya Corp. (Electronic Equipment Manufacturers)(c) 129,300 4,476,816 - ------------------------------------------------------------------------ Keyence Corp. (Electronic Equipment Manufacturers)(b) 22,200 5,081,043 - ------------------------------------------------------------------------ Mizuho Financial Group, Inc. (Diversified Banks) (Acquired 10/24/05; Cost $2,013,641)(a)(d) 335 2,250,395 - ------------------------------------------------------------------------ Nitto Denko Corp. (Specialty Chemicals)(a) 59,000 3,572,320 - ------------------------------------------------------------------------ Orix Corp. (Consumer Finance)(a)(b) 12,300 2,306,059 - ------------------------------------------------------------------------ SMC Corp. (Industrial Machinery)(a)(b) 21,000 2,805,141 - ------------------------------------------------------------------------ Takeda Pharmaceutical Co. Ltd. (Pharmaceuticals)(a) 50,500 2,777,239 - ------------------------------------------------------------------------ Toyota Motor Corp. (Automobile Manufacturers)(a) 80,500 3,737,807 ======================================================================== 29,572,060 ========================================================================
F-1
SHARES VALUE - ------------------------------------------------------------------------ MEXICO-1.64% Grupo Televisa, S.A.-ADR (Broadcasting & Cable TV) 26,900 $ 1,966,390 - ------------------------------------------------------------------------ Wal-Mart de Mexico S.A. de C.V.-Series V (Hypermarkets & Super Centers) 989,200 4,814,853 ======================================================================== 6,781,243 ======================================================================== NETHERLANDS-0.74% Royal DSM N.V. (Specialty Chemicals)(a) 84,800 3,045,263 ======================================================================== RUSSIA-0.53% OAO LUKOIL-ADR (Integrated Oil & Gas)(a) 40,100 2,211,761 ======================================================================== SINGAPORE-1.08% DBS Group Holdings Ltd. (Diversified Banks)(a) 238,000 2,153,546 - ------------------------------------------------------------------------ Marvell Technology Group Ltd. (Semiconductors)(c) 50,000 2,320,500 ======================================================================== 4,474,046 ======================================================================== SOUTH KOREA-1.99% Hyundai Motor Co. (Automobile Manufacturers)(a) 31,560 2,332,524 - ------------------------------------------------------------------------ LG.Philips LCD Co., Ltd.-ADR (Electronic Equipment Manufacturers)(b)(c) 112,073 2,130,508 - ------------------------------------------------------------------------ Samsung Electronics Co., Ltd. (Electronic Equipment Manufacturers)(a) 7,000 3,739,321 ======================================================================== 8,202,353 ======================================================================== SPAIN-2.60% ACS, Actividades de Construccion y Servicios, S.A. (Construction & Engineering)(a) 115,200 3,293,699 - ------------------------------------------------------------------------ Banco Santander Central Hispano S.A. (Diversified Banks)(a) 298,300 3,805,040 - ------------------------------------------------------------------------ Industria de Diseno Textil, S.A. (Apparel Retail)(a) 122,800 3,634,540 ======================================================================== 10,733,279 ======================================================================== SWEDEN-1.28% Atlas Copco A.B.-Class A (Industrial Machinery) 112,900 2,063,376 - ------------------------------------------------------------------------ Volvo A.B.-Class B (Construction & Farm Machinery & Heavy Trucks)(a)(b) 78,700 3,237,982 ======================================================================== 5,301,358 ======================================================================== SWITZERLAND-9.01% Alcon, Inc. (Health Care Supplies) 47,953 6,372,954 - ------------------------------------------------------------------------ Compagnie Financiere Richemont A.G.-Class A (Apparel, Accessories & Luxury Goods)(a) 142,400 5,420,382 - ------------------------------------------------------------------------ Nestle S.A. (Packaged Foods & Meats)(a) 7,165 2,133,184 - ------------------------------------------------------------------------ Roche Holding A.G. (Pharmaceuticals) 48,050 7,179,264 - ------------------------------------------------------------------------ Serono S.A.-Class B (Biotechnology)(a) 3,330 2,156,825 - ------------------------------------------------------------------------ Syngenta A.G. (Fertilizers & Agricultural Chemicals)(a)(c) 68,110 7,302,853 - ------------------------------------------------------------------------ UBS A.G. (Diversified Capital Markets)(a) 78,530 6,667,623 ======================================================================== 37,233,085 ========================================================================
SHARES VALUE - ------------------------------------------------------------------------ TAIWAN-0.47% Taiwan Semiconductor Manufacturing Co. Ltd. (Semiconductors)(a) 1,233,747 $ 1,929,782 ======================================================================== UNITED KINGDOM-7.93% Aviva PLC (Multi-Line Insurance) 354,984 4,191,971 - ------------------------------------------------------------------------ BP PLC (Integrated Oil & Gas)(a) 198,700 2,199,719 - ------------------------------------------------------------------------ Imperial Tobacco Group PLC (Tobacco) 285,370 8,184,780 - ------------------------------------------------------------------------ O2 PLC (Wireless Telecommunication Services) 1,201,458 4,360,599 - ------------------------------------------------------------------------ Reckitt Benckiser PLC (Household Products)(a) 142,680 4,312,709 - ------------------------------------------------------------------------ Tesco PLC (Food Retail)(a) 959,269 5,108,241 - ------------------------------------------------------------------------ Vodafone Group PLC (Wireless Telecommunication Services)(a) 1,670,930 4,386,392 ======================================================================== 32,744,411 ======================================================================== Total Foreign Stocks & Other Equity Interests (Cost $196,793,368) 287,421,532 ======================================================================== DOMESTIC COMMON STOCKS-28.31% AEROSPACE & DEFENSE-1.36% General Dynamics Corp. 29,500 3,430,850 - ------------------------------------------------------------------------ Lockheed Martin Corp. 36,000 2,180,160 ======================================================================== 5,611,010 ======================================================================== APPAREL RETAIL-0.54% Chico's FAS, Inc.(c) 56,000 2,214,240 ======================================================================== APPLICATION SOFTWARE-0.56% Amdocs Ltd.(c) 88,000 2,329,360 ======================================================================== BIOTECHNOLOGY-1.23% Amgen Inc.(c) 30,500 2,310,680 - ------------------------------------------------------------------------ Gilead Sciences, Inc.(c) 58,838 2,780,095 ======================================================================== 5,090,775 ======================================================================== COMMUNICATIONS EQUIPMENT-1.44% Cisco Systems, Inc.(c) 110,000 1,919,500 - ------------------------------------------------------------------------ Motorola, Inc. 96,000 2,127,360 - ------------------------------------------------------------------------ QUALCOMM Inc. 47,450 1,886,612 ======================================================================== 5,933,472 ======================================================================== COMPUTER HARDWARE-0.92% Apple Computer, Inc.(c) 30,000 1,727,700 - ------------------------------------------------------------------------ Dell Inc.(c) 64,454 2,054,794 ======================================================================== 3,782,494 ======================================================================== COMPUTER STORAGE & PERIPHERALS-0.61% EMC Corp.(c) 180,000 2,512,800 ======================================================================== DEPARTMENT STORES-1.10% Federated Department Stores, Inc. 44,500 2,730,965 - ------------------------------------------------------------------------ Nordstrom, Inc. 52,000 1,801,800 ======================================================================== 4,532,765 ========================================================================
F-2
SHARES VALUE - ------------------------------------------------------------------------ DRUG RETAIL-0.44% CVS Corp. 74,000 $ 1,806,340 ======================================================================== FOOTWEAR-0.51% NIKE, Inc.-Class B 25,000 2,101,250 ======================================================================== GENERAL MERCHANDISE STORES-0.52% Target Corp. 38,500 2,144,065 ======================================================================== HEALTH CARE FACILITIES-0.52% HCA Inc. 44,500 2,144,455 ======================================================================== HEALTH CARE SERVICES-0.85% Medco Health Solutions, Inc.(c) 40,129 2,267,288 - ------------------------------------------------------------------------ Quest Diagnostics Inc. 27,000 1,261,170 ======================================================================== 3,528,458 ======================================================================== HOME IMPROVEMENT RETAIL-0.54% Home Depot, Inc. (The) 54,000 2,216,160 ======================================================================== HOUSEHOLD PRODUCTS-0.89% Procter & Gamble Co. (The) 66,000 3,695,340 ======================================================================== HOUSEWARES & SPECIALTIES-0.64% Fortune Brands, Inc. 35,000 2,658,950 ======================================================================== INTERNET SOFTWARE & SERVICES-0.54% Yahoo! Inc.(c) 60,000 2,218,200 ======================================================================== INVESTMENT BANKING & BROKERAGE-1.50% Goldman Sachs Group, Inc. (The) 49,000 6,192,130 ======================================================================== MANAGED HEALTH CARE-2.68% Aetna Inc. 40,269 3,566,223 - ------------------------------------------------------------------------ CIGNA Corp. 28,537 3,306,582 - ------------------------------------------------------------------------ Humana Inc.(c) 40,000 1,775,600 - ------------------------------------------------------------------------ UnitedHealth Group Inc. 42,195 2,442,669 ======================================================================== 11,091,074 ======================================================================== MULTI-LINE INSURANCE-0.52% Hartford Financial Services Group, Inc. (The) 27,000 2,153,250 ======================================================================== OIL & GAS EQUIPMENT & SERVICES-1.38% BJ Services Co. 164,597 5,719,746 ======================================================================== OIL & GAS REFINING & MARKETING-1.02% Valero Energy Corp. 40,000 4,209,600 ======================================================================== PHARMACEUTICALS-2.31% Allergan, Inc. 23,375 2,087,387 - ------------------------------------------------------------------------
SHARES VALUE - ------------------------------------------------------------------------ PHARMACEUTICALS-(CONTINUED) Johnson & Johnson 119,246 $ 7,467,184 ======================================================================== 9,554,571 ======================================================================== PROPERTY & CASUALTY INSURANCE-1.49% Allstate Corp. (The) 116,915 6,171,943 ======================================================================== RAILROADS-0.62% Burlington Northern Santa Fe Corp. 41,000 2,544,460 ======================================================================== RESTAURANTS-0.47% YUM! Brands, Inc. 38,000 1,933,060 ======================================================================== SEMICONDUCTORS-0.51% Analog Devices, Inc. 61,000 2,121,580 ======================================================================== STEEL-0.36% Nucor Corp. 25,000 1,496,250 ======================================================================== SYSTEMS SOFTWARE-1.73% Microsoft Corp. 90,000 2,313,000 - ------------------------------------------------------------------------ Oracle Corp.(c) 245,000 3,106,600 - ------------------------------------------------------------------------ Symantec Corp.(c) 73,000 1,741,050 ======================================================================== 7,160,650 ======================================================================== THRIFTS & MORTGAGE FINANCE-0.51% MGIC Investment Corp. 35,400 2,097,096 ======================================================================== Total Domestic Common Stocks (Cost $102,834,852) 116,965,544 ======================================================================== MONEY MARKET FUNDS-0.97% Liquid Assets Portfolio-Institutional Class(e) 1,997,903 1,997,903 - ------------------------------------------------------------------------ STIC Prime Portfolio-Institutional Class(e) 1,997,903 1,997,903 ======================================================================== Total Money Market Funds (Cost $3,995,806) 3,995,806 ======================================================================== TOTAL INVESTMENTS--98.85% (excluding investments purchased with cash collateral from securities loaned) (Cost $303,624,026) 408,382,882 ======================================================================== INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-17.96% STIC Prime Portfolio-Institutional Class(e)(f) 74,176,177 74,176,177 ======================================================================== Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $74,176,177) 74,176,177 ======================================================================== TOTAL INVESTMENTS--116.81% (Cost $377,800,203) 482,559,059 ======================================================================== OTHER ASSETS LESS LIABILITIES-(16.81%) (69,450,278) ======================================================================== NET ASSETS-100.00% $413,108,781 ________________________________________________________________________ ========================================================================
F-3 Investment Abbreviations: ADR - American Depositary Receipt Pfd. - Preferred
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 value of these securities at October 31, 2005 was $180,428,270, which represented 43.68% of the Fund's Net Assets. See Note 1A. (b) All or a portion of this security has been pledged as collateral for securities lending transactions at October 31, 2005. (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 this security. The value of this security at October 31, 2005 represented 0.54% of the Fund's Net Assets. Unless otherwise indicated, this security is not considered to be illiquid. (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 to Financial Statements which are an integral part of the financial statements. F-4 STATEMENT OF ASSETS AND LIABILITIES October 31, 2005 ASSETS: Investments, at value (cost $299,628,220)* $ 404,387,076 - ------------------------------------------------------------ Investments in affiliated money market funds (cost $78,171,983) 78,171,983 ============================================================ Total investments (cost $377,800,203) 482,559,059 ============================================================ Foreign currencies, at value (cost $6,328,165) 6,304,385 - ------------------------------------------------------------ Receivables for: Investments sold 2,799,623 - ------------------------------------------------------------ Fund shares sold 246,757 - ------------------------------------------------------------ Dividends and interest 333,679 - ------------------------------------------------------------ Investment for trustee deferred compensation and retirement plans 57,008 - ------------------------------------------------------------ Other assets 20,552 ============================================================ Total assets 492,321,063 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 3,639,711 - ------------------------------------------------------------ Fund shares reacquired 772,040 - ------------------------------------------------------------ Trustee deferred compensation and retirement plans 94,843 - ------------------------------------------------------------ Collateral upon return of securities loaned 74,176,177 - ------------------------------------------------------------ Accrued distribution fees 154,004 - ------------------------------------------------------------ Accrued trustees' and officer's fees and benefits 1,699 - ------------------------------------------------------------ Accrued transfer agent fees 221,779 - ------------------------------------------------------------ Accrued operating expenses 152,029 ============================================================ Total liabilities 79,212,282 ============================================================ Net assets applicable to shares outstanding $ 413,108,781 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $ 635,434,854 - ------------------------------------------------------------ Undistributed net investment income 971,774 - ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities and foreign currencies (328,024,922) - ------------------------------------------------------------ Unrealized appreciation of investment securities and foreign currencies 104,727,075 ============================================================ $ 413,108,781 ____________________________________________________________ ============================================================ NET ASSETS: Class A $ 284,121,565 ____________________________________________________________ ============================================================ Class B $ 105,367,749 ____________________________________________________________ ============================================================ Class C $ 23,619,467 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 14,941,044 ____________________________________________________________ ============================================================ Class B 5,895,053 ____________________________________________________________ ============================================================ Class C 1,320,755 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 19.02 - ------------------------------------------------------------ Offering price per share: (Net asset value of $19.02 divided by 95.25%) $ 19.97 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 17.87 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 17.88 ____________________________________________________________ ============================================================ * At October 31, 2005, securities with an aggregate value of $72,080,567 were on loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-5 STATEMENT OF OPERATIONS For the year ended October 31, 2005 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $688,036) $ 9,295,481 - ------------------------------------------------------------------------- Dividends from affiliated money market funds (includes securities lending income of $270,428 after compensation to counterparties of $1,808,378) 456,643 - ------------------------------------------------------------------------- Interest 8,476 ========================================================================= Total investment income 9,760,600 ========================================================================= EXPENSES: Advisory fees 3,760,099 - ------------------------------------------------------------------------- Administrative services fees 121,744 - ------------------------------------------------------------------------- Custodian fees 298,126 - ------------------------------------------------------------------------- Distribution fees: Class A 997,105 - ------------------------------------------------------------------------- Class B 1,250,351 - ------------------------------------------------------------------------- Class C 258,923 - ------------------------------------------------------------------------- Transfer agent fees 1,996,274 - ------------------------------------------------------------------------- Trustees' and officer's fees and benefits 30,655 - ------------------------------------------------------------------------- Other 360,975 ========================================================================= Total expenses 9,074,252 ========================================================================= Less: Fees waived, expenses reimbursed and expense offset arrangement (252,895) ========================================================================= Net expenses 8,821,357 ========================================================================= Net investment income 939,243 ========================================================================= REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain from: Investment securities (includes gains (losses) from securities sold to affiliates of $(46,844)) 59,314,284 - ------------------------------------------------------------------------- Foreign currencies 128,933 ========================================================================= 59,443,217 ========================================================================= Change in net unrealized appreciation (depreciation) of: Investment securities (1,548,599) - ------------------------------------------------------------------------- Foreign currencies (48,522) ========================================================================= (1,597,121) ========================================================================= Net gain from investment securities and foreign currencies 57,846,096 ========================================================================= Net increase in net assets resulting from operations $58,785,339 _________________________________________________________________________ =========================================================================
See accompanying Notes to financial statements which are an integral part of the financial statements. F-6 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2005 and 2004
2005 2004 - ------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 939,243 $ (2,212,745) - ------------------------------------------------------------------------------------------- Net realized gain from investment securities, foreign currencies and futures contracts 59,443,217 65,312,164 - ------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities, foreign currencies and futures contracts (1,597,121) (7,636,388) =========================================================================================== Net increase in net assets resulting from operations 58,785,339 55,463,031 - ------------------------------------------------------------------------------------------- Share transactions-net: Class A (40,745,440) (77,829,276) - ------------------------------------------------------------------------------------------- Class B (50,289,812) (60,815,446) - ------------------------------------------------------------------------------------------- Class C (7,418,997) (8,514,512) =========================================================================================== Net increase (decrease) in net assets resulting from share transactions (98,454,249) (147,159,234) =========================================================================================== Net increase (decrease) in net assets (39,668,910) (91,696,203) =========================================================================================== NET ASSETS: Beginning of year 452,777,691 544,473,894 =========================================================================================== End of year (including undistributed net investment income (loss) of $971,774 and $(100,003), respectively) $413,108,781 $ 452,777,691 ___________________________________________________________________________________________ ===========================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-7 NOTES TO FINANCIAL STATEMENTS October 31, 2005 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. The Fund's investment objective is long-term growth of capital. Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services, which may be considered fair valued, or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are 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 and domestic and foreign index futures. 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. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is 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 -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. 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. J. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. When the contracts F-9 are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. K. COLLATERAL -- To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund's practice to replace such collateral no later than the next business day. This practice does not apply to securities pledged as collateral for securities lending transactions. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE - ------------------------------------------------------------------- First $1 billion 0.85% - ------------------------------------------------------------------- Over $1 billion 0.80% __________________________________________________________________ ===================================================================
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE - ------------------------------------------------------------------- First $250 million 0.80% - ------------------------------------------------------------------- Next $250 million 0.78% - ------------------------------------------------------------------- Next $500 million 0.76% - ------------------------------------------------------------------- Next $1.5 billion 0.74% - ------------------------------------------------------------------- Next $2.5 billion 0.72% - ------------------------------------------------------------------- Next $2.5 billion 0.70% - ------------------------------------------------------------------- Next $2.5 billion 0.68% - ------------------------------------------------------------------- Over $10 billion 0.66% __________________________________________________________________ ===================================================================
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2005, AIM waived fees of $214,777. At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $25,109. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the year ended October 31, 2005, AIM was paid $121,744. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the year ended October 31, 2005, the Fund paid AISI $1,996,274. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B 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 ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Effective January 1, 2005 through June 30, 2005, the Fund paid ADI 0.35% of the average daily net assets of Class A shares. Prior to January 1, 2005, the Fund paid ADI 0.50% of the average daily net assets of Class A 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. National Association of Securities Dealers ("NASD") Rules also impose a cap on the total sales F-10 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, 2005, the Class A, Class B and Class C shares paid $997,105, $1,250,351 and $258,923, 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, 2005, ADI advised the Fund that it retained $38,301 in front-end sales commissions from the sale of Class A shares and $652, $40,954 and $2,054 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 ADI. NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended October 31, 2005. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS) - ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ 5,732,411 $ 63,694,905 $ (67,429,413) $ -- $ 1,997,903 $ 92,724 $ -- - ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 5,732,411 63,694,905 (67,429,413) -- 1,997,903 93,491 -- ================================================================================================================================== Subtotal $11,464,822 $127,389,810 $(134,858,826) $ -- $ 3,995,806 $186,215 $ -- ==================================================================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS) - ---------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $76,311,756 $ 19,447,605 $ (95,759,361) $ -- $ -- $ 48,097 $ -- - ---------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class $ -- $289,133,674 (214,957,497) -- 74,176,177 222,331 -- ================================================================================================================================== Subtotal $76,311,756 $308,581,279 $(310,716,858) $ -- $74,176,177 $270,428 $ -- ================================================================================================================================== Total $87,776,578 $435,971,089 $(445,575,684) $ -- $78,171,983 $456,643 $ -- __________________________________________________________________________________________________________________________________ ==================================================================================================================================
* Net of compensation to counterparties. NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the year ended October 31, 2005, the Fund engaged in securities purchases of $1,224,404 and sales of $132,510, which resulted in net realized gains (losses) of $(46,844). 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, 2005, the Fund received credits from this arrangement, which resulted in the reduction of the Fund's total expenses of $13,009. F-11 NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2005, the Fund paid legal fees of $4,131 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, 2005, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the rate contractually agreed upon. NOTE 8--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the market value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the 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, 2005, securities with an aggregate value of $72,080,567 were on loan to brokers. The loans were secured by cash collateral of $74,176,177 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2005, the Fund received dividends on cash collateral of $270,428 for securities lending transactions, which are net of compensation to counterparties. F-12 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, 2005 and 2004. TAX COMPONENTS OF NET ASSETS As of October 31, 2005, the components of net assets on a tax basis were as follows:
2005 - ---------------------------------------------------------------------------- Undistributed ordinary income $ 1,934,437 - ---------------------------------------------------------------------------- Unrealized appreciation -- investments 103,628,943 - ---------------------------------------------------------------------------- Temporary book/tax differences (85,014) - ---------------------------------------------------------------------------- Capital loss carryforward (327,804,439) - ---------------------------------------------------------------------------- Shares of beneficial interest 635,434,854 ============================================================================ Total net assets $413,108,781 ____________________________________________________________________________ ============================================================================
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 and the recognition of income for tax purposes on certain passive foreign investment companies. The tax-basis unrealized appreciation on investments amount includes appreciation (depreciation) on foreign currencies of $(31,781). 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 $58,942,010 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, 2005 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* - ----------------------------------------------------------------------------- October 31, 2009 $215,440,562 - ----------------------------------------------------------------------------- October 31, 2010 101,042,257 - ----------------------------------------------------------------------------- October 31, 2011 11,321,620 ============================================================================= Total capital loss carryforward $327,804,439 _____________________________________________________________________________ =============================================================================
* 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, 2005 was $219,691,782 and $308,822,461, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $ 107,027,891 - ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (3,367,167) =============================================================================== Net unrealized appreciation of investment securities $ 103,660,724 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $378,898,335.
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions, on October 31, 2005, undistributed net investment income (loss) was increased by $132,534, undistributed net realized gain (loss) was decreased by $125,694 and shares of beneficial interest decreased by $6,840. 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 - ----------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------- 2005(A) 2004 -------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------------------------------------- Sold: Class A 818,989 $ 14,908,841 1,232,139 $ 19,652,547 - ----------------------------------------------------------------------------------------------------------------------- Class B 432,979 7,415,155 565,634 8,560,279 - ----------------------------------------------------------------------------------------------------------------------- Class C 174,146 2,989,787 221,675 3,352,828 ======================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 1,378,417 25,054,414 1,762,944 28,418,398 - ----------------------------------------------------------------------------------------------------------------------- Class B (1,461,084) (25,054,414) (1,859,129) (28,418,398) ======================================================================================================================= Reacquired:(b) Class A (4,433,381) (80,708,695) (7,934,725) (125,900,221) - ----------------------------------------------------------------------------------------------------------------------- Class B (1,902,178) (32,650,553) (2,711,929) (40,957,327) - ----------------------------------------------------------------------------------------------------------------------- Class C (607,182) (10,408,784) (783,613) (11,867,340) ======================================================================================================================= (5,599,294) $(98,454,249) (9,507,004) $(147,159,234) _______________________________________________________________________________________________________________________ =======================================================================================================================
(a) There are two entities that are 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. ADI has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially. (b) Amount is net of redemption fees of $1,339, $566 and $118 for Class A, Class B and Class C shares, respectively, for the year ended October 31, 2005 and $1,549, $802 and $149 for Class A, Class B and Class C shares, respectively, for the year ended October 31, 2004. 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, ------------------------------------------------------------- 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 16.65 $ 14.91 $ 12.66 $ 14.58 $ 24.83 - --------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.08(a)(b) (0.04)(b) (0.08) (0.11)(b) (0.13) - --------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.29 1.78 2.33 (1.81) (10.08) =========================================================================================================================== Total from investment operations 2.37 1.74 2.25 (1.92) (10.21) =========================================================================================================================== Less distributions from net realized gains -- -- -- -- (0.04) =========================================================================================================================== Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- -- =========================================================================================================================== Net asset value, end of period $ 19.02 $ 16.65 $ 14.91 $ 12.66 $ 14.58 ___________________________________________________________________________________________________________________________ =========================================================================================================================== Total return(c) 14.23% 11.67% 17.77% (13.17)% (41.17)% ___________________________________________________________________________________________________________________________ =========================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $284,122 $286,068 $329,739 $335,954 $439,612 ___________________________________________________________________________________________________________________________ =========================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.77%(d) 1.96% 2.04% 1.95% 1.68% - --------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.82%(d) 1.97% 2.04% 1.95% 1.79% =========================================================================================================================== Ratio of net investment income (loss) to average net assets 0.44%(a)(d) (0.24)% (0.58)% (0.75)% (0.66)% ___________________________________________________________________________________________________________________________ =========================================================================================================================== Portfolio turnover rate 51% 56% 75% 98% 134% ___________________________________________________________________________________________________________________________ ===========================================================================================================================
(a) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.05 and 0.27%, respectively. (b) Calculated using average shares outstanding. (c) 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. (d) Ratios are based on average daily net assets of $291,437,236. F-14 NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B ------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------- 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 15.76 $ 14.18 $ 12.09 $ 14.00 $ 23.98 - --------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.04)(a)(b) (0.11)(b) (0.15) (0.17)(b) (0.24) - --------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.15 1.69 2.24 (1.74) (9.70) =========================================================================================================================== Total from investment operations 2.11 1.58 2.09 (1.91) (9.94) =========================================================================================================================== Less distributions from net realized gains -- -- -- -- (0.04) =========================================================================================================================== Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- -- =========================================================================================================================== Net asset value, end of period $ 17.87 $ 15.76 $ 14.18 $ 12.09 $ 14.00 ___________________________________________________________________________________________________________________________ =========================================================================================================================== Total return(c) 13.39% 11.14% 17.29% (13.64)% (41.50)% ___________________________________________________________________________________________________________________________ =========================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $105,368 $139,061 $181,891 $206,189 $369,171 ___________________________________________________________________________________________________________________________ =========================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.43%(d) 2.46% 2.54% 2.45% 2.19% - --------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.48%(d) 2.47% 2.54% 2.45% 2.30% =========================================================================================================================== Ratio of net investment income (loss) to average net assets (0.22)%(a)(d) (0.74)% (1.08)% (1.25)% (1.16)% ___________________________________________________________________________________________________________________________ =========================================================================================================================== Portfolio turnover rate 51% 56% 75% 98% 134% ___________________________________________________________________________________________________________________________ ===========================================================================================================================
(a) Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets include a special cash dividend of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the special dividend are $(0.07) and (0.39)%, respectively. (b) Calculated using average shares outstanding. (c) 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. (d) Ratios are based on average daily net assets of $125,035,084.
CLASS C -------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------- 2005 2004 2003 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 15.77 $ 14.18 $ 12.10 $ 14.01 $ 23.98 - ---------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.04)(a)(b) (0.11)(b) (0.15) (0.17)(b) (0.22) - ---------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 2.15 1.70 2.23 (1.74) (9.71) ====================================================================================================================== Total from investment operations 2.11 1.59 2.08 (1.91) (9.93) ====================================================================================================================== Less distributions from net realized gains -- -- -- -- (0.04) ====================================================================================================================== Redemption fees added to shares of beneficial interest 0.00 0.00 -- -- -- ====================================================================================================================== Net asset value, end of period $ 17.88 $ 15.77 $ 14.18 $ 12.10 $ 14.01 ______________________________________________________________________________________________________________________ ====================================================================================================================== Total return(c) 13.38% 11.21% 17.19% (13.63)% (41.46)% ______________________________________________________________________________________________________________________ ====================================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $23,619 $27,649 $32,844 $34,778 $51,624 ______________________________________________________________________________________________________________________ ====================================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.43%(d) 2.46% 2.54% 2.45% 2.19% - ---------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.48%(d) 2.47% 2.54% 2.45% 2.30% ====================================================================================================================== Ratio of net investment income (loss) to average net assets (0.22)%(a)(d) (0.74)% (1.08)% (1.25)% (1.16)% ______________________________________________________________________________________________________________________ ====================================================================================================================== Portfolio turnover rate 51% 56% 75% 98% 134% ______________________________________________________________________________________________________________________ ======================================================================================================================
(a) Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets include a special cash dividend of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets excluding the special dividend are $(0.07) and (0.39)%, respectively. (b) Calculated using average shares outstanding. (c) 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. (d) Ratios are based on average daily net assets of $25,892,319. F-15 NOTE 14--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Half of this amount has already been paid to the fair fund pursuant to the terms of the settlement with the remainder due December 31, 2005. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. REGULATORY INQUIRIES AND PENDING LITIGATION IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, 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. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On June 13, 2005, the MDL Court (as defined below) issued a Conditional Transfer Order transferring this lawsuit to the MDL Court, which Conditional Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. AIM and ADI have the right to contest the WVASC's findings and conclusions, which they intend to do. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; - that certain AIM Funds inadequately employed fair value pricing; - that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; F-16 NOTE 14--LEGAL PROCEEDINGS--(CONTINUED) - that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees; - 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; and - that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate (this lawsuit was dismissed by the Court on August 12, 2005). These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. All lawsuits based on allegations of market timing, late trading and related activity have been transferred to the United States District Court for the District of Maryland. On August 25, 2005, the Court issued rulings on the common issues of law presented in defendants' motions to dismiss the shareholder class and derivative complaints. These rulings were issued in the context of the Janus lawsuits, but the Court's legal determinations apply at the omnibus level to all cases within his track, including the AIM and IFG cases. The Court dismissed for failure to make pre-suit demand on the fund board all derivative causes of action but one: the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"), as to which the demand requirement does not apply. The Court dismissed all claims asserted in the class complaint but two: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on the 36(b) claim to fees attributable to timing assets, as opposed to all fees on funds in which any timing occurred. The question whether the duplicative Section 36(b) claim properly belongs in the derivative complaint or in the class action complaint will be decided at a later date. The Court will subsequently issue an order applying his legal rulings to the allegations in the AIM and IFG complaints. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds. F-17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of AIM International Mutual Funds 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 AIM Global Growth Fund (one of the funds constituting AIM International Mutual Funds, hereafter referred to as the "Fund") at October 31, 2005, 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP December 19, 2005 Houston, Texas F-18 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2005 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 109 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, Vice Chair, Group Inc. (financial services holding Principal Executive Officer company); Director and Vice Chairman, and President 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 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; and Chairman, AIM Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 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 - ------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered Trustee investment company (2 portfolios)) 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 None Trustee private business corporations, including the Boss Group Ltd. (private investment and management); Cortland Trust, Inc. (Chairman) (registered investment company (3 portfolios)); Annuity and Life Re (Holdings), Ltd. (insurance company); and CompuDyne Corporation (provider of products and services to the public security market) 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 - ------------------------------------------------------------------------------------------------------------------------------- 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 Owner, Dos Angelos Ranch, L.P. Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) - ------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered Trustee Naftalis and Frankel LLP investment company (3 portfolios)) - ------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc. Trustee (San Diego, California) - ------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None Trustee of the USA - -------------------------------------------------------------------------------------------------------------------------------
(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. (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. TRUSTEES AND OFFICERS--(CONTINUED) As of October 31, 2005 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 109 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 - ------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, 2005 Retired None Jr.(3) -- 1944 Trustee Formerly: Partner, Deloitte & Touche - ------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 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 Vice President, A I M Distributors, Inc., AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds and Chief Compliance Officer, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A Senior Vice President and Assistant General Counsel, ICON Senior Officer Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------- 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. and A I M Officer Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., AIM Investment Services, Inc. and 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; Vice President, A I M Distributors, Inc.; and Director and General Counsel, Fund Management Company - ------------------------------------------------------------------------------------------------------------------------------- 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. - ------------------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A Vice President, Principal Advisors, Inc. Financial Officer and Treasurer Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A Vice President Investment Officer, A I M Advisors Inc.; Director, Chairman, Chief Executive Officer, President and Chief Investment Officer, A I M Capital Management, Inc.; Executive Vice President, A I M Management Group Inc. Formerly: Senior Vice President, AIM Private Asset Management, Inc.; and Chief Equity Officer, and Senior Investment Officer, A I M Capital Management, 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. - -------------------------------------------------------------------------------------------------------------------------------
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005. 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, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company 1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED) The percentage of qualifying assets are not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005 and October 31, 2005 are 70.37%, 72.42%, 71.28% and 71.62%, respectively. DOMESTIC EQUITY SECTOR EQUITY AIM ALLOCATION SOLUTIONS AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund AIM Basic Balanced Fund* AIM Energy Fund AIM Growth Allocation Fund(2) AIM Basic Value Fund AIM Financial Services Fund AIM Moderate Allocation Fund AIM Blue Chip Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund AIM Capital Development Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation AIM Charter Fund AIM Gold & Precious Metals Fund Fund AIM Constellation Fund AIM Leisure Fund AIM Diversified Dividend Fund AIM Multi-Sector Fund DIVERSIFIED PORTFOLIOS AIM Dynamics Fund AIM Real Estate Fund(1) AIM Large Cap Basic Value Fund AIM Technology Fund AIM Income Allocation Fund AIM Large Cap Growth Fund AIM Utilities Fund AIM International Allocation Fund AIM Mid Cap Basic Value Fund AIM Mid Cap Core Equity Fund(1) FIXED INCOME AIM Mid Cap Growth Fund AIM Opportunities I Fund TAXABLE AIM Opportunities II Fund AIM Opportunities III Fund AIM Floating Rate Fund AIM Premier Equity Fund AIM High Yield Fund AIM S&P 500 Index Fund AIM Income Fund AIM Select Equity Fund AIM Intermediate Government Fund AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund AIM Small Cap Growth Fund(1) AIM Money Market Fund AIM Small Company Growth Fund AIM Short Term Bond Fund AIM Summit Fund AIM Total Return Bond Fund AIM Trimark Endeavor Fund Premier Portfolio AIM Trimark Small Companies Fund Premier U.S.Government Money Portfolio AIM Weingarten Fund *Domestic equity and income fund TAX-FREE INTERNATIONAL/GLOBAL EQUITY AIM High Income Municipal Fund(1) AIM Asia Pacific Growth Fund AIM Municipal Bond Fund AIM Developing Markets Fund AIM Tax-Exempt Cash Fund AIM European Growth Fund AIM Tax-Free Intermediate Fund AIM European Small Company Fund(1) Premier Tax-Exempt Portfolio AIM Global Aggressive Growth Fund AIM Global Equity Fund ======================================================================================= AIM Global Growth Fund CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AIM Global Value Fund AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AIM International Core Equity Fund AND READ IT CAREFULLY BEFORE INVESTING. AIM International Growth Fund ======================================================================================= AIM International Small Company Fund(1) AIM Trimark Fund
(1) This fund has limited public sales of its shares to certain investors. For more information on who may continue to invest in the fund, please see the appropriate prospectus. (2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM Growth Allocation Fund. If used after January 20, 2006, this report must be accompanied by a Fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $129 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $381 billion in assets under management. Data as of September 30, 2005. AIMinvestments.com GLG-AR-1 A I M Distributors, Inc. YOUR GOALS. OUR SOLUTIONS.--Registered Trademark-- - --------------------------------------------------------------------------------------- Mutual Retirement Annuities College Separately Offshore Cash [AIM INVESTMENTS LOGO APPEARS HERE] Funds Products Savings Managed Products Management --Registered Trademark-- Plans Accounts - ---------------------------------------------------------------------------------------
AIM INTERNATIONAL GROWTH FUND Annual Report to Shareholders o October 31,2005 [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 October 31, 2005, and is based on total net assets. ABOUT SHARE CLASSES o Class B shares are not available as an o The unmanaged LIPPER INTERNATIONAL by and is the exclusive property and a investment for retirement plans MULTI-CAP GROWTH FUND INDEX represents service mark of Morgan Stanley Capital maintained pursuant to Section 401 of an average of the performance of the 10 International Inc. and Standard & the Internal Revenue Code, including largest international Poor's. 401(k) plans, money purchase pension multi-capitalization growth funds plans and profit sharing plans. Plans tracked by Lipper, Inc., an independent The Fund provides a complete list of its that had existing accounts invested in mutual fund performance monitor. holdings four times in each fiscal Class B shares prior to September 30, year, at the quarter-ends. For the second 2003, will continue to be allowed to o The unmanaged Standard & Poor's and fourth quarters, the lists appear in make additional purchases. Composite Index of 500 Stocks (the S&P the Fund's semiannual and annual reports 500--Registered Trademark-- INDEX) is to shareholders. For the first and third o Class R shares are available only to an index of common stocks frequently quarters,the Fund files the lists with certain retirement plans. Please see the used as a general measure of U.S. stock the Securities and Exchange Commission prospectus for more information. market performance. (SEC) on Form N-Q. The most recent list of portfolio holdings is available at PRINCIPAL RISKS OF INVESTING IN THE FUND o The unmanaged MSCI WORLD INDEX is a AIMinvestments.com. From our home group of global securities tracked by page, click on Products & o International investing presents Morgan Stanley Capital International. Performance, then Mutual Funds, then Fund certain risks not associated with Overview. Select your Fund from the investing solely in the United States. o The Fund is not managed to track the drop-down menu and click on Complete These include risks relating to performance of any particular index, Quarterly Holdings. Shareholders can fluctuations in the value of the U.S. including the indexes defined here, and also look up the Fund's Forms N-Q on the dollar relative to the values of other consequently, the performance of the SEC's Web site at sec.gov. And copies of currencies, the custody arrangements Fund may deviate significantly from the the Fund's Forms N-Q may be reviewed and made for the Fund's foreign holdings, performance of the indexes. copied at the SEC's Public Reference differences in accounting, political Room at 450 Fifth Street, N.W., risks and the lesser degree of public o A direct investment cannot be made in Washington, D.C. 20549-0102. You can information required to be provided by an index. Unless otherwise indicated, obtain information on the operation of non-U.S. companies. index results include reinvested the Public Reference Room, including dividends, and they do not reflect sales information about duplicating fee o Investing in emerging markets involves charges. Performance of an index of charges, by calling 202-942-8090 or greater risk and potential reward than funds reflects fund expenses; 800-732-0330, or by electronic request at investing in more established markets. performance of a market index does not. the following e-mail address: publicinfo@sec.gov. The SEC file numbers ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION for the Fund are 811-06463 and 33-44611. o The unmanaged MSCI Europe, Australasia o The returns shown in management's A description of the policies and and the Far East Index (the MSCI discussion of Fund performance are based procedures that the Fund uses to EAFE--Registered Trademark-- INDEX) is a on net asset values calculated for determine how to vote proxies relating group of foreign securities tracked by shareholder transactions. Generally to portfolio securities is available Morgan Stanley Capital International. accepted accounting principles require without charge, upon request, from our adjustments to be made to the net assets Client Services department at o The unmanaged MSCI EUROPE, AUSTRALASIA of the Fund at period end for financial 800-959-4246 or on the AIM Web site, AND THE FAR EAST GROWTH INDEX is a reporting purposes, and as such, the net AIMinvestments.com. On the home page, subset of the unmanaged MSCI EAFE, which asset values for shareholder scroll down and click on AIM Funds Proxy represents the performance of foreign transactions and the returns based on Policy. The information is also stocks tracked by Morgan Stanley Capital those net asset values may differ from available on the Securities and Exchange International. The Growth portion the net asset values and returns Commission's Web site, sec.gov. measures performance of companies with reported in the Financial Highlights. higher price/earnings ratios and higher Information regarding how the Fund voted forecasted growth values. o Industry classifications used in this proxies related to its portfolio report are generally according to the securities during the 12 months ended Global Industry Classification Standard, June 30, 2005, is available at our Web which was developed site. Go to AIMinvestments.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the Securities and Exchange Commission's Web site,sec.gov. ======================================== FUND NASDAQ SYMBOLS Class A Shares AIIEX Class B Shares AIEBX Class C Shares AIECX Class R Shares AIERX ======================================== ===================================================================================== THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. ===================================================================================== NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE AIMINVESTMENTS.COM
AIM INTERNATIONAL GROWTH FUND Dear Fellow AIM Funds Shareholders: The fiscal year covered by this report was quite good to equity investors. Domestically, the broad-based S&P 500 Index returned 8.72%. Globally, Morgan Stanley's MSCI World [GRAHAM Index rose 13.27%. Much of this good performance, though, PHOTO] was attained early in the fiscal year as virtually every equity index declined during October of 2005. Concern about the inflationary potential of rising energy costs was frequently cited as a major cause of market weakness. Within the indexes, there was considerable variability in the performance of different sectors and markets. Domestically, energy sector performance far outpaced that of the other sectors in the S&P 500 Index, reflecting rising oil and gas prices. Overseas, emerging markets produced more ROBERT H. GRAHAM attractive results than did developed markets, at least in part because emerging markets tend to be more closely tied to the performance of natural resources and commodities. One could make a strong argument for global diversification of a stock portfolio using the performance data for the fiscal year ended October 31, 2005. Of course, your financial advisor is the person most qualified to help you decide whether such diversification is appropriate for you. For a discussion of the specific market conditions that [WILLIAMSON affected your Fund and how your Fund was managed during the PHOTO] fiscal year, please turn to Page 3. NEW INFORMATION IN THIS REPORT We would like to call your attention to two new elements in this report. First, on Page 2, is a message from Bruce Crockett, the independent Chair of the Board of Trustees of the AIM Funds. We first introduced you to Mr. Crockett in MARK H. WILLIAMSON the annual report on your Fund dated October 31, 2004. Mr. Crockett has been on our Funds' Board since 1992; he assumed his responsibilities as Chair in October 2004. Mr. Crockett plans to keep AIM shareholders informed of the work of the Board regularly via letters in the Fund reports. We certainly think this is a valuable addition to the reports. The Board is charged with looking out for the interests of shareholders, and Mr. Crockett's letter provides insight into some of the many issues the Board addresses in governing your Fund. One of the most important decisions the Board makes each year is whether to approve the advisory agreement your Fund has with AIM. Essentially, this agreement hires AIM to manage the assets in your Fund. A discussion of the factors the Board considered in reviewing the agreement is the second new element in the report, and we encourage you to read it. It appears on Pages 8 and 9. Further information about the markets, your Fund, and investing in general is always available on our widely acclaimed Web site, AIMinvestments.com. We invite you to visit it frequently. We at AIM remain committed to building solutions to help you meet your investment goals. We thank you for your continued participation in AIM Investments --Registered Trademark--. If you have any questions, please contact our award-winning Client Service representatives at 800-959-4246. We are happy to be of help. Sincerely, /s/ ROBERT H. GRAHAM /s/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, President, A I M Advisors, AIM Funds Inc. December 15, 2005 AIM Investments is a registered service mark of A I M Management Group Inc. A I M Advisors, Inc. and A I M Capital Management, Inc. are the investment advisors. A I M Distributors, Inc. is the distributor for the retail funds represented by AIM Investments. 1 AIM INTERNATIONAL GROWTH FUND Dear AIM Funds Shareholders: As independent Chair of the Board of Trustees of the AIM Funds, I'm writing to report on the work being done by your Board. At our most recent meeting in June 2005, your Board approved voluntary fee reductions from A I M Advisors, Inc. [CROCKETT (AIM) that save shareholders approximately $20.8 million PHOTO] annually, based on asset levels as of March 31, 2005. The majority of these expense reductions, which took effect July 1, 2005, will be achieved by a permanent reduction to 0.25% of the Rule 12b-1 fees on Class A and Class A3 shares of those AIM Funds that previously charged these fees at a higher rate. Our June meeting, which was the culmination of more than two and one-half months of review and discussions, took place over a three-day period. The meeting included your BRUCE L. CROCKETT Board's annual comprehensive evaluation of each fund's advisory agreement with AIM. After this evaluation, in which questions about fees, performance and operations were addressed by AIM, your Board approved all advisory agreements for the year beginning July 1, 2005. You can find information on the factors considered and conclusions reached by your Board in its evaluation of each fund's advisory agreement at AIMinvestments.com. (Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals.") The advisory agreement information about your Fund is also included in this annual report on Pages 8 and 9. I encourage you to review it. Together with monitoring fund expenses, fund performance is your Board's priority. Our initial goal is to work with AIM to bring about improvement in every AIM Fund that has been underperforming its category. Your Board has a well-defined process and structure for monitoring all funds and identifying and assisting AIM in improving underperforming funds. Our Investments Committee--which functions along with Audit, Governance, Valuation and Compliance Committees--is the only one of these five standing committees to include all 14 independent Board members. Further, our Investments Committee is divided into three underlying subcommittees, each responsible for, among other things, reviewing the performance, fees and expenses of the funds that have been assigned to it. At subcommittee meetings, held throughout the year, the performance of every AIM Fund is evaluated. If a fund has underperformed its peer group for a meaningful period, we work closely with AIM to discover the causes and help develop the right responses. In some cases, AIM may determine that a change in portfolio management strategy or portfolio managers is required. In other cases, where a fund no longer seems viable, it may be merged with a similar fund, being careful to consider the needs of all shareholders affected by the decision. Following AIM's recommendation and your Board's approval, eight funds were recently merged. Be assured that your Board is working closely with the management of AIM to help you reach your investment goals. Should you or your advisor have questions or comments about the governance of AIM Funds, I invite you to write to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100, Houston, TX 77046. Your Board looks forward to keeping you informed about the governance of your funds. Sincerely, /s/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair On Behalf of the Board of Trustees AIM Funds December 15, 2005 2 AIM INTERNATIONAL GROWTH FUND MANAGEMENT'S DISCUSSION diversification benefit of international OF FUND PERFORMANCE investing. ===================================================================================== PERFORMANCE SUMMARY We seek to minimize stock-specific ======================================== risk by building a portfolio that holds Foreign stocks outperformed U.S. equities FUND VS. INDEXES a variety of companies. for the third consecutive year. Given this environment, we are pleased to once Total returns, 10/31/04-10/31/05, We believe disciplined sell decisions again reward shareholders with excluding applicable sales charges. If are a key determinant of successful double-digit Fund performance. For sales charges were included, returns investing. We consider selling a stock long-term Fund performance, please turn would be lower. for any one of the following reasons: to Pages 6 and 7. Class A Shares 19.04% o a company's fundamentals deteriorate As the table to the right or it posts disappointing earnings illustrates, your Fund modestly Class B Shares 18.19 outperformed both its broad market and o a stock's price seems overvalued style specific benchmarks. We attribute Class C Shares 18.17 this success to strong stock selection o a more attractive opportunity is in outperforming markets/countries, such Class R Shares 18.79 presented as Canada and Mexico, which are not included in MSCI EAFE Index benchmarks. MSCI EAFE Index MARKET CONDITIONS AND YOUR FUND (Broad Market Index) 18.09 Although most world markets posted MSCI EAFE Growth Index positive returns for the fiscal year, (Style-specific Index) 17.65 foreign equities were once again the performance leaders. Despite a Lipper International Multi-Cap strengthening U.S. dollar, international Growth Fund Index stocks outperformed U.S. equities by (Peer Group Index) 22.15 more than a two-to-one margin when calculated in U.S. dollars. In local SOURCE: LIPPER, INC. currency terms, foreign stocks outpaced ======================================== U.S. stocks three-to-one. ===================================================================================== HOW WE INVEST We believe that earnings drive stock o high return on invested capital In Europe, markets rallied amid low prices and that companies generating interest rates (the European Central substantial, repeatable, above average o reasonable prices with low valuations Bank has kept rates at 2% for several earnings growth should provide long-term years), attractive valuations compared growth of capital. We use a systematic, stock-by stock to U.S. stocks and corporate profits approach, focusing on strengths of buoyed by restructuring and cost Therefore, when selecting stocks for individual companies, rather than sector cutting. In Japan, stocks climbed to your Fund we look for large- and mid-cap or country trends. Our goal is a levels not witnessed in several years as foreign companies with the following well-diversified, reasonably priced, Japan's economy finally regained attributes: quality portfolio. We adhere to our momentum. Japanese corporate earnings investment process regardless of the also continued to o accelerating earnings and revenues macroeconomic environment. o strong cash flow generation We do not hedge currencies because we (dividends, share buybacks) believe currency exposure increases the (continued) ======================================== ======================================== ======================================== PORTFOLIO COMPOSITION TOP 5 COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. Japan 14.1% 1. Total S.A. (France) 2.2% 2. France 13.8 2. Eni S.p.A. (Italy) 2.0 [PIE CHART] 3. United Kingdom 11.3 3. BNP Paribas S.A. (France) 1.8 Consumer Discretionary 15.6% 4. Switzerland 7.7 4. Anglo Irish Bank Corp. PLC Industrials 11.3% 5. Canada 6.8 (Ireland) 1.8 Consumer Staples 10.9% 5. Imperial Tobacco Group PLC Energy 9.9% (United Kingdom) 1.8 Information Technology 8.1% TOTAL NET ASSETS $1.9 BILLION 6. Vinci S.A. (France) 1.8 Health Care 8.0% 7. Syngenta A.G. (Switzerland) 1.7 Financials 21.2% TOTAL NUMBER OF HOLDINGS* 114 8. Infosys Technologies Ltd. Money Market Funds Plus (India) 1.7 Other Assets Less Liabilities 2.4% 9. Roche Holding A.G. Utilities 1.5% (Switzerland) 1.7 Telecommunications Services 4.6% 10. UBS A.G. (Switzerland) 1.6 Materials 6.5% The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. *Excluding money market fund holdings. ======================================== ======================================== ========================================
3 AIM INTERNATIONAL GROWTH FUND improve, while Prime Minister Junichiro Given strong Fund performance, we had Koizumi's dramatic election victory few detractors to report. Although U.K. CLAS G. OLSSON, resonated well with investors. holdings posted positive returns for the [OLSSON senior portfolio Fund, during the fiscal year U.K. PHOTO] manager and head of Fund performance was broad-based with markets were hindered by higher oil AIM's International all regions registering positive prices and a slowdown in private Investment returns. Our largest regional allocation consumption. NEXT PLC, a long-time Fund Management Unit, is lead manager of AIM was in Europe. Strong stock selection holding, declined due to slower retail International Growth Fund with respect helped us outperform our style-specific growth in the U.K. as consumers to the Fund's investments in Europe and benchmark in Europe, although we responded to interest rate hikes by the Canada. Mr. Olsson joined AIM in 1994. continued to be underweight in our Bank of England in 2004. The downdraft Mr. Olsson became a commissioned naval exposure to the region. This allocation in consumer spending finally caught up officer at the Royal Swedish Naval should not be construed as a bias to the stock. Though we still believe Academy in 1988. He also received a against European stocks--we continue to this is a top European company, we sold B.B.A. from The University of Texas at find very compelling investment our position. Austin. opportunities there--but rather as an indication of our flexibility in seeking Foreign currency exchange investment opportunities elsewhere. also hindered Fund returns. Though some foreign currencies, including the BARRETT K. SIDES, For instance, our holdings in Mexico, Canadian dollar, Mexican peso and [SIDES senior portfolio Brazil and Canada, countries not part of Brazilian real appreciated against the PHOTO] manager, is lead our MSCI EAFE benchmarks, gave the Fund dollar during the fiscal year, most did manager of AIM a competitive edge. Latin American and not. Most notably the euro, British International Growth Canadian markets were supported by pound and Japanese yen depreciated Fund with respect to the Fund's strong domestic demand and higher against the dollar. As we do not hedge investments in Asia Pacific and Latin commodity prices. Canadian holdings in currencies, Fund returns were dampened America. He joined AIM in 1990. Mr. particular benefited the portfolio; two by this negative currency effect. Sides graduated with a B.S. in economics of our top performers were Canadian from Bucknell University. He also energy companies. IN CLOSING received a master's in international business from the University of St. Sector performance was also Performance of international stocks over Thomas. broad-based with every sector the last several years underscores the registering double-digit returns. With investment opportunities beyond U.S. SHUXIN CAO, oil prices approaching $70 per barrel borders. We believe our bottom-up [CAO Chartered Financial during the fiscal year, the energy investment process allows us to build a PHOTO] Analyst, portfolio sector benefited from a dramatic rise in strong portfolio based on world class manager, is manager commodity prices. Many of our top companies from around the world. Given of AIM International performing stocks were oil companies our international focus, we believe your Growth Fund. He including SUNCOR ENERGY INC. (Canada), Fund can provide diversification joined AIM in 1997. Mr. Cao graduated CANADIAN NATURAL RESOURCES (Canada), ENI opportunities beyond U.S. stocks as from Tianjin Foreign Language Institute S.p.A. (Italy) and TOTAL S.A. (France). international stocks often trade at a with a B.A. in English. He also received These companies have strong earnings discount to their U.S. peers. We are an M.B.A. from Texas A&M University and growth and underlying return on capital pleased to again provide shareholders is a Certified Public Accountant. coupled with attractive valuations- with positive Fund returns for the - -characteristics we believe can lead to fiscal year. Thank you for your MATTHEW W. DENNIS, strong long-term performance. continued participation in AIM [DENNIS Chartered Financial International Growth Fund. PHOTO] Analyst, portfolio Our bottom-up investment approach, manager, is manager focusing on individual companies, THE VIEWS AND OPINIONS EXPRESSED IN of AIM International enabled us to outperform our benchmark MANAGEMENT'S DISCUSSION OF FUND Growth Fund. He has been in the in most sectors including energy, PERFORMANCE ARE THOSE OF A I M ADVISORS, investment business since 1994. Mr. consumer discretionary, consumer INC. THESE VIEWS AND OPINIONS ARE Dennis received a B.A. in economics from staples, industrials, information SUBJECT TO CHANGE AT ANY TIME BASED ON The University of Texas at Austin. He technology and telecommunication FACTORS SUCH AS MARKET AND ECONOMIC also earned an M.S. in finance from services. CONDITIONS. THESE VIEWS AND OPINIONS MAY Texas A&M University. NOT BE RELIED UPON AS INVESTMENT ADVICE Although our financial holdings OR RECOMMENDATIONS, OR AS AN OFFER FOR A JASON T. HOLZER, performed well, our lack of exposure to PARTICULAR SECURITY. THE INFORMATION IS [HOLZER Chartered Financial select banks in Japan--many of which NOT A COMPLETE ANALYSIS OF EVERY ASPECT PHOTO] Analyst, senior were restructuring candidates that did OF ANY MARKET, COUNTRY, INDUSTRY, portfolio manager, not fit our investment criteria--held SECURITY OR THE FUND. STATEMENTS OF FACT is portfolio manager back comparative sector returns. We also ARE FROM SOURCES CONSIDERED RELIABLE, of AIM International Growth Fund. Mr. had less exposure to Japanese BUT A I M ADVISORS, INC. MAKES NO Holzer joined AIM in 1996. He received a investments than our style-specific REPRESENTATION OR WARRANTY AS TO THEIR B.A. in quantitative economics and an benchmark, hindering comparative COMPLETENESS OR ACCURACY. ALTHOUGH M.S. in engineering-economic systems performance. HISTORICAL PERFORMANCE IS NO GUARANTEE from Stanford University. OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT Assisted by Asia/Latin America Team and MANAGEMENT PHILOSOPHY. EUROPE/CANADA TEAM SEE important Fund and index [RIGHT ARROW GRAPHIC] disclosures inside front cover. FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE,PLEASE SEE PAGES 6 AND 7.
4 AIM INTERNATIONAL GROWTH FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur to estimate the expenses that you paid The hypothetical account values and two types of costs: (1) transaction over the period. Simply divide your expenses may not be used to estimate the costs, which may include sales charges account value by $1,000 (for example, an actual ending account balance or (loads) on purchase payments; contingent $8,600 account value divided by $1,000 = expenses you paid for the period. You deferred sales charges on redemptions; 8.6), then multiply the result by the may use this information to compare the and redemption fees, if any; and (2) number in the table under the heading ongoing costs of investing in the Fund ongoing costs, including management entitled "Actual Expenses Paid During and other funds. To do so, compare this fees; distribution and/or service fees Period" to estimate the expenses you 5% hypothetical example with the 5% (12b-1); and other Fund expenses. This paid on your account during this period. hypothetical examples that appear in the example is intended to help you shareholder reports of the other funds. understand your ongoing costs (in HYPOTHETICAL EXAMPLE FOR COMPARISON dollars) of investing in the Fund and to PURPOSES Please note that the expenses shown compare these costs with ongoing costs in the table are meant to highlight your of investing in other mutual funds. The The table below also provides ongoing costs only and do not reflect example is based on an investment of information about hypothetical account any transactional costs, such as sales $1,000 invested at the beginning of the values and hypothetical expenses based charges (loads) on purchase payments, period and held for the entire period on the Fund's actual expense ratio and contingent deferred sales charges on May 1, 2005, through October 31, 2005. an assumed rate of return of 5% per year redemptions, and redemption fees, if before expenses, which is not the Fund's any. Therefore, the hypothetical ACTUAL EXPENSES actual return. The Fund's actual information is useful in comparing cumulative total returns at net asset ongoing costs only, and will not help The table below provides information value after expenses for the six months you determine the relative total costs about actual account values and actual ended October 31, 2005, appear in the of owning different funds. In addition, expenses. You may use the information in table "Cumulative Total Returns" on Page if these transactional costs were this table, together with the amount you 7. included, your costs would have been invested, higher. ==================================================================================================================================== ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (5/01/05) (10/31/05)(1) PERIOD(2),(3) (10/31/05) PERIOD(2),(4) RATIO A $ 1,000.00 $ 1,103.00 $ 8.69 $ 1,016.94 $ 8.34 1.64% B 1,000.00 1,099.10 12.54 1,013.26 12.03 2.37 C 1,000.00 1,099.00 12.54 1,013.26 12.03 2.37 R 1,000.00 1,101.80 9.91 1,015.78 9.50 1.87 (1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31, 2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. Effective on July 1, 2005, the distributor contractually agreed to reduce rule 12b-1 plan fees for Class A shares to 0.25%. The annualized expense ratio restated as if this agreement had been in effect throughout the entire most recent fiscal half year is 1.62% for the Class A shares. (3) The actual expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $8.59 for Class A shares. (4) The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $8.24 for Class A shares. ====================================================================================================================================
[ARROW BUTTON For More Information Visit IMAGE] AIMinvestments.com 5 AIM INTERNATIONAL GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE RESULTS OF A $10,000 INVESTMENT Fund data from 4/7/92,index data from 3/31/92 [MOUNTAIN CHART] ===========================================================================
DATE AIM INTERNATIONAL GROWTH MSCI EAFE MSCI EAFE FUND-CLASS A SHARES GROWTH INDEX INDEX 3/31/92 $9450 $10000 $10000 4/92 9710 9777 10047 5/92 10293 10508 10720 6/92 10185 10042 10211 7/92 9796 9884 9950 8/92 9959 10658 10574 9/92 9775 10437 10365 10/92 9602 9895 9822 11/92 9634 10034 9914 12/92 9702 10046 9965 1/93 9723 9955 9964 2/93 9940 10239 10265 3/93 10524 10966 11160 4/93 11034 11852 12219 5/93 11369 12201 12477 6/93 11142 12091 12282 7/93 11445 12444 12712 8/93 12289 13079 13399 9/93 12420 12760 13097 10/93 13189 13163 13501 11/93 12810 11872 12320 12/93 14144 12572 13210 1/94 14739 13517 14327 2/94 14284 13415 14287 3/94 13525 12755 13672 4/94 13981 13281 14252 5/94 13851 13126 14170 6/94 13633 13251 14370 7/94 14154 13367 14509 8/94 14555 13670 14852 9/94 14197 13214 14384 10/94 14630 13584 14863 11/94 13762 12973 14149 12/94 13670 13140 14238 1/95 12892 12636 13691 2/95 13220 12632 13651 3/95 13705 13426 14503 4/95 14134 14020 15048 5/95 14460 13859 14869 6/95 14709 13572 14608 7/95 15521 14437 15518 8/95 15204 13830 14926 9/95 15486 14146 15217 10/95 15396 13764 14808 11/95 15453 14143 15220 12/95 15913 14635 15833 1/96 16295 14645 15898 2/96 16631 14696 15952 3/96 16920 15049 16291 4/96 17465 15413 16764 5/96 17545 15091 16456 6/96 17905 15144 16549 7/96 17024 14654 16065 8/96 17419 14668 16100 9/96 17895 15070 16528 10/96 17825 14945 16359 11/96 18659 15423 17010 12/96 18929 15142 16791 1/97 18882 14511 16203 2/97 19097 14735 16468 3/97 18943 14823 16528 4/97 18895 14971 16615 5/97 20029 15851 17697 6/97 21069 16773 18673 7/97 21892 17174 18975 8/97 20007 15849 17558 9/97 21726 16897 18541 10/97 19864 15298 17116 11/97 19876 15265 16942 12/97 20011 15461 17089 1/98 20203 16160 17871 2/98 21581 17232 19018 3/98 22960 17465 19603 4/98 23295 17640 19758 5/98 23715 17516 19662 6/98 23739 17758 19811 7/98 24147 17838 20012 8/98 20802 15922 17533 9/98 20264 15474 16995 10/98 21078 17044 18767 11/98 21953 17868 19728 12/98 22697 18894 20507 1/99 22965 18993 20446 2/99 21916 18376 19959 3/99 22282 18625 20792 4/99 23001 18815 21634 5/99 22159 17998 20520 6/99 23573 18695 21320 7/99 24049 19054 21954 8/99 24073 19161 22034 9/99 24598 19465 22256 10/99 26502 20508 23090 11/99 30003 22010 23892 12/99 35200 24460 26036 1/00 32771 23084 24382 2/00 36074 24364 25038 3/00 34959 24821 26009 4/00 32138 23181 24640 5/00 30200 21745 24038 6/00 31580 22521 24978 7/00 30794 21110 23931 8/00 31998 21334 24139 9/00 29352 19922 22963 10/00 27338 19001 22421 11/00 25034 18124 21580 12/00 26153 18464 22347 1/01 26535 18412 22336 2/01 23536 16542 20661 3/01 21886 15397 19284 4/01 23140 16452 20624 5/01 22800 15789 19896 6/01 22554 15022 19083 7/01 22035 14658 18735 8/01 21244 13989 18261 9/01 19228 12665 16411 10/01 19691 13169 16831 11/01 19910 13845 17452 12/01 20304 13926 17555 1/02 19486 13175 16623 2/02 19732 13352 16739 3/02 20562 13922 17726 4/02 20589 13933 17762 5/02 20820 13961 17987 6/02 20384 13601 17271 7/02 18395 12151 15566 8/02 18408 12057 15530 9/02 16473 11008 13863 10/02 17290 11630 14608 11/02 17589 11972 15271 12/02 17412 11694 14757 1/03 16745 11115 14141 2/03 16514 10876 13816 3/03 16268 10761 13545 4/03 17236 11693 14873 5/03 18258 12297 15774 6/03 18639 12511 16155 7/03 18747 12675 16546 8/03 19047 12907 16946 9/03 19483 13344 17468 10/03 20750 14111 18557 11/03 21132 14441 18969 12/03 22252 15435 20451 1/04 22962 15736 20740 2/04 23588 16034 21219 3/04 23520 16047 21339 4/04 23014 15648 20856 5/04 23191 15608 20900 6/04 23532 15817 21385 7/04 22782 15174 20691 8/04 22959 15191 20782 9/04 23846 15566 21325 10/04 24788 16087 22052 11/04 26314 17195 23559 12/04 27459 17924 24592 1/05 27009 17510 24141 2/05 28222 18212 25184 3/05 27581 17765 24551 4/05 26748 17422 23974 5/05 26967 17474 23986 6/05 27636 17614 24304 7/05 28808 18151 25049 8/05 29776 18672 25682 9/05 30484 19458 26826 10/05 29518 18926 26042
=========================================================================== SOURCE: LIPPER,INC. The data shown in the chart include This chart, which is a logarithmic reinvested distributions, applicable chart, presents the fluctuations in the sales charges, Fund expenses and value of the Fund and its indexes. We management fees. Index results include believe that a logarithmic chart is more reinvested dividends, but they do not effective than other types of charts in reflect sales charges. Performance of an illustrating changes in value during the index of funds reflects fund expenses early years shown in the chart. The and management fees; performance of a vertical axis, the one that indicates market index does not. Performance shown the dollar value of an investment, is in the chart and table(s) does not constructed with each segment reflect deduction of taxes a shareholder representing a percent change in the would pay on Fund distributions or sale value of the investment. In this chart, of Fund shares. Performance of the each segment represents a doubling, or indexes does not reflect the effects of 100% change, in the value of the taxes. investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000, is the same space between $20,000 and $40,000.
6 AIM INTERNATIONAL GROWTH FUND ======================================== ======================================== ======================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS As of 10/31/05, including applicable As of 9/30/05, most recent calendar 6 months ended 10/31/05, excluding sales charges quarter-end, including applicable sales applicable sales charges charges CLASS A SHARES Class A Shares 10.30% Inception (4/7/92) 8.31% CLASS A SHARES Class B Shares 9.91 10 Years 6.13 Inception (4/7/92) 8.62% Class C Shares 9.90 5 Years 0.40 10 Years 6.41 Class R Shares 10.18 1 Year 12.48 5 Years -0.36 ======================================== 1 Year 20.81 CLASS B SHARES Inception (9/15/94) 5.99% CLASS B SHARES 10 Years 6.09 Inception (9/15/94) 6.35% 5 Years 0.45 10 Years 6.37 1 Year 13.19 5 Years -0.31 1 Year 22.03 CLASS C SHARES Inception (8/4/97) 3.18% CLASS C SHARES 5 Years 0.84 Inception (8/4/97) 3.64% 1 Year 17.17 5 Years 0.07 1 Year 26.00 CLASS R SHARES 10 Years 6.47% CLASS R SHARES 5 Years 1.27 10 Years 6.76% 1 Year 18.79 5 Years 0.50 1 Year 27.59 ======================================== ======================================== CLASS R SHARES' INCEPTION DATE IS JUNE PERFORMANCE FIGURES REFLECT REINVESTED SHARES IS 1% FOR THE FIRST YEAR AFTER 3, 2002. RETURNS SINCE THAT DATE ARE DISTRIBUTIONS, CHANGES IN NET ASSET PURCHASE. CLASS R SHARES DO NOT HAVE A HISTORICAL RETURNS. ALL OTHER RETURNS VALUE AND THE EFFECT OF THE MAXIMUM FRONT-END SALES CHARGE; RETURNS SHOWN ARE BLENDED RETURNS OF HISTORICAL CLASS SALES CHARGE UNLESS OTHERWISE STATED. ARE AT NET ASSET VALUE AND DO NOT R SHARE PERFORMANCE AND RESTATED CLASS A INVESTMENT RETURN AND PRINCIPAL VALUE REFLECT A 0.75% CDSC THAT MAY BE IMPOSED SHARE PERFORMANCE (FOR PERIODS PRIOR TO WILL FLUCTUATE SO THAT YOU MAY HAVE A ON A TOTAL REDEMPTION OF RETIREMENT PLAN THE INCEPTION DATE OF CLASS R SHARES) AT GAIN OR LOSS WHEN YOU SELL SHARES. ASSETS WITHIN THE FIRST YEAR. NET ASSET VALUE, ADJUSTED TO REFLECT THE HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS A SHARE PERFORMANCE REFLECTS THE PERFORMANCE OF THE FUND'S SHARE CLASS R SHARES. THE MAXIMUM 5.50% SALES CHARGE, AND CLASSES WILL DIFFER DUE TO DIFFERENT CLASS B AND CLASS C SHARE PERFORMANCE SALES CHARGE STRUCTURES AND CLASS THE PERFORMANCE DATA QUOTED REPRESENT REFLECTS THE APPLICABLE CONTINGENT EXPENSES. PAST PERFORMANCE AND CANNOT GUARANTEE DEFERRED SALES CHARGE (CDSC) FOR THE COMPARABLE FUTURE RESULTS; CURRENT PERIOD INVOLVED. THE CDSC ON CLASS B A REDEMPTION FEE OF 2% WILL BE PERFORMANCE MAY BE LOWER OR HIGHER. SHARES DECLINES FROM 5% BEGINNING AT THE IMPOSED ON CERTAIN REDEMPTIONS OR PLEASE VISIT AIMINVESTMENTS.COM FOR THE TIME OF PURCHASE TO 0% AT THE BEGINNING EXCHANGES OUT OF THE FUND WITHIN 30 DAYS MOST RECENT MONTH-END PERFORMANCE. OF THE SEVENTH YEAR. THE CDSC ON CLASS C OF PURCHASE. EXCEPTIONS TO THE REDEMPTION FEE ARE LISTED IN THE FUND'S PROSPECTUS.
7 AIM INTERNATIONAL GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION The Board of Trustees of AIM o The quality of services to be provided company separate accounts with International Mutual Funds (the "Board") by AIM. The Board reviewed the investment strategies comparable to oversees the management of AIM credentials and experience of the those of the Fund; (ii) was lower than International Growth Fund (the "Fund") officers and employees of AIM who will the advisory fee rates for a offshore and, as required by law, determines provide investment advisory services to fund for which an AIM affiliate serves annually whether to approve the the Fund. In reviewing the as advisor with investment strategies continuance of the Fund's advisory qualifications of AIM to provide comparable to those of the Fund; and agreement with A I M Advisors, Inc. investment advisory services, the (iii) was higher than the advisory fee ("AIM"). Based upon the recommendation Board reviewed the qualifications of rates for nine separately managed wrap of the Investments Committee of the AIM's investment personnel and accounts managed by an AIM affiliate Board, which is comprised solely of considered such issues as AIM's with investment strategies comparable to independent trustees, at a meeting held portfolio and product review process, those of the Fund. The Board noted that on June 30, 2005, the Board, including various back office support functions AIM has agreed to waive advisory fees of all of the independent trustees, provided by AIM and AIM's equity and the Fund and to limit the Fund's total approved the continuance of the advisory fixed income trading operation. Based on operating expenses, as discussed below. agreement (the "Advisory Agreement") the review of these and other factors, Based on this review, the Board between the Fund and AIM for another the Board concluded that the quality of concluded that the advisory fee rate for year, effective July 1, 2005. services to be provided by AIM was the Fund under the Advisory Agreement appropriate and that AIM currently is was fair and reasonable. The Board considered the factors providing satisfactory services in discussed below in evaluating the accordance with the terms of the fairness and reasonableness of the Advisory Agreement. o Fees relative to those of comparable Advisory Agreement at the meeting on funds with other advisors. The Board June 30, 2005 and as part of the Board's o The performance of the Fund relative reviewed the advisory fee rate for the ongoing oversight of the Fund. In their to comparable funds. The Board Fund under the Advisory Agreement. The deliberations, the Board and the inde- reviewed the performance of the Fund Board compared effective contractual pendent trustees did not identify any during the past one, three and five advisory fee rates at a common asset particular factor that was controlling, calendar years against the performance level and noted that the Fund's rate was and each trustee attributed different of funds advised by other advisors with comparable to the median rate of the weights to the various factors. investment strategies comparable to funds advised by other advisors with those of the Fund. The Board noted that investment strategies comparable to One of the responsibilities of the the Fund's performance for the one and those of the Fund that the Board Senior Officer of the Fund, who is three year periods was above the median reviewed. The Board noted that AIM has independent of AIM and AIM's affili- performance of such comparable funds and agreed to waive advisory fees of the ates, is to manage the process by which below such median performance for the Fund and to limit the Fund's total the Fund's proposed management fees are five year period. Based on this review, operating expenses, as discussed below. negotiated to ensure that they are the Board concluded that no changes Based on this review, the Board negotiated in a manner which is at arm's should be made to the Fund and that it concluded that the advisory fee rate for length and reasonable. To that end, the was not necessary to change the Fund's the Fund under the Advisory Agreement Senior Officer must either supervise a portfolio management team at this time. was fair and reasonable. competitive bidding process or prepare an independent written evaluation. The o The performance of the Fund relative o Expense limitations and fee waivers. Senior Officer has recommended an to indices. The Board reviewed the The Board noted that AIM has independent written evaluation in lieu performance of the Fund during the past contractually agreed to waive advisory of a competitive bidding process and, one, three and five calendar years fees of the Fund through December 31, upon the direction of the Board, has against the performance of the Lipper 2009 to the extent necessary so that the prepared such an independent written International Multi-Cap Growth Index. advisory fees payable by the Fund do not evaluation. Such written evaluation also The Board noted that the Fund's exceed a specified maximum advisory considered certain of the factors performance in for the one and three fee rate, which maximum rate includes discussed below. In addition, as year periods was above the performance breakpoints and is based on net asset discussed below, the Senior Officer made of such Index and comparable to such levels. The Board considered the certain recommendations to the Board in Index for the five year period. Based on contractual nature of this fee waiver connection with such written evaluation. this review, the Board concluded that no and noted that it remains in effect changes should be made to the Fund and until December 31, 2009. The Board noted The discussion below serves as a that it was not necessary to change the that AIM has contractually agreed to summary of the Senior Officer's Fund's portfolio management team at waive fees and/or limit expenses of the independent written evaluation and this time. Fund through October 31, 2005 in an recommendations to the Board in amount equal to 0.05% of assets in connection therewith, as well as a o Meeting with the Fund's portfolio excess of $500 million. The Board discussion of the material factors and managers and investment personnel. With considered the contractual nature of the conclusions with respect thereto respect to the Fund, the Board is this fee waiver/expense limitation and that formed the basis for the Board's meeting periodically with such Fund's noted that it remains in effect until approval of the Advisory Agreement. portfolio managers and/or other October 31, 2005. The Board considered After consideration of all of the investment personnel and believes that the effect this fee waiver/expense factors below and based on its informed such individuals are competent and able limitation would have on the Fund's business judgment, the Board determined to continue to carry out their estimated expenses and concluded that that the Advisory Agreement is in the responsibilities under the Advisory the levels of fee waivers/expense limi- best interests of the Fund and its Agreement. tations for the Fund were fair and shareholders and that the compensation reasonable. to AIM under the Advisory Agreement is o Overall performance of AIM. The Board fair and reasonable and would have been considered the overall performance of o Breakpoints and economies of scale. obtained through arm's length AIM in providing investment advisory and The Board reviewed the structure of the negotiations. portfolio administrative services to the Fund's advisory fee under the Advisory Fund and concluded that such performance Agreement, noting that it includes one o The nature and extent of the advisory was satisfactory. breakpoint. The Board reviewed the level services to be provided by AIM. The of the Fund's advisory fees, and noted Board reviewed the services to be o Fees relative to those of clients of that such fees, as a percentage of the provided by AIM under the Advisory AIM with comparable investment Fund's net assets, have decreased as net Agreement. Based on such review, the strategies. The Board reviewed the assets increased because the Advisory Board concluded that the range of advisory fee rate for the Fund under the Agreement includes a breakpoint. The services to be provided by AIM under the Advisory Agreement. The Board noted that Board noted that AIM has contractually Advisory Agreement was appropriate and this rate (i) was higher than the agreed to waive advisory fees of the that AIM currently is providing services advisory fee rate for a variable insur- Fund through December 31, 2009 to the in accordance with the terms of the ance fund advised by AIM and offered to extent necessary so that the Advisory Agreement. insurance
8 AIM INTERNATIONAL GROWTH FUND advisory fees payable by the Fund do not o Profitability of AIM and its o Other factors and current trends. In exceed a specified maximum advisory fee affiliates. The Board reviewed determining whether to continue the rate, which maximum rate includes information concerning the profitability Advisory Agreement for the Fund, the breakpoints and is based on net asset of AIM's (and its affiliates') Board considered the fact that AIM, levels. The Board concluded that the investment advisory and other activities along with others in the mutual fund Fund's fee levels under the Advisory and its financial condition. The Board industry, is subject to regulatory Agreement therefore reflect economies of considered the overall profitability of inquiries and litigation related to a scale and that it was not necessary to AIM, as well as the profitability of AIM wide range of issues. The Board also change the advisory fee breakpoints in in connection with managing the Fund. considered the governance and the Fund's advisory fee schedule. The Board noted that AIM's operations compliance reforms being undertaken by remain profitable, although increased AIM and its affiliates, including o Investments in affiliated money market expenses in recent years have reduced maintaining an internal controls funds. The Board also took into account AIM's profitability. Based on the review committee and retaining an independent the fact that uninvested cash and cash of the profitability of AIM's and its compliance consultant, and the fact that collateral from securities lending affiliates' investment advisory and AIM has undertaken to cause the Fund to arrangements (collectively, "cash other activities and its financial operate in accordance with certain balances") of the Fund may be invested condition, the Board concluded that the governance policies and practices. The in money market funds advised by AIM compensation to be paid by the Fund to Board concluded that these actions pursuant to the terms of an SEC AIM under its Advisory Agreement was not indicated a good faith effort on the exemptive order. The Board found that excessive. part of AIM to adhere to the highest the Fund may realize certain benefits ethical standards, and determined that upon investing cash balances in AIM o Benefits of soft dollars to AIM. The the current regulatory and litigation advised money market funds, including a Board considered the benefits realized environment to which AIM is subject higher net return, increased liquidity, by AIM as a result of brokerage should not prevent the Board from increased diversification or decreased transactions executed through "soft continuing the Advisory Agreement for transaction costs. The Board also found dollar" arrangements. Under these the Fund. that the Fund will not receive reduced arrangements, brokerage commissions paid services if it invests its cash balances by the Fund and/or other funds advised in such money market funds. The Board by AIM are used to pay for research and noted that, to the extent the Fund execution services. This research is invests in affiliated money market used by AIM in making investment funds, AIM has voluntarily agreed to decisions for the Fund. The Board waive a portion of the advisory fees it concluded that such arrangements were receives from the Fund attributable to appropriate. such investment. The Board noted that, to the extent the Fund invests in o AIM's financial soundness in light of affiliated money market funds, AIM has the Fund's needs. The Board considered voluntarily agreed to waive a portion whether AIM is financially sound and has of the advisory fees it receives from the resources necessary to perform its the Fund attributable to such invest- obligations under the Advisory ment. The Board further determined that Agreement, and concluded that AIM has the proposed securities lending program the financial resources necessary to and related procedures with respect to fulfill its obligations under the the lending Fund is in the best Advisory Agreement. interests of the lending Fund and its respective shareholders. The Board o Historical relationship between the therefore concluded that the investment Fund and AIM. In determining whether to of cash collateral received in continue the Advisory Agreement for the connection with the securities lending Fund, the Board also considered the program in the money market funds prior relationship between AIM and the according to the procedures is in the Fund, as well as the Board's knowledge best interests of the lending Fund and of AIM's operations, and concluded that its respective shareholders. it was beneficial to maintain the cur- rent relationship, in part, because of o Independent written evaluation and such knowledge. The Board also reviewed recommendations of the Fund's Senior the general nature of the non-investment Officer. The Board noted that, upon advisory services currently performed by their direction, the Senior Officer of AIM and its affiliates, such as the Fund, who is independent of AIM and administrative, transfer agency and AIM's affiliates, had prepared an distribution services, and the fees independent written evaluation in order received by AIM and its affiliates for to assist the Board in determining the performing such services. In addition to reasonableness of the proposed management reviewing such services, the trustees fees of the AIM Funds, including the Fund. also considered the organizational The Board noted that the Senior Officer's structure employed by AIM and its written evaluation had been relied upon affiliates to provide those services. by the Board in this regard in lieu of a Based on the review of these and other competitive bidding process. In factors, the Board concluded that AIM determining whether to continue the and its affiliates were qualified to Advisory Agreement for the Fund, the continue to provide non-investment Board considered the Senior Officer's advisory services to the Fund, including written evaluation and the recommendation administrative, transfer agency and made by the Senior Officer to the Board distribution services, and that AIM and that the Board consider implementing a its affiliates currently are providing process to assist them in more closely satisfactory non-investment advisory monitoring the performance of the AIM services. Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
9 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/05 AIM INTERNATIONAL GROWTH FUND =============================================== INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS PLEASE NOTE THAT PAST PERFORMANCE IS NOT For periods ended 10/31/05 INDICATIVE OF FUTURE RESULTS. MORE RECENT The following information has been RETURNS MAY BE MORE OR LESS THAN THOSE prepared to provide Institutional Inception (3/15/02) 11.11% SHOWN. ALL RETURNS ASSUME REINVESTMENT OF Class shareholders with a 1 Year 19.79 DISTRIBUTIONS AT NET ASSET VALUE. performance overview specific to 6 Months* 10.62 INVESTMENT RETURN AND PRINCIPAL VALUE WILL their holdings. Institutional Class =============================================== FLUCTUATE SO YOUR SHARES, WHEN REDEEMED, shares are offered exclusively to MAY BE WORTH MORE OR LESS THAN THEIR institutional investors, including AVERAGE ANNUAL TOTAL RETURNS ORIGINAL COST. SEE FULL REPORT FOR defined contribution plans that meet For periods ended 9/30/05, most recent calendar INFORMATION ON COMPARATIVE BENCHMARKS. certain criteria. quarter-end PLEASE CONSULT YOUR FUND PROSPECTUS FOR MORE INFORMATION. FOR THE MOST CURRENT Inception (3/15/02) 12.41% MONTH-END PERFORMANCE, PLEASE CALL 1 Year 28.70 800-451-4246 OR VISIT AIMINVESTMENTS.COM. 6 Months* 10.85 * Cumulative total return that has not been annualized =============================================== INSTITUTIONAL CLASS SHARES HAVE NO SALES CHARGE; THEREFORE, PERFORMANCE IS AT NET ASSET VALUE (NAV). PERFORMANCE OF INSTITUTIONAL CLASS SHARES WILL DIFFER FROM PERFORMANCE OF OTHER SHARE CLASSES DUE TO DIFFERING SALES CHARGES AND CLASS EXPENSES. ==================================== NASDAQ SYMBOL AIEVX ==================================== 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.] - REGISTERED TRADEMARK - [AIM INVESTMENTS LOGO] AIMINVESTMENTS.COM IGR-INS-1 - REGISTERED TRADEMARK -
INFORMATION ABOUT YOUR FUND'S EXPENSES CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE divide your account value by $1,000 (for The hypothetical account values and example, an $8,600 account value divided by expenses may not be used to estimate the As a shareholder of the Fund, you $1,000 = 8.6), then multiply the result by the actual ending account balance or expenses incur ongoing costs, including number in the table under the heading entitled you paid for the period. You may use this management fees and other Fund "Actual Expenses Paid During Period" to information to compare the ongoing costs of expenses. This example is intended estimate the expenses you paid on your account investing in the Fund and other funds. To to help you understand your ongoing during this period. do so, compare this 5% hypothetical example costs (in dollars) of investing in with the 5% hypothetical examples that the Fund and to compare these costs HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES appear in the shareholder reports of the with ongoing costs of investing in other funds. other mutual funds. The example is The table below also provides information about based on an investment of $1,000 hypothetical account values and hypothetical Please note that the expenses shown in invested at the beginning of the expenses based on the Fund's actual expense the table are meant to highlight your period and held for the entire ratio and an assumed rate of return of 5% per ongoing costs only. Therefore, the period May 1, 2005, through October year before expenses, which is not the Fund's hypothetical information is useful in 31, 2005. actual return. The Fund's actual cumulative comparing ongoing costs only, and will not total return after expenses for the six months help you determine the relative total costs ACTUAL EXPENSES ended October 31, 2005, appears in the table on of owning different funds. the front of this supplement. 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 ==================================================================================================================================== ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (5/1/05) (10/31/05)(1) PERIOD(2) (10/31/05) PERIOD(2) RATIO Institutional $ 1,000.00 $ 1,106.20 $ 5.73 $1,019.76 $5.50 1.08% (1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, to October 31, 2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total return after expenses for the six months ended October 31, 2005, appears in the table on the front of this supplement. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. ==================================================================================================================================== AIMINVESTMENTS.COM IGR-INS-1
FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2005
SHARES VALUE - ----------------------------------------------------------------------------- FOREIGN STOCKS & OTHER EQUITY INTERESTS-97.62% AUSTRALIA-2.97% BHP Billiton Ltd. (Diversified Metals & Mining)(a) 1,829,300 $ 28,387,929 - ----------------------------------------------------------------------------- Brambles Industries Ltd. (Diversified Commercial & Professional Services)(a)(b) 1,586,000 10,052,377 - ----------------------------------------------------------------------------- Coca-Cola Amatil Ltd. (Soft Drinks)(a) 1,214,000 6,946,843 - ----------------------------------------------------------------------------- QBE Insurance Group Ltd. (Property & Casualty Insurance)(a) 908,000 12,128,120 ============================================================================= 57,515,269 ============================================================================= AUSTRIA-0.53% OMV A.G. (Integrated Oil & Gas)(a) 190,900 10,304,404 ============================================================================= BELGIUM-2.33% InBev N.V. (Brewers) 547,300 21,879,218 - ----------------------------------------------------------------------------- KBC Groep N.V. (Diversified Banks)(a) 285,200 23,238,484 ============================================================================= 45,117,702 ============================================================================= BRAZIL-1.25% Companhia de Bebidas das Americas-Pfd.-ADR (Brewers)(b) 408,700 14,508,850 - ----------------------------------------------------------------------------- Petroleo Brasileiro S.A.-ADR (Integrated Oil & Gas) 168,700 9,678,319 ============================================================================= 24,187,169 ============================================================================= CANADA-6.79% Canadian National Railway Co. (Railroads) 260,650 18,869,290 - ----------------------------------------------------------------------------- Canadian Natural Resources Ltd. (Oil & Gas Exploration & Production) 410,700 16,882,846 - ----------------------------------------------------------------------------- EnCana Corp. (Oil & Gas Exploration & Production) 350,200 16,088,948 - ----------------------------------------------------------------------------- Manulife Financial Corp. (Life & Health Insurance) 518,350 26,978,515 - ----------------------------------------------------------------------------- Power Corp. of Canada (Other Diversified Financial Services) 413,000 10,221,405 - ----------------------------------------------------------------------------- Shoppers Drug Mart Corp. (Drug Retail) 354,300 11,784,271 - ----------------------------------------------------------------------------- Shoppers Drug Mart Corp. (Drug Retail) (Acquired 11/18/03; Cost $2,955,117)(c)(d) 138,500 4,619,937 - ----------------------------------------------------------------------------- Suncor Energy, Inc. (Integrated Oil & Gas) 487,900 26,108,361 ============================================================================= 131,553,573 ============================================================================= CHINA-0.80% Ping An Insurance (Group) Co. of China, Ltd.-Class H (Life & Health Insurance)(a) 3,350,000 5,435,496 - ----------------------------------------------------------------------------- Shanghai Electric Group Co. Ltd.-Class H (Heavy Electrical Equipment)(a)(e) 32,000,000 10,127,517 ============================================================================= 15,563,013 =============================================================================
SHARES VALUE - -----------------------------------------------------------------------------
FRANCE-13.79% AXA (Multi-Line Insurance)(a) 572,500 $ 16,583,255 - ----------------------------------------------------------------------------- BNP Paribas S.A. (Diversified Banks)(a) 470,998 35,716,020 - ----------------------------------------------------------------------------- Bouygues S.A. (Wireless Telecommunication Services) 412,600 20,362,008 - ----------------------------------------------------------------------------- Pernod Ricard S.A. (Distillers & Vintners)(b) 128,738 22,515,031 - ----------------------------------------------------------------------------- Sanofi-Aventis (Pharmaceuticals)(a) 236,580 18,946,758 - ----------------------------------------------------------------------------- Societe Generale (Diversified Banks)(a) 219,600 25,077,426 - ----------------------------------------------------------------------------- Technip S.A. (Oil & Gas Equipment & Services)(a) 9,700 528,254 - ----------------------------------------------------------------------------- Technip S.A. (Oil & Gas Equipment & Services) (Acquired 12/16/04; Cost $8,703,354)(a)(d) 195,400 10,641,328 - ----------------------------------------------------------------------------- Total S.A. (Integrated Oil & Gas)(a) 167,449 42,174,201 - ----------------------------------------------------------------------------- Veolia Environnement (Multi-Utilities)(a) 345,200 14,395,458 - ----------------------------------------------------------------------------- Vinci S.A. (Construction & Engineering) 441,760 34,525,859 - ----------------------------------------------------------------------------- Vivendi Universal S.A. (Movies & Entertainment)(a) 812,900 25,548,432 ============================================================================= 267,014,030 ============================================================================= GERMANY-4.99% Adidas-Salomon A.G. (Apparel, Accessories & Luxury Goods) 115,650 19,406,765 - ----------------------------------------------------------------------------- Continental A.G. (Tires & Rubber)(a) 142,100 10,863,500 - ----------------------------------------------------------------------------- Henkel KGaA-Pfd. (Household Products)(a)(b) 99,600 8,585,114 - ----------------------------------------------------------------------------- MAN A.G. (Industrial Machinery)(a) 208,700 9,691,155 - ----------------------------------------------------------------------------- Merck KGaA (Pharmaceuticals)(a)(b) 175,250 14,502,720 - ----------------------------------------------------------------------------- Porsche A.G.-Pfd. (Automobile Manufacturers)(b) 21,235 15,310,818 - ----------------------------------------------------------------------------- Puma A.G. Rudolf Dassler Sport (Footwear) 72,102 18,258,056 ============================================================================= 96,618,128 ============================================================================= GREECE-1.17% OPAP S.A. (Casinos & Gaming)(a) 784,600 22,674,485 ============================================================================= HONG KONG-3.31% Cheung Kong (Holdings) Ltd. (Real Estate Management & Development)(a) 1,332,000 13,897,202 - ----------------------------------------------------------------------------- China Construction Bank-Class H (Diversified Banks) (Acquired 10/20/05; Cost $12,818,584)(d)(e) 41,898,000 12,701,113 - ----------------------------------------------------------------------------- Esprit Holdings Ltd. (Apparel Retail)(a) 1,948,000 13,757,787 - ----------------------------------------------------------------------------- Hutchison Whampoa Ltd. (Industrial Conglomerates)(a) 1,469,000 13,942,910 - ----------------------------------------------------------------------------- Sun Hung Kai Properties Ltd. (Real Estate Management & Development)(a) 1,038,000 9,839,368 ============================================================================= 64,138,380 ============================================================================= HUNGARY-1.25% OTP Bank Rt. (Diversified Banks)(a) 672,100 24,280,305 =============================================================================
F-1
SHARES VALUE - ----------------------------------------------------------------------------- INDIA-2.32% Housing Development Finance Corp. Ltd. (Thrifts & Mortgage Finance)(a) 554,736 $ 11,942,078 - ----------------------------------------------------------------------------- Infosys Technologies Ltd. (IT Consulting & Other Services)(a) 589,288 33,047,782 ============================================================================= 44,989,860 ============================================================================= IRELAND-3.27% Allied Irish Banks PLC (Diversified Banks)(a) 597,800 12,608,804 - ----------------------------------------------------------------------------- Anglo Irish Bank Corp. PLC (Diversified Banks)(a) 2,583,002 34,971,154 - ----------------------------------------------------------------------------- CRH PLC (Construction Materials)(a) 627,811 15,719,152 ============================================================================= 63,299,110 ============================================================================= ISRAEL-0.82% Teva Pharmaceutical Industries Ltd.-ADR (Pharmaceuticals) 418,700 15,960,844 ============================================================================= ITALY-2.83% Eni S.p.A. (Integrated Oil & Gas)(a)(b) 1,449,249 38,771,018 - ----------------------------------------------------------------------------- Mediaset S.p.A. (Broadcasting & Cable TV)(a) 1,451,900 15,947,400 ============================================================================= 54,718,418 ============================================================================= JAPAN-14.10% Astellas Pharma Inc. (Pharmaceuticals)(a) 581,000 20,777,880 - ----------------------------------------------------------------------------- Canon Inc. (Office Electronics)(a) 179,800 9,515,982 - ----------------------------------------------------------------------------- Daiwa House Industry Co., Ltd. (Homebuilding)(a) 987,000 13,256,458 - ----------------------------------------------------------------------------- FANUC Ltd. (Industrial Machinery)(a) 252,200 19,935,905 - ----------------------------------------------------------------------------- Hoya Corp. (Electronic Equipment Manufacturers)(a) 60,600 2,130,296 - ----------------------------------------------------------------------------- Hoya Corp. (Electronic Equipment Manufacturers)(e) 646,800 22,394,467 - ----------------------------------------------------------------------------- JSR Corp. (Specialty Chemicals)(a) 742,500 17,486,622 - ----------------------------------------------------------------------------- Keyence Corp. (Electronic Equipment Manufacturers) 75,300 17,234,349 - ----------------------------------------------------------------------------- Mizuho Financial Group, Inc. (Diversified Banks) (Acquired 10/24/05; Cost $9,401,000)(a)(d) 1,564 10,506,322 - ----------------------------------------------------------------------------- Nidec Corp. (Electronic Equipment Manufacturers)(a) 120,500 7,053,777 - ----------------------------------------------------------------------------- Nidec Corp. (Electronic Equipment Manufacturers)(e) 120,500 6,677,478 - ----------------------------------------------------------------------------- Nissan Motor Co., Ltd. (Automobile Manufacturers)(a) 876,900 9,165,827 - ----------------------------------------------------------------------------- Nitto Denko Corp. (Specialty Chemicals)(a) 231,700 14,028,926 - ----------------------------------------------------------------------------- OMRON Corp. (Electronic Equipment Manufacturers)(a) 306,100 7,224,549 - ----------------------------------------------------------------------------- Orix Corp. (Consumer Finance)(a) 64,000 11,999,005 - ----------------------------------------------------------------------------- SMC Corp. (Industrial Machinery)(a) 79,300 10,592,746 - ----------------------------------------------------------------------------- Suzuki Motor Corp. (Automobile Manufacturers)(a) 491,000 8,462,920 - ----------------------------------------------------------------------------- Takeda Pharmaceutical Co. Ltd. (Pharmaceuticals)(a) 422,400 23,229,818 - ----------------------------------------------------------------------------- Toyota Motor Corp. (Automobile Manufacturers)(a) 593,000 27,534,401 - -----------------------------------------------------------------------------
SHARES VALUE - -----------------------------------------------------------------------------
JAPAN-(CONTINUED) Yamaha Motor Co., Ltd. (Motorcycle Manufacturers)(a) 646,500 $ 13,915,344 ============================================================================= 273,123,072 ============================================================================= MEXICO-2.69% America Movil S.A. de C.V.-Series L-ADR (Wireless Telecommunication Services)(b) 932,900 24,488,625 - ----------------------------------------------------------------------------- Grupo Televisa, S.A.-ADR (Broadcasting & Cable TV) 128,900 9,422,590 - ----------------------------------------------------------------------------- Wal-Mart de Mexico S.A. de C.V.-Series V (Hypermarkets & Super Centers) 3,740,400 18,206,100 ============================================================================= 52,117,315 ============================================================================= NETHERLANDS-0.87% Koninklijke (Royal) DSM N.V. (Specialty Chemicals)(a) 471,200 16,921,318 ============================================================================= RUSSIA-0.53% OAO LUKOIL-ADR (Integrated Oil & Gas)(a) 186,000 10,259,043 ============================================================================= SINGAPORE-1.74% DBS Group Holdings Ltd. (Diversified Banks)(a) 1,410,000 12,758,401 - ----------------------------------------------------------------------------- Keppel Corp. Ltd. (Industrial Conglomerates)(a) 2,021,000 13,878,415 - ----------------------------------------------------------------------------- Singapore Airlines Ltd. (Airlines)(a) 1,073,000 7,121,002 ============================================================================= 33,757,818 ============================================================================= SOUTH AFRICA-0.54% Standard Bank Group Ltd. (Diversified Banks)(a) 1,015,761 10,468,794 ============================================================================= SOUTH KOREA-2.81% Daewoo Shipbuilding & Marine Engineering Co., Ltd. (Construction & Farm Machinery & Heavy Trucks)(a) 299,400 6,011,846 - ----------------------------------------------------------------------------- Hyundai Motor Co. (Automobile Manufacturers)(a) 166,670 12,318,181 - ----------------------------------------------------------------------------- Kookmin Bank (Diversified Banks)(a) 150,880 8,673,534 - ----------------------------------------------------------------------------- LG.Philips LCD Co., Ltd.-ADR (Electronic Equipment Manufacturers)(b)(e) 582,437 11,072,127 - ----------------------------------------------------------------------------- Samsung Electronics Co., Ltd. (Electronic Equipment Manufacturers)(a) 30,540 16,314,124 ============================================================================= 54,389,812 ============================================================================= SPAIN-3.39% ACS, Actividades de Construccion y Servicios, S.A. (Construction & Engineering)(a) 520,400 14,878,829 - ----------------------------------------------------------------------------- Banco Santander Central Hispano S.A. (Diversified Banks)(a) 1,370,800 17,485,581 - ----------------------------------------------------------------------------- Grupo Ferrovial, S.A. (Construction & Engineering)(a) 209,900 15,503,385 - ----------------------------------------------------------------------------- Industria de Diseno Textil, S.A. (Apparel Retail)(a) 599,000 17,728,744 ============================================================================= 65,596,539 ============================================================================= SWEDEN-1.73% Atlas Copco A.B.-Class A (Industrial Machinery) 527,100 9,633,353 - ----------------------------------------------------------------------------- Swedish Match A.B. (Tobacco)(a) 805,600 9,158,644 - -----------------------------------------------------------------------------
F-2
SHARES VALUE - ----------------------------------------------------------------------------- SWEDEN-(CONTINUED) Volvo A.B.-Class B (Construction & Farm Machinery & Heavy Trucks)(a) 357,800 $ 14,721,090 ============================================================================= 33,513,087 ============================================================================= SWITZERLAND-7.72% Compagnie Financiere Richemont A.G.-Class A (Apparel, Accessories & Luxury Goods)(a)(f) 757,660 28,839,935 - ----------------------------------------------------------------------------- Nestle S.A. (Packaged Foods & Meats)(a) 45,200 13,457,071 - ----------------------------------------------------------------------------- Roche Holding A.G. (Pharmaceuticals) 219,475 32,792,277 - ----------------------------------------------------------------------------- Serono S.A.-Class B (Biotechnology)(a) 14,240 9,223,180 - ----------------------------------------------------------------------------- Syngenta A.G. (Fertilizers & Agricultural Chemicals)(a)(e) 314,690 33,741,521 - ----------------------------------------------------------------------------- UBS A.G. (Diversified Capital Markets)(a) 370,098 31,423,326 ============================================================================= 149,477,310 ============================================================================= TAIWAN-1.21% Hon Hai Precision Industry Co., Ltd. (Electronic Manufacturing Services)(a) 3,169,450 13,752,616 - ----------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd. (Semiconductors)(a) 6,222,699 9,733,316 ============================================================================= 23,485,932 ============================================================================= TURKEY-0.61% Akbank T.A.S. (Diversified Banks)(a) 1,911,600 11,891,072 ============================================================================= UNITED KINGDOM-11.26% Aviva PLC (Multi-Line Insurance) 1,606,640 18,972,654 - ----------------------------------------------------------------------------- BP PLC (Integrated Oil & Gas)(a) 874,500 9,681,199 - ----------------------------------------------------------------------------- Capita Group PLC (Human Resource & Employment Services) 1,289,900 8,906,443 - ----------------------------------------------------------------------------- Enterprise Inns PLC (Restaurants)(a) 1,048,600 14,460,835 - ----------------------------------------------------------------------------- Imperial Tobacco Group PLC (Tobacco) 1,216,200 34,882,185 - ----------------------------------------------------------------------------- International Power PLC (Independent Power Producers & Energy Traders)(a) 3,840,200 15,775,757 - -----------------------------------------------------------------------------
SHARES VALUE - -----------------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED) O2 PLC (Wireless Telecommunication Services) 5,924,490 $ 21,502,477 - ----------------------------------------------------------------------------- Reckitt Benckiser PLC (Household Products)(a) 721,230 21,800,220 - ----------------------------------------------------------------------------- Shire Pharmaceuticals Group PLC (Pharmaceuticals)(a) 1,623,100 19,180,560 - ----------------------------------------------------------------------------- Tesco PLC (Food Retail)(a) 4,485,673 23,886,835 - ----------------------------------------------------------------------------- Vodafone Group PLC (Wireless Telecommunication Services)(a) 8,671,900 22,764,778 - ----------------------------------------------------------------------------- William Hill PLC (Casinos & Gaming)(a) 663,830 6,278,085 ============================================================================= 218,092,028 ============================================================================= Total Foreign Stocks & Other Equity Interests (Cost $1,276,013,175) 1,891,027,830 ============================================================================= MONEY MARKET FUNDS-0.85% Liquid Assets Portfolio-Institutional Class(g) 8,233,242 8,233,242 - ----------------------------------------------------------------------------- STIC Prime Portfolio-Institutional Class(g) 8,233,242 8,233,242 ============================================================================= Total Money Market Funds (Cost $16,466,484) 16,466,484 ============================================================================= TOTAL INVESTMENTS-98.47% (excluding investments purchased with cash collateral from securities loaned) (Cost $1,292,479,659) 1,907,494,314 ============================================================================= INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-4.17% Liquid Assets Portfolio-Institutional Class(g)(h) 80,692,180 80,692,180 ============================================================================= Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $80,692,180) 80,692,180 ============================================================================= TOTAL INVESTMENTS-102.64% (Cost $1,373,171,839) 1,988,186,494 ============================================================================= OTHER ASSETS LESS LIABILITIES-(2.64%) (51,083,111) ============================================================================= NET ASSETS-100.00% $1,937,103,383 _____________________________________________________________________________ =============================================================================
Investment Abbreviations: ADR - American Depositary Receipt Pfd. - Preferred
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 value of these securities at October 31, 2005 was $1,318,182,251, which represented 68.05% of the Fund's Net Assets. See Note 1A. (b) All or a portion of this security has been pledged as collateral for securities lending transactions at October 31, 2005. (c) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The value of this security at October 31, 2005 represented 0.24% of the Fund's Net Assets. See Note 1A. (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 value of these securities at October 31, 2005 was $38,468,700, which represented 1.99% of the Fund's Net Assets. Unless otherwise indicated, these securities are not considered to be illiquid. (e) Non-income producing security. (f) Each unit represents one A bearer share in the company and one bearer share participation certificate in Richemont S.A. (g) The money market fund and the Fund are affiliated by having the same investment advisor. See Note 3. (h) 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 to Financial Statements which are an integral part of the financial statements. F-3 STATEMENT OF ASSETS AND LIABILITIES October 31, 2005 ASSETS: Investments, at value (cost $1,276,013,175)* $1,891,027,830 - ------------------------------------------------------------ Investments in affiliated money market funds (cost $97,158,664) 97,158,664 ============================================================ Total investments (cost $1,373,171,839) 1,988,186,494 ============================================================ Foreign currencies, at value (cost $25,199,788) 25,071,888 - ------------------------------------------------------------ Receivables for: Investments sold 14,547,792 - ------------------------------------------------------------ Fund shares sold 3,901,318 - ------------------------------------------------------------ Dividends 1,844,901 - ------------------------------------------------------------ Investment for trustee deferred compensation and retirement plans 114,184 - ------------------------------------------------------------ Other assets 57,344 ============================================================ Total assets 2,033,723,921 ____________________________________________________________ ============================================================ LIABILITIES: Payables for: Investments purchased 10,706,565 - ------------------------------------------------------------ Fund shares reacquired 3,280,344 - ------------------------------------------------------------ Trustee deferred compensation and retirement plans 248,550 - ------------------------------------------------------------ Collateral upon return of securities loaned 80,692,180 - ------------------------------------------------------------ Accrued distribution fees 605,454 - ------------------------------------------------------------ Accrued trustees' and officer's fees and benefits 3,512 - ------------------------------------------------------------ Accrued transfer agent fees 791,201 - ------------------------------------------------------------ Accrued operating expenses 292,732 ============================================================ Total liabilities 96,620,538 ============================================================ Net assets applicable to shares outstanding $1,937,103,383 ____________________________________________________________ ============================================================ NET ASSETS CONSIST OF: Shares of beneficial interest $1,519,522,586 - ------------------------------------------------------------ Undistributed net investment income 9,174,647 - ------------------------------------------------------------ Undistributed net realized gain (loss) from investment securities and foreign currencies (206,414,006) - ------------------------------------------------------------ Unrealized appreciation of investment securities and foreign currencies 614,820,156 ============================================================ $1,937,103,383 ____________________________________________________________ ============================================================ NET ASSETS: Class A $1,447,048,509 ____________________________________________________________ ============================================================ Class B $ 250,055,605 ____________________________________________________________ ============================================================ Class C $ 132,386,971 ____________________________________________________________ ============================================================ Class R $ 8,700,085 ____________________________________________________________ ============================================================ Institutional Class $ 98,912,213 ____________________________________________________________ ============================================================ SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 66,905,584 ____________________________________________________________ ============================================================ Class B 12,451,916 ____________________________________________________________ ============================================================ Class C 6,586,209 ____________________________________________________________ ============================================================ Class R 406,026 ____________________________________________________________ ============================================================ Institutional Class 4,502,412 ____________________________________________________________ ============================================================ Class A: Net asset value per share $ 21.63 - ------------------------------------------------------------ Offering price per share: (Net asset value of $21.63 divided by 94.50%) $ 22.89 ____________________________________________________________ ============================================================ Class B: Net asset value and offering price per share $ 20.08 ____________________________________________________________ ============================================================ Class C: Net asset value and offering price per share $ 20.10 ____________________________________________________________ ============================================================ Class R: Net asset value and offering price per share $ 21.43 ____________________________________________________________ ============================================================ Institutional Class: Net asset value and offering price per share $ 21.97 ____________________________________________________________ ============================================================
* At October 31, 2005, securities with an aggregate value of $77,292,395 were on loan to brokers. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-4 STATEMENT OF OPERATIONS For the year ended October 31, 2005 INVESTMENT INCOME: Dividends (net of foreign withholding tax of $3,697,813) $ 39,222,079 - -------------------------------------------------------------------------- Dividends from affiliated money market funds (includes securities lending income of $1,124,590, after compensation to counterparties of $1,873,017) 2,984,992 - -------------------------------------------------------------------------- Interest 56,790 ========================================================================== Total investment income 42,263,861 ========================================================================== EXPENSES: Advisory fees 17,569,855 - -------------------------------------------------------------------------- Administrative services fees 436,565 - -------------------------------------------------------------------------- Custodian fees 1,793,054 - -------------------------------------------------------------------------- Distribution fees: Class A 4,045,810 - -------------------------------------------------------------------------- Class B 2,867,796 - -------------------------------------------------------------------------- Class C 1,280,875 - -------------------------------------------------------------------------- Class R 23,920 - -------------------------------------------------------------------------- Transfer agent fees -- A, B, C and R 6,693,626 - -------------------------------------------------------------------------- Transfer agent fees -- Institutional 11,220 - -------------------------------------------------------------------------- Trustees' and officer's fees and benefits 79,787 - -------------------------------------------------------------------------- Other 863,410 ========================================================================== Total expenses 35,665,918 ========================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangement (960,934) ========================================================================== Net expenses 34,704,984 ========================================================================== Net investment income 7,558,877 ========================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain from: Investment securities 165,499,094 - -------------------------------------------------------------------------- Foreign currencies 1,573,449 ========================================================================== 167,072,543 ========================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities 147,676,240 - -------------------------------------------------------------------------- Foreign currencies (696,162) ========================================================================== 146,980,078 ========================================================================== Net gain from investment securities and foreign currencies 314,052,621 ========================================================================== Net increase in net assets resulting from operations $321,611,498 __________________________________________________________________________ ==========================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-5 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2005 and 2004
2005 2004 - ---------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 7,558,877 $ 1,466,201 - ---------------------------------------------------------------------------------------------- Net realized gain from investment securities and foreign currencies 167,072,543 154,523,642 - ---------------------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities and foreign currencies 146,980,078 135,099,856 ============================================================================================== Net increase in net assets resulting from operations 321,611,498 291,089,699 ============================================================================================== 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 (86,426,188) (38,592,887) - ---------------------------------------------------------------------------------------------- Class B (100,538,960) (118,039,680) - ---------------------------------------------------------------------------------------------- Class C (4,637,039) (17,787,137) - ---------------------------------------------------------------------------------------------- Class R 5,654,245 1,355,519 - ---------------------------------------------------------------------------------------------- Institutional Class 79,580,219 12,408,997 ============================================================================================== Net increase (decrease) in net assets resulting from share transactions (106,367,723) (160,655,188) ============================================================================================== Net increase in net assets 215,243,775 128,857,045 ============================================================================================== NET ASSETS: Beginning of year 1,721,859,608 1,593,002,563 ============================================================================================== End of year (including undistributed net investment income (loss) of $9,174,647 and $(274,968), respectively) $1,937,103,383 $1,721,859,608 ______________________________________________________________________________________________ ==============================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-6 NOTES TO FINANCIAL STATEMENTS October 31, 2005 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. The Fund's investment objective is long-term growth of capital. Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services, which may be considered fair valued, or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are 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 and domestic and foreign index futures. 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. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is 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 -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. 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-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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE - --------------------------------------------------------------------- First $1 billion 0.95% - --------------------------------------------------------------------- Over $1 billion 0.90% ____________________________________________________________________ =====================================================================
Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of:
AVERAGE NET ASSETS RATE - -------------------------------------------------------------------- First $250 million 0.935% - -------------------------------------------------------------------- Next $250 million 0.91% - -------------------------------------------------------------------- Next $500 million 0.885% - -------------------------------------------------------------------- Next $1.5 billion 0.86% - -------------------------------------------------------------------- Next $2.5 billion 0.835% - -------------------------------------------------------------------- Next $2.5 billion 0.81% - -------------------------------------------------------------------- Next $2.5 billion 0.785% - -------------------------------------------------------------------- Over $10 billion 0.76% ___________________________________________________________________ ====================================================================
AIM has contractually agreed to waive 0.05% of advisory fees on the Fund's average daily net assets in excess of $500 million, through October 31, 2005. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2005, AIM waived fees of $814,911. At the request of the Trustees of the Trust, AMVESCAP PLC. ("AMVESCAP") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $91,306. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the year ended October 31, 2005, AIM was paid $436,565. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the year ended October 31, 2005, the Fund paid AISI $6,693,626 for Class A, Class B, Class C and Class R share classes and $11,220 for Institutional Class shares. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B, Class C, Class 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 ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Prior to July 1, 2005, the Fund paid ADI 0.30% of the average daily net assets of Class A 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. National Association of Securities Dealers ("NASD") Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2005, the Class A, Class B, Class C and Class R shares paid $4,045,810, $2,867,796, $1,280,875 and $23,920, 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, 2005, ADI advised the Fund that it retained $169,848 in front-end sales commissions from the sale of Class A shares and $4,720, $67,529, $5,890 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 ADI. 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, 2005. INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS) - ----------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $2,582,491 $270,354,007 $(264,703,256) $ -- $ 8,233,242 $ 926,679 $ -- - ----------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 2,582,491 270,354,007 (264,703,256) -- 8,233,242 933,723 -- =================================================================================================================================== Subtotal $5,164,982 $540,708,014 $(529,406,512) $ -- $16,466,484 $1,860,402 $ -- ___________________________________________________________________________________________________________________________________ ===================================================================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS) - ----------------------------------------------------------------------------------------------------------------------------------- Liquid Assets Portfolio- Institutional Class $ -- $ 300,353,222 $ (219,661,042) $ -- $80,692,180 $ 251,241 $ -- - ----------------------------------------------------------------------------------------------------------------------------------- STIC Prime Portfolio- Institutional Class 45,583,860 731,959,317 (777,543,177) -- -- 873,349 -- =================================================================================================================================== Subtotal $45,583,860 $1,032,312,539 $ (997,204,219) $ -- $80,692,180 $1,124,590 $ -- =================================================================================================================================== Total $50,748,842 $1,573,020,553 $(1,526,610,731) $ -- $97,158,664 $2,984,992 $ -- ___________________________________________________________________________________________________________________________________ ===================================================================================================================================
* Net of compensation to 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, 2005, the Fund received credits from this arrangement, which resulted in the reduction of the Fund's total expenses of $54,717. NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2005, the Fund paid legal fees of $7,933 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. F-10 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. During the year ended October 31, 2005, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the rate contractually agreed upon. NOTE 7--PORTFOLIO SECURITIES LOANED The Fund may lend portfolio securities having a market value up to one-third of the Fund's total asses. 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, 2005, securities with an aggregate value of $77,292,395 were on loan to brokers. The loans were secured by cash collateral of $80,692,180 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2005, the Fund received dividends on cash collateral of $1,124,590 for securities lending transactions, which are net of compensation to counterparties. 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, 2005 and 2004 was as follows:
2005 2004 - --------------------------------------------------------------------------------- Distributions paid from ordinary income $ -- $1,577,466 _________________________________________________________________________________ =================================================================================
TAX COMPONENTS OF NET ASSETS: As of October 31, 2005, the components of net assets on a tax basis were as follows:
2005 - ---------------------------------------------------------------------------- Undistributed ordinary income $ 13,941,535 - ---------------------------------------------------------------------------- Unrealized appreciation -- investments 609,380,128 - ---------------------------------------------------------------------------- Temporary book/tax differences (219,589) - ---------------------------------------------------------------------------- Capital loss carryforward (205,521,277) - ---------------------------------------------------------------------------- Shares of beneficial interest 1,519,522,586 ============================================================================ Total net assets $1,937,103,383 ____________________________________________________________________________ ============================================================================
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 realization of unrealized gains on passive foreign investment companies. The tax-basis unrealized appreciation (depreciation) on investments amount includes appreciation (depreciation) on foreign currencies of $(194,500). F-11 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, 2005 to utilizing $196,528,664 of capital loss carryforward in the fiscal year ended October 31, 2006. The Fund utilized $164,718,032 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, 2005 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* - ----------------------------------------------------------------------------- October 31, 2008 $ 2,432,573 - ----------------------------------------------------------------------------- October 31, 2009 9,557,579 - ----------------------------------------------------------------------------- October 31, 2010 193,531,125 ============================================================================= Total capital loss carryforward $205,521,277 _____________________________________________________________________________ =============================================================================
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. NOTE 9--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2005 was $673,953,806 and $752,647,612 respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS - ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $615,914,619 - ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (6,339,991) ============================================================================== Net unrealized appreciation of investment securities $609,574,628 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,378,611,866.
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions and passive foreign investment companies, on October 31, 2005, undistributed net investment income was increased by $1,890,738 and undistributed net realized gain (loss) was decreased by $1,890,738. This reclassification 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 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 - -------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------ 2005(a) 2004 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT - -------------------------------------------------------------------------------------------------------------------------- Sold: Class A 18,721,536 $ 381,380,192 16,594,554 $ 276,996,258 - -------------------------------------------------------------------------------------------------------------------------- Class B 1,993,930 37,701,226 1,606,048 25,327,091 - -------------------------------------------------------------------------------------------------------------------------- Class C 1,776,272 33,816,769 1,702,233 26,571,147 - -------------------------------------------------------------------------------------------------------------------------- Class R 434,539 9,047,454 125,195 2,109,225 - -------------------------------------------------------------------------------------------------------------------------- Institutional Class 3,991,792 84,280,029 727,969 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 3,692,644 75,387,488 3,753,177 63,985,626 - -------------------------------------------------------------------------------------------------------------------------- Class B (3,962,574) (75,387,488) (4,001,836) (63,985,626) ========================================================================================================================== Reacquired:(b) Class A (26,448,370) (543,193,868) (22,889,869) (381,057,300) - -------------------------------------------------------------------------------------------------------------------------- Class B (3,320,218) (62,852,698) (5,052,339) (79,381,145) - -------------------------------------------------------------------------------------------------------------------------- Class C (2,020,119) (38,453,808) (2,824,116) (44,358,284) - -------------------------------------------------------------------------------------------------------------------------- Class R (164,354) (3,393,209) (46,636) (753,706) - -------------------------------------------------------------------------------------------------------------------------- Institutional Class (217,170) (4,699,810) (5,334) (90,827) ========================================================================================================================== (5,522,092) $(106,367,723) (10,216,941) $(160,655,188) __________________________________________________________________________________________________________________________ ==========================================================================================================================
(a) There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and it owns 27% of the outstanding shares of the Fund. ADI has an agreement with this entity to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this entity are also owned beneficially. (b) Amount is net of redemption fees of $14,834, $2,960, $1,319, $47 and $445 for Class A, Class B, Class C, Class R and Institutional Class shares, respectively, for the year ended October 31, 2005 and $12,886, $3,679, $1,251, $15 and $20 for Class A, Class B, Class C, Class R and Institutional Class shares, respectively, for the year ended October 31, 2004. 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, -------------------------------------------------------------------------- 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 18.16 $ 15.23 $ 12.69 $ 14.45 $ 21.60 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.11(a) 0.05(a) 0.01(a) (0.03)(a) (0.01) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.36 2.90 2.53 (1.73) (5.66) ================================================================================================================================= Total from investment operations 3.47 2.95 2.54 (1.76) (5.67) ================================================================================================================================= Less distributions: Dividends from net investment income -- (0.02) -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Distributions from net realized gains -- -- -- -- (1.48) ================================================================================================================================= Total distributions -- (0.02) -- -- (1.48) ================================================================================================================================= Redemption fees added to beneficial interest 0.00 0.00 -- -- -- ================================================================================================================================= Net asset value, end of period $ 21.63 $ 18.16 $ 15.23 $ 12.69 $ 14.45 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 19.11% 19.40% 20.02% (12.18)% (27.96)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $1,447,049 $1,288,548 $1,117,420 $1,093,344 $1,404,269 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.69%(c) 1.70% 1.74% 1.70% 1.57% - --------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.74%(c) 1.74% 1.82% 1.74% 1.61% ================================================================================================================================= Ratio of net investment income (loss) to average net assets 0.54%(c) 0.27% 0.09% (0.21)% (0.04)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 37% 54% 77% 77% 85% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(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 $1,430,523,323. F-14 NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B ------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 16.99 $ 14.32 $ 12.02 $ 13.78 $ 20.81 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.03)(a) (0.07)(a) (0.08)(a) (0.12)(a) (0.13) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.12 2.74 2.38 (1.64) (5.42) ================================================================================================================================= Total from investment operations 3.09 2.67 2.30 (1.76) (5.55) ================================================================================================================================= Less distributions from net realized gains -- -- -- -- (1.48) ================================================================================================================================= Redemption fees added to beneficial interest 0.00 0.00 -- -- -- ================================================================================================================================= Net asset value, end of period $ 20.08 $ 16.99 $ 14.32 $ 12.02 $ 13.78 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 18.19% 18.64% 19.14% (12.77)% (28.48)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $250,056 $301,380 $360,671 $401,288 $612,125 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.41%(c) 2.40% 2.44% 2.40% 2.27% - --------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.46%(c) 2.44% 2.52% 2.44% 2.31% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.18)%(c) (0.43)% (0.61)% (0.91)% (0.75)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 37% 54% 77% 77% 85% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(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 $286,779,598. F-15 NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C ------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2005 2004 2003 2002 2001 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 17.00 $ 14.33 $ 12.03 $ 13.79 $ 20.82 - --------------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.03)(a) (0.07)(a) (0.08)(a) (0.12)(a) (0.13) - --------------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.13 2.74 2.38 (1.64) (5.42) ================================================================================================================================= Total from investment operations 3.10 2.67 2.30 (1.76) (5.55) ================================================================================================================================= Less distributions from net realized gains -- -- -- -- (1.48) ================================================================================================================================= Redemption fees added to beneficial interest 0.00 0.00 -- -- -- ================================================================================================================================= Net asset value, end of period $ 20.10 $ 17.00 $ 14.33 $ 12.03 $ 13.79 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Total return(b) 18.24% 18.63% 19.12% (12.76)% (28.47)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratios/supplemental data: Net assets, end of period (000s omitted) $132,387 $116,136 $113,965 $114,070 $165,857 _________________________________________________________________________________________________________________________________ ================================================================================================================================= Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 2.41%(c) 2.40% 2.44% 2.40% 2.27% - --------------------------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 2.46%(c) 2.44% 2.52% 2.44% 2.31% ================================================================================================================================= Ratio of net investment income (loss) to average net assets (0.18)%(c) (0.43)% (0.61)% (0.91)% (0.75)% _________________________________________________________________________________________________________________________________ ================================================================================================================================= Portfolio turnover rate 37% 54% 77% 77% 85% _________________________________________________________________________________________________________________________________ =================================================================================================================================
(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 $128,087,543. F-16 NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R ---------------------------------------------- JUNE 3, 2002 (DATE SALES YEAR ENDED OCTOBER 31, COMMENCED) TO ----------------------------- OCTOBER 31, 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $18.04 $15.14 $12.69 $15.27 - ------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) 0.07(a) 0.01(a) 0.01(a) (0.02)(a) - ------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 3.32 2.89 2.44 (2.56) ============================================================================================================ Total from investment operations 3.39 2.90 2.45 (2.58) ============================================================================================================ Redemption fees added to beneficial interest 0.00 0.00 -- -- ============================================================================================================ Net asset value, end of period $21.43 $18.04 $15.14 $12.69 ____________________________________________________________________________________________________________ ============================================================================================================ Total return(b) 18.79% 19.15% 19.31% (16.90)% ____________________________________________________________________________________________________________ ============================================================================================================ Ratios/supplemental data: Net assets, end of period (000s omitted) $8,700 $2,450 $ 867 $ 49 ____________________________________________________________________________________________________________ ============================================================================================================ Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.91%(c) 1.90% 1.94% 1.89%(d) - ------------------------------------------------------------------------------------------------------------ Without fee waivers and/or expense reimbursements 1.96%(c) 1.94% 2.02% 1.93%(d) ============================================================================================================ Ratio of net investment income (loss) to average net assets 0.32%(c) 0.07% (0.11)% (0.40)%(d) ____________________________________________________________________________________________________________ ============================================================================================================ Portfolio turnover rate 37% 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 $4,783,939. (d) Annualized. F-17 NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS ------------------------------------------------- MARCH 15, 2002 (DATE SALES YEAR ENDED OCTOBER 31, COMMENCED) TO ------------------------------- OCTOBER 31, 2005 2004 2003 2002 - --------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 18.34 $ 15.37 $12.73 $ 15.09 - --------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.25(a) 0.15(a) 0.09(a) 0.03(a) - --------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 3.38 2.93 2.55 (2.39) =============================================================================================================== Total from investment operations 3.63 3.08 2.64 (2.36) =============================================================================================================== Less distributions from net realized gains -- (0.11) -- -- =============================================================================================================== Redemption fees added to beneficial interest 0.00 0.00 -- -- =============================================================================================================== Net asset value, end of period $ 21.97 $ 18.34 $15.37 $ 12.73 _______________________________________________________________________________________________________________ =============================================================================================================== Total return(b) 19.79% 20.15% 20.74% (15.64)% _______________________________________________________________________________________________________________ =============================================================================================================== Ratios/supplemental data: Net assets, end of period (000s omitted) $98,912 $13,345 $ 79 $ 74 _______________________________________________________________________________________________________________ =============================================================================================================== Ratio of expenses to average net assets: With fee waivers and/or expense reimbursements 1.07%(c) 1.13% 1.17% 1.16%(d) - --------------------------------------------------------------------------------------------------------------- Without fee waivers and/or expense reimbursements 1.12%(c) 1.17% 1.21% 1.20%(d) =============================================================================================================== Ratio of net investment income to average net assets 1.16%(c) 0.84% 0.66% 0.33%(d) _______________________________________________________________________________________________________________ =============================================================================================================== Portfolio turnover rate 37% 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 $46,476,134. (d) Annualized. NOTE 13--CHANGE IN INDEPENDENT PUBLIC ACCOUNTING FIRM On June 29, 2005, the Audit Committee (the "Audit Committee") of the Board of Trustees (the "Board") of the Trust appointed PricewaterhouseCoopers LLP ("PwC") as the independent registered public accounting firm of the Fund for the fiscal year ending October 31, 2005. Such appointment was ratified and approved by the Independent Trustees of the Board. For the prior fiscal year, Ernst & Young ("E&Y") was the Fund's independent registered public accounting firm. On June 29, 2005, the Trust obtained a formal resignation from E&Y as the independent registered public accounting firm of the Fund. E&Y's report on the financial statements of the Fund for the past two years did not contain an adverse or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. During the period E&Y was engaged, there were no disagreements with E&Y on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to E&Y's satisfaction, would have caused E&Y to make reference to that matter in connection with such reports. NOTE 14--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Half of this amount has already been paid to the fair fund pursuant to the terms of the settlement with the remainder due December 31, 2005. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent F-18 NOTE 14--LEGAL PROCEEDINGS--(CONTINUED) distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. REGULATORY INQUIRIES AND PENDING LITIGATION IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, 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. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On June 13, 2005, the MDL Court (as defined below) issued a Conditional Transfer Order transferring this lawsuit to the MDL Court, which Conditional Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. AIM and ADI have the right to contest the WVASC's findings and conclusions, which they intend to do. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; - that certain AIM Funds inadequately employed fair value pricing; - that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; - that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees; - 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; and - that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate (this lawsuit was dismissed by the Court on August 12, 2005). These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. F-19 NOTE 14--LEGAL PROCEEDINGS--(CONTINUED) All lawsuits based on allegations of market timing, late trading and related activity have been transferred to the United States District Court for the District of Maryland. On August 25, 2005, the Court issued rulings on the common issues of law presented in defendants' motions to dismiss the shareholder class and derivative complaints. These rulings were issued in the context of the Janus lawsuits, but the Court's legal determinations apply at the omnibus level to all cases within his track, including the AIM and IFG cases. The Court dismissed for failure to make pre-suit demand on the fund board all derivative causes of action but one: the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"), as to which the demand requirement does not apply. The Court dismissed all claims asserted in the class complaint but two: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on the 36(b) claim to fees attributable to timing assets, as opposed to all fees on funds in which any timing occurred. The question whether the duplicative Section 36(b) claim properly belongs in the derivative complaint or in the class action complaint will be decided at a later date. The Court will subsequently issue an order applying his legal rulings to the allegations in the AIM and IFG complaints. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds. F-20 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of AIM International Mutual Funds 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 AIM International Growth Fund (one of the funds constituting AIM International Mutual Funds, hereafter referred to as the "Fund") at October 31, 2005, 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP December 19, 2005 Houston, Texas F-21 OTHER INFORMATION TRUSTEES AND OFFICERS As of October 31, 2005 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 109 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, Vice Chair, Group Inc. (financial services holding Principal Executive Officer company); Director and Vice Chairman, and President 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 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; and Chairman, AIM Advisors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 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 - ------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered Trustee investment company (2 portfolios)) 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 None Trustee private business corporations, including the Boss Group Ltd. (private investment and management); Cortland Trust, Inc. (Chairman) (registered investment company (3 portfolios)); Annuity and Life Re (Holdings), Ltd. (insurance company); and CompuDyne Corporation (provider of products and services to the public security market) 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 - ------------------------------------------------------------------------------------------------------------------------------- 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 Owner, Dos Angelos Ranch, L.P. Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) - ------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered Trustee Naftalis and Frankel LLP investment company (3 portfolios)) - ------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc. Trustee (San Diego, California) - ------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA None Trustee of the USA - -------------------------------------------------------------------------------------------------------------------------------
(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. (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. TRUSTEES AND OFFICERS--(CONTINUED) As of October 31, 2005 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 109 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 - ------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1981 Partner, law firm of Pennock & Cooper None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Ruth H. Quigley -- 1935 2001 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee - ------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, 2005 Retired None Jr.(3) -- 1944 Trustee Formerly: Partner, Deloitte & Touche - ------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 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 Vice President, A I M Distributors, Inc., AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds and Chief Compliance Officer, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A Senior Vice President and Assistant General Counsel, ICON Senior Officer Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. - ------------------------------------------------------------------------------------------------------------------------------- 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. and A I M Officer Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., AIM Investment Services, Inc. and 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; Vice President, A I M Distributors, Inc.; and Director and General Counsel, Fund Management Company - ------------------------------------------------------------------------------------------------------------------------------- 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. - ------------------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A Vice President, Principal Advisors, Inc. Financial Officer and Treasurer Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. - ------------------------------------------------------------------------------------------------------------------------------- J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief N/A Vice President Investment Officer, A I M Advisors Inc.; Director, Chairman, Chief Executive Officer, President and Chief Investment Officer, A I M Capital Management, Inc.; Executive Vice President, A I M Management Group Inc. Formerly: Senior Vice President, AIM Private Asset Management, Inc.; and Chief Equity Officer, and Senior Investment Officer, A I M Capital Management, 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. - -------------------------------------------------------------------------------------------------------------------------------
(3) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005. 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, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Ballard Spahr INDEPENDENT TRUSTEES AIM Investment State Street Bank and Andrews & Ingersoll, LLP Kramer, Levin, Naftalis Services, Inc. Trust Company 1735 Market Street & Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103-7599 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED) The percentage of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005, and October 31, 2005 are 99.91%, 99.89%, 99.91%, 99.92%, respectively. DOMESTIC EQUITY AIM Aggressive Growth Fund SECTOR EQUITY AIM ALLOCATION SOLUTIONS AIM Basic Balanced Fund* AIM Basic Value Fund AIM Advantage Health Sciences Fund AIM Conservative Allocation Fund AIM Blue Chip Fund AIM Energy Fund AIM Growth Allocation Fund(2) AIM Capital Development Fund AIM Financial Services Fund AIM Moderate Allocation Fund AIM Charter Fund AIM Global Health Care Fund AIM Moderate Growth Allocation Fund AIM Constellation Fund AIM Global Real Estate Fund AIM Moderately Conservative Allocation Fund AIM Diversified Dividend Fund AIM Gold & Precious Metals Fund AIM Dynamics Fund AIM Leisure Fund AIM Large Cap Basic Value Fund AIM Multi-Sector Fund AIM Large Cap Growth Fund AIM Real Estate Fund(1) DIVERSIFIED PORTFOLIOS AIM Mid Cap Basic Value Fund AIM Technology Fund AIM Mid Cap Core Equity Fund(1) AIM Utilities Fund AIM Income Allocation Fund AIM Mid Cap Growth Fund AIM International Allocation Fund AIM Opportunities I Fund FIXED INCOME AIM Opportunities II Fund AIM Opportunities III Fund TAXABLE AIM Premier Equity Fund AIM S&P 500 Index Fund AIM Floating Rate Fund AIM Select Equity Fund AIM High Yield Fund AIM Small Cap Equity Fund AIM Income Fund AIM Small Cap Growth Fund(1) AIM Intermediate Government Fund AIM Small Company Growth Fund AIM Limited Maturity Treasury Fund AIM Summit Fund AIM Money Market Fund AIM Trimark Endeavor Fund AIM Short Term Bond Fund AIM Trimark Small Companies Fund AIM Total Return Bond Fund AIM Weingarten Fund Premier Portfolio Premier U.S.Government Money Portfolio * Domestic equity and income fund TAX-FREE INTERNATIONAL/GLOBAL EQUITY AIM High Income Municipal Fund(1) AIM Asia Pacific Growth Fund AIM Municipal Bond Fund AIM Developing Markets Fund AIM Tax-Exempt Cash Fund AIM European Growth Fund AIM Tax-Free Intermediate Fund AIM European Small Company Fund(1) Premier Tax-Exempt Portfolio AIM Global Aggressive Growth Fund AIM Global Equity Fund ===================================================================================== AIM Global Growth Fund CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AIM Global Value Fund AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AIM International Core Equity Fund AND READ IT CAREFULLY BEFORE INVESTING. AIM International Growth Fund ===================================================================================== AIM International Small Company Fund(1) AIM Trimark Fund
(1) This fund has limited public sales of its shares to certain investors. For more information on who may continue to invest in the fund, please see the appropriate prospectus. (2) Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM Growth Allocation Fund. If used after January 20, 2006, this report must be accompanied by a Fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M Management Group Inc. has provided leadership in the investment management industry since 1976 and manages $129 billion in assets. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest independent financial services companies with $381 billion in assets under management. Data as of September 30, 2005. AIMinvestments.com IGR-AR-1 A I M Distributors,Inc. YOUR GOALS. OUR SOLUTIONS.--Registered Trademark-- [AIM INVESTMENTS LOGO APPEARS HERE] ================================================================================ --Registered Trademark-- Mutual Retirement Annuities College Separately Offshore Cash Funds Products Savings Managed Products Management Plans Accounts ================================================================================
AIM INTERNATIONAL CORE EQUITY FUND Annual Report to Shareholders . October 31, 2005 [COVER IMAGE] [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 October 31, 2005, and is based on total net assets. ABOUT SHARE CLASSES .. Class B shares are not available as an investment for retirement plans maintained pursuant to Section 401 of the Internal Revenue Code, including 401(k) plans, money purchase pension plans and profit sharing plans. Plans that had existing accounts invested in Class B shares prior to September 30, 2003, will continue to be allowed to make additional purchases. .. Class R shares are available only to certain retirement plans. Please see the prospectus for more information. .. Investor Class shares are closed to most investors. For more information on who may continue to invest in the Investor Class shares, please see the prospectus. PRINCIPAL RISKS OF INVESTING IN THE FUND .. The Fund may invest 100% of its assets in the securities of non-U.S. issuers. 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. .. Investing in emerging markets involves greater risk and potential reward than investing in more established markets. ABOUT INDEXES USED IN THIS REPORT .. The unmanaged MSCI Europe, Australasia and the Far East Index (the MSCI EAFE - --REGISTERED TRADEMARK--Index) is a group of foreign securities tracked by Morgan Stanley Capital International. .. The unmanaged LIPPER INTERNATIONAL LARGE-CAP CORE FUND INDEX represents an average of the performance of the 10 largest international large-cap core mutual funds tracked by Lipper, Inc., an independent mutual fund performance monitor. .. The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500 - --REGISTERED TRADEMARK-- Index) is an index of common stocks frequently used as a general measure of U.S. stock market performance. .. The unmanaged MSCI WORLD INDEX is a group of global securities tracked by Morgan Stanley Capital International. .. The Fund is not managed to track the performance of any particular index, including the indexes defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the indexes. .. 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 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 provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at AIMinvestments.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC's Web site at sec.gov. And copies of the Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202-942-8090 or 800-732-0330, or by electronic request at the following e-mail address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-06463 and 33-44611. 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 June 30, 2005, is available at our Web site. Go to AIMinvestments.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the Securities and Exchange Commission's Web site, sec.gov. - -------------------------------------------------------------------------------- FUND NASDAQ SYMBOLS Class A Shares IBVAX Class B Shares IBVBX Class C Shares IBVCX Class R Shares IIBRX Investor Class Shares IIBCX - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - -------------------------------------------------------------------------------- AIMINVESTMENTS.COM AIM INTERNATIONAL CORE EQUITY FUND DEAR FELLOW AIM FUNDS SHAREHOLDERS: [GRAHAM PHOTO] The fiscal year covered by this report was quite good to equity investors. Domestically, the broad- based S&P 500 Index returned 8.72%. Globally, Morgan Stanley's MSCI World Index rose 13.27%. Much of this good performance, though, was attained early in the fiscal year as virtually every equity index declined during October of 2005. Concern about the inflationary potential of rising energy costs was frequently cited as a major cause of market weakness. ROBERT H. GRAHAM Within the indexes, there was considerable variability in the performance of different sectors and markets. Domestically, energy sector performance far outpaced that of the other sectors in the S&P 500 Index, reflecting rising oil and gas prices. Overseas, emerging markets produced more attractive results than did developed markets, at least in part because emerging markets tend to be more closely tied to the performance of natural resources and commodities. One could make a strong argument for global diversification of a stock portfolio using the performance data for the fiscal year ended October 31, 2005. Of course, your financial advisor is the person most qualified to help you decide whether such diversification is appropriate for you. [WILLIAMSON PHOTO] For a discussion of the specific market conditions that affected your Fund and how your Fund was managed during the fiscal year, please turn to Page 3. NEW INFORMATION IN THIS REPORT MARK H. WILLIAMSON We would like to call your attention to two new elements in this report. First, on Page 2, is a message from Bruce Crockett, the independent Chair of the Board of Trustees of the AIM Funds. We first introduced you to Mr. Crockett in the annual report on your Fund dated October 31, 2004. Mr. Crockett has been on our Funds' Board since 1992; he assumed his responsibilities as Chair in October 2004. Mr. Crockett plans to keep AIM shareholders informed of the work of the Board regularly via letters in the Fund reports. We certainly think this is a valuable addition to the reports. The Board is charged with looking out for the interests of shareholders, and Mr. Crockett's letter provides insight into some of the many issues the Board addresses in governing your Fund. One of the most important decisions the Board makes each year is whether to approve the advisory agreement your Fund has with AIM. Essentially, this agreement hires AIM to manage the assets in your Fund. A discussion of the factors the Board considered in reviewing the agreement is the second new element in the report, and we encourage you to read it. It appears on Pages 8 and 9. Further information about the markets, your Fund, and investing in general is always available on our widely acclaimed Web site, AIMinvestments.com. We invite you to visit it frequently. We at AIM remain committed to building solutions to help you meet your investment goals. We thank you for your continued participation in AIM Investments--REGISTERED TRADEMARK--. If you have any questions, please contact our award-winning Client Service representatives at 800-959-4246. We are happy to be of help. Sincerely, /S/ ROBERT H. GRAHAM /S/ MARK H. WILLIAMSON Robert H. Graham Mark H. Williamson President & Vice Chair, AIM Funds President, A I M Advisors, Inc. DECEMBER 15, 2005 AIM INVESTMENTS IS A REGISTERED SERVICE MARK OF A I M MANAGEMENT GROUP INC. A I M ADVISORS, INC. AND A I M CAPITAL MANAGEMENT, INC. ARE THE INVESTMENT ADVISORS. A I M DISTRIBUTORS, INC. IS THE DISTRIBUTOR FOR THE RETAIL FUNDS REPRESENTED BY AIM INVESTMENTS.
1 AIM INTERNATIONAL CORE EQUITY FUND
DEAR AIM FUNDS SHAREHOLDERS: As independent Chair of the Board of Trustees of the AIM Funds, I'm writing to report on the work being done by your Board. [CROCKETT PHOTO] At our most recent meeting in June 2005, your Board approved voluntary fee reductions from A I M Advisors, Inc. (AIM) that save shareholders approximately $20.8 million annually, based on asset levels as of March 31, 2005. The majority of these expense reductions, which took effect July 1, 2005, will be achieved by a permanent reduction to 0.25% of the Rule 12b-1 fees on Class A and Class A3 shares of those AIM Funds that previously charged these fees at a higher rate. BRUCE L. CROCKETT Our June meeting, which was the culmination of more than two and one-half months of review and discussions, took place over a three-day period. The meeting included your Board's annual comprehensive evaluation of each fund's advisory agreement with AIM. After this evaluation, in which questions about fees, performance and operations were addressed by AIM, your Board approved all advisory agreements for the year beginning July 1, 2005. You can find information on the factors considered and conclusions reached by your Board in its evaluation of each fund's advisory agreement at AIMinvestments.com. (Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals.") The advisory agreement information about your Fund is also included in this annual report on Pages 8 and 9. I encourage you to review it. Together with monitoring fund expenses, fund performance is your Board's priority. Our initial goal is to work with AIM to bring about improvement in every AIM Fund that has been underperforming its category. Your Board has a well-defined process and structure for monitoring all funds and identifying and assisting AIM in improving underperforming funds. Our Investments Committee--which functions along with Audit, Governance, Valuation and Compliance Committees--is the only one of these five standing committees to include all 14 independent Board members. Further, our Investments Committee is divided into three underlying subcommittees, each responsible for, among other things, reviewing the performance, fees and expenses of the funds that have been assigned to it. At subcommittee meetings, held throughout the year, the performance of every AIM Fund is evaluated. If a fund has underperformed its peer group for a meaningful period, we work closely with AIM to discover the causes and help develop the right responses. In some cases, AIM may determine that a change in portfolio management strategy or portfolio managers is required. In other cases, where a fund no longer seems viable, it may be merged with a similar fund, being careful to consider the needs of all shareholders affected by the decision. Following AIM's recommendation and your Board's approval, eight funds were recently merged. Be assured that your Board is working closely with the management of AIM to help you reach your investment goals. Should you or your advisor have questions or comments about the governance of AIM Funds, I invite you to write to me at AIM Investments, AIM Investments Tower, 11 Greenway Plaza, Suite 100, Houston, TX 77046. Your Board looks forward to keeping you informed about the governance of your funds. Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair On Behalf of the Board of Trustees AIM Funds DECEMBER 15, 2005
2 AIM INTERNATIONAL CORE EQUITY FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY During the fiscal year ended October 31, 2005, the international stock market was very bullish in general, helping the Fund post double-digit returns. However, most international stock markets gave greater rewards to riskier securities such as small-cap, emerging-market and lower-quality stocks, which are not a focus of the Fund. Consequently, the Fund's returns for the year trailed those of the MSCI EAFE Index (EAFE), which measures the broad European, Australasian and Far Eastern markets. The Fund's investment results relative to the EAFE were heavily affected during the fiscal year by the sheer magnitude of the gains within the international marketplace. The large, financially strong companies favored by our investment process were largely neglected by investors, who focused much of their attention on the higher-risk areas. Your Fund's long-term performance is shown on pages 6 and 7 of this report. - -------------------------------------------------------------------------------- FUND VS. INDEXES TOTAL RETURNS, 10/31/04-10/31/05, EXCLUDING APPLICABLE SALES CHARGES. IF SALES CHARGES WERE INCLUDED, RETURNS WOULD BE LOWER. Class A Shares 13.89% Class B Shares 13.00 Class C Shares 13.00 Class R Shares 13.64 Investor Class Shares 13.92 MSCI EAFE Index (Broad Market and Style-specific Index) 18.09 Lipper International Large-Cap Core Fund Index (Peer Group Index) 17.64 SOURCE: LIPPER, INC. - -------------------------------------------------------------------------------- HOW WE INVEST Our stock selection process, which is driven by precise financial, valuation, and global sector-based research criteria, represents the primary focus of our investment efforts. In addition to having a long time horizon (supported by four-to five-year average holding periods for investments), risk management at the stock and portfolio level also plays an important role. Our investment process is clearly delineated in three discrete investment steps that include a financial and valuation assessment, global sector-based research based on primary company contact, and team-based portfolio decisions. Risk is explicitly managed at the overall portfolio level through the use of statistical tools to monitor appropriate risk relative to expected return and to ensure diversification within the portfolio. At the stock-selection level, there is a strong bias in favor of companies with proven financial strength. Stocks held in the Fund tend to provide above-average stability of growth, as measured by the variability of underlying profitability, as well as below-average balance sheet leverage. Risk management efforts also seek to ensure that the largest single component of active risk is security-specific, which is consistent with stock selection being the sole targeted area of returns relative to the benchmark. Stock selection focuses on large, well-established companies with at least five years of quoted financial history. Predictable and consistent returns are sought by avoiding undue portfolio concentrations and as a result of the caliber of our portfolio holdings. We consider selling a security when its share price increases and its ranking deteriorates relative to other companies, the company's fundamentals deteriorate or the security causes the overall portfolio to fall outside the acceptable risk parameters. MARKET CONDITIONS AND YOUR FUND In general, international markets continued to perform well relative to the U.S. stock market during the Fund's fiscal year, continuing the trend of the past few years. All 10 sectors of the EAFE produced positive returns during the period. However, the U.S. dollar strengthened over the year against the euro, the Japanese yen and (Continued) - --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION TOP 5 INDUSTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. Diversified Banks 12.6% 1. GlaxoSmithKline PLC-ADR [PIE CHART] 2. Pharmaceuticals 9.3 (United Kingdom) 2.9% Financials 23.4% 3. Integrated Oil & Gas 6.8 2. Royal Bank of Scotland Group PLC Consumer Staples 4. Integrated Telecommunication (United Kingdom) 11.8% Services 6.0 2.8 Consumer Discretionary 10.6% 5. Packaged Foods & Meats 3.7 3. Nokia Oyj (Finland) 2.4 Health Care 10.1% 4. Shin-Etsu Chemical Co., Ltd. Industrials 9.0% (Japan) 2.4 Telecommunications Services 5. BAE Systems PLC 7.9% (United Kingdom) 2.3 Energy 7.9% 6. Takeda Pharmaceutical Co. Ltd. Materials 7.8% (Japan) 2.2 Information Technology 6.6% 7. Vodafone Group PLC Money Market Funds Plus (United Kingdom) 1.9 Other Assets Less Liabilities 3.3% 8. Reed Elsevier PLC Utilities 1.6% (United Kingdom) 1.9 9. Aegon N.V. (Netherlands) 1.8 10. TNT N.V. (Netherlands) 1.7 TOTAL NET ASSETS $279.5 MILLION TOTAL NUMBER OF HOLDINGS* 81
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. *Excluding money market fund holdings. - -------------------------------------------------------------------------------- 3 AIM INTERNATIONAL CORE EQUITY FUND several other currencies. This reduced the returns of stocks denominated in those currencies upon conversion into dollars, somewhat diminishing Fund results. With oil prices approaching $70 per barrel during the fiscal year, the energy sector benefited from a dramatic rise in commodity prices. The Fund reaped benefits from both an allocation and stock selection perspective. The single largest positive contributor to Fund returns was EnCana, a Canadian natural gas provider. Statoil, a Norwegian oil and gas company, also contributed positively. These companies benefited from rising commodity prices, strong production growth relative to their peers and attractive valuations--characteristics we believe could lead to strong long-term performance. During the period, we took profits on some energy holdings to scale back the Fund's exposure and bring it into line with the EAFE. WE CONTINUE TO BELIEVE NON-U.S. EQUITIES ARE MORE ATTRACTIVELY VALUED THAN DOMESTIC STOCKS. The market trend of higher-risk securities outperforming lower-risk stocks was especially pronounced in Japan, and much of the under-performance within the Fund came from that region. NEC ELECTRONICS CORP., a Japanese information technology company, was a detractor during the fiscal year. We continued to hold this company due to our conviction in its long term potential. Results from the United Kingdom (U.K.) were mixed. Defense contractor BAE SYSTEMS was among the Fund's top contributors, as was pharmaceutical giant GLAXOSMITHKLINE. The consumer discretionary and consumer staples sectors in the U.K. suffered as interest rate hikes imposed during previous years began taking a toll on consumer spending. British home improvement retailer KINGFISHER suffered as a result and was a negative contributor to the Fund's performance. The company continued to trade at attractive valuations and we retained it in the portfolio due to our belief in its prospects for long-term success. IN CLOSING At the end of the Fund's fiscal year, we continue to believe non-U.S. equities are more attractively valued than domestic stocks and offer U.S.-based investors valuable portfolio diversification. We anticipate that returns from global equity markets may be more modest in the coming year. In our opinion, macroeconomic conditions indicate possible risks from a decelerating worldwide growth rate, inflationary pressures and further U.S. interest-rate increases. We remain committed to our disciplined strategy of selecting securities based on the strengths of individual companies. We believe many of the well established, financially strong companies favored by our investment approach may be better positioned to perform well in such conditions than some of the higher-risk market segments that have outperformed in recent years. We welcome any new investors who have joined the Fund during the reporting period, and to all of our shareholders we would like to say 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. See important Fund and index disclosures inside front cover. - -------------------------------------------------------------------------------- The Fund is team managed by INVESCO Global Asset Management (N.A.), Inc. The five most senior members of the investment team, who have the most significant responsibility for managing the Fund, are as follows: [GRANADE PHOTO] ERIK B. GRANADE, Chartered Financial Analyst, is a manager of AIM International Core Equity Fund. He began his investment career in 1986 and has been a portfolio manager with INVESCO and its affiliates since 1996. He holds a B.A. in economics from Trinity College in Hartford, Connecticut. [BAKER PHOTO] INGRID E. BAKER, Chartered Financial Analyst, is a manager of AIM International Core Equity Fund. She began her investment career in 1990 and joined INVESCO in 1999. She holds a B.A. in inter-national politics from Oberlin College and an M.B.A. in finance from the University of Navarra in Spain. [DAVIDSON PHOTO] W. LINDSAY DAVIDSON is a manager of AIM International Core Equity Fund. He began his investment career in 1974 and has served as portfolio manager with AMVESCAP PLC and affiliated companies since 1984. A native of St. Andrews, Scotland, he received his degree in economics with honors from Edinburgh University. [GARREN PHOTO] MICHELE T. GARREN, Chartered Financial Analyst, is a manager of AIM International Core Equity Fund. She began her investment career in 1987 and joined INVESCO in 1997. She holds a B.B.A. in finance from Southern Methodist University and an M.B.A. in finance from New York University. [STARKE PHOTO] KENT A. STARKE, Chartered Financial Analyst, is a manager of AIM International Core Equity Fund. He began his investment career in 1983 and joined INVESCO in 1992. He has been with the international equity product since its inception. He received a B.B.A. from the University of Georgia and an M.S. in Finance from Georgia State University. - -------------------------------------------------------------------------------- [RIGHT ARROW GRAPHIC] FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE RECORD, PLEASE TURN TO PAGES 6 AND 7. 4 AIM INTERNATIONAL CORE EQUITY FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; 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, 2005, through October 31, 2005. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The Fund's actual cumulative total returns at net asset value after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7. THE HYPOTHETICAL ACCOUNT VALUES AND EXPENSES MAY NOT BE USED TO ESTIMATE THE ACTUAL ENDING ACCOUNT BALANCE OR EXPENSES YOU PAID FOR THE PERIOD. YOU MAY USE THIS INFORMATION TO COMPARE THE ONGOING COSTS OF INVESTING IN THE FUND AND OTHER FUNDS. TO DO SO, COMPARE THIS 5% HYPOTHETICAL EXAMPLE WITH THE 5% HYPOTHETICAL EXAMPLES THAT APPEAR IN THE SHAREHOLDER REPORTS OF THE OTHER FUNDS. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED SHARE ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (5/1/05) (10/31/05)/1/ PERIOD/2,3/ (10/31/05) PERIOD/2,4/ RATIO A $1,000.00 $1,065.40 $ 8.49 $1,016.99 $ 8.29 1.63% B 1,000.00 1,061.20 12.21 1,013.36 11.93 2.35 C 1,000.00 1,060.70 12.21 1,013.36 11.93 2.35 R 1,000.00 1,063.60 9.62 1,015.88 9.40 1.85 Investor 1,000.00 1,065.50 8.33 1,017.14 8.13 1.60
/1/The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31, 2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total returns at net asset value after expenses for the six months ended October 31, 2005, appear in the table "Cumulative Total Returns" on Page 7. /2/Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. Effective on July 1, 2005, the distributor contractually agreed to reduce Rule 12b-1 plan fees for Class A shares to 0.25%. The annualized expense ratio restated as if this agreement had been in effect throughout the entire most recent fiscal half year is 1.60% for Class A shares. /3/The actual expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $8.33 for Class A shares. /4/The hypothetical expenses paid restated as if the changes discussed above had been in effect throughout the entire most recent fiscal half year are $8.13 for Class A shares. - -------------------------------------------------------------------------------- [ARROW BUTTON For More Information Visit IMAGE] AIMINVESTMENTS.COM 5 AIM INTERNATIONAL CORE EQUITY FUND YOUR FUND'S LONG-TERM PERFORMANCE - -------------------------------------------------------------------------------- RESULTS OF A $10,000 INVESTMENT FUND DATA FROM 10/28/98, INDEX DATA FROM 10/31/98 [MOUNTAIN CHART]
AIM INTERNATIONAL LIPPER INTERNATIONAL CORE EQUITY FUND- LARGE-CAP CORE MSCI EAFE DATE CLASS A SHARES FUND INDEX INDEX 10/28/98 $ 10000 10/98 10020 $ 10000 $ 10000 11/98 10340 10509 10512 12/98 10650 10790 10927 1/99 10429 10876 10895 2/99 10109 10578 10635 3/99 10379 10977 11079 4/99 10589 11495 11528 5/99 10329 11014 10934 6/99 10680 11557 11361 7/99 10780 11860 11698 8/99 10850 11945 11741 9/99 10840 11993 11859 10/99 11199 12428 12303 11/99 11686 13333 12731 12/99 13146 14993 13873 1/00 12043 14125 12992 2/00 12486 15065 13342 3/00 12682 15218 13859 4/00 12002 14298 13130 5/00 11919 14039 12809 6/00 12620 14700 13310 7/00 12126 14252 12752 8/00 12424 14441 12862 9/00 11672 13600 12236 10/00 11497 13213 11947 11/00 11103 12778 11499 12/00 11555 13318 11908 1/01 11950 13288 11902 2/01 11239 12430 11009 3/01 10540 11542 10276 4/01 11273 12271 10990 5/01 11070 11910 10602 6/01 10686 11529 10168 7/01 10392 11210 9983 8/01 10200 10982 9730 9/01 9208 9859 8745 10/01 9228 10073 8969 11/01 9623 10450 9299 12/01 9668 10610 9354 1/02 9352 10105 8857 2/02 9566 10275 8920 3/02 10120 10815 9445 4/02 10391 10836 9464 5/02 10572 10963 9584 6/02 10154 10571 9203 7/02 9092 9477 8294 8/02 9160 9492 8275 9/02 8054 8488 7387 10/02 8303 8992 7784 11/02 8720 9399 8137 12/02 8529 9066 7863 1/03 8156 8652 7535 2/03 7930 8438 7362 3/03 7783 8255 7218 4/03 8461 9024 7925 5/03 8913 9548 8405 6/03 9026 9758 8608 7/03 9218 9996 8817 8/03 9388 10240 9030 9/03 9523 10437 9308 10/03 9998 11040 9888 11/03 10311 11248 10108 12/03 11106 12031 10898 1/04 11220 12277 11052 2/04 11492 12554 11307 3/04 11436 12575 11370 4/04 11220 12183 11113 5/04 11311 12161 11137 6/04 11696 12325 11395 7/04 11322 11873 11025 8/04 11356 11971 11074 9/04 11663 12332 11363 10/04 12083 12703 11751 11/04 12741 13523 12553 12/04 13251 14097 13104 1/05 12919 13797 12864 2/05 13537 14422 13419 3/05 13205 14037 13082 4/05 12920 13713 12775 5/05 12885 13758 12781 6/05 12988 13914 12950 7/05 13274 14398 13347 8/05 13594 14854 13685 9/05 14120 15387 14294 10/05 13761 14944 13877
SOURCE: LIPPER, INC. - -------------------------------------------------------------------------------- Past performance cannot guarantee comparable future results. The data shown in the chart include 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 and table(s) 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. This chart, which is a logarithmic chart, presents the fluctuations in the value of the Fund and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment. In this chart, each segment represents a doubling, or 100% change, in the value of the investment. In other words, the space between $5,000 and $10,000 is the same size as the space between $10,000 and $20,000 and so on. 6 AIM INTERNATIONAL CORE EQUITY FUND - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS As of 10/31/05, including applicable sales charges CLASS A SHARES Inception (3/28/02) 6.93% 1 Year 7.65 CLASS B SHARES Inception (3/28/02) 7.40% 1 Year 8.00 CLASS C SHARES Inception (2/14/00) 0.90% 5 Years 2.65 1 Year 12.00 CLASS R SHARES Inception (11/24/03) 16.60% 1 Year 13.64 INVESTOR CLASS SHARES Inception (10/28/98) 4.66% 5 Years 3.66 1 Year 13.92 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS As of 9/30/05, most recent calendar quarter-end, including applicable sales charges CLASS A SHARES Inception (3/28/02) 7.87% 1 Year 14.26 CLASS B SHARES Inception (3/28/02) 8.40% 1 Year 15.12 CLASS C SHARES Inception (2/14/00) 1.39% 5 Years 2.86 1 Year 19.15 CLASS R SHARES Inception (11/24/03) 19.07% 1 Year 20.74 INVESTOR CLASS SHARES Inception (10/28/98) 5.10% 5 Years 3.87 1 Year 21.06 ================================================================================ CUMULATIVE TOTAL RETURNS 6 months ended 10/31/05, excluding applicable sales charges Class A Shares 6.54% Class B Shares 6.12 Class C Shares 6.07 Class R Shares 6.36 Investor Class Shares 6.55 - -------------------------------------------------------------------------------- THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT GUARANTEE COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE VISIT AIMINVESTMENTS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE FIGURES REFLECT REINVESTED DISTRIBUTIONS, CHANGES IN NET ASSET VALUE AND THE EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR SALE OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. CLASS A SHARE PERFORMANCE REFLECTS THE MAXIMUM 5.50% SALES CHARGE, AND CLASS B AND CLASS C SHARE PERFORMANCE REFLECTS THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CDSC ON CLASS B SHARES DECLINES FROM 5% BEGINNING AT THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE SEVENTH YEAR. THE CDSC ON CLASS C SHARES IS 1% FOR THE FIRST YEAR AFTER PURCHASE. CLASS R SHARES DO NOT HAVE A FRONT-END SALES CHARGE; RETURNS SHOWN ARE AT NET ASSET VALUE AND DO NOT REFLECT A 0.75% CDSC THAT MAY BE IMPOSED ON A TOTAL REDEMPTION OF RETIREMENT PLAN ASSETS WITHIN THE FIRST YEAR. INVESTOR CLASS SHARES DO NOT HAVE A FRONT-END SALES CHARGE OR 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 IN THE PAST, 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. 7 AIM INTERNATIONAL CORE EQUITY FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT AND SUMMARY OF INDEPENDENT WRITTEN FEE EVALUATION The Board of Trustees of AIM International Mutual Funds (the "Board") oversees the management of AIM International Core Equity Fund (the "Fund") and, as required by law, determines annually whether to approve the continuance of the Fund's advisory agreement with A I M Advisors, Inc. ("AIM"). Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the advisory agreement (the "Advisory Agreement") between the Fund and AIM for another year, effective July 1, 2005. The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors. One of the responsibilities of the Senior Officer of the Fund, who is independent of AIM and AIM's affiliates, is to manage the process by which the Fund's proposed management fees are negotiated to ensure that they are negotiated in a manner which is at arm's length and reasonable. To that end, the Senior Officer must either supervise a competitive bidding process or prepare an independent written evaluation. The Senior Officer has recommended an independent written evaluation in lieu of a competitive bidding process and, upon the direction of the Board, has prepared such an independent written evaluation. Such written evaluation also considered certain of the factors discussed below. In addition, as discussed below, the Senior Officer made certain recommendations to the Board in connection with such written evaluation. The discussion below serves as a summary of the Senior Officer's independent written evaluation and recommendations to the Board in connection therewith, as well as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Advisory Agreement is in the best interests of the Fund and its shareholders and that the compensation to AIM under the Advisory Agreement is fair and reasonable and would have been obtained through arm's length negotiations. .. The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement. .. The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement. .. The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was above the median performance of such comparable funds. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. .. The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper International Large Cap Core Index. The Board noted that the Fund's performance in such periods was above the Index performance. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. .. Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement. .. Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory. .. Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate was higher than the sub-advisory fee rate for an unaffiliated mutual fund for which an AIM affiliate serves as sub-advisor with investment strategies comparable to those of the Fund, although the total management fees paid by such unaffiliated mutual fund was higher than the advisory fee rate for the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable. .. Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable. .. Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through October 31, 2005 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect until October 31, 2005. The Board considered the effect this fee waiver/expense limitation would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable. .. Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes six breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule. .. Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the Fund may realize certain benefits upon investing cash balances in AIM advised money market funds, including a higher net return, increased liquidity, increased diversification or decreased transaction costs. The Board also found that the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the lending Fund and its respective shareholders. The Board therefore concluded that the investment of cash collateral received in connection with the securities lending program in the money market funds according to the procedures is in the best interests of the lending Fund and its respective shareholders. (continued) 8 AIM INTERNATIONAL CORE EQUITY FUND .. Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund, who is independent of AIM and AIM's affiliates, had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable. .. Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive. .. Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate. .. AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement. .. Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services. .. Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund. APPROVAL OF SUB-ADVISORY AGREEMENT The Board oversees the management of the Fund and, as required by law, determines annually whether to approve the continuance of the Fund's sub-advisory agreement. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved the continuance of the sub-advisory agreement (the "Sub-Advisory Agreement") between INVESCO Global Asset Management (N.A.), Inc. (the "Sub-Advisor") and AIM with respect to the Fund for another year, effective July 1, 2005. The Board considered the factors discussed below in evaluating the fairness and reasonableness of the Sub-Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of the Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors. The discussion below serves as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of the Sub-Advisory Agreement. After consideration of all of the factors below and based on its informed business judgment, the Board determined that the Sub-Advisory Agreement is in the best interests of the Fund and its shareholders. .. The nature and extent of the advisory services to be provided by the Sub-Advisor. The Board reviewed the services to be provided by the Sub-Advisor under the Sub-Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement was appropriate and that the Sub-Advisor currently is providing services in accordance with the terms of the Sub-Advisory Agreement. .. The quality of services to be provided by the Sub-Advisor. The Board reviewed the credentials and experience of the officers and employees of the Sub-Advisor who will provide investment advisory services to the Fund. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by the Sub-Advisor was appropriate, and that the Sub-Advisor currently is providing satisfactory services in accordance with the terms of the Sub-Advisory Agreement. .. The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was above the median performance of such comparable funds. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. .. The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper International Large Cap Core Index. The Board noted that the Fund's performance in such periods was above the Index performance. The Board also noted that AIM began serving as investment advisor to the Fund in November 2003. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time. .. Meeting with the Fund's portfolio managers and investment personnel. The Board is meeting periodically with the Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Sub-Advisory Agreement. .. Overall performance of the Sub-Advisor. The Board considered the overall performance of the Sub-Advisor in providing investment advisory services to the Fund and concluded that such performance was satisfactory. .. Advisory fees, expense limitations and fee waivers, and breakpoints and economies of scale. In reviewing these factors, the Board considered only the advisory fees charged to the Fund by AIM and did not consider the sub-advisory fees paid by AIM to the Sub-Advisor. The Board believes that this approach is appropriate because the sub-advisory fees have no effect on the Fund or its shareholders, as they are paid by AIM rather than the Fund. Furthermore, AIM and the Sub-Advisor are affiliates and the Board believes that the allocation of fees between them is a business matter, provided that the advisory fees charged to the Fund are fair and reasonable. .. Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive. .. The Sub-Advisor's financial soundness in light of the Fund's needs. The Board considered whether the Sub-Advisor is financially sound and has the resources necessary to perform its obligations under the Sub-Advisory Agreement, and concluded that the Sub-Advisor has the financial resources necessary to fulfill its obligations under the Sub-Advisory Agreement. 9 SUPPLEMENT TO ANNUAL REPORT DATED 10/31/05 AIM 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. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS For periods ended 10/31/05 Inception (4/30/04) 15.17% 1 Year 14.53 6 Months* 6.78 ================================================================================ AVERAGE ANNUAL TOTAL RETURNS For periods ended 9/30/05, most recent calendar quarter-end Inception (4/30/04) 18.26% 1 Year 21.76 6 Months* 7.34 *Cumulative total return that has not been annualized ================================================================================ INSTITUTIONAL CLASS SHARES HAVE NO SALES CHARGE; THEREFORE, PERFORMANCE IS AT NET ASSET VALUE (NAV). PERFORMANCE OF INSTITUTIONAL CLASS SHARES WILL DIFFER FROM PERFORMANCE OF OTHER SHARE CLASSES DUE TO DIFFERING SALES CHARGES AND CLASS EXPENSES. PLEASE NOTE THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. MORE RECENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. ALL RETURNS ASSUME REINVESTMENT OF DISTRIBUTIONS AT 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. - -------------------------------------------------------------------------------- NASDAQ SYMBOL IBVIX - -------------------------------------------------------------------------------- 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] - REGISTERED TRADEMARK - - REGISTERED TRADEMARK - AIMINVESTMENTS.COM I-ICE-INS-1
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, 2005, through October 31, 2005. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The Fund's actual cumulative total return after expenses for the six months ended October 31, 2005, appears in the table on the front of this supplement. THE HYPOTHETICAL ACCOUNT VALUES AND EXPENSES MAY NOT BE USED TO ESTIMATE THE ACTUAL ENDING ACCOUNT BALANCE OR EXPENSES YOU PAID FOR THE PERIOD. YOU MAY USE THIS INFORMATION TO COMPARE THE ONGOING COSTS OF INVESTING IN THE FUND AND OTHER FUNDS. TO DO SO, COMPARE THIS 5% HYPOTHETICAL EXAMPLE WITH THE 5% HYPOTHETICAL EXAMPLES THAT APPEAR IN THE SHAREHOLDER REPORTS OF THE OTHER FUNDS. Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. - --------------------------------------------------------------------------------
ACTUAL HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES) BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE SHARE CLASS (5/1/05) (10/31/05)/1/ PERIOD/2/ (10/31/05) PERIOD/2/ RATIO Institutional $ 1,000.00 $ 1,067.80 $ 5.16 $ 1,020.21 $5.04 0.99%
/1/The actual ending account value is based on the actual total return of the Fund for the period May 1, 2005, through October 31, 2005, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. The Fund's actual cumulative total return after expenses for the six months ended October 31, 2005, appears in the table on the front of this supplement. /2/Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. - -------------------------------------------------------------------------------- AIMINVESTMENTS.COM I-ICE-INS-1 FINANCIALS SCHEDULE OF INVESTMENTS October 31, 2005
SHARES VALUE - ---------------------------------------------------------------------------------- FOREIGN STOCKS & OTHER EQUITY INTERESTS-96.61% AUSTRALIA-1.62% National Australia Bank Ltd. (Diversified Banks)/(a)(b)/ 129,600 $ 3,206,375 - ---------------------------------------------------------------------------------- National Australia Bank Ltd.-ADR (Diversified Banks)/(a)/ 10,600 1,314,506 - ---------------------------------------------------------------------------------- 4,520,881 - ---------------------------------------------------------------------------------- BELGIUM-1.48% Belgacom S.A. (Integrated Telecommunication Services)/(b)/ 123,100 4,128,504 - ---------------------------------------------------------------------------------- CANADA-2.06% BCE Inc. (Integrated Telecommunication Services)/(a)/ 105,900 2,614,660 - ---------------------------------------------------------------------------------- EnCana Corp. (Oil & Gas Exploration & Production) 68,800 3,160,821 - ---------------------------------------------------------------------------------- 5,775,481 - ---------------------------------------------------------------------------------- CHINA-0.39% China Life Insurance Co., Ltd.-ADR (Life & Health Insurance)/(c)/ 37,100 1,088,885 - ---------------------------------------------------------------------------------- DENMARK-1.41% Danske Bank A.S. (Diversified Banks)/(b)/ 125,800 3,945,710 - ---------------------------------------------------------------------------------- FINLAND-4.47% Nokia Oyj (Communications Equipment)/(b)/ 406,550 6,823,374 - ---------------------------------------------------------------------------------- Stora Enso Oyj-Class R (Paper Products)/(b)/ 271,900 3,481,423 - ---------------------------------------------------------------------------------- UPM-Kymmene Oyj (Paper Products)/(b)/ 113,800 2,197,933 - ---------------------------------------------------------------------------------- 12,502,730 - ---------------------------------------------------------------------------------- FRANCE-5.38% Compagnie Generale des Etablissements Michelin- Class B (Tires & Rubber)/(a)/ 72,461 3,912,129 - ---------------------------------------------------------------------------------- Credit Agricole S.A. (Diversified Banks)/(a)(b)/ 113,600 3,330,099 - ---------------------------------------------------------------------------------- Societe Generale-ADR (Diversified Banks)/(d)/ 155,100 3,538,932 - ---------------------------------------------------------------------------------- Total S.A.-ADR (Integrated Oil & Gas) 33,730 4,250,655 - ---------------------------------------------------------------------------------- 15,031,815 - ---------------------------------------------------------------------------------- GERMANY-3.87% BASF A.G. (Diversified Chemicals)/(b)/ 32,400 2,336,187 - ---------------------------------------------------------------------------------- BASF A.G.-ADR (Diversified Chemicals) 29,750 2,141,702 - ---------------------------------------------------------------------------------- Bayerische Motoren Werke A.G. (Automobile Manufacturers)/(b)/ 87,200 3,784,511 - ---------------------------------------------------------------------------------- Deutsche Bank A.G.-German Shares (Diversified Capital Markets)/(a)/ 14,200 1,329,893 - ---------------------------------------------------------------------------------- Deutsche Bank A.G. -New York Shares (Diversified Capital Markets) 13,070 1,223,352 - ---------------------------------------------------------------------------------- 10,815,645 - ---------------------------------------------------------------------------------- HONG KONG-1.55% Cheung Kong (Holdings) Ltd. (Real Estate Management & Development)/(b)/ 135,000 1,408,500 - ---------------------------------------------------------------------------------- Hutchison Whampoa Ltd. (Industrial Conglomerates)/(b)/ 307,100 2,914,818 - ---------------------------------------------------------------------------------- 4,323,318 - ----------------------------------------------------------------------------------
SHARES VALUE - --------------------------------------------------------------------------------- ITALY-1.50% Eni S.p.A.-ADR (Integrated Oil & Gas)/(a)/ 31,325 $ 4,189,719 - --------------------------------------------------------------------------------- JAPAN-22.06% Canon Inc. (Office Electronics)/(b)/ 59,900 3,170,230 - --------------------------------------------------------------------------------- Canon Inc.-ADR (Office Electronics) 48,700 2,584,509 - --------------------------------------------------------------------------------- East Japan Railway Co. (Railroads)/(b)/ 705 4,203,000 - --------------------------------------------------------------------------------- Fuji Photo Film Co., Ltd. (Photographic Products)/(b)/ 72,000 2,299,452 - --------------------------------------------------------------------------------- Fuji Photo Film Co., Ltd.-ADR (Photographic Products) 94,100 3,015,905 - --------------------------------------------------------------------------------- Kao Corp. (Household Products)/(b)/ 150,000 3,582,679 - --------------------------------------------------------------------------------- Millea Holdings, Inc. (Property & Casualty Insurance)/(b)/ 162 2,946,753 - --------------------------------------------------------------------------------- NEC Electronics Corp. (Semiconductors) (Acquired 05/18/04-02/09/05; Cost $2,059,548)/(a)(b)/ 40,800 1,101,628 - --------------------------------------------------------------------------------- Nintendo Co., Ltd. (Home Entertainment Software)/(b)/ 31,300 3,513,791 - --------------------------------------------------------------------------------- Nippon Telegraph and Telephone Corp. (Integrated Telecommunication Services)/(b)/ 705 3,359,852 - --------------------------------------------------------------------------------- Nippon Telegraph and Telephone Corp.-ADR (Integrated Telecommunication Services) 24,585 587,827 - --------------------------------------------------------------------------------- Nomura Holdings, Inc. (Investment Banking & Brokerage)/(b)/ 307,000 4,727,935 - --------------------------------------------------------------------------------- Olympus Corp. (Health Care Equipment)/(a)(b)/ 100,000 2,219,420 - --------------------------------------------------------------------------------- Seven & I Holdings Co., Ltd. (Food Retail)/(c)/ 66,000 2,154,732 - --------------------------------------------------------------------------------- Shin-Etsu Chemical Co., Ltd. (Specialty Chemicals)/(b)/ 138,200 6,652,396 - --------------------------------------------------------------------------------- SMC Corp. (Industrial Machinery)/(a)(b)/ 20,800 2,778,425 - --------------------------------------------------------------------------------- Sony Corp.-ADR (Consumer Electronics) 94,120 3,087,136 - --------------------------------------------------------------------------------- Takeda Pharmaceutical Co. Ltd. (Pharmaceuticals)/(b)/ 112,200 6,170,420 - --------------------------------------------------------------------------------- Toyota Motor Corp. (Automobile Manufacturers)/(b)/ 75,500 3,505,645 - --------------------------------------------------------------------------------- 61,661,735 - --------------------------------------------------------------------------------- MEXICO-1.59% Fomento Economico Mexicano, S.A. de C.V.-ADR (Soft Drinks) 26,700 1,815,333 - --------------------------------------------------------------------------------- Telefonos de Mexico S.A. de C.V.-Series L-ADR (Integrated Telecommunication Services) 130,190 2,627,234 - --------------------------------------------------------------------------------- 4,442,567 - --------------------------------------------------------------------------------- NETHERLANDS-7.61% Aegon N.V. (Life & Health Insurance) 331,400 4,985,477 - --------------------------------------------------------------------------------- Heineken N.V. (Brewers)/(a)(b)/ 129,000 4,086,364 - --------------------------------------------------------------------------------- ING Groep N.V.-ADR (Other Diversified Financial Services) 116,950 3,375,177 - --------------------------------------------------------------------------------- Royal DSM N.V. (Specialty Chemicals)/(b)/ 47,140 1,692,850 - --------------------------------------------------------------------------------- Koninklijke (Royal) Philips Electronics N.V.-New York Shares (Consumer Electronics) 87,550 2,290,308 - --------------------------------------------------------------------------------- TNT N.V. (Air Freight & Logistics) 205,950 4,860,915 - --------------------------------------------------------------------------------- 21,291,091 - --------------------------------------------------------------------------------- NORWAY-1.05% Statoil A.S.A. (Integrated Oil & Gas)/(b)/ 132,100 2,933,760 - ---------------------------------------------------------------------------------
F-1
SHARES VALUE - ----------------------------------------------------------------------------------- SOUTH KOREA-2.42% Kookmin Bank (Diversified Banks)/(b)/ 34,700 $ 1,994,775 - ----------------------------------------------------------------------------------- Korea Electric Power Corp.-ADR (Electric Utilities) 80,700 1,317,831 - ----------------------------------------------------------------------------------- KT Corp.-ADR (Integrated Telecommunication Services) 160,550 3,459,853 - ----------------------------------------------------------------------------------- 6,772,459 - ----------------------------------------------------------------------------------- SPAIN-2.23% Endesa, S.A.-ADR (Electric Utilities) 122,385 3,033,924 - ----------------------------------------------------------------------------------- Repsol YPF, S.A.-ADR (Integrated Oil & Gas) 107,035 3,190,713 - ----------------------------------------------------------------------------------- 6,224,637 - ----------------------------------------------------------------------------------- SWEDEN-1.20% Nordea Bank A.B. (Diversified Banks)/(b)/ 341,500 3,346,120 - ----------------------------------------------------------------------------------- SWITZERLAND-9.08% Credit Suisse Group (Diversified Capital Markets)/(b)/ 96,700 4,278,537 - ----------------------------------------------------------------------------------- Nestle S.A. (Packaged Foods & Meats)/(b)/ 9,250 2,753,936 - ----------------------------------------------------------------------------------- Nestle S.A.-ADR (Packaged Foods & Meats)/(d)/ 38,575 2,868,252 - ----------------------------------------------------------------------------------- Novartis A.G. (Pharmaceuticals) 88,100 4,739,719 - ----------------------------------------------------------------------------------- Novartis A.G.-ADR (Pharmaceuticals) 70,000 3,767,400 - ----------------------------------------------------------------------------------- Roche Holding A.G. (Pharmaceuticals) 14,500 2,166,479 - ----------------------------------------------------------------------------------- Zurich Financial Services A.G. (Multi-Line Insurance) 28,195 4,809,806 - ----------------------------------------------------------------------------------- 25,384,129 - ----------------------------------------------------------------------------------- TAIWAN-0.42% Taiwan Semiconductor Manufacturing Co. Ltd.-ADR (Semiconductors) 145,109 1,172,481 - ----------------------------------------------------------------------------------- UNITED KINGDOM-25.22% Anglo American PLC (Diversified Metals & Mining) 113,800 3,364,669 - ----------------------------------------------------------------------------------- BAA PLC (Airport Services) 349,400 3,795,082 - ----------------------------------------------------------------------------------- BAE Systems PLC (Aerospace & Defense)/(b)/ 1,110,000 6,491,854 - ----------------------------------------------------------------------------------- Boots Group PLC (Drug Retail)/(b)/ 257,300 2,803,991 - ----------------------------------------------------------------------------------- BP PLC (Integrated Oil & Gas)/(b)/ 234,600 2,597,152 - ----------------------------------------------------------------------------------- Cadbury Schweppes PLC (Packaged Foods & Meats)/(b)/ 470,000 4,627,086 - -----------------------------------------------------------------------------------
SHARES VALUE - ------------------------------------------------------------------------------- UNITED KINGDOM-(CONTINUED) Diageo PLC (Distillers & Vintners) 328,200 $ 4,851,865 - ------------------------------------------------------------------------------- GlaxoSmithKline PLC (Pharmaceuticals) 36,000 936,285 - ------------------------------------------------------------------------------- GlaxoSmithKline PLC-ADR (Pharmaceuticals) 156,200 8,120,838 - ------------------------------------------------------------------------------- HSBC Holdings PLC-ADR (Diversified Banks) 49,285 3,881,687 - ------------------------------------------------------------------------------- Kingfisher PLC (Home Improvement Retail)/(b)/ 620,300 2,327,086 - ------------------------------------------------------------------------------- Lloyds TSB Group PLC (Diversified Banks)/(b)/ 350,000 2,870,092 - ------------------------------------------------------------------------------- Morrison (William) Supermarkets PLC (Food Retail) 1,185,200 3,430,782 - ------------------------------------------------------------------------------- Reed Elsevier PLC (Publishing)/(b)/ 579,700 5,292,949 - ------------------------------------------------------------------------------- Royal Bank of Scotland Group PLC (Diversified Banks)/(b)/ 284,300 7,873,158 - ------------------------------------------------------------------------------- Royal Dutch Shell PLC-Class A-ADR (Integrated Oil & Gas) 29,450 1,827,078 - ------------------------------------------------------------------------------- Vodafone Group PLC (Wireless Telecommunication Services)/(b)/ 2,065,000 5,420,873 - ------------------------------------------------------------------------------- 70,512,527 - ------------------------------------------------------------------------------- Total Foreign Stocks & Other Equity Interests (Cost $218,902,082) 270,064,194 - ------------------------------------------------------------------------------- MONEY MARKET FUNDS-3.82% Premier Portfolio-Institutional Class (Cost $10,682,350)/(e)/ 10,682,350 10,682,350 - ------------------------------------------------------------------------------- TOTAL INVESTMENTS-100.43% (excluding investments purchased with cash collateral from securities loaned) (Cost $229,584,432) 280,746,544 - ------------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED MONEY MARKET FUNDS-6.43% Premier Portfolio--Institutional Class/(e)(f)/ 17,969,344 17,969,344 - ------------------------------------------------------------------------------- Total Money Market Funds (purchased with cash collateral from securities loaned) (Cost $17,969,344) 17,969,344 - ------------------------------------------------------------------------------- TOTAL INVESTMENTS-106.86% (Cost $247,553,776) 298,715,888 - ------------------------------------------------------------------------------- OTHER ASSETS LESS LIABILITIES-(6.86%) (19,174,286) - ------------------------------------------------------------------------------- NET ASSETS-100.00% $ 279,541,602 - -------------------------------------------------------------------------------
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 securities lending transactions at October 31, 2005. /(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 value of these securities at October 31, 2005 was $149,179,643 which represented 53.37% of the Fund's Net Assets. 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 value of these securities at October 31, 2005 was $6,407,184, which represented 2.29% of the Fund's Net Assets. See Note 1A. /(e)/The money market fund and the Fund are affiliated by having the same investment advisor. See 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 7. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-2 STATEMENT OF ASSETS AND LIABILITIES October 31, 2005
ASSETS: Investments, at value (cost $218,902,082)* $270,064,194 - ----------------------------------------------------------------------------------- Investments in affiliated money market funds (cost $28,651,694) 28,651,694 - ----------------------------------------------------------------------------------- Total investments (cost $247,553,776) 298,715,888 - ----------------------------------------------------------------------------------- Receivables for: Investments sold 1,257,336 - ----------------------------------------------------------------------------------- Fund shares sold 716,314 - ----------------------------------------------------------------------------------- Dividends 545,196 - ----------------------------------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 44,449 - ----------------------------------------------------------------------------------- Other assets 93,412 - ----------------------------------------------------------------------------------- Total assets 301,372,595 - ----------------------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 2,667,571 - ----------------------------------------------------------------------------------- Fund shares reacquired 542,190 - ----------------------------------------------------------------------------------- Amount due custodian 362,431 - ----------------------------------------------------------------------------------- Trustee deferred compensation and retirement plans 56,171 - ----------------------------------------------------------------------------------- Collateral upon return of securities loaned 17,969,344 - ----------------------------------------------------------------------------------- Accrued distribution fees 78,123 - ----------------------------------------------------------------------------------- Accrued trustees' and officer's fees and benefits 1,778 - ----------------------------------------------------------------------------------- Accrued transfer agent fees 86,751 - ----------------------------------------------------------------------------------- Accrued operating expenses 66,634 - ----------------------------------------------------------------------------------- Total liabilities 21,830,993 - ----------------------------------------------------------------------------------- Net assets applicable to shares outstanding $279,541,602 - ----------------------------------------------------------------------------------- NET ASSETS CONSIST OF: Shares of beneficial interest $225,063,043 - ----------------------------------------------------------------------------------- Undistributed net investment income 2,223,232 - ----------------------------------------------------------------------------------- Undistributed net realized gain from investment securities and foreign currencies 1,095,964 - ----------------------------------------------------------------------------------- Unrealized appreciation of investment securities and foreign currencies 51,159,363 - ----------------------------------------------------------------------------------- $279,541,602 - -----------------------------------------------------------------------------------
NET ASSETS: Class A $90,022,353 ----------------------------------------------------------- Class B $28,784,800 ----------------------------------------------------------- Class C $38,107,515 ----------------------------------------------------------- Class R $ 2,621,514 ----------------------------------------------------------- Investor Class $46,987,510 ----------------------------------------------------------- Institutional Class $73,017,910 ----------------------------------------------------------- SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 7,567,135 ----------------------------------------------------------- Class B 2,441,352 ----------------------------------------------------------- Class C 3,301,277 ----------------------------------------------------------- Class R 220,804 ----------------------------------------------------------- Investor Class 3,903,031 ----------------------------------------------------------- Institutional Class 6,099,726 ----------------------------------------------------------- Class A : Net asset value per share $ 11.90 ----------------------------------------------------------- Offering price per share: (Net asset value of $11.90 / 94.50%) $ 12.59 ----------------------------------------------------------- Class B : Net asset value and offering price per share $ 11.79 ----------------------------------------------------------- Class C : Net asset value and offering price per share $ 11.54 ----------------------------------------------------------- Class R: Net asset value and offering price per share $ 11.87 ----------------------------------------------------------- Investor Class: Net asset value and offering price per share $ 12.04 ----------------------------------------------------------- Institutional Class: Net asset value and offering price per share $ 11.97 -----------------------------------------------------------
* At October 31, 2005, securities with an aggregate value of $17,287,429 were on loan to brokers. See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-3 STATEMENT OF OPERATIONS For the year ended October 31, 2005
INVESTMENT INCOME: Dividends (net of foreign withholding tax of $669,500) $ 6,197,826 - --------------------------------------------------------------------------------------------- Dividends from affiliated money market funds (includes securities lending income of $144,771, after compensation to counterparties of $758,442) 404,887 - --------------------------------------------------------------------------------------------- Total investment income 6,602,713 - --------------------------------------------------------------------------------------------- EXPENSES: Advisory fees 1,792,685 - --------------------------------------------------------------------------------------------- Administrative services fees 104,976 - --------------------------------------------------------------------------------------------- Custodian fees 97,632 - --------------------------------------------------------------------------------------------- Distribution fees: Class A 238,546 - --------------------------------------------------------------------------------------------- Class B 277,342 - --------------------------------------------------------------------------------------------- Class C 383,579 - --------------------------------------------------------------------------------------------- Class R 12,972 - --------------------------------------------------------------------------------------------- Investor Class 120,120 - --------------------------------------------------------------------------------------------- Transfer agent fees- A, B, C, R and Investor 549,525 - --------------------------------------------------------------------------------------------- Transfer agent fees-Institutional 2,734 - --------------------------------------------------------------------------------------------- Trustees' and officer's fees and benefits 22,559 - --------------------------------------------------------------------------------------------- Other 305,561 - --------------------------------------------------------------------------------------------- Total expenses 3,908,231 - --------------------------------------------------------------------------------------------- Less:Fees waived, expenses reimbursed and expense offset arrangement (10,636) - --------------------------------------------------------------------------------------------- Net expenses 3,897,595 - --------------------------------------------------------------------------------------------- Net investment income 2,705,118 - --------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN CURRENCIES: Net realized gain (loss) from: Investment securities 14,556,422 - --------------------------------------------------------------------------------------------- Foreign currencies (436,126) - --------------------------------------------------------------------------------------------- 14,120,296 - --------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of: Investment securities 11,685,742 - --------------------------------------------------------------------------------------------- Foreign currencies (10,370) - --------------------------------------------------------------------------------------------- 11,675,372 - --------------------------------------------------------------------------------------------- Net gain from investment securities and foreign currencies 25,795,668 - --------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $28,500,786 - ---------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-4 STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2005 and 2004
2005 - ------------------------------------------------------------------------------------------------------------------------ OPERATIONS: Net investment income $ 2,705,118 - ------------------------------------------------------------------------------------------------------------------------ Net realized gain from investment securities and foreign currencies 14,120,296 - ------------------------------------------------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities and foreign currencies 11,675,372 - ------------------------------------------------------------------------------------------------------------------------ Net increase in net assets resulting from operations 28,500,786 - ------------------------------------------------------------------------------------------------------------------------ Distributions to shareholders from net investment income: Class A (445,320) - ------------------------------------------------------------------------------------------------------------------------ Class B (16,207) - ------------------------------------------------------------------------------------------------------------------------ Class C (65,085) - ------------------------------------------------------------------------------------------------------------------------ Class R (14,030) - ------------------------------------------------------------------------------------------------------------------------ Investor Class (314,265) - ------------------------------------------------------------------------------------------------------------------------ Institutional Class (244,538) - ------------------------------------------------------------------------------------------------------------------------ Decrease in net assets resulting from distributions (1,099,445) - ------------------------------------------------------------------------------------------------------------------------ Share transactions-net: Class A 20,388,288 - ------------------------------------------------------------------------------------------------------------------------ Class B 1,779,734 - ------------------------------------------------------------------------------------------------------------------------ Class C (2,982,997) - ------------------------------------------------------------------------------------------------------------------------ Class R 207,566 - ------------------------------------------------------------------------------------------------------------------------ Investor Class (3,117,007) - ------------------------------------------------------------------------------------------------------------------------ Institutional Class 52,077,505 - ------------------------------------------------------------------------------------------------------------------------ Net increase in net assets resulting from share transactions 68,353,089 - ------------------------------------------------------------------------------------------------------------------------ Net increase in net assets 95,754,430 - ------------------------------------------------------------------------------------------------------------------------ NET ASSETS: Beginning of year 183,787,172 - ------------------------------------------------------------------------------------------------------------------------ End of year (including undistributed net investment income of $2,223,232 and $1,050,690, respectively) $279,541,602 - ------------------------------------------------------------------------------------------------------------------------
2004 - ----------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 1,247,768 - ----------------------------------------------------------------------------------------------------------------------- Net realized gain 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) - ----------------------------------------------------------------------------------------------------------------------- Institutional Class -- - ----------------------------------------------------------------------------------------------------------------------- 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 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 $2,223,232 and $1,050,690, respectively) $183,787,172 - -----------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. F-5 NOTES TO FINANCIAL STATEMENTS October 31, 2005 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM 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 consists of multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund's investment objective is to seek total return. Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services, which may be considered fair valued, or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the customary trading session on the valuation date or absent a NOCP, at the closing bid price. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are 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 and domestic and foreign index futures. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. F-6 Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, AIM may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. G. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is 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 -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. 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. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------- First $500 million 0.75% ---------------------------------------------------- Next $500 million 0.65% ---------------------------------------------------- Next $1 billion 0.55% ---------------------------------------------------- Next $2 billion 0.45% ---------------------------------------------------- Next $2 billion 0.40% ---------------------------------------------------- Next $2 billion 0.375% ---------------------------------------------------- Over $8 billion 0.35% ----------------------------------------------------
F-7 Under the terms of a master sub-advisory agreement between AIM and INVESCO Global Asset Management (N.A.) ("IGAM"), AIM pays IGAM 40% of the amount of AIM's compensation on the sub-advised assets. 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, Investor Class and Institutional Class shares to 2.00%, 2.75%, 2.75%, 2.25%, 2.00% and 1.75% of average daily net assets, respectively, through October 31, 2006. In determining the advisor's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses to exceed the numbers reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, in addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more fully below, the expense offset arrangements from which the Fund may benefit are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. AIM did not waive fees and/or reimburse expenses during the period under this expense limitation. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the fund). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended October 31, 2005, AIM waived fees of $3,138. At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the year ended October 31, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $590. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. Pursuant to such agreement, for the year ended October 31, 2005, AIM was paid $104,976. The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the year ended October 31, 2005, the Fund paid AISI $549,525 for Class A, Class B, Class C, Class R and Investor Class share classes and $2,734 for Institutional Class shares. The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B, Class C, Class 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 ADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.50% of the average daily net assets of Class R shares and 0.25% of the average daily net assets of Investor Class shares. Prior to July 1, 2005, the Fund paid ADI 0.35% of the average daily net assets of Class A shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R or Investor Class shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. National Association of Securities Dealers ("NASD") Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended October 31, 2005, the Class A, Class B, Class C, Class R and Investor Class shares paid $238,546, $277,342, $383,579, $12,972, and $120,120, 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. For the year ended October 31, 2005, ADI advised the Fund that it retained $32,193 in front-end sales commissions from the sale of Class A shares and $48, $9,011, $2,615 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 ADI. NOTE 3--INVESTMENTS IN AFFILIATES The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market fund 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 an affiliated money market fund for the year ended October 31, 2005. F-8 INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME GAIN (LOSS) - -------------------------------------------------------------------------------------------------------------------------- Premier Portfolio-Institutional Class $3,494,279 $77,120,270 $(69,932,199) $ -- $10,682,350 $260,116 $ -- - --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED FUND 10/31/04 AT COST FROM SALES (DEPRECIATION) 10/31/05 INCOME* GAIN (LOSS) - ----------------------------------------------------------------------------------------------------------------------------- Premier Portfolio-Institutional Class $38,945,109 $242,413,401 $(263,389,166) $ -- $17,969,344 $144,771 $ -- - ----------------------------------------------------------------------------------------------------------------------------- Total $42,439,388 $319,533,671 $(333,321,365) $ -- $28,651,694 $404,887 $ -- - -----------------------------------------------------------------------------------------------------------------------------
* Net of compensation to 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, 2005, the Fund received credits from this arrangement, which resulted in the reduction of the Fund's total expenses of $6,908. NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee and Officer of the Fund who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2005, the Fund paid legal fees of $3,463 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. During the year ended October 31, 2005, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and AIM, not to exceed the rate contractually agreed upon. NOTE 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. F-9 At October 31, 2005, securities with an aggregate value of $17,287,429 were on loan to brokers. The loans were secured by cash collateral of $17,969,344 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2005, the Fund received dividends on cash collateral of $144,771 for securities lending transactions, which are net of compensation to counterparties. 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, 2005 and 2004 was as follows:
2005 2004 ----------------------------------------------------------- Distributions paid from ordinary income $1,099,445 $489,876 -----------------------------------------------------------
TAX COMPONENTS OF NET ASSETS:
2005 As of October 31, 2005, the components of net assets on a tax basis were as follows: ---- Undistributed ordinary income $ 2,270,119 - -------------------------------------------------------------------------------------------------- Undistributed long-term gain 9,324,879 - -------------------------------------------------------------------------------------------------- Unrealized appreciation--investments 44,882,942 - -------------------------------------------------------------------------------------------------- Temporary book/tax differences (46,886) - -------------------------------------------------------------------------------------------------- Capital loss carryforward (1,952,495) - -------------------------------------------------------------------------------------------------- Shares of beneficial interest 225,063,043 - -------------------------------------------------------------------------------------------------- Total net assets $279,541,602 - --------------------------------------------------------------------------------------------------
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 certain corporate actions. The tax-basis unrealized appreciation on investments amount includes appreciation (depreciation) on foreign currencies of $(2,749). 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, 2005 to utilizing $1,952,495 of capital loss carryforward in the fiscal year ended October 31, 2006. The Fund utilized $3,212,773 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, 2005 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* --------------------------------------------- October 31, 2009 $1,634,475 --------------------------------------------- October 31, 2010 318,020 --------------------------------------------- Total capital loss carryforward $1,952,495 ---------------------------------------------
* 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 3, 2003, the date of the reorganization of INVESCO Advantage Fund into the Fund, and 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 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, 2005 was $108,758,361 and $45,127,853, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $51,864,182 ------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (6,978,491) ------------------------------------------------------------------------- Net unrealized appreciation of investment securities $44,885,691 -------------------------------------------------------------------------
Cost of investments for tax purposes is $253,830,197. NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions, passive foreign investment companies, reorganization expenses and the use of a portion of the proceeds from redemptions as distributions, on October 31, 2005, undistributed net investment income (loss) was decreased by $433,131, undistributed net realized gain (loss) was decreased by $1,132,895 and shares of beneficial interest increased by $1,566,026. This reclassification had no effect on the net assets of the Fund. F-10 NOTE 11--SHARE INFORMATION The Fund currently consists of six different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares, Investor Class shares and Institutional Class shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Class R shares, Investor Class shares and Institutional Class shares are sold at net asset value. Under certain circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. Investor Class shares of the Fund are offered only to certain grandfathered investors.
CHANGES IN SHARES OUTSTANDING - ------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------- 2005(a) 2004 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------------------- Sold: Class A 3,683,711 $ 42,067,093 2,187,817 $ 21,070,438 - ------------------------------------------------------------------------------------------------------------- Class B 852,397 9,660,234 726,386 6,786,146 - ------------------------------------------------------------------------------------------------------------- Class C 557,708 6,173,726 607,932 5,844,662 - ------------------------------------------------------------------------------------------------------------- Class R/(b)/ 106,097 1,214,679 111,406 1,094,858 - ------------------------------------------------------------------------------------------------------------- Investor Class 1,014,202 11,703,395 1,427,600 14,079,460 - ------------------------------------------------------------------------------------------------------------- Institutional Class/(c)/ 4,608,700 52,821,822 1,571,660 15,727,981 - ------------------------------------------------------------------------------------------------------------- Issued as reinvestment of dividends: Class A 36,718 407,568 17,683 156,851 - ------------------------------------------------------------------------------------------------------------- Class B 1,231 13,623 5,564 49,244 - ------------------------------------------------------------------------------------------------------------- Class C 2,955 32,029 6,021 52,143 - ------------------------------------------------------------------------------------------------------------- Class R/(b)/ 1,222 13,563 422 3,742 - ------------------------------------------------------------------------------------------------------------- Investor Class 25,955 291,470 11,868 106,340 - ------------------------------------------------------------------------------------------------------------- Institutional Class/(c)/ 21,991 244,538 -- -- - ------------------------------------------------------------------------------------------------------------- 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 175,673 2,004,370 169,160 1,680,849 - ------------------------------------------------------------------------------------------------------------- Class B (176,720) (2,004,370) (170,086) (1,680,849) - ------------------------------------------------------------------------------------------------------------- Reacquired:/(e)/ Class A (2,090,118) (24,090,743) (2,363,667) (23,262,195) - ------------------------------------------------------------------------------------------------------------- Class B (517,865) (5,889,753) (477,775) (4,653,991) - ------------------------------------------------------------------------------------------------------------- Class C (828,056) (9,188,752) (1,576,001) (15,078,644) - ------------------------------------------------------------------------------------------------------------- Class R/(b)/ (88,020) (1,020,676) (37,343) (371,198) - ------------------------------------------------------------------------------------------------------------- Investor Class (1,305,798) (15,111,872) (2,585,961) (25,621,003) - ------------------------------------------------------------------------------------------------------------- Institutional Class/(c)/ (86,215) (988,855) (16,410) (166,035) - ------------------------------------------------------------------------------------------------------------- 5,995,768 $ 68,353,089 11,618,278 $100,889,716 - -------------------------------------------------------------------------------------------------------------
/(a)/There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and it owns 10% of the outstanding shares of the Fund. ADI has an agreement with this entity to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to this entity, which 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 of the shares owned of record by this entity are also owned beneficially. 23% 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 on November 21, 2003. AIM International Core Equity Fund's 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 $3,047, $1,166, $1,676, $106, $2,104 and $1,366 for Class A, Class B, Class C, Class R, Investor Class and Institutional Class shares, respectively, for the year ended October 31, 2005 and $1,154, $454, $725, $32, $1,030 and $86 for Class A, Class B, Class C, Class R, Investor Class and Institutional Class shares, respectively, for the year ended October 31, 2004. F-11 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 (DATE SALES COMMENCED TO YEAR ENDED OCTOBER 31, OCTOBER 31, ---------------------------------- 2002 2005 2004 2003 -------------- - ----------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.52 $ 8.74 $ 7.31 $ 8.96 - --------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.14/(a)/ 0.09/(a)/ 0.07/(a)/ 0.01/(b)/ - --------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.32 1.72 1.39 (1.66) - --------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.46 1.81 1.46 (1.65) - --------------------------------------------------------------------------------------------------------------------------- Less dividends from net investment income (0.08) (0.03) (0.03) -- - --------------------------------------------------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 11.90 $ 10.52 $ 8.74 $ 7.31 - --------------------------------------------------------------------------------------------------------------------------- Total return/(c)/ 13.89% 20.78% 19.96% (18.42)% - --------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $90,022 $60,603 $2,033 $ 2,944 - --------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 1.56%/(d)/ 1.84%/(e)/ 1.87% 1.48%/(f)/ - --------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 1.20%/(d)/ 0.94% 0.91% 0.47%/(f)/ - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 69% 51% 44% - ---------------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income per share was calculated after permanent book tax differences, such as corporate actions which were reclassified from accumulated net investment income to paid in capital. Had net investment income per share been calculated using the current method, which is before reclassification of net operating losses, net investment income per share would have been $0.00. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. /(d)/Ratios and based on average daily net assets of $76,621,439. /(e)/After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.86%. /(f)/Annualized. F-12 NOTE 12--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS B ------------------------------------------------- MARCH 28, 2002 (DATE SALES COMMENCED) TO YEAR ENDED OCTOBER 31, OCTOBER 31, --------------------------------- 2002 2005 2004 2003 -------------- - ---------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.43 $ 8.72 $ 7.31 $ 8.96 - ----------------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) 0.06/(a)/ 0.02/(a)/ 0.00/(a)/ (0.01)/(a)(b)/ - ----------------------------------------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) 1.31 1.71 1.43 (1.64) - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.37 1.73 1.43 (1.65) - ----------------------------------------------------------------------------------------------------------------------------- Less dividends from net investment income (0.01) (0.02) (0.02) -- - ----------------------------------------------------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 11.79 $ 10.43 $ 8.72 $ 7.31 - ----------------------------------------------------------------------------------------------------------------------------- Total return/(c)/ 13.11% 19.92% 19.50% (18.42)% - ----------------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $28,785 $23,812 $ 573 $ 84 - ----------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and /or expense reimbursements 2.25%/(d)/ 2.53% 2.75% 2.60%/(e)/ - ----------------------------------------------------------------------------------------------------------------------------- Without fee waivers and /or expense reimbursements 2.25%/(d)/ 2.57% 4.13% 2.60%/(e)/ - ----------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.51%/(d)/ 0.25% 0.03% (0.14)%/(e)/ - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 69% 51% 44% - -----------------------------------------------------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income (loss) per share was calculated after permanent book tax differences, such as corporate actions which were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.01). /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year. /(d)/Ratios are based on average daily net assets of $27,734,132. /(e)/Annualized. F-13 NOTE 12--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS C ---------------------------------------------------- YEAR ENDED OCTOBER 31, ---------------------------------------------------- 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 10.22 $ 8.53 $ 7.16 $ 8.06 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income (loss) 0.06/(a)/ 0.04/(a)/ 0.00/(a)/ (0.02)/(b)/ - ------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 1.28 1.67 1.37 (0.88) - ------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.34 1.71 1.37 (0.90) - ------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.02) (0.02) -- -- - ------------------------------------------------------------------------------------------------------------------------ Distributions from net realized gains -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ Total distributions (0.02) (0.02) -- -- - ------------------------------------------------------------------------------------------------------------------------ Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 11.54 $ 10.22 $ 8.53 $ 7.16 - ------------------------------------------------------------------------------------------------------------------------ Total return/(c)/ 13.11% 20.13% 19.13% (11.17)% - ------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $38,108 $36,490 $2,608 $ 1,115 - ------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets: With fee waivers and /or expense reimbursements 2.25%/(d)/ 2.41% 2.75% 2.75% - ------------------------------------------------------------------------------------------------------------------------ Without fee waivers and /or expense reimbursements 2.25%/(d)/ 2.46% 4.14% 3.52% - ------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets 0.51%/(d)/ 0.37% 0.03% (0.43)% - ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 21% 69% 51% 44% - ------------------------------------------------------------------------------------------------------------------------
-------- -------- 2001 - -------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.14 - -------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) (0.02)/(b)/ - -------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (2.12) - -------------------------------------------------------------------------------- Total from investment operations (2.14) - -------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.00) - -------------------------------------------------------------------------------- Distributions from net realized gains (0.94) - -------------------------------------------------------------------------------- Total distributions (0.94) - -------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 - -------------------------------------------------------------------------------- Net asset value, end of period $ 8.06 - -------------------------------------------------------------------------------- Total return/(c)/ (20.75)% - -------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $ 1,272 - -------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and /or expense reimbursements 2.76% - -------------------------------------------------------------------------------- Without fee waivers and /or expense reimbursements 3.02% - -------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.62)% - -------------------------------------------------------------------------------- Portfolio turnover rate 54% - --------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income (loss) per share was calculated after permanent book tax differences, such as corporate actions which were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.03) and $(0.04) for the years ended 2002 and 2001, respectively. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges. /(d)/Ratios are based on average daily net assets of $38,357,919. F-14 NOTE 12--FINANCIAL HIGHLIGHTS-(CONTINUED)
CLASS R -------------------------- NOVEMBER 24, 2003 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2005 2004 - --------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.51 $ 8.90 - --------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.12/(a)/ 0.08/(a)/ - --------------------------------------------------------------------------------------------- Net gains on securities (both realized and unrealized) 1.31 1.56 - --------------------------------------------------------------------------------------------- Total from investment operations 1.43 1.64 - --------------------------------------------------------------------------------------------- Less dividends from net investment income (0.07) (0.03) - --------------------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 0.00 - --------------------------------------------------------------------------------------------- Net asset value, end of period $11.87 $10.51 - --------------------------------------------------------------------------------------------- Total return/(b)/ 13.64% 18.49% - --------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $2,622 $2,118 - --------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 1.75%/(c)/ 1.91%/(d)(e)/ - --------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 1.01%/(c)/ 0.87%/(e)/ - --------------------------------------------------------------------------------------------- Portfolio turnover rate 21% 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 based on average daily net assets of $2,594,447. /(d)/After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.93%. /(e)/Annualized.
INVESTOR CLASS ---------------------------------------------------- YEAR ENDED OCTOBER 31, ---------------------------------------------------- 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 10.64 $ 8.83 $ 7.35 $ 8.17 - ------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income 0.15/(a)/ 0.09/(a)/ 0.06/(a)/ 0.05/(b)/ - ------------------------------------------------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) 1.33 1.75 1.44 (0.87) - ------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.48 1.84 1.50 (0.82) - ------------------------------------------------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.08) (0.03) (0.02) -- - ------------------------------------------------------------------------------------------------------------------------ Distributions from net realized gains -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ Total distributions (0.08) (0.03) (0.02) -- - ------------------------------------------------------------------------------------------------------------------------ Redemption fees added to shares of beneficial interest 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 12.04 $ 10.64 $ 8.83 $ 7.35 - ------------------------------------------------------------------------------------------------------------------------ Total return/(c)/ 13.92% 20.84% 20.42% (10.04)% - ------------------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $46,988 $44,345 $46,920 $40,620 - ------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets: With fee waivers and /or expense reimbursements 1.50%/(d)/ 1.84% 2.00% 1.99% - ------------------------------------------------------------------------------------------------------------------------ Without fee waivers and /or expense reimbursements 1.50%/(d)/ 1.89% 2.26% 1.99% - ------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 1.26%/(d)/ 0.94% 0.78% 0.42% - ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 21% 69% 51% 44% - ------------------------------------------------------------------------------------------------------------------------
-------- -------- 2001 - ------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.16 - ------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.03/(b)/ - ------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (2.07) - ------------------------------------------------------------------------------- Total from investment operations (2.04) - ------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.01) - ------------------------------------------------------------------------------- Distributions from net realized gains (0.94) - ------------------------------------------------------------------------------- Total distributions (0.95) - ------------------------------------------------------------------------------- Redemption fees added to shares of beneficial interest 0.00 - ------------------------------------------------------------------------------- Net asset value, end of period $ 8.17 - ------------------------------------------------------------------------------- Total return/(c)/ (19.74)% - ------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $46,562 - ------------------------------------------------------------------------------- Ratio of expenses to average net assets: With fee waivers and /or expense reimbursements 1.89% - ------------------------------------------------------------------------------- Without fee waivers and /or expense reimbursements 1.89% - ------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.12% - ------------------------------------------------------------------------------- Portfolio turnover rate 54% - -------------------------------------------------------------------------------
/(a)/Calculated using average shares outstanding. /(b)/The net investment income per share was calculated after permanent book tax differences, such as corporate actions which were reclassified from accumulated net investment income to paid in capital. Had net investment income per share been calculated using the current method, which is before reclassification of net operating losses, net investment income per share would have been $0.04 and $0.01 for the years ended 2002 and 2001, respectively. /(c)/Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. /(d)/Ratios are based on average daily net assets of $48,197,977. F-15 NOTE 12--FINANCIAL HIGHLIGHTS-(CONTINUED)
INSTITUTIONAL CLASS -------------------------- APRIL 30, 2004 (DATE SALES YEAR ENDED COMMENCED) TO OCTOBER 31, OCTOBER 31, 2005 2004 - ------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 10.56 $ 9.78 - ------------------------------------------------------------------------------------------ Income from investment operations: Net investment income 0.21/(a)/ 0.09/(a)/ - ------------------------------------------------------------------------------------------ Net gains on securities (both realized and unrealized) 1.32 0.69 - ------------------------------------------------------------------------------------------ Total from investment operations 1.53 0.78 - ------------------------------------------------------------------------------------------ Less dividends from net investment income (0.12) -- - ------------------------------------------------------------------------------------------ Redemption fees added to shares of beneficial interest 0.00 0.00 - ------------------------------------------------------------------------------------------ Net asset value, end of period $ 11.97 $ 10.56 - ------------------------------------------------------------------------------------------ Total return/(b)/ 14.53% 7.97% - ------------------------------------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $73,018 $16,421 - ------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 0.98%/(c)/ 1.07%/(d)/ - ------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets 1.78%/(c)/ 1.71%/(d)/ - ------------------------------------------------------------------------------------------ Portfolio turnover rate 21% 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 based on average daily net assets of $45,518,794. /(d)/Annualized. NOTE 13--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Half of this amount has already been paid to the fair fund pursuant to the terms of the settlement with the remainder due December 31, 2005. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future. At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. REGULATORY INQUIRIES AND PENDING LITIGATION IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, 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. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM F-16 NOTE 13--LEGAL PROCEEDINGS-(CONTINUED) Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future. On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code (S) 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On June 13, 2005, the MDL Court (as defined below) issued a Conditional Transfer Order transferring this lawsuit to the MDL Court, which Conditional Transfer Order was finalized on October 19, 2005. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling. On August 30, 2005, the West Virginia Office of the State Auditor--Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI. The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. AIM and ADI have the right to contest the WVASC's findings and conclusions, which they intend to do. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging: . that the defendants permitted improper market timing and related activity in the AIM Funds; . that certain AIM Funds inadequately employed fair value pricing; . that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; . that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees; . 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; and . that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate (this lawsuit was dismissed by the Court on August 12, 2005). These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees. All lawsuits based on allegations of market timing, late trading and related activity have been transferred to the United States District Court for the District of Maryland. On August 25, 2005, the Court issued rulings on the common issues of law presented in defendants' motions to dismiss the shareholder class and derivative complaints. These rulings were issued in the context of the Janus lawsuits, but the Court's legal determinations apply at the omnibus level to all cases within his track, including the AIM and IFG cases. The Court dismissed for failure to make pre-suit demand on the fund board all derivative causes of action but one: the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"), as to which the demand requirement does not apply. The Court dismissed all claims asserted in the class complaint but two: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on the 36(b) claim to fees attributable to timing assets, as opposed to all fees on funds in which any timing occurred. The question whether the duplicative Section 36(b) claim properly belongs in the derivative complaint or in the class action complaint will be decided at a later date. The Court will subsequently issue an order applying his legal rulings to the allegations in the AIM and IFG complaints. At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund. * * * * * * * * * * * * * * * * As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds. F-17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of AIM International Mutual Funds 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 AIM International Core Equity Fund (one of the funds constituting AIM International Mutual Funds, hereafter referred to as the "Fund") at October 31, 2005, 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP December 19, 2005 Houston, Texas F-18 TRUSTEES AND OFFICERS As of October 31, 2005 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 109 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 POSITIONS(S) HELD WITH THE TRUSTEE AND/ PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S) 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 None Trustee, Vice Chair, Principal Group Inc. (financial services holding Executive Officer and President 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 President Officer, A I M Management Group Inc.; Director and President, A I M Advisors, Inc.; Director, A I M Capital Management, Inc. and A I M Distributors, Inc.; Director and Chairman, AIM Investment Services, Inc., Fund Management Company 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; and Chairman, A I M Advisors, Inc. - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology ACE Limited (insurance Trustee and Chair Associates (technology consulting company); and Captaris, Inc. company) (unified messaging provider) - --------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee - --------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Badgley Funds, Inc. (registered Trustee investment company Formerly: Partner, law firm of Baker & (2 portfolios)) McKenzie - --------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Co-President and Founder, Green, None Trustee Manning & 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 None Trustee private business corporations, including the Boss Group Ltd. (private investment and management); Cortland Trust, Inc. (Chairman) (registered investment company (3 portfolios)); Annuity and Life Re (Holdings), Ltd. (insurance company); and CompuDyne Corporation (provider of products and services to the public security market) 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 - --------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff and Discovery Trustee Century Group, Inc. (government affairs Global Education Fund (non- company); and owner, Dos Angelos Ranch, profit) L.P. Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company) - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered Trustee Naftalis and Frankel LLP investment company (3 portfolios)) - --------------------------------------------------------------------------------------------------------------------------------- Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services General Chemical Group, Inc. Trustee (San Diego, California) - --------------------------------------------------------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, Jr./3 /-- 1944 2005 Retired None Trustee Formerly: Partner, Deloitte & Touche - ---------------------------------------------------------------------------------------------------------------------------------
/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. /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. Stickel was elected as a trustee of the Trust effective October 1, 2005. TRUSTEES AND OFFICERS-(CONTINUED) As of October 31, 2005 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 109 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 POSITION(S) HELD WITH THE TRUSTEE AND/ PRINCIPAL OCCUPATION(S) DURING PAST 5 OTHER DIRECTORSHIP(S) TRUST OR OFFICER SINCE YEARS HELD BY TRUSTEE - ---------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS - ---------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management N/A Senior Vice President and Chief Group Inc. (financial services holding 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 Vice President, A I M Distributors, Inc., AIM Investment Services, Inc. and Fund Management Company Formerly: Senior Vice President and Compliance Director, Delaware Investments Family of Funds and Chief Compliance Officer, A I M Distributors, Inc. - ---------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and N/A Senior Vice President and Assistant General Counsel, ICON Senior Officer Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. - ---------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 Director, Senior Vice President, N/A Senior Vice President, Secretary and Secretary and General Counsel, A I M Chief Legal Officer Management Group Inc. and A I M Advisors, Inc.; Director and Vice President, INVESCO Distributors, Inc.; Vice President, A I M Capital Management, Inc., AIM Investment Services, Inc. and 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.; and Director and General Counsel, Fund Management Company - ---------------------------------------------------------------------------------------------------------------------- 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. - ---------------------------------------------------------------------------------------------------------------------- Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I N/A Vice President, Principal Financial M Advisors, Inc. Officer and Treasurer Formerly: Senior Vice President, AIM Investment Services, Inc.; and Vice President, A I M Distributors, Inc. - ---------------------------------------------------------------------------------------------------------------------- J. Phillip Ferguson -- 1945 2005 Senior Vice President and Chief N/A Vice President Investment Officer, A I M Advisors Inc.; Director, Chairman, Chief Executive Officer, President and Chief Investment Officer, A I M Capital Management, Inc.; Executive Vice President, A I M Management Group Inc. Formerly: Senior Vice President, AIM Private Asset Management, Inc.; Chief Equity Officer, and Senior Investment Officer, A I M Capital Management, 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. - ----------------------------------------------------------------------------------------------------------------------
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, Texas 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Ballard Spahr INDEPENDENT TRUSTEES AIM Investment Services, Inc. State Street Bank and Trust Andrews & Ingersoll, LLP Kramer, Levin, Naftalis & P.O. Box 4739 Company 1735 Market Street Frankel LLP Houston, TX 77210-4739 225 Franklin Street Philadelphia, PA 19103-7599 1177 Avenue of the Americas Boston, MA 02110-2801 New York, NY 10036-2714
SUB-ADVISOR INVESCO Global 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, 2005, 0% is eligible for the dividends received deduction for corporations. For its tax year ended October 31, 2005, the Fund designated 100%, or the maximum amount 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. The Fund distributed long-term capital gains of $1,569,000 for the Fund's tax year ended October 31, 2005. U.S. ESTATE TAX FOR NON-RESIDENT ALIEN SHAREHOLDERS (UNAUDITED) The percentage of qualifying assets not subject to the estate tax for the fiscal quarters ended January 31, 2005, April 30, 2005, July 31, 2005 and October 31, 2005 are 99.14%, 99.85%, 99.82%, and 99.86%, respectively. DOMESTIC EQUITY SECTOR EQUITY AIM Aggressive Growth Fund AIM Advantage Health Sciences Fund AIM Basic Balanced Fund* AIM Energy Fund AIM Basic Value Fund AIM Financial Services Fund AIM Blue Chip Fund AIM Global Health Care Fund AIM Capital Development Fund AIM Global Real Estate Fund AIM Charter Fund AIM Gold & Precious Metals Fund AIM Constellation Fund AIM Leisure Fund AIM Diversified Dividend Fund AIM Multi-Sector Fund AIM Dynamics Fund AIM Real Estate Fund/1/ AIM Large Cap Basic Value Fund AIM Technology Fund AIM Large Cap Growth Fund AIM Utilities Fund AIM Mid Cap Basic Value Fund AIM Mid Cap Core Equity Fund/1/ FIXED INCOME AIM Mid Cap Growth Fund AIM Opportunities I Fund TAXABLE AIM Opportunities II Fund AIM Opportunities III Fund AIM Floating Rate Fund AIM Premier Equity Fund AIM High Yield Fund AIM S&P 500 Index Fund AIM Income Fund AIM Select Equity Fund AIM Intermediate Government Fund AIM Small Cap Equity Fund AIM Limited Maturity Treasury Fund AIM Small Cap Growth Fund/1/ AIM Money Market Fund AIM Small Company Growth Fund AIM Short Term Bond Fund AIM Summit Fund AIM Total Return Bond Fund AIM Trimark Endeavor Fund Premier Portfolio AIM Trimark Small Companies Fund Premier U.S. Government Money Portfolio AIM Weingarten Fund *Domestic equity and income fund TAX-FREE INTERNATIONAL/GLOBAL EQUITY AIM High Income Municipal Fund/1/ AIM Municipal Bond Fund AIM Asia Pacific Growth Fund AIM Tax-Exempt Cash Fund AIM Developing Markets Fund AIM Tax-Free Intermediate Fund AIM European Growth Fund Premier Tax-Exempt Portfolio AIM European Small Company Fund/1/ AIM Global Aggressive Growth Fund AIM ALLOCATION SOLUTIONS AIM Global Equity Fund AIM Global Growth Fund AIM Conservative Allocation Fund AIM Global Value Fund AIM Growth Allocation Fund/2/ AIM International Core Equity Fund AIM Moderate Allocation Fund AIM International Growth Fund AIM Moderate Growth Allocation Fund AIM International Small Company Fund/1/ AIM Moderately Conservative Allocation Fund AIM Trimark Fund DIVERSIFIED PORTFOLIOS AIM Income Allocation Fund AIM International Allocation Fund
/1/This fund has limited public sales of its shares to certain investors. For more information on who may continue to invest in the fund, please see the appropriate prospectus. /2/Effective April 29, 2005, AIM Aggressive Allocation Fund was renamed AIM Growth Allocation Fund. If used after January 20, 2006, this report must be accompanied by a Fund Performance & Commentary or by an AIM Quarterly Performance Review for the most recent quarter-end. Mutual funds distributed by A I M Distributors, Inc. A I M MANAGEMENT GROUP INC. HAS PROVIDED LEADERSHIP IN THE INVESTMENT MANAGEMENT INDUSTRY SINCE 1976 AND MANAGES $129 BILLION IN ASSETS. AIM IS A SUBSIDIARY OF AMVESCAP PLC, ONE OF THE WORLD'S LARGEST INDEPENDENT FINANCIAL SERVICES COMPANIES WITH $381 BILLION IN ASSETS UNDER MANAGEMENT. DATA AS OF SEPTEMBER 30, 2005. - -------------------------------------------------------------------------------- CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY. FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR FINANCIAL ADVISOR AND READ IT CAREFULLY BEFORE INVESTING. - -------------------------------------------------------------------------------- AIMinvestments.com I-ICE--AR-1 A I M Distributors, Inc. [YOUR GOALS. OUR SOLUTIONS.] - REGISTERED TRADEMARK - Mutual Retirement Annuities College Separately Offshore Cash Funds Products Savings Managed Products Management Plans Accounts [AIM INVESTMENTS LOGO] - REGISTERED TRADEMARK - ITEM 2. CODE OF ETHICS. 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. On the date of the reporting period, October 31, 2005, the Registrant's audit committee financial expert was Prema Mathai-Davis. Dr. Mathai-Davis is "independent" within the meaning of that term as used in Form N-CSR. On October 27, 2005, the Board of Trustees determined that Raymond Stickel, Jr. is an audit committee financial expert. Mr. Stickel was appointed to the Registrant's Audit Committee effective as of October 1, 2005. Mr. Stickel is "independent" within the meaning of that term as used in Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES FEES BILLED BY PWC RELATED TO THE REGISTRANT PWC billed the Registrant aggregate fees for services rendered to the Registrant for the last two fiscal years as follows:
Percentage of Fees Billed Applicable Percentage of Fees to Non-Audit Billed Applicable to Services Provided Non-Audit Services for fiscal year end Provided for fiscal Fees Billed for 2005 Pursuant to Fees Billed for year end 2004 Services Rendered Waiver of Services Rendered to Pursuant to Waiver to the Registrant Pre-Approval the Registrant for of Pre-Approval for fiscal year end 2005 Requirement(1) fiscal year end 2004 Requirement(1) ------------------------ ------------------- -------------------- --------------------- Audit Fees $ 230,419 N/A $ 213,253 N/A Audit-Related Fees(2) $ 10,000 0% $ 0 0% Tax Fees(3) $ 56,095 0% $ 50,567 0% All Other Fees $ 0 0% $ 0 0% -------------- -------------- Total Fees $ 296,514 0% $ 263,820 0%
PWC billed the Registrant aggregate non-audit fees of $66,095 for the fiscal year ended 2005, and $50,567 for the fiscal year ended 2004, 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) Audit-Related Fees for the fiscal year end October 31, 2005 includes fees billed for completing agreed-upon procedures related to fund mergers. (3) Tax Fees for the fiscal year end October 31, 2005 includes fees billed for reviewing tax returns and consultation services. Tax fees for fiscal year end October 31, 2004 includes fees billed for reviewing tax returns and consultation services. 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 Fees Billed for Non-Audit Services Percentage of Fees Non-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 2005 Provided for fiscal fiscal year end 2004 Provided for fiscal That Were Required year end 2005 That Were Required year end 2004 to be Pre-Approved Pursuant to Waiver to be Pre-Approved Pursuant to Waiver of by the Registrant's of Pre-Approval by the Registrant's Pre-Approval Audit Committee Requirement(1) Audit Committee Requirement(1) ------------------- -------------------- -------------------- --------------------- Audit-Related Fees $0 0% $0 0% Tax Fees $0 0% $0 0% All Other Fees $0 0% $0 0% -- -- Total Fees(2) $0 0% $0 0%
- ---------- (1) With respect to the provision of non-audit services, the pre-approval requirement is waived pursuant to a de minimis exception if (i) such services were not recognized as non-audit services by the Registrant at the time of engagement, (ii) the aggregate amount of all such services provided is no more than 5% of the aggregate audit and non-audit fees paid by the Registrant, 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) 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 2005, and $0 for the fiscal year ended 2004, 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. PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICIES AND PROCEDURES As adopted by the Audit Committees of the AIM Funds (the "Funds") Last Amended September 13, 2005 I. 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 estimated pre-approved fee levels provided at the time the service was pre-approved will also require specific approval by the Audit Committees before payment is made. The Audit Committees will also consider the impact of additional fees on the Auditor's independence when determining whether to approve any additional fees for previously pre-approved services. The Audit Committees will annually review and generally pre-approve the services that may be provided by each Auditor without obtaining specific pre-approval from the Audit Committee. The term of any general pre-approval runs from the date of such pre-approval through September 30th of the following year, unless the Audit Committees consider a different period and state otherwise. The Audit Committees will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. The purpose of these policies and procedures is to set forth the guidelines to assist the Audit Committees in fulfilling their responsibilities. II. 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. III. AUDIT SERVICES The annual audit services engagement terms will be subject to specific pre-approval of the Audit Committees. Audit services include the annual financial statement audit and other procedures such as tax provision work that is required to be performed by the independent auditor to be able to form an opinion on the Funds' financial statements. The Audit Committee will obtain, review and consider sufficient information concerning the proposed Auditor to make a reasonable evaluation of the Auditor's qualifications and independence. In addition to the annual Audit services engagement, the Audit Committees may grant 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. IV. 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. 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. AUDIT-RELATED SERVICES "Audit-related services" are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements or that are traditionally performed by the independent auditor. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; and agreed-upon procedures related to mergers, compliance with ratings agency requirements and interfund lending activities. TAX SERVICES "Tax services" include, but are not limited to, the review and signing of the Funds' federal tax returns, the review of required distributions by the Funds and consultations regarding tax matters such as the tax treatment of new investments or the impact of new regulations. The Audit Committee will scrutinize carefully the retention of the Auditor in connection with a transaction initially recommended by the Auditor, the major business purpose of which may be tax avoidance or the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with the Funds' Treasurer (or his or her designee) and may consult with outside counsel or advisors as necessary to ensure the consistency of Tax services rendered by the Auditor with the foregoing policy. No Auditor shall represent any Fund or any Service Provider before a tax court, district court or federal court of claims. ALL OTHER AUDITOR SERVICES The Audit Committees may pre-approve non-audit services classified as "All other services" that are not categorically prohibited by the SEC, as listed in Exhibit 1 to this policy. V. PRE-APPROVAL FEE LEVELS OR ESTABLISHED AMOUNTS Pre-approval of estimated fees or established amounts for services to be provided by the Auditor under general or specific pre-approval policies will be set periodically by the Audit Committees. Any proposed fees exceeding 110% of the maximum estimated pre-approved fees or established amounts for pre-approved audit and non-audit services will be reported to the Audit Committees at the quarterly Audit Committees meeting and will require specific approval by the Audit Committees before payment is made. The Audit Committee will always factor in the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services and in determining whether to approve any additional fees exceeding 110% of the maximum pre-approved fees or established amounts for previously pre-approved services. VI. PROCEDURES On an annual basis, A I M Advisors, Inc. ("AIM") will submit to the Audit Committees for general pre-approval, a list of non-audit services that the Funds or Service Affiliates of the Funds may request from the Auditor. The list will describe the non-audit services in reasonable detail and will include an estimated range of fees and such other information as the Audit Committee may request. Each request for services to be provided by the Auditor under the general pre-approval of the Audit Committees will be submitted to the Funds' Treasurer (or his or her designee) and must include a detailed description of the services to be rendered. The Treasurer or his or her designee will ensure that such services are included within the list of services that have received the general pre-approval of the Audit Committees. The Audit Committees will be informed at the next quarterly scheduled Audit Committees meeting of any such services for which the Auditor rendered an invoice and whether such services and fees had been pre-approved and if so, by what means. Each request to provide services that require specific approval by the Audit Committees shall be submitted to the Audit Committees jointly by the Fund's Treasurer or his or her designee and the Auditor, and must include a joint statement that, in their view, such request is consistent with the policies and procedures and the SEC Rules. 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 o 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 15, 2005, 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 15, 2005, the Registrant's disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that material information relating to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. (b) There have been no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. 12(a)(1) Code of Ethics. 12(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. 12(a)(3) Not applicable. 12(b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: AIM International Mutual Funds By: /s/ Robert H. Graham --------------------------- Robert H. Graham Principal Executive Officer Date: January 6, 2006 Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ Robert H. Graham --------------------------- Robert H. Graham Principal Executive Officer Date: January 6, 2006 By: /s/ Sidney M. Dilgren --------------------------- Sidney M. Dilgren Principal Financial Officer Date: January 6, 2006 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. EX-99.CODE ETH 2 h31759exv99wcodeeth.txt CODE OF ETHICS THE AIM FAMILY OF FUNDS CODE OF ETHICS FOR SENIOR OFFICERS I. INTRODUCTION The Boards of Directors/Trustees ("Board") of The AIM Family of Funds (the "Companies") have adopted this code of ethics (this "Code") applicable to their Principal Executive Officer and Principal Financial and Accounting Officer (the "Covered Officers") to promote: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in documents filed with the Securities and Exchange Commission ("SEC") and in other public communications; o compliance with applicable governmental laws, rules and regulations; o the prompt internal reporting to an appropriate person or persons identified in the Code of violations of the Code; and o accountability for adherence to the Code. II. COVERED OFFICERS SHOULD ACT HONESTLY AND CANDIDLY Each Covered Officer named in Exhibit A to this Code owes a duty to the Companies to act with integrity. Integrity requires, among other things, being honest and candid. Deceit and subordination of principle are inconsistent with integrity. Each Covered Officer must: o act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Companies' policies; o observe both the form and spirit of laws and governmental rules and regulations, accounting standards and policies of the Companies; o adhere to a high standard of business ethics; and o place the interests of the Companies before the Covered Officer's own personal interests. Business practices Covered Officers should be guided by and adhere to these fiduciary standards. III. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST GUIDING PRINCIPLES. A "conflict of interest" occurs when an individual's private interest interferes with the interests of the Companies. A conflict of interest can arise when a Covered Officer takes actions or has interests that may make it difficult to perform his or her work for the Companies objectively and effectively. For example, a conflict of interest would arise if a Covered Officer, or a member or his family, receives improper personal benefits as a result of his or her position in any of the Companies. In addition, investment companies should be sensitive to situations that create apparent, but not actual, conflicts of interest. Service to the Companies should never be subordinated to personal gain and advantage. Certain conflicts of interest covered by this Code arise out of the relationships between Covered Officers and the Companies that already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended and the Investment Advisers Act of 1940, as amended. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Companies because of their status as "affiliated persons" of the Companies. Therefore, as to the existing statutory and regulatory prohibitions on individual behavior, they will be deemed to be incorporated in this Code and therefore any material violation will also be deemed a violation of this Code. Covered Officers must in all cases comply with applicable statutes and regulations. As to conflicts arising from, or as a result of the contractual relationship between, the Companies and the investment adviser of which the Covered Officers are also officers or employees, it is recognized by the Board that, subject to the adviser's fiduciary duties to the Companies, the Covered Officers will in the normal course of their duties (whether formally for the Companies or for the adviser, or for both) be involved in establishing policies and implementing decisions which will have different effects on the adviser and the Companies. The Board recognizes that the participation of the Covered Officers in such activities is inherent in the contractual relationship between the Companies and the adviser and is consistent with the expectation of the Board of the performance by the Covered Officers of their duties as officers of the Companies. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of other investment companies advised by the same adviser and the codes which apply to senior officers of those investment companies will apply to the Covered Officers acting in those distinct capacities. Each Covered Officer must: o avoid conflicts of interest wherever possible; o handle any actual or apparent conflict of interest ethically; o not use his or her personal influence or personal relationships to influence investment decisions or financial reporting by an investment company whereby the Covered Officer would benefit personally to the detriment of any of the Companies; o not cause an investment company to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit of such company; o not use knowledge of portfolio transactions made or contemplated for an investment company to profit or cause others to profit, by the market effect of such transactions; and o as described in more detail below, discuss any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest with the Chief Legal Officer of the AIM Funds (the "Chief Legal Officer"). Some conflict of interest situations that should always be discussed with the Chief Legal Officer, if material, include the following: o any outside business activity that detracts from an individual's ability to devote appropriate time and attention to his or her responsibilities with the Companies; o being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member; o any direct ownership interest in, or any consulting or employment relationship with, any of the Companies' service providers, other than its investment adviser, distributor or other AMVESCAP affiliated entities and other than a de minimis ownership interest (for purposes of this section of the Code an ownership interest of 1% or less shall constitute a de minimis ownership interest, and an ownership interest of more than 1% creates a rebuttable presumption that there may be a material conflict of interest); and o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Companies for effecting portfolio transactions or for selling or redeeming shares, other than an interest arising from the Covered Officer's employment with AIM, its subsidiaries, its parent organizations and any affiliates or subsidiaries thereof, such as compensation or equity ownership, and other than an interest arising from a de minimis ownership interest in a company with which the Companies execute portfolios transactions or a company that receives commissions or other fees related to its sales and redemptions of shares of the Companies (for purposes of this section of the Code an ownership interest of 1% or less shall constitute a de minimis ownership interest, and an ownership interest of more than 1% creates a rebuttable presumption that there may be a material conflict of interest). IV. DISCLOSURE Each Covered Officer is required to be familiar, and comply, with the Companies' disclosure controls and procedures so that the Companies' subject reports and documents filed with the SEC comply in all material respects with the applicable federal securities laws and SEC rules. In addition, each Covered Officer having direct or supervisory authority regarding these SEC filings or the Companies' other public communications should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Companies and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure. Each Covered Officer must: o familiarize himself/herself with the disclosure requirements applicable to the Companies as well as the business and financial operations of the Companies; and o not knowingly misrepresent, or cause others to misrepresent, facts about the Companies to others, whether within or outside the Companies, including representations to the Companies' internal auditors, independent Directors/Trustees, independent auditors, and to governmental regulators and self-regulatory organizations. V. COMPLIANCE It is the Companies' policy to comply in all material respects with all applicable governmental laws, rules and regulations. It is the personal responsibility of each Covered Officer to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to affiliated transactions, accounting and auditing matters. VI. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon receipt of the Code, sign and submit to the Chief Compliance Officer of the Companies an acknowledgement stating that he or she has received, read, and understands the Code. o annually thereafter submit a form to the Chief Compliance Officer of the Companies confirming that he or she has received, read and understands the Code and has complied with the requirements of the Code. o not retaliate against any employee or other Covered Officer for reports of potential violations that are made in good faith. o notify the Chief Legal Officer promptly if he becomes aware of any existing or potential violation of this Code. Failure to do so is itself a violation of this Code. Except as described otherwise below, the Chief Legal Officer is responsible for applying this Code to specific situations in which questions are presented to him or her and has the authority to interpret this Code in any particular situation. The Chief Legal Officer shall take all action he or she considers appropriate to investigate any actual or potential violations reported to him or her. The Chief Legal Officer is authorized to consult, as appropriate, with the Chairman of the Audit Committees of the Board, counsel to the Companies and counsel to the independent Directors/Trustees, and is encouraged to do so. The Chief Legal Officer is responsible for granting waivers and determining sanctions, as appropriate. In addition, approvals, interpretations, or waivers sought by the Covered Officers may also be considered by the Chairman of the AIM Funds Audit Committees. The Companies will follow these procedures in investigating and enforcing this Code, and in reporting on the Code: o the Chief Legal Officer will take all appropriate action to investigate any violations reported to him or her; o violations and potential violations will be reported to the Chairman of the Audit Committees of the Board after such investigation; o if the Chairman of the Audit Committees determines that a violation has occurred, he or she will inform the Board, which will take all appropriate disciplinary or preventive action; o appropriate disciplinary or preventive action may include a letter of censure, suspension, dismissal or, in the event of criminal or other serious violations of law, notification to the SEC or other appropriate law enforcement authorities; o the Chief Legal Officer will be responsible for granting waivers, as appropriate; and o any changes to or waivers of this Code will, to the extent required, be disclosed on Form N-CSR as provided by SEC rules. VII. OTHER POLICIES AND PROCEDURES The Companies' and the Advisers' and Principal Underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act and the Advisers' more detailed policies and procedures set forth in its Compliance and Supervisory Procedures Manual are separate requirements applying to Covered Officers and others, and are not part of this Code. VIII. AMENDMENTS This Code may not be amended except in written form, which is specifically approved by a majority vote of the Companies' Board, including a majority of independent Directors/Trustees. IX. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the members of the Companies' Board, counsel to the Companies, and counsel to the independent Directors/Trustees. Date: September 17, 2003 EXHIBIT A Persons Covered by this Code of Ethics: Robert H. Graham Sidney M. Dilgren Date: January 1, 2004 THE AIM FAMILY OF FUNDS CODE OF ETHICS--ACKNOWLEDGEMENT I hereby acknowledge that I am a Principal Officer of the Companies and I am aware of and subject to the Companies' Code of Ethics. Accordingly, I have read and understood the requirements of the Code of Ethics and I am committed to fully comply with the Code of Ethics. I recognize my obligation to promote: 1. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; 2. Full, fair, accurate, timely, and understandable disclosure in reports and documents that the Companies file with, or submit to, the Commission and in other public communications made by the Companies; and 3. Compliance with applicable governmental laws, rules, and regulations. - --------------------------- ---------------------------------------------- Date Name: Title: EX-99.CERT 3 h31759exv99wcert.txt CERTIFICATIONS OF PEO AND PFO AS REQUIRED BY RULE 30A-2(A) I, Robert H. Graham, Principal Executive Officer, certify that: 1. I have reviewed this report on Form N-CSR of AIM International Mutual Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3 (d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidating subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filling date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 6, 2006 /s/ Robert H. Graham --------------------------------------------- Robert H. Graham, Principal Executive Officer I, Sidney M. Dilgren, Principal Financial Officer, certify that: 1. I have reviewed this report on Form N-CSR of AIM International Mutual Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidating subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filling date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 6, 2006 /s/ Sidney M. Dilgren ---------------------------------------------- Sidney M. Dilgren, Principal Financial Officer EX-99.906CERT 4 h31759exv99w906cert.txt CERTIFICATIONS OF PEO AND PFO AS REQUIRED BY RULE 30A-2(B) CERTIFICATION OF SHAREHOLDER REPORT In connection with the Certified Shareholder Report of AIM International Mutual Funds (the "Company") on Form N-CSR for the period ended October 31, 2005, as filed with the Securities and Exchange Commission (the "Report"), I, Robert H. Graham, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: January 6, 2006 /s/ Robert H. Graham --------------------------------------------- Robert H. Graham, Principal Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION OF SHAREHOLDER REPORT In connection with the Certified Shareholder Report of AIM International Mutual Funds (the "Company") on Form N-CSR for the period ended October 31, 2005, as filed with the Securities and Exchange Commission (the "Report"), I, Sidney M. Dilgren, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: January 6, 2006 /s/ Sidney M. Dilgren ---------------------------------------------- Sidney M. Dilgren, Principal Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----