N-CSR 1 h65018nvcsr.txt FORM N-CSR - ANNUAL REPORT ------------------------ OMB APPROVAL ------------------------ OMB Number: 3235-0570 Expires: August 31, 2011 Estimated average burden hours per response: 18.9 ------------------------ 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) Philip A. Taylor 11 Greenway Plaza, Suite 100 Houston, Texas 77046 (Name and address of agent for service) Registrant's telephone number, including area code: (713) 626-1919 Date of fiscal year end: 10/31 Date of reporting period: 10/31/08 Item 1. Reports to Stockholders. [INVESCO AIM LOGO] AIM ASIA PACIFIC GROWTH FUND -- SERVICE MARK -- Annual Report to Shareholders o October 31, 2008 [MOUNTAIN GRAPHIC] 2 Letters to Shareholders 4 Performance Summary 4 Management Discussion 6 Long-Term Fund Performance 8 Supplemental Information 9 Schedule of Investments 11 Financial Statements 14 Notes to Financial Statements 20 Financial Highlights 22 Auditor's Report 23 Fund Expenses 24 Approval of Investment Advisory Agreement 27 Tax Information 28 Trustees and Officers
Dear Shareholder: In previous reports, I've talked with you about short-term market volatility. I'd like to take this opportunity to update you on recent market developments and provide some perspective and encouragement to my fellow long-term investors. [TAYLOR PHOTO] MARKET OVERVIEW At the start of the fiscal year in November 2007, we saw warning signs of increasing economic ills -- a weakening housing market, rising inflation and slowing job growth, among others. In response, the U.S. Federal Reserve Board Philip Taylor (the Fed) repeatedly cut short-term interest rate targets to stimulate economic growth and expand market liquidity.(1) Also, Congress and the president worked together to enact an economic stimulus plan that included billions of dollars in rebates to taxpayers. These actions helped the economy and the U.S. stock market until the spring of 2008, when other factors came to the forefront -- triggering a severe correction that eventually drove major stock-market indexes to multi-year lows.(2) HOW WE GOT HERE The cause of this correction was years of lax lending associated with the recent housing boom. Mortgage loans of questionable quality were bundled into hard-to-value securities that were bought by, and traded among, financial institutions. As the value of those securities declined, financial institutions sought to unload them -- but there were few buyers. With the value of their assets falling and access to credit tightening, a number of well-established financial firms faced severe difficulties, and investor uncertainty and market volatility spiked. In October 2008, the administration and Congress enacted a plan, the Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury to purchase up to $700 billion in troubled mortgage-related assets -- the largest and most direct effort to resolve a credit crisis in the last half century. The Fed, in concert with other central banks, cut short-term interest rate targets and undertook other initiatives intended to restore investor confidence, expand lending and mitigate the effects of the global credit crisis. The recent volatility in the stock, fixed-income and credit markets has driven home the importance of three timeless investing principles. INVESTING IN VOLATILE MARKETS Through up markets and down, we believe history shows investors should: o INVEST FOR THE LONG TERM. Short-term fluctuations have always been a reality of the markets. We urge you to stick to your investment plan and stay focused on your long-term goals. o DIVERSIFY. Although diversification doesn't eliminate the risk of loss or guarantee a profit, a careful selection of complementary asset classes may cushion your portfolio against excessive volatility. o STAY FULLY INVESTED. Trying to time the market is a gamble, not an investment strategy. A sound investment strategy includes viewing market volatility as a matter of course, not a reason to panic. A trusted financial advisor can explain more fully the potential value of following these principles. An experienced advisor who knows your individual investment goals, financial situation and risk tolerance can be your most valuable asset during times of market volatility. Your advisor can provide guidance and can monitor your investments to ensure they're on course. It's also helpful to remember that many of history's significant buying opportunities resulted from short-term economic crises that, in their time, were considered unprecedented. We believe current market uncertainty may represent a buying opportunity for patient, long-term investors. Rest assured that Invesco Aim's portfolio managers are working diligently on your behalf to capitalize on this situation. MANAGING MONEY IS OUR FOCUS As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain markets. Our parent company, Invesco Ltd., is one of the world's largest and most diversified global investment managers. Invesco provides clients with diversified investment strategies from distinct management teams around the globe and a range of investment products. Invesco's single focus is asset management -- which means we focus on doing one thing well: managing your money. That can be reassuring in uncertain times. While market conditions change often, commitment to putting shareholders first, helping clients achieve their investment goals and providing excellent customer service remains constant. If you have questions about this report or your account, please contact one of our client service representatives at 800 959 4246. Thank you for your continued confidence, and we look forward to serving you.
Sincerely, /S/ PHILIP TAYLOR Philip Taylor Senior Managing Director, Invesco Ltd. CEO, Invesco Aim (1) U.S. Federal Reserve; (2) Lipper Inc. 2 AIM ASIA PACIFIC GROWTH FUND Dear Fellow Shareholders: As I write this letter, turbulent financial markets are causing considerable investor anxiety, reminding us again that markets are cyclical and the correction of excess is often painful, at least in the short term. Your Board of [CROCKETT Trustees believes in the wisdom of a long-term perspective and consistent PHOTO] investment discipline. We continue to put your interests first in the effort to improve investment performance, contain shareholder costs and uphold the highest ethical standards. We remain enthusiastic about the global reach and investment expertise that Invesco, a leading independent global investment management company, brings to Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse investment strategies deployed throughout the worldwide network of Invesco investment centers has helped strengthen the management of many AIM Funds. The rebranding of the Funds' management company as Invesco Aim was followed by the launch of an upgraded, investor-friendly website (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and Investment News through the end of 2008. At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals." We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be interested to hear your thoughts on this policy. As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured that your comments are received, welcomed and heard in the interim. We look forward to hearing from you and to representing you.
Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair AIM Funds Board of Trustees 3 AIM ASIA PACIFIC GROWTH FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ======================================================================================= PERFORMANCE SUMMARY spared as all Asian markets experienced double-digit declines.(1) Emerging Asia The volatility and weakness experienced by Asian equities over the fiscal year was saw some of the largest declines with reflected in the performance of the Fund. For the fiscal year ended October 31, 2008, markets like China, as represented by the Class A shares of AIM Asia Pacific Growth Fund, at net asset value, delivered a return MSCI China Index, and India, as of -56.60%. This is compared with the MSCI All Country Asia Pacific Ex-Japan Index represented by the MSCI India Index, which which returned -57.26%.(triangle) Stock selection in China and an overweight exposure returned -65% and -62%, respectively.(1) in Malaysia contributed favorably to relative results. Despite the volatility in equity Your Fund's long-term performance appears later in this report. markets, economic data from the region was relatively robust. Growth in China and FUND VS. INDEXES India slowed from last year but remained relatively strong and export figures Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does remained resilient. Over the fiscal year, not include applicable contingent deferred sales charges (CDSC) or front-end sales inflationary pressures moderated, charges, which would have reduced performance. relieving the pressure to continue tightening monetary policy. The easing of Class A Shares -56.60% inflation provided Asian policy makers Class B Shares -56.93 with greater freedom to adopt measures Class C Shares -56.91 designed to stimulate economic activity. Class Y Shares* -56.60 The clearest sign of this shift in focus MSCI EAFE Index(triangle) (Broad Market Index) -46.62 was the first interest-rate cut in six MSCI All Country Asia Pacific Ex-Japan Index(triangle) (Style-Specific Index) -57.26 years for China, where reserve Lipper Pacific Region Ex-Japan Funds Index(triangle) (Peer Group Index) -55.95 requirements for medium and smaller banks were reduced.(2) (triangle) Lipper Inc. Within this environment, the Fund * Share class incepted during the fiscal year. See page 7 for a detailed explanation performed in line with its style-specific of Fund performance. index, but trailed its Lipper peer group ======================================================================================= benchmark.(1) The Fund's Class A shares, at net asset value, returned -56.60% for HOW WE INVEST the fiscal year, while the MSCI All Country Asia Pacific Ex-Japan Index When selecting stocks for your Fund, we companies rather than sectors, countries returned -57.26%.(1) The Lipper Pacific employ a disciplined investment strategy or market-cap trends. Region Ex-Japan Funds Index returned that emphasizes fundamental research, -55.95%.(1) supported by both quantitative analysis We believe disciplined sell decisions and portfolio construction techniques. Our are key to successful investing. We In geographical terms, stock selection "EQV" (Earnings, Quality, Valuation) consider selling a stock for one of the in China and a large overweight strategy focuses primarily on identifying following reasons: representation in Malaysia both added quality companies that have experienced, value versus the Fund's style-specific or exhibit the potential for, accelerating o A company's fundamentals deteriorate or index. Stock selection and an underweight or above average earnings growth but whose it posts disappointing earnings. in India helped as well. In contrast, stock prices do not fully reflect these stock section in Singapore, Korea and Hong attributes. o A stock's price seems overvalued. Kong were the principal detractors from both relative and absolute results. The While research responsibilities within o A more attractive opportunity becomes largest stock level detractors included the portfolio management team are focused available. Singapore based oil and gas equipment by market capitalization, such as large- company EZRA HOLDINGS and marine rig or mid/ small-cap stocks, we select MARKET CONDITIONS AND YOUR FUND investments for the Fund by using a bottom-up investment approach. This means Asian equity markets experienced a that we construct the Fund primarily on a volatile 12 months ending October 31, stock-by-stock basis. We focus on the 2008, as global issues dominated the strengths of individual investment landscape. Domestic economic and corporate news was largely overshadowed by the deepening troubles experienced by developed markets, which undermined equities globally. During the fiscal year, no country was ========================================== ========================================== ========================================== PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS* By sector Financials 20.5% 1. Australia 16.1% 1. CSL Ltd. 3.9% Consumer Discretionary 17.4 2. China 12.2 2. SM Investments Corp. 3.2 Industrials 12.9 3. Hong Kong 11.8 3. Siam Commercial Bank PCL 3.1 Information Technology 11.9 4. Malaysia 10.4 4. Infosys Technologies Ltd. 3.0 Telecommunication Services 8.0 5. Taiwan 9.1 5. BHP Billiton Ltd. 2.9 Health Care 7.6 ========================================== 6. Cheung Kong (Holdings) Ltd. 2.7 Consumer Staples 7.1 7. United Overseas Bank Ltd. 2.7 Materials 7.0 ========================================== 8. Hutchison Whampoa Ltd. 2.6 Energy 2.4 Total Net Assets $258.1 million 9. CNOOC Ltd.-ADR 2.4 Utilities 1.4 10. Philippine Long Distance Money Market Funds Plus Other Total Number of Holdings* 74 Telephone Co. 2.4 Assets Less Liabilities 3.8 ========================================== ========================================== ========================================== The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. * Excluding money market fund holdings.
4 AIM ASIA PACIFIC GROWTH FUND builder KEPPEL CORP. Ezra Holdings was no decade-low valuations are increasingly SHUXIN CAO longer held at the end of the fiscal year. more available in these consumer-related Chartered Financial Analyst, sectors. [CAO senior portfolio manager, is In terms of sectors, the underweight PHOTO] co-manager of AIM Asia position in financials versus the MSCI All From a country perspective, exposure to Pacific Growth Fund. Mr. Cao Country Asia Pacific Ex-Japan Index China was increased incrementally through joined Invesco Aim in 1997. He graduated benefited relative results as the global selective buying on market weakness. These from Tianjin Foreign Language Institute credit crisis led to pressures on additions were very cautious and gradual with a B.A. in English. Mr. Cao also financial institutions. In addition, stock as we believed earnings may continue to earned an M.B.A. from Texas A&M University selection and an underweight exposure in display further downside risks. In and is a certified public accountant. the materials sector helped as commodity contrast, the Fund's exposure in Hong prices came under pressure on worries that Kong, South Korea and India saw a decline. MARK JASON a global economic slowdown would lead to Chartered Financial Analyst, weaker demand. Volatile markets can test an investor's [JASON portfolio manager, is resolve, and 2008 has so far been one of PHOTO] co-manager of AIM Asia The Fund's results were also hurt by the most turbulent periods in many years. Pacific Growth Fund. Mr. the Fund's all-cap flexibility. An However, it's always worth remembering Jason joined Invesco Aim in 2001 as a overweight exposure in small-cap stocks, that market turbulence can create senior equity analyst. He spent more than which were hard hit over the period, investment opportunities. five years focusing on Asian and Latin detracted from relative results versus the American stocks before assuming his larger-cap biased style-specific index. We welcome any new investors who have current duties in 2007. Mr. Jason earned Broadly speaking, a flight to liquidity joined the Fund during the fiscal year, both a B.S. in real estate and a B.S. in and safety continued, regardless of and to all of our shareholders we would Finance from the University of California fundamentals, and negatively affected like to express our appreciation for your at Northridge. small-cap returns. continued investment in AIM Asia Pacific Growth Fund. BARRETT SIDES Our overall "EQV" focused strategy Senior portfolio manager, is remained the same, despite the volatile (1) Lipper Inc. [SIDES co-manager of AIM Asia nature of markets. We continued to favor PHOTO] Pacific Growth Fund. Mr. sectors that may benefit from the region's (2) Bloomberg L.P. Sides joined Invesco Aim in domestic demand, while aiming to minimize 1990. He graduated with a exposure to cyclical sectors that are The views and opinions expressed in B.S. in economics from Bucknell Univer- vulnerable amid the weak global management's discussion of Fund sity. Mr. Sides also earned an M.B.A. in environment. performance are those of Invesco Aim international business from the University Advisors, Inc. These views and opinions of St. Thomas. Over the fiscal year, our exposure to are subject to change at any time based on the telecommunication services and health factors such as market and economic Assisted by the Asia Pacific/Latin America care sectors increased markedly as stocks conditions. These views and opinions may Teams with robust growth and reasonable not be relied upon as investment advice or valuations were added to the portfolio. In recommendations, or as an offer for a contrast, our exposure to the industrials particular security. The information is and energy sectors saw a significant not a complete analysis of every aspect of reduction. any market, country, industry, security or the Fund. Statements of fact are from One of our larger exposures was to the sources considered reliable, but Invesco consumer via consumer discretionary and Aim Advisors, Inc. makes no representation consumer staples, segments of the market or warranty as to their completeness or that are focused on domestic consumption. accuracy. Although historical performance We were keenly aware of the challenges is no guarantee of future results, these consumers faced, but strong local insights may help you understand our franchises trading at investment management philosophy. See important Fund and index disclosures later in this report.
5 AIM ASIA PACIFIC GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE Past performance cannot guarantee Performance of an index of funds reflects early years shown in the chart. The comparable future results. fund expenses and management fees; vertical axis, the one that indicates the performance of a market index does not. dollar value of an investment, is The data shown in the chart include Performance shown in the chart and constructed with each segment representing reinvested distributions, applicable sales table(s) does not reflect deduction of a percent change in the value of the charges and Fund expenses including taxes a shareholder would pay on Fund investment. In this chart, each segment management fees. Results for Class B distributions or sale of Fund shares. represents a doubling, or 100% change, in shares are calculated as if a hypothetical the value of the investment. In other shareholder had liquidated his entire This chart, which is a logarithmic words, the space between $5,000 and investment in the Fund at the close of the chart, presents the fluctuations in the $10,000 is the same size as the space reporting period and paid the applicable value of the Fund and its indexes. We between $ 10,000 and $20,000, and so on. contingent deferred sales charges. Index believe that a logarithmic chart is more results include reinvested dividends, but effective than other types of charts in they do not reflect sales charges. illustrating changes in value during the
6 AIM ASIA PACIFIC GROWTH FUND ==================================================================================================================================== [MOUNTAIN CHART] RESULTS OF A $10,000 INVESTMENT -- CLASS A, B AND C SHARES (OLDEST SHARE CLASSES) Index data from 10/31/97, Fund data from 11/3/97 AIM Asia AIM Asia AIM Asia Pacific Growth Pacific Growth Pacific Growth Lipper Pacific Fund-Class A Fund-Class B Fund-Class C Region Ex-Japan Date Shares Shares Shares MSCI EAFE Index(1) Funds Index(1) 10/31/97 $10000 $10000 11/97 $ 8401 $ 8890 $ 8890 9898 9650 12/97 8174 8650 8650 9984 9400 1/98 7834 8280 8290 10441 8511 2/98 9346 9879 9880 11111 9823 3/98 9167 9690 9690 11453 9751 4/98 8713 9199 9200 11544 9170 5/98 7759 8189 8190 11488 8065 6/98 6814 7189 7180 11575 7196 7/98 6682 7039 7030 11692 7014 8/98 5633 5939 5920 10244 6163 9/98 6474 6809 6800 9929 6787 10/98 7267 7629 7610 10965 7760 11/98 7475 7848 7820 11526 8133 12/98 7477 7848 7820 11981 8185 1/99 7305 7668 7640 11946 7981 2/99 7201 7558 7540 11661 7790 3/99 7714 8078 8061 12148 8516 4/99 9138 9580 9553 12640 9786 5/99 9395 9841 9813 11989 9562 6/99 10867 11372 11345 12456 11093 7/99 10459 10932 10914 12827 11082 8/99 10440 10902 10884 12873 11339 9/99 9946 10371 10353 13003 10767 10/99 10232 10662 10642 13490 11026 11/99 11628 12114 12085 13959 12606 12/99 12560 13074 13045 15212 14314 1/00 12085 12574 12544 14245 14151 2/00 13282 13815 13786 14628 14382 3/00 15126 15707 15689 15196 14927 4/00 13502 14016 14007 14396 13032 5/00 12447 12914 12906 14044 12199 6/00 13321 13805 13798 14594 13150 7/00 12456 12915 12906 13982 12397 8/00 12419 12864 12856 14103 12459 9/00 11183 11573 11564 13416 11173 10/00 10167 10511 10502 13099 10169 11/00 9872 10211 10202 12608 9678 12/00 9743 10065 10065 13056 9617 1/01 10810 11160 11160 13050 10806 2/01 10201 10527 10528 12071 10249 3/01 9123 9402 9402 11267 9082 4/01 9685 9985 9985 12050 9401 5/01 9772 10076 10066 11624 9401 6/01 9600 9885 9885 11149 9206 7/01 9285 9554 9554 10946 8850 8/01 8731 8982 8981 10669 8553 9/01 7797 8017 8017 9588 7334 10/01 8188 8419 8409 9834 7669 11/01 8712 8951 8951 10196 8605 12/01 9179 9422 9413 10257 9174 ====================================================================================================================================
(1) Lipper Inc. ==================================================================================================================================== [MOUNTAIN CHART] 1/02 9407 9653 9645 9712 9537 2/02 9465 9713 9695 9780 9645 3/02 9931 10185 10167 10356 10286 4/02 9969 10225 10208 10377 10359 5/02 9921 10165 10147 10509 10308 6/02 9502 9733 9715 10090 9790 7/02 9092 9311 9294 9094 9352 8/02 8882 9080 9062 9074 9127 9/02 8044 8227 8208 8099 8124 10/02 8130 8307 8289 8534 8344 11/02 8454 8629 8611 8922 8887 12/02 8187 8358 8339 8622 8377 1/03 8339 8508 8490 8262 8437 2/03 8177 8337 8320 8072 8091 3/03 7796 7945 7928 7914 7714 4/03 8063 8216 8199 8689 8117 5/03 8654 8819 8792 9216 8842 6/03 9178 9341 9304 9439 9389 7/03 9712 9883 9847 9667 10064 8/03 10493 10667 10640 9900 10776 9/03 10646 10828 10791 10206 10912 10/03 11513 11692 11656 10842 11793 11/03 11522 11703 11666 11083 11701 12/03 12266 12446 12409 11949 12571 1/04 12627 12808 12761 12118 13080 2/04 13066 13250 13202 12397 13489 3/04 12913 13079 13041 12467 13228 4/04 12236 12396 12358 12185 12622 5/04 12112 12266 12217 12226 12390 6/04 11807 11945 11905 12494 12276 7/04 11655 11784 11745 12088 12003 8/04 12207 12336 12297 12142 12503 9/04 12731 12858 12809 12459 13012 10/04 13074 13200 13151 12884 13201 11/04 14036 14165 14106 13764 14339 12/04 14493 14617 14569 14368 14826 1/05 14550 14667 14620 14104 14904 2/05 15321 15440 15383 14714 15702 3/05 14749 14847 14800 14344 15051 4/05 14673 14766 14720 14007 14930 5/05 14768 14857 14801 14014 15403 6/05 15226 15308 15263 14200 15738 7/05 15960 16041 15986 14635 16837 8/05 16046 16112 16056 15005 16743 9/05 16723 16786 16729 15673 17792 10/05 15628 15671 15623 15215 16809 11/05 16658 16696 16639 15587 18132 12/05 17496 17524 17466 16313 19212 1/06 19021 19035 18966 17314 20594 2/06 19107 19114 19048 17276 20464 3/06 19923 19919 19844 17845 21181 4/06 21112 21096 21023 18698 22310 5/06 19721 19698 19623 17971 20535 6/06 19490 19455 19381 17970 20271 7/06 19509 19455 19391 18148 20294 8/06 20124 20059 19984 18647 20932 9/06 20718 20632 20568 18676 21732 10/06 21888 21779 21705 19402 22573 11/06 23499 23380 23296 19982 24186 12/06 24178 24037 23953 20609 25646 1/07 24377 24225 24140 20749 25466 2/07 24964 24787 24703 20916 25491 3/07 25830 25629 25547 21450 26023 4/07 27093 26870 26779 22402 27195 5/07 28646 28391 28300 22795 29280 6/07 29431 29160 29050 22823 30528 7/07 30635 30327 30226 22487 32205 ====================================================================================================================================
==================================================================================================================================== [MOUNTAIN CHART] 8/07 30068 29753 29643 22135 31834 9/07 32437 32065 31958 23320 35042 10/07 35016 34598 34479 24236 39010 11/07 32267 31869 31759 23439 35904 12/07 32109 31687 31578 22911 35743 1/08 28998 28601 28499 20795 31643 2/08 29267 28847 28747 21093 32095 3/08 28097 27670 27580 20871 30158 4/08 28636 28198 28098 22004 32421 5/08 29097 28621 28523 22218 31963 6/08 26118 25676 25599 20401 28377 7/08 25454 25006 24928 19746 27665 8/08 24230 23793 23714 18946 26104 9/08 20544 20165 20093 16207 22348 10/08 15204 15234 14855 12936 17182 ====================================================================================================================================
========================================== ========================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS As of 10/31/08, including maximum As of 9/30/08, the most recent calendar applicable sales charges quarter-end, including maximum applicable sales charges CLASS A SHARES Inception (11/3/97) 3.89% CLASS A SHARES 10 Years 7.05 Inception (11/3/97) 6.83% 5 Years 4.53 10 Years 11.61 1 Year -58.99 5 Years 12.78 1 Year -40.15 CLASS B SHARES Inception (11/3/97) 3.90% CLASS B SHARES 10 Years 7.08 Inception (11/3/97) 6.85% 5 Years 4.64 10 Years 11.63 1 Year -58.84 5 Years 13.00 1 Year -39.89 CLASS C SHARES Inception (11/3/97) 3.67% CLASS C SHARES 10 Years 6.92 Inception (11/3/97) 6.61% 5 Years 4.97 10 Years 11.44 1 Year -57.29 5 Years 13.24 1 Year -37.68 CLASS Y SHARES ========================================== 10 Years 7.66% 5 Years 5.71 PRESENTED IN OTHER SECTIONS OF THIS REPORT 1 Year -56.60 THAT ARE BASED ON EXPENSES INCURRED DURING ========================================== THE PERIOD COVERED BY THIS REPORT. CLASS Y SHARES' INCEPTION DATE IS OCTOBER CLASS A SHARE PERFORMANCE REFLECTS THE 3, 2008; RETURNS SINCE THAT DATE ARE MAXIMUM 5.50% SALES CHARGE, AND CLASS B ACTUAL RETURNS. ALL OTHER RETURNS ARE AND CLASS C SHARE PERFORMANCE REFLECTS THE BLENDED RETURNS OF ACTUAL CLASS Y SHARE APPLICABLE CONTINGENT DEFERRED SALES PERFORMANCE AND RESTATED CLASS A SHARE CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE PERFORMANCE (FOR PERIODS PRIOR TO THE CDSC ON CLASS B SHARES DECLINES FROM 5% INCEPTION DATE OF CLASS Y SHARES) AT NET BEGINNING AT THE TIME OF PURCHASE TO 0% AT ASSET VALUE. THE RESTATED CLASS A SHARE THE BEGINNING OF THE SEVENTH YEAR. THE PERFORMANCE REFLECTS THE RULE 12B-1 FEES CDSC ON CLASS C SHARES IS 1% FOR THE FIRST APPLICABLE TO CLASS A SHARES AS WELL AS YEAR AFTER PURCHASE. CLASS Y SHARES DO NOT ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS HAVE A FRONT-END SALES CHARGE OR A CDSC; RECEIVED BY CLASS A SHARES. CLASS A SHARES THEREFORE, PERFORMANCE IS AT NET ASSET INCEPTION DATE IS NOVEMBER 3, 1997. VALUE. THE PERFORMANCE DATA QUOTED REPRESENT THE PERFORMANCE OF THE FUND'S SHARE PAST PERFORMANCE AND CANNOT GUARANTEE CLASSES WILL DIFFER PRIMARILY DUE TO COMPARABLE FUTURE RESULTS; CURRENT DIFFERENT SALES CHARGE STRUCTURES AND PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE CLASS EXPENSES. VISIT INVESCOAIM.COM FOR THE MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE FIGURES HAD THE ADVISOR NOT WAIVED FEES AND/OR REFLECT REINVESTED DISTRIBUTIONS, CHANGES REIMBURSED EXPENSES IN THE PAST, IN NET ASSET VALUE AND THE EFFECT OF THE PERFORMANCE WOULD HAVE BEEN LOWER. MAXIMUM SALES CHARGE UNLESS OTHERWISE STATED. INVESTMENT RETURN AND PRINCIPAL A REDEMPTION FEE OF 2% WILL BE IMPOSED VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF A GAIN OR LOSS WHEN YOU SELL SHARES. THE FUND WITHIN 31 DAYS OF PURCHASE. EXCEPTIONS TO THE REDEMPTION FEE ARE THE TOTAL ANNUAL FUND OPERATING EXPENSE LISTED IN THE FUND'S PROSPECTUS. RATIO SET FORTH IN THE MOST RECENT FUND PROSPECTUS AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C AND CLASS Y SHARES WAS 1.62%, 2.37%, 2.37% AND 1.37%, RESPECTIVELY. THE EXPENSE RATIOS PRESENTED ABOVE MAY VARY FROM THE EXPENSE RATIOS
10 AIM ASIA PACIFIC GROWTH FUND AIM ASIA PACIFIC GROWTH FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets. o Unless otherwise noted, all data provided by Invesco Aim. ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION o Effective September 30, 2003, only o The MSCI EAFE--REGISTERED TRADEMARK-- o The Chartered Financial Analyst--REGIS- previously established qualified plans INDEX is a free float-adjusted market TERED TRADEMARK-- (CFA--REGISTERED are eligible to purchase Class B shares capitalization index that is designed TRADEMARK--) designation is a globally of any AIM fund. to measure developed market equity recognized standard for measuring the performance, excluding the U.S. and competence and integrity of investment o Class Y shares are available only to Canada. professionals. certain investors. Please see the prospectus for more information. o The MSCI ALL COUNTRY ASIA PACIFIC o The returns shown in management's EX-JAPAN INDEX measures the performance discussion of Fund performance are PRINCIPAL RISKS OF INVESTING IN THE FUND of securities listed on stock exchanges based on net asset values calculated of 12 countries in the Asia-Pacific for shareholder transactions. Generally o Investing in developing countries can region including developed and emerging accepted accounting principles require add additional risk, such as high rates countries but excluding Japan. adjustments to be made to the net of inflation or sharply devalued assets of the Fund at period end for currencies against the U.S. dollar. o The LIPPER PACIFIC REGION EX-JAPAN financial reporting purposes, and as Transaction costs are often higher, and FUNDS INDEX is an equally weighted such, the net asset values for there may be delays in settlement representation of the largest funds in shareholder transactions and the procedures. the Lipper Pacific Region Ex-Japan returns based on those net asset values Funds category. These funds seek to may differ from the net asset values o Prices of equity securities change in concentrate their investments in equity and returns reported in the Financial response to many factors, including the securities with primary trading markets Highlights. historical and prospective earnings of or operations concentrated in the the issuer, the value of its assets, Pacific region (including Asian o Industry classifications used in this general economic conditions, interest countries) and that specifically do not report are generally according to the rates, investor perceptions and market invest in Japan. Global Industry Classification liquidity. Standard, which was developed by and is o The MSCI CHINA INDEX is a free the exclusive property and a service o Foreign securities have additional float-adjusted market capitalization mark of MSCI Inc. and Standard & risks, including exchange rate changes, index that is designed to measure Poor's. political and economic upheaval, equity market performance in China. relative lack of information, relatively low market liquidity, and o The MSCI INDIA INDEX is an unmanaged the potential lack of strict financial index considered representative of and accounting controls and standards. Indian stocks. o Investing in a Fund that invests in o The Fund is not managed to track the smaller companies involves risks not performance of any particular index, associated with investing in more including the indexes defined here, and established companies, such as business consequently, the performance of the risk, stock price fluctuations and Fund may deviate significantly from the illiquidity. performance of the indexes. o Although the Fund's returns during o A direct investment cannot be made in certain periods were positively an index. Unless otherwise indicated, affected by its investments in initial index results include reinvested public offerings (IPOs), there can be dividends, and they do not reflect no assurance that the Fund will have sales charges. Performance of an index favorable IPO investment opportunities of funds reflects fund expenses; in the future. performance of a market index does not. o The prices of securities held by the Fund may decline in response to market risks. ======================================================================================= ========================================== THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares ASIAX ======================================================================================= Class B Shares ASIBX Class C Shares ASICX NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class Y Shares ASIYX ==========================================
11 AIM ASIA PACIFIC GROWTH FUND SCHEDULE OF INVESTMENTS October 31, 2008
SHARES VALUE -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS & OTHER EQUITY INTERESTS-96.19% AUSTRALIA-16.08% BHP Billiton Ltd. 392,900 $ 7,547,615 -------------------------------------------------------------------------------- Coca-Cola Amatil Ltd. 685,000 3,663,943 -------------------------------------------------------------------------------- Cochlear Ltd. 133,000 5,060,911 -------------------------------------------------------------------------------- Computershare Ltd. 667,841 3,743,484 -------------------------------------------------------------------------------- CSL Ltd.(a) 192,000 4,678,977 -------------------------------------------------------------------------------- CSL Ltd. 225,923 5,505,669 -------------------------------------------------------------------------------- QBE Insurance Group Ltd. 243,000 4,189,032 -------------------------------------------------------------------------------- Toll Holdings Ltd. 768,600 3,070,217 -------------------------------------------------------------------------------- Woolworths Ltd. 217,200 4,022,900 ================================================================================ 41,482,748 ================================================================================ CHINA-12.21% China Green (Holdings) Ltd. 2,382,000 1,832,935 -------------------------------------------------------------------------------- China Mobile Ltd. 311,235 2,730,883 -------------------------------------------------------------------------------- CNOOC Ltd.-ADR 76,600 6,257,454 -------------------------------------------------------------------------------- Haitian International Holdings Ltd. 8,673,000 1,134,304 -------------------------------------------------------------------------------- Kingdee International Software Group Co. Ltd.(b) 28,882,000 4,210,048 -------------------------------------------------------------------------------- Mingyuan Medicare Development Co. Ltd. 30,800,000 2,272,508 -------------------------------------------------------------------------------- Minth Group Ltd. 3,624,000 1,269,555 -------------------------------------------------------------------------------- Stella International Holdings Ltd. 4,792,000 4,047,922 -------------------------------------------------------------------------------- Xinyi Glass Holdings Co. Ltd. 13,650,000 3,872,515 -------------------------------------------------------------------------------- Xiwang Sugar Holdings Co. Ltd. 12,484,000 1,514,824 -------------------------------------------------------------------------------- Yantai North Andre Juice Co. Ltd.-Class H 65,021,000 2,370,051 ================================================================================ 31,512,999 ================================================================================ HONG KONG-11.75% Champion Real Estate Investment Trust(a) 3,000,000 712,759 -------------------------------------------------------------------------------- Champion Real Estate Investment Trust 1,800,000 427,655 -------------------------------------------------------------------------------- Cheung Kong (Holdings) Ltd. 724,000 7,050,334 -------------------------------------------------------------------------------- Dickson Concepts (International) Ltd. 5,426,000 1,206,541 -------------------------------------------------------------------------------- Esprit Holdings Ltd. 557,000 3,127,018 -------------------------------------------------------------------------------- eSun Holdings Ltd.(c) 6,044,000 211,367 -------------------------------------------------------------------------------- Hongkong Land Holdings Ltd. 1,162,000 3,116,701 -------------------------------------------------------------------------------- Hutchison Whampoa Ltd. 1,202,000 6,579,601 -------------------------------------------------------------------------------- Li & Fung Ltd. 1,752,200 3,523,299 -------------------------------------------------------------------------------- Paliburg Holdings Ltd. 11,613,240 837,003 -------------------------------------------------------------------------------- Paliburg Holdings Ltd.-Wts., expiring 11/08/10(a)(c) 12,903,600 16,650 -------------------------------------------------------------------------------- Regal Hotels International Holdings Ltd. 11,344,000 2,124,463 -------------------------------------------------------------------------------- Wing Hang Bank Ltd. 295,500 1,382,440 ================================================================================ 30,315,831 ================================================================================ INDIA-4.30% Bharat Heavy Electricals Ltd. 129,076 3,423,773 -------------------------------------------------------------------------------- Infosys Technologies Ltd. 269,380 7,669,907 ================================================================================ 11,093,680 ================================================================================ INDONESIA-5.30% PT Astra International Tbk 5,216,000 4,471,550 -------------------------------------------------------------------------------- PT Bank Central Asia Tbk 13,459,000 3,342,657 -------------------------------------------------------------------------------- PT Indocement Tunggal Prakarsa Tbk 6,064,000 1,985,988 -------------------------------------------------------------------------------- PT Summarecon Agung Tbk 133,892,500 2,618,948 -------------------------------------------------------------------------------- PT Telekomunikasi Indonesia 2,534,500 1,258,301 ================================================================================ 13,677,444 ================================================================================ MALAYSIA-10.36% Bumiputra-Commerce Holdings Berhad 1,034,100 1,796,299 -------------------------------------------------------------------------------- Digi.com Berhad 970,000 5,049,573 -------------------------------------------------------------------------------- Goldis Berhad 6,047,000 2,130,125 -------------------------------------------------------------------------------- Kossan Rubber Industries Berhad 7,048,900 4,385,248 -------------------------------------------------------------------------------- Parkson Holdings Berhad 5,097,500 4,801,042 -------------------------------------------------------------------------------- Public Bank Berhad 1,378,000 3,264,167 -------------------------------------------------------------------------------- SP Setia Berhad 2,477,400 1,952,413 -------------------------------------------------------------------------------- WCT Berhad 3,713,066 1,338,526 -------------------------------------------------------------------------------- YTL Cement Berhad 3,272,300 2,022,206 ================================================================================ 26,739,599 ================================================================================ PHILIPPINES-8.76% First Gen Corp.(a)(c) 1,962,600 555,467 -------------------------------------------------------------------------------- First Gen Corp.(c) 1,573,900 445,454 -------------------------------------------------------------------------------- GMA Holdings, Inc.-PDR(a)(b) 1,468,000 126,002 -------------------------------------------------------------------------------- GMA Holdings, Inc.-PDR(b) 51,811,000 4,447,069 -------------------------------------------------------------------------------- Philippine Long Distance Telephone Co. 152,400 6,227,863 -------------------------------------------------------------------------------- PNOC Energy Development Corp. 41,396,000 2,519,005 -------------------------------------------------------------------------------- PNOC Energy Development Corp.(a) 2,335,000 142,088 -------------------------------------------------------------------------------- SM Investments Corp. 2,007,595 8,150,467 ================================================================================ 22,613,415 ================================================================================ SINGAPORE-4.54% Keppel Corp. Ltd. 1,484,000 4,571,305 -------------------------------------------------------------------------------- Singapore Technologies Engineering Ltd. 125,000 197,862 -------------------------------------------------------------------------------- United Overseas Bank Ltd. 780,000 6,946,828 ================================================================================ 11,715,995 ================================================================================ SOUTH KOREA-7.66% CJ CheilJedang Corp.(c) 13,148 1,487,521 -------------------------------------------------------------------------------- CJ Corp.(c) 91,870 2,445,762 -------------------------------------------------------------------------------- Daegu Bank 359,940 1,818,562 -------------------------------------------------------------------------------- Daegu Department Store Co., Ltd. 347,300 2,056,878 --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 9 AIM ASIA PACIFIC GROWTH FUND
SHARES VALUE -------------------------------------------------------------------------------- SOUTH KOREA-(CONTINUED) Hyundai Department Store Co., Ltd. 59,700 $ 2,814,916 -------------------------------------------------------------------------------- Hyundai Development Co. 87,900 2,365,675 -------------------------------------------------------------------------------- Hyundai H&S Co., Ltd. 40,710 1,349,767 -------------------------------------------------------------------------------- Lotte Confectionery Co., Ltd. 4,034 3,376,503 -------------------------------------------------------------------------------- TechnoSemiChem Co., Ltd. 194,076 2,039,243 ================================================================================ 19,754,827 ================================================================================ TAIWAN-9.07% Delta Electronics Inc. 2,163,675 4,993,942 -------------------------------------------------------------------------------- Hon Hai Precision Industry Co., Ltd. 1,077,798 2,614,746 -------------------------------------------------------------------------------- Hung Poo Real Estate Development Corp. 5,434,436 2,899,308 -------------------------------------------------------------------------------- Taiwan Mobile Co., Ltd. 3,870,298 5,387,057 -------------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd. 2,941,756 4,353,662 -------------------------------------------------------------------------------- Wistron Corp. 3,896,848 3,165,762 ================================================================================ 23,414,477 ================================================================================ THAILAND-6.16% Kasikornbank PCL 2,210,200 3,222,454 -------------------------------------------------------------------------------- Major Cineplex Group PCL(d) 11,001,900 1,956,820 -------------------------------------------------------------------------------- Siam Commercial Bank PCL(d) 5,241,400 8,062,560 -------------------------------------------------------------------------------- Thai Stanley Electric PCL-Class F(d) 1,260,100 2,661,290 ================================================================================ 15,903,124 ================================================================================ Total Foreign Common Stocks & Other Equity Interests (Cost $363,132,641) 248,224,139 ================================================================================ MONEY MARKET FUNDS-2.70% Liquid Assets Portfolio-Institutional Class(e) 3,488,762 3,488,762 -------------------------------------------------------------------------------- Premier Portfolio-Institutional Class(e) 3,488,762 3,488,762 ================================================================================ Total Money Market Funds (Cost $6,977,524) 6,977,524 ================================================================================ TOTAL INVESTMENTS(f)-98.89% (Cost $370,110,165) 255,201,663 ================================================================================ OTHER ASSETS LESS LIABILITIES-1.11% 2,859,438 ================================================================================ NET ASSETS-100.00% $258,061,101 ________________________________________________________________________________ ================================================================================
Investment Abbreviations: ADR - American Depositary Receipt PDR - Philippine Deposit Receipts Wts. - Warrants
Notes to Schedule of Investments: (a) Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at October 31, 2008 was $6,231,943, which represented 2.41% of the Fund's Net Assets. Unless otherwise indicated, these securities are not considered illiquid at October 31, 2008. (b) Affiliated company during the period. The Investment Company Act of 1940 defines affiliates as those companies in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The aggregate value of these securities as of October 31, 2008 was $8,783,119, which represented 3.40% of the Fund's Net Assets. See Note 3. (c) Non-income producing security. (d) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The aggregate value of these securities at October 31, 2008 was $12,680,670, which represented 4.91% 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. (f) The majority of foreign securities were fair valued using adjusted closing market prices. See accompanying Notes to Financial Statements which are an integral part of the financial statements. 10 AIM ASIA PACIFIC GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2008 ASSETS: Investments, at value (Cost $351,551,674) $ 243,651,068 ------------------------------------------------------- Investments in affiliates, at value (Cost $18,558,491) 11,550,595 ======================================================= Total investments (Cost $370,110,165) 255,201,663 ======================================================= Foreign currencies, at value (Cost $5,375,688) 5,228,410 ------------------------------------------------------- Receivables for: Investments sold 199,527 ------------------------------------------------------- Fund shares sold 481,824 ------------------------------------------------------- Dividends 142,986 ------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 24,936 ------------------------------------------------------- Other assets 40,628 ======================================================= Total assets 261,319,974 _______________________________________________________ ======================================================= LIABILITIES: Payables for: Investments purchased 1,349,057 ------------------------------------------------------- Fund shares reacquired 965,206 ------------------------------------------------------- Accrued fees to affiliates 312,145 ------------------------------------------------------- Accrued other operating expenses 578,357 ------------------------------------------------------- Trustee deferred compensation and retirement plans 54,108 ======================================================= Total liabilities 3,258,873 ======================================================= Net assets applicable to shares outstanding $ 258,061,101 _______________________________________________________ ======================================================= NET ASSETS CONSIST OF: Shares of beneficial interest $ 369,065,116 ------------------------------------------------------- Undistributed net investment income 5,252,340 ------------------------------------------------------- Undistributed net realized gain (loss) (1,208,694) ------------------------------------------------------- Unrealized appreciation (depreciation) (115,047,661) ======================================================= $ 258,061,101 _______________________________________________________ ======================================================= NET ASSETS: Class A $ 189,402,711 _______________________________________________________ ======================================================= Class B $ 26,677,723 _______________________________________________________ ======================================================= Class C $ 37,629,573 _______________________________________________________ ======================================================= Class Y $ 4,351,094 _______________________________________________________ ======================================================= SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 14,009,540 _______________________________________________________ ======================================================= Class B 2,108,756 _______________________________________________________ ======================================================= Class C 2,987,705 _______________________________________________________ ======================================================= Class Y 321,837 _______________________________________________________ ======================================================= Class A: Net asset value per share $ 13.52 ------------------------------------------------------- Maximum offering price per share (Net asset value of $13.52 divided by 94.50%) $ 14.31 _______________________________________________________ ======================================================= Class B: Net asset value and offering price per share $ 12.65 _______________________________________________________ ======================================================= Class C: Net asset value and offering price per share $ 12.59 _______________________________________________________ ======================================================= Class Y: Net asset value and offering price per share $ 13.52 _______________________________________________________ =======================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 11 AIM ASIA PACIFIC GROWTH FUND STATEMENT OF OPERATIONS For the year ended October 31, 2008 INVESTMENT INCOME: Dividends (net of foreign withholding taxes of $1,771,686) $ 16,525,002 ------------------------------------------------------------------------------------------------ Dividends from affiliates (includes securities lending income of $122,388) 1,382,507 ================================================================================================ Total investment income 17,907,509 ================================================================================================ EXPENSES: Advisory fees 5,448,769 ------------------------------------------------------------------------------------------------ Administrative services fees 157,444 ------------------------------------------------------------------------------------------------ Custodian fees 904,459 ------------------------------------------------------------------------------------------------ Distribution fees: Class A 1,100,022 ------------------------------------------------------------------------------------------------ Class B 630,822 ------------------------------------------------------------------------------------------------ Class C 910,775 ------------------------------------------------------------------------------------------------ Transfer agent fees 1,507,839 ------------------------------------------------------------------------------------------------ Trustees' and officers' fees and benefits 32,361 ------------------------------------------------------------------------------------------------ Other 441,922 ================================================================================================ Total expenses 11,134,413 ================================================================================================ Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (85,387) ================================================================================================ Net expenses 11,049,026 ================================================================================================ Net investment income 6,858,483 ================================================================================================ REALIZED AND UNREALIZED GAIN (LOSS) FROM: Net realized gain (loss) from: Investment securities (net of foreign taxes of $243,209) (1,176,181) ------------------------------------------------------------------------------------------------ Foreign currencies (1,271,683) ================================================================================================ (2,447,864) ================================================================================================ Change in net unrealized appreciation (depreciation) of: Investment securities (net of foreign taxes on holdings of $3,091,991) (421,484,833) ------------------------------------------------------------------------------------------------ Foreign currencies (329,976) ================================================================================================ (421,814,809) ================================================================================================ Net realized and unrealized gain (loss) (424,262,673) ================================================================================================ Net increase (decrease) in net assets resulting from operations $(417,404,190) ________________________________________________________________________________________________ ================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 12 AIM ASIA PACIFIC GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2008 and 2007
2008 2007 --------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 6,858,483 $ 4,020,571 --------------------------------------------------------------------------------------------------------- Net realized gain (loss) (2,447,864) 85,045,460 --------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) (421,814,809) 198,165,403 ========================================================================================================= Net increase (decrease) in net assets resulting from operations (417,404,190) 287,231,434 ========================================================================================================= Distributions to shareholders from net investment income: Class A (3,795,249) (1,443,028) --------------------------------------------------------------------------------------------------------- Class B (99,294) -- --------------------------------------------------------------------------------------------------------- Class C (143,490) -- ========================================================================================================= Total distributions from net investment income (4,038,033) (1,443,028) ========================================================================================================= Distributions to shareholders from net realized gains: Class A (61,909,244) (11,106,619) --------------------------------------------------------------------------------------------------------- Class B (9,486,893) (2,104,538) --------------------------------------------------------------------------------------------------------- Class C (13,709,431) (2,181,651) ========================================================================================================= Total distributions from net realized gains (85,105,568) (15,392,808) ========================================================================================================= Share transactions-net: Class A (82,788,560) 152,873,003 --------------------------------------------------------------------------------------------------------- Class B (12,163,274) 7,256,325 --------------------------------------------------------------------------------------------------------- Class C (16,048,978) 37,850,716 --------------------------------------------------------------------------------------------------------- Class Y 5,629,069 -- ========================================================================================================= Net increase (decrease) in net assets resulting from share transactions (105,371,743) 197,980,044 ========================================================================================================= Net increase (decrease) in net assets (611,919,534) 468,375,642 ========================================================================================================= NET ASSETS: Beginning of year 869,980,635 401,604,993 ========================================================================================================= End of year (includes undistributed net investment income of $5,252,340 and $3,921,823, respectively) $ 258,061,101 $869,980,635 _________________________________________________________________________________________________________ =========================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 13 AIM ASIA PACIFIC GROWTH FUND NOTES TO FINANCIAL STATEMENTS October 31, 2008 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 assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The Fund's investment objective is long-term growth of capital. The Fund currently consists of four different classes of shares: Class A, Class B, Class C and Class Y. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waiver shares may be subject to contingent deferred sales charges ("CDSC"). Class B shares and Class C shares are sold with a CDSC. Class Y shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer's assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. 14 AIM ASIA PACIFIC GROWTH FUND The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain/loss for investments no longer held and as unrealized gain/loss for investments still held. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment advisor may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund's taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. G. ACCOUNTING ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. J. SECURITIES LENDING -- The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. K. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The 15 AIM ASIA PACIFIC GROWTH FUND combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. L. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. Fluctuations in the value of these contracts are recorded as unrealized appreciation (depreciation) until the contracts are closed. When these contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. The Fund could be exposed to risk, which may be in excess of the amount reflected in the Statement of Assets and Liabilities, if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with Invesco Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Advisor based on the annual rate of the Fund's average daily net assets as follows:
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% ___________________________________________________________________ ===================================================================
Under the terms of a master sub-advisory agreement approved by shareholders of the Fund, effective May 1, 2008, between the Advisor and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Advisor(s). The Advisor has contractually agreed, through at least June 30, 2009, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Advisor receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds. For the year ended October 31, 2008, the Advisor waived advisory fees of $41,476. At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $10,886. The Trust has entered into a master administrative services agreement with Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees. The Trust has entered into a transfer agency and service agreement with Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has agreed to pay IAIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the course of providing such services. IAIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IAIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust's Board of Trustees. For the year ended October 31, 2008, the expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees. The Trust has entered into master distribution agreements with Invesco Aim Distributors, Inc. ("IADI") to serve as the distributor for the Class A, Class B, Class C and Class Y shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays IADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of each class of Class B and Class C shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such 16 AIM ASIA PACIFIC GROWTH FUND classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority ("FINRA") impose a cap on the total sales charges, including asset- based sales charges that may be paid by any class of shares of the Fund. For the year ended October 31, 2008, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees. Front-end sales commissions and CDSC (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2008, IADI advised the Fund that IADI retained $158,213 in front-end sales commissions from the sale of Class A shares and $36,388, $140,173 and $60,924 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of Invesco Aim, IAIS and/or IADI. NOTE 3--INVESTMENTS IN OTHER AFFILIATES The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the investments in affiliates for the year ended October 31, 2008.
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND 10/31/07 AT COST FROM SALES (DEPRECIATION) 10/31/08 INCOME -------------------------------------------------------------------------------------------------------------------------- GMA Holdings, Inc.-PDR $ 9,499,447 $ 961,935 $ -- $(5,888,311) $4,573,071 $197,004 -------------------------------------------------------------------------------------------------------------------------- Kingdee International Software Group Co. Ltd.(a) 5,749,960 878,754 (1,261,542) (1,017,903) 4,210,048 95,994 ========================================================================================================================== Total Investments in Other Affiliates $15,249,407 $1,840,689 $(1,261,542) $(6,906,214) $8,783,119 $292,998 __________________________________________________________________________________________________________________________ ========================================================================================================================== REALIZED GAIN (LOSS) -------------------------------------------- GMA Holdings, Inc.-PDR $ -- -------------------------------------------- Kingdee International Software Group Co. Ltd.(a) (139,221) ============================================ Total Investments in Other Affiliates $(139,221) ____________________________________________ ============================================
(a) As of October 31, 2008, the security is no longer considered an affiliate of the Fund. NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended October 31, 2008, the Fund engaged in securities purchases of $22,616. NOTE 5--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2008, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $33,025. NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officers' Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2008, the Fund paid legal fees of $4,258 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 7--CASH BALANCES The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco Aim, not to exceed the contractually agreed upon rate. 17 AIM ASIA PACIFIC GROWTH FUND NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED OCTOBER 31, 2008 AND 2007:
2008 2007 -------------------------------------------------------------------------------------------------------- Ordinary income $20,571,142 $ 1,443,028 -------------------------------------------------------------------------------------------------------- Long-term capital gain 68,572,459 15,392,808 ======================================================================================================== Total distributions $89,143,601 $16,835,836 ________________________________________________________________________________________________________ ========================================================================================================
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
2008 ------------------------------------------------------------------------------------------------ Undistributed ordinary income $ 5,316,192 ------------------------------------------------------------------------------------------------ Net appreciation (depreciation)-investments (115,152,905) ------------------------------------------------------------------------------------------------ Net appreciation (depreciation)-other investments (139,159) ------------------------------------------------------------------------------------------------ Temporary book/tax differences (63,852) ------------------------------------------------------------------------------------------------ Capital loss carryforward (964,291) ------------------------------------------------------------------------------------------------ Shares of beneficial interest 369,065,116 ================================================================================================ Total net assets $ 258,061,101 ________________________________________________________________________________________________ ================================================================================================
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's net unrealized appreciation (depreciation) difference is attributable primarily to wash sales. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. The Fund has a capital loss carryforward as of October 31, 2008 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* ----------------------------------------------------------------------------------------------- October 31, 2016 $964,291 _______________________________________________________________________________________________ ===============================================================================================
* 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--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions on October 31, 2008, undistributed net investment income was decreased by $1,489,933, undistributed net realized gain (loss) was increased by $1,530,808 and shares of beneficial interest decreased by $40,875. This reclassification had no effect on the net assets of the Fund. NOTE 10--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended October 31, 2008 was $142,380,352 and $263,375,685, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 25,461,024 ------------------------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (140,613,929) ================================================================================================ Net unrealized appreciation (depreciation) of investment securities $(115,152,905) ________________________________________________________________________________________________ ================================================================================================ Cost of investments for tax purposes is $370,354,568.
18 AIM ASIA PACIFIC GROWTH FUND NOTE 11--SHARE INFORMATION
SUMMARY OF SHARE ACTIVITY -------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------------- 2008(a) 2007 ----------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------------------------------------------------------------- Sold: Class A 4,613,156 $ 121,544,675 10,858,212 $ 301,941,372 -------------------------------------------------------------------------------------------------------------------------- Class B 433,222 10,960,605 1,194,028 31,212,042 -------------------------------------------------------------------------------------------------------------------------- Class C 884,628 22,316,753 2,298,857 61,390,243 -------------------------------------------------------------------------------------------------------------------------- Class Y(b) 329,465 5,747,508 -- -- ========================================================================================================================== Issued as reinvestment of dividends: Class A 2,141,494 59,983,256 454,156 10,877,024 -------------------------------------------------------------------------------------------------------------------------- Class B 340,688 8,987,340 87,633 1,993,643 -------------------------------------------------------------------------------------------------------------------------- Class C 485,504 12,749,319 91,497 2,073,315 ========================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 466,651 11,453,713 308,975 8,171,565 -------------------------------------------------------------------------------------------------------------------------- Class B (496,690) (11,453,713) (325,015) (8,171,565) ========================================================================================================================== Reacquired:(c) Class A(b) (11,605,998) (275,770,204) (6,057,329) (168,116,958) -------------------------------------------------------------------------------------------------------------------------- Class B (949,454) (20,657,506) (667,453) (17,777,795) -------------------------------------------------------------------------------------------------------------------------- Class C (2,344,095) (51,115,050) (974,472) (25,612,842) -------------------------------------------------------------------------------------------------------------------------- Class Y(b) (7,628) (118,439) -- -- ========================================================================================================================== Net increase (decrease) in share activity (5,709,057) $(105,371,743) 7,269,089 $ 197,980,044 __________________________________________________________________________________________________________________________ ==========================================================================================================================
(a) There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 25% of the outstanding shares of the Fund. IADI has an agreement with these entities to sell Fund shares. The Fund, Invesco Aim and/or Invesco Aim affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco Aim and/or Invesco Aim affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. (b) Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A into Class Y shares of the Fund:
CLASS SHARES AMOUNT --------------------------------------------------------------------------------------------------- Class Y 326,848 $ 5,710,032 --------------------------------------------------------------------------------------------------- Class A (326,848) (5,710,032) ___________________________________________________________________________________________________ ===================================================================================================
(c) Net of redemption fees of $64,912 and $95,566 allocated among the classes based on relative net assets of each class for the years ended October 31, 2008 and 2007, respectively. 19 AIM ASIA PACIFIC GROWTH FUND NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
NET GAINS NET ASSET NET ON SECURITIES DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET NET ASSET BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END OF PERIOD (LOSS)(A) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD(B) --------------------------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 $35.16 $ 0.34 $(18.36) $(18.02) $(0.21) $(3.41) $(3.62) $13.52 Year ended 10/31/07 22.82 0.24 13.00 13.24 (0.10) (0.80) (0.90) 35.16 Year ended 10/31/06 16.41 0.14 6.39 6.53 (0.12) -- (0.12) 22.82 Year ended 10/31/05 13.72 0.14 2.55 2.69 -- -- -- 16.41 Year ended 10/31/04 12.07 (0.01) 1.66 1.65 -- -- -- 13.72 --------------------------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 33.19 0.14 (17.23) (17.09) (0.04) (3.41) (3.45) 12.65 Year ended 10/31/07 21.65 0.02 12.32 12.34 -- (0.80) (0.80) 33.19 Year ended 10/31/06 15.61 (0.01) 6.08 6.07 (0.03) -- (0.03) 21.65 Year ended 10/31/05 13.14 0.03 2.44 2.47 -- -- -- 15.61 Year ended 10/31/04 11.64 (0.09) 1.59 1.50 -- -- -- 13.14 --------------------------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 33.06 0.14 (17.16) (17.02) (0.04) (3.41) (3.45) 12.59 Year ended 10/31/07 21.56 0.02 12.28 12.30 -- (0.80) (0.80) 33.06 Year ended 10/31/06 15.55 (0.01) 6.05 6.04 (0.03) -- (0.03) 21.56 Year ended 10/31/05 13.09 0.03 2.43 2.46 -- -- -- 15.55 Year ended 10/31/04 11.60 (0.09) 1.58 1.49 -- -- -- 13.09 --------------------------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(e) 17.47 0.02 (3.97) (3.95) -- -- -- 13.52 ___________________________________________________________________________________________________________________________ =========================================================================================================================== RATIO OF RATIO OF EXPENSES EXPENSES TO AVERAGE TO AVERAGE NET RATIO OF NET NET ASSETS ASSETS WITHOUT INVESTMENT NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS) TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO RETURN(C) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(D) ------------------------------------------------------------------------------------------------------------ CLASS A Year ended 10/31/08 (56.58)% $189,403 1.67%(f) 1.68%(f) 1.34%(f) 25% Year ended 10/31/07 59.90 646,720 1.61 1.63 0.84 41 Year ended 10/31/06 39.97 292,771 1.83 1.85 0.68 58 Year ended 10/31/05 19.61 156,379 2.01 2.03 0.85 36 Year ended 10/31/04 13.67 106,129 2.23 2.25 (0.09) 68 ------------------------------------------------------------------------------------------------------------ CLASS B Year ended 10/31/08 (56.91) 26,678 2.42(f) 2.43(f) 0.59(f) 25 Year ended 10/31/07 58.70 92,295 2.36 2.38 0.09 41 Year ended 10/31/06 38.96 53,936 2.58 2.60 (0.07) 58 Year ended 10/31/05 18.80 35,600 2.69 2.71 0.17 36 Year ended 10/31/04 12.89 29,174 2.88 2.90 (0.74) 68 ------------------------------------------------------------------------------------------------------------ CLASS C Year ended 10/31/08 (56.92) 37,630 2.42(f) 2.43(f) 0.59(f) 25 Year ended 10/31/07 58.77 130,965 2.36 2.38 0.09 41 Year ended 10/31/06 38.92 54,898 2.58 2.60 (0.07) 58 Year ended 10/31/05 18.79 26,626 2.69 2.71 0.17 36 Year ended 10/31/04 12.84 11,220 2.88 2.90 (0.74) 68 ------------------------------------------------------------------------------------------------------------ CLASS Y Year ended 10/31/08(e) (22.61) 4,351 1.52(f)(g) 1.52(f)(g) 1.49(f)(g) 25 ____________________________________________________________________________________________________________ ============================================================================================================
(a) Calculated using average shares outstanding. (b) Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. (d) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. (e) Commencement date of October 3, 2008. (f) Ratios are based on average daily net assets (000's omitted) of $440,009, $63,082, $91,078, and $4,577 for Class A, Class B, Class C, and Class Y shares, respectively (g) Annualized. 20 AIM ASIA PACIFIC GROWTH FUND NOTE 13--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On May 23, 2008, the Securities and Exchange Commission ("SEC") publicly posted its final approval of the Distribution Plans ("Distribution Plans") for the distribution of monies placed into two separate Fair Funds created pursuant to a settlement reached on October 8, 2004 between Invesco Funds Group, Inc. ("IFG"), Invesco Aim Advisors, Inc. ("Invesco Aim") and Invesco Aim Distributors, Inc. ("IADI") and the SEC (the "Order"). One of the Fair Funds consists of $325 million, plus interest and any contributions by other settling parties, for distribution to shareholders of certain mutual funds formerly advised by IFG who may have been harmed by market timing and related activity. The second Fair Fund consists of $50 million, plus interest and any contributions by other settling parties, for distribution to shareholders of mutual funds advised by Invesco Aim who may have been harmed by market timing and related activity. The Distribution Plans provide for the distribution to all eligible investors to compensate such investors for injury they may have suffered as a result of market timing in the affected funds. The Distribution Plans include a provision for any residual amounts in the Fair Funds to be distributed in the future to the affected funds. Because the distribution of the Fair Funds has not yet commenced, management of Invesco Aim and the Fund are unable to estimate the amount of distribution to be made to the Fund, if any. At the request of the trustees of the AIM Funds, Invesco Ltd. ("Invesco"), the parent company of IFG and Invesco Aim, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. PENDING LITIGATION AND REGULATORY INQUIRIES On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05- 1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into certain arrangements permitting market timing of the AIM Funds and failed to disclose these arrangements in the prospectuses for such Funds, and conclusions of law to the effect that Invesco Aim and IADI violated the West Virginia securities laws. The WVASC orders Invesco Aim and IADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. By agreement with the Commissioner of Securities, Invesco Aim's time to respond to that Order has been indefinitely suspended. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; and - that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid. The case pending in Illinois State Court regarding fair value pricing was dismissed with prejudice on May 6, 2008. All lawsuits based on allegations of market timing, late trading and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various Invesco Aim- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA purportedly brought on behalf of participants in the Invesco 401(k) plan. Based on orders issued by the MDL Court, all claims asserted against the AIM Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco defendants' motion to dismiss the Amended Class Action Complaint for Violations of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June 16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and remanded this lawsuit back to the MDL Court for further proceedings. IFG, Invesco Aim, IADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the future. At the present time, management of Invesco Aim and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund. 21 AIM ASIA PACIFIC GROWTH FUND 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, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP December 16, 2008 Houston, Texas 22 AIM ASIA PACIFIC GROWTH FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. The actual ending account and expenses of the Class Y shares in the below example are based on an investment of $1,000 invested as of close of business October 3, 2008 (the date the share class commenced operations) and held through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period (as of close of business October 3, 2008 through October 31, 2008 for the Class Y shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class Y shares, the ending account value and expense information may not provide a meaningful comparison to mutual funds that provide such information for a full six month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
--------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO --------------------------------------------------------------------------------------------------- A $1,000.00 $530.60 $6.62 $1,016.49 $ 8.72 1.72% --------------------------------------------------------------------------------------------------- B 1,000.00 528.40 9.49 1,012.72 12.50 2.47 --------------------------------------------------------------------------------------------------- C 1,000.00 528.70 9.49 1,012.72 12.50 2.47 --------------------------------------------------------------------------------------------------- Y 1,000.00 773.90 1.07 1,017.50 7.71 1.52 ---------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008, (as of close of business October 3, 2008, through October 31, 2008 for the Class Y shares) after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. For the Class Y shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 29 (as of close of business October 3, 2008, through October 31, 2008)/366. Because the Class Y shares have not been in existence for a full six month period, the actual ending account value and expense information shown may not provide a meaningful comparison to fund expense information of classes that show such data for a full six month period and, because the actual ending account value and expense information in the expense example covers a short time period, return and expense data may not be indicative of return and expense data for longer time periods. (3) Hypothetical expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect a one-half year period. The hypothetical ending account value and expenses may be used to compare ongoing costs of investing in Class Y shares of the Fund and other funds because such data is based on a full six month period. 23 AIM ASIA PACIFIC GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT The Board of Trustees (the Board) of AIM their assigned funds. During the contract ated the information provided differently International Mutual Funds is required renewal process, the Trustees receive from one another and attributed different under the Investment Company Act of 1940 comparative performance and fee data weight to the various factors. The to approve annually the renewal of the AIM regarding the AIM Funds prepared by an Trustees recognized that the advisory Asia Pacific Growth Fund's (the Fund) independent company, Lipper, Inc. arrangements and resulting advisory fees investment advisory agreement with Invesco (Lipper), under the direction and for the Fund and the other AIM Funds are Aim Advisors, Inc. (Invesco Aim). During supervision of the independent Senior the result of years of review and contract renewal meetings held on June Officer who also prepares a separate negotiation between the Trustees and 18-19, 2008, the Board as a whole and the analysis of this information for the Invesco Aim, that the Trustees may focus disinterested or "independent" Trustees, Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of voting separately, approved the recommendations to the Investments these arrangements in some years than in continuance of the Fund's investment Committee regarding the performance, fees others, and that the Trustees' advisory agreement for another year, and expenses of their assigned funds. The deliberations and conclusions in a effective July 1, 2008. In doing so, the Investments Committee considers each particular year may be based in part on Board determined that the Fund's Sub-Committee's recommendations and makes their deliberations and conclusions of investment advisory agreement is in the its own recommendations regarding the these same arrangements throughout the best interests of the Fund and its performance, fees and expenses of the AIM year and in prior years. shareholders and that the compensation to Funds to the full Board. The Investments Invesco Aim under the Fund's investment Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF advisory agreement is fair and reasonable. Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION its annual recommendation to the Board The independent Trustees met separately whether to approve the continuance of each The discussion below serves as a summary during their evaluation of the Fund's AIM Fund's investment advisory agreement of the Senior Officer's independent investment advisory agreement with and sub-advisory agreements for another written evaluation with respect to the independent legal counsel from whom they year. Fund's investment advisory agreement as received independent legal advice, and the well as a discussion of the material independent Trustees also received The independent Trustees are assisted factors and related conclusions that assistance during their deliberations from in their annual evaluation of the Fund's formed the basis for the Board's approval the independent Senior Officer, a investment advisory agreement by the of the Fund's investment advisory full-time officer of the AIM Funds who independent Senior Officer. One agreement and sub-advisory agreements. reports directly to the independent responsibility of the Senior Officer is to Unless otherwise stated, information set Trustees. manage the process by which the AIM Funds' forth below is as of June 19, 2008 and proposed management fees are negotiated does not reflect any changes that may have THE BOARD'S FUND EVALUATION PROCESS during the annual contract renewal process occurred since that date, including but to ensure that they are negotiated in a not limited to changes to the Fund's The Board's Investments Committee has manner that is at arms' length and performance, advisory fees, expense established three Sub-Committees that are reasonable. Accordingly, the Senior limitations and/or fee waivers. responsible for overseeing the management Officer must either supervise a of a number of the series portfolios of competitive bidding process or prepare an I. Investment Advisory Agreement the AIM Funds. This Sub-Committee independent written evaluation. The Senior structure permits the Trustees to focus on Officer has recommended that an A. Nature, Extent and Quality of the performance of the AIM Funds that have independent written evaluation be provided Services Provided by Invesco Aim been assigned to them. The Sub-Committees and, at the direction of the Board, has meet throughout the year to review the prepared an independent written The Board reviewed the advisory services performance of their assigned funds, and evaluation. provided to the Fund by Invesco Aim under the Sub-Committees review monthly and the Fund's investment advisory agreement, quarterly comparative performance During the annual contract renewal the performance of Invesco Aim in information and periodic asset flow data process, the Board considered the factors providing these services, and the for their assigned funds. These materials discussed below under the heading "Factors credentials and experience of the officers are prepared under the direction and and Conclusions and Summary of Independent and employees of Invesco Aim who provide supervision of the independent Senior Written Fee Evaluation" in evaluating the these services. The Board's review of the Officer. Over the course of each year, the fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide Sub-Committees meet with portfolio investment advisory agreement and these services included the Board's managers for their assigned funds and sub-advisory agreements at the contract consideration of Invesco Aim's portfolio other members of management and review renewal meetings and at their meetings and product review process, various back with these individuals the performance, throughout the year as part of their office support functions provided by investment objective(s), policies, ongoing oversight of the Fund. The Fund's Invesco Aim, and Invesco Aim's equity and strategies and limitations of these funds. investment advisory agreement and fixed income trading operations. The Board sub-advisory agreements were considered concluded that the nature, extent and In addition to their meetings separately, although the Board also quality of the advisory services provided throughout the year, the Sub-Committees considered the common interests of all of to the Fund by Invesco Aim were meet at designated contract renewal the AIM Funds in their deliberations. The appropriate and that Invesco Aim currently meetings each year to conduct an in-depth Board considered all of the information is providing satisfactory advisory review of the performance, fees and provided to them and did not identify any services in accordance with the terms of expenses of particular factor that was controlling. the Fund's investment advisory agreement. Each Trustee may have evalu- In addition, based on their ongoing meetings throughout the year with the continued
24 AIM ASIA PACIFIC GROWTH FUND Fund's portfolio manager or managers, the on fund performance. Although the the Fund shares directly in economies of Board concluded that these individuals are independent written evaluation of the scale through lower fees charged by third competent and able to continue to carry Fund's Senior Officer only considered Fund party service providers based on the out their responsibilities under the performance through the most recent combined size of all of the AIM Funds and Fund's investment advisory agreement. calendar year, the Board also reviewed affiliates. more recent Fund performance and this In determining whether to continue the review did not change their conclusions. E. Profitability and Financial Fund's investment advisory agreement, the Resources of Invesco Aim Board considered the prior relationship C. Advisory Fees and Fee Waivers between Invesco Aim and the Fund, as well The Board reviewed information from as the Board's knowledge of Invesco Aim's The Board compared the Fund's contractual Invesco Aim concerning the costs of the operations, and concluded that it was advisory fee rate to the contractual advisory and other services that Invesco beneficial to maintain the current advisory fee rates of funds in the Fund's Aim and its affiliates provide to the Fund relationship, in part, because of such expense group that are not managed by and the profitability of Invesco Aim and knowledge. The Board also considered the Invesco Aim, at a common asset level and its affiliates in providing these steps that Invesco Aim and its affiliates as of the end of the past calendar year. services. The Board also reviewed have taken over the last several years to The Board noted that the Fund's information concerning the financial improve the quality and efficiency of the contractual advisory fee rate was below condition of Invesco Aim and its services they provide to the AIM Funds in the median contractual advisory fee rate affiliates. The Board also reviewed with the areas of investment performance, of funds in its expense group. The Board Invesco Aim the methodology used to product line diversification, also reviewed the methodology used by prepare the profitability information. The distribution, fund operations, shareholder Lipper in determining contractual fee Board considered the overall profitability services and compliance. The Board rates. The Board noted that Invesco Aim of Invesco Aim, as well as the concluded that the quality and efficiency does not serve as an advisor to other profitability of Invesco Aim in connection of the services Invesco Aim and its mutual funds or other clients with with managing the Fund. The Board noted affiliates provide to the AIM Funds in investment strategies comparable to those that Invesco Aim continues to operate at a each of these areas have generally of the Fund. net profit, although increased expenses in improved, and support the Board's approval recent years have reduced the of the continuance of the Fund's The Board noted that Invesco Aim has profitability of Invesco Aim and its investment advisory agreement. not proposed any advisory fee waivers or affiliates. The Board concluded that the expense limitations for the Fund. Based Fund's fees were fair and reasonable, and B. Fund Performance upon amendments to the Fund's contractual that the level of profits realized by advisory fee schedule in recent years, the Invesco Aim and its affiliates from The Board compared the Fund's performance Board concluded that it was not necessary providing services to the Fund was not during the past one, three and five at this time to discuss with Invesco Aim excessive in light of the nature, quality calendar years to the performance of funds whether to amend the contractual advisory and extent of the services provided. The in the Fund's performance group that are fee schedule or implement any fee waivers Board considered whether Invesco Aim is not managed by Invesco Aim, and against or expense limitations for the Fund. financially sound and has the resources the performance of all funds in the Lipper necessary to perform its obligations under Pacific Ex Japan Funds Index. The Board After taking account of the Fund's the Fund's investment advisory agreement, also reviewed the criteria used by Invesco contractual advisory fee rate, as well as and concluded that Invesco Aim has the Aim to identify the funds in the Fund's the comparative advisory fee information financial resources necessary to fulfill performance group for inclusion in the discussed above, the Board concluded that these obligations. Lipper reports. The Board noted that the the Fund's advisory fees were fair and Fund's performance was in the fifth reasonable. F. Independent Written Evaluation of quintile of its performance group for the the Fund's Senior Officer one year period and the fourth quintile D. Economies of Scale and Breakpoints for the three and five year periods (the The Board noted that, at their direction, first quintile being the best performing The Board considered the extent to which the Senior Officer of the Fund, who is funds and the fifth quintile being the there are economies of scale in Invesco independent of Invesco Aim and Invesco worst performing funds). The Board noted Aim's provision of advisory services to Aim's affiliates, had prepared an that the Fund's performance was below the the Fund. The Board also considered independent written evaluation to assist performance of the Index for the one, whether the Fund benefits from such the Board in determining the three and five year periods. The Board economies of scale through contractual reasonableness of the proposed management noted that Invesco Aim acknowledges the breakpoints in the Fund's advisory fee fees of the AIM Funds, including the Fund. Fund's underperformance because of shorter schedule or through advisory fee waivers The Board noted that they had relied upon term performance results and continues to or expense limitations. The Board noted the Senior Officer's written evaluation monitor the Fund. The Board also that the Fund's contractual advisory fee instead of a competitive bidding process. considered the steps Invesco Aim has taken schedule includes seven breakpoints and In determining whether to continue the over the last several years to improve the that the level of the Fund's advisory Fund's investment advisory agreement, the quality and efficiency of the services fees, as a percentage of the Fund's net Board considered the Senior Officer's that Invesco Aim provides to the AIM assets, has decreased as net assets written evaluation. Funds. The Board concluded that Invesco increased because of the breakpoints. Aim continues to be responsive to the Based on this information, the Board G. Collateral Benefits to Invesco Aim Board's focus concluded that the Fund's advisory fees and its Affiliates appropriately reflect economies of scale at current asset levels. The Board also The Board considered various other noted that benefits received by Invesco Aim and its continued
25 AIM ASIA PACIFIC GROWTH FUND affiliates resulting from Invesco Aim's cash collateral. The Board considered the pursuant to the sub-advisory agreements relationship with the Fund, including the contractual nature of this fee waiver and and the services to be provided by Invesco fees received by Invesco Aim and its noted that it remains in effect until at Aim pursuant to the Fund's investment affiliates for their provision of least June 30, 2009. The Board concluded advisory agreement, as well as the administrative, transfer agency and that the Fund's investment of uninvested allocation of fees between Invesco Aim and distribution services to the Fund. The cash and cash collateral from any the Affiliated Sub-Advisers pursuant to Board considered the performance of securities lending arrangements in the the sub-advisory agreements. The Board Invesco Aim and its affiliates in affiliated money market funds is in the noted that the sub-advisory fees have no providing these services and the best interests of the Fund and its direct effect on the Fund or its organizational structure employed by shareholders. shareholders, as they are paid by Invesco Invesco Aim and its affiliates to provide Aim to the Affiliated Sub-Advisers, and these services. The Board also considered II. Sub-Advisory Agreements that Invesco Aim and the Affiliated that these services are provided to the Sub-Advisers are affiliates. After taking Fund pursuant to written contracts which A. Nature, Extent and Quality of account of the Fund's contractual are reviewed and approved on an annual Services Provided by Affiliated sub-advisory fee rate, as well as other basis by the Board. The Board concluded Sub-Advisers relevant factors, the Board concluded that that Invesco Aim and its affiliates were the Fund's sub-advisory fees were fair and providing these services in a satisfactory The Board reviewed the services to be reasonable. manner and in accordance with the terms of provided by Invesco Trimark Ltd., Invesco their contracts, and were qualified to Asset Management Deutschland, GmbH, D. Financial Resources of the continue to provide these services to the Invesco Asset Management Limited, Invesco Affiliated Sub-Advisers Fund. Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Global Asset The Board considered whether each The Board considered the benefits Management (N.A.), Inc., Invesco Hong Kong Affiliated Sub-Adviser is financially realized by Invesco Aim as a result of Limited, Invesco Institutional (N.A.), sound and has the resources necessary to portfolio brokerage transactions executed Inc. and Invesco Senior Secured perform its obligations under its through "soft dollar" arrangements. Under Management, Inc. (collectively, the respective sub-advisory agreement, and these arrangements, portfolio brokerage "Affiliated Sub-Advisers") under the concluded that each Affiliated Sub-Adviser commissions paid by the Fund and/or other sub-advisory agreements and the has the financial resources necessary to funds advised by Invesco Aim are used to credentials and experience of the officers fulfill these obligations. pay for research and execution services. and employees of the Affiliated The Board noted that soft dollar Sub-Advisers who will provide these arrangements shift the payment obligation services. The Board concluded that the for the research and execution services nature, extent and quality of the services from Invesco Aim to the funds and to be provided by the Affiliated therefore may reduce Invesco Aim's Sub-Advisers were appropriate. The Board expenses. The Board also noted that noted that the Affiliated Sub-Advisers, research obtained through soft dollar which have offices and personnel that are arrangements may be used by Invesco Aim in geographically dispersed in financial making investment decisions for the Fund centers around the world, have been formed and may therefore benefit Fund in part for the purpose of researching and shareholders. The Board concluded that compiling information and making Invesco Aim's soft dollar arrangements recommendations on the markets and were appropriate. The Board also concluded economies of various countries and that, based on their review and securities of companies located in such representations made by Invesco Aim, these countries or on various types of arrangements were consistent with investments and investment techniques, and regulatory requirements. providing investment advisory services. The Board concluded that the sub-advisory The Board considered the fact that the agreements will benefit the Fund and its Fund's uninvested cash and cash collateral shareholders by permitting Invesco Aim to from any securities lending arrangements utilize the additional resources and may be invested in money market funds talent of the Affiliated Sub-Advisers in advised by Invesco Aim pursuant to managing the Fund. procedures approved by the Board. The Board noted that Invesco Aim will receive B. Fund Performance advisory fees from these affiliated money market funds attributable to such The Board did not view Fund performance as investments, although Invesco Aim has a relevant factor in considering whether contractually agreed to waive through at to approve the sub-advisory agreements for least June 30, 2009, the advisory fees the Fund, as no Affiliated Sub-Adviser payable by the Fund in an amount equal to currently manages any portion of the 100% of the net advisory fees Invesco Aim Fund's assets. receives from the affiliated money market funds with respect to the Fund's C. Sub-Advisory Fees investment of uninvested cash, but not The Board considered the services to be provided by the Affiliated Sub-Advisers
26 AIM ASIA PACIFIC GROWTH FUND TAX INFORMATION Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors. The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state's requirement. The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2008:
FEDERAL AND STATE INCOME TAX ---------------------------- Long-Term Capital Gain Dividends $ 68,572,459 Qualified Dividend Income* 30.15% Corporate Dividends Received Deduction* 0% Foreign Taxes 0.06 per share Foreign Source Income 1.04 per share
* The above percentages are based on ordinary income dividends paid to shareholders during the Fund's fiscal year. NON-RESIDENT ALIEN SHAREHOLDER INFORMATION The percentages of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008, and October 31, 2008 were 99.81%, 99.54%, 99.94%, and 99.84%, respectively. 27 AIM ASIA PACIFIC GROWTH FUND TRUSTEES AND OFFICERS The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 103 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS -------------------------------------------------------------------------------------------------------------------------------- Martin L. 2007 Executive Director, Chief Executive Officer and President, None Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global Trustee investment management firm); Chairman, Invesco Aim Advisors, Inc. (registered investment advisor); Director, Chairman, Chief Executive Officer and President, IVZ Inc. (holding company); INVESCO North American Holdings, Inc. (holding company); and, INVESCO Group Services, Inc. (service provider); Trustee, The AIM Family of Funds--Registered Trademark--; Vice Chairman, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business Formerly: Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco Aim and a global investment management firm); Chairman, Investment Company Institute; President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) -------------------------------------------------------------------------------------------------------------------------------- Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim Advisors, Inc., and 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Aim Management Group, Inc. (financial services holding company) and Invesco Aim Capital Management, Inc. (registered investment advisor); Director and President, INVESCO Funds Group, Inc. (registered investment advisor and register transfer agent) and AIM GP Canada Inc. (general partner for a limited partnership); Director, Invesco Aim Distributors, Inc. (registered broker dealer); Director and Chairman, Invesco Aim Investment Services, Inc. (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, IVZ Callco Inc. (holding company), INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (formerly AIM Canada Holdings Inc.) (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (formerly AIM Trimark Global Fund Inc.) (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services) (registered investment advisor and registered transfer agent) and Invesco Trimark Dealer Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered broker dealer); Trustee, President and Principal Executive Officer of The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only); and Manager, Invesco PowerShares Capital Management LLC Formerly: President, Invesco Trimark Dealer Inc.; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Director and President, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services); Senior Managing Director, Invesco Holding Company Limited; Trustee and Executive Vice President, Tax-Free Investments Trust; Director and Chairman, Fund Management Company (registered broker dealer); President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; and Director, Trimark Trust (federally regulated Canadian Trust Company) -------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES -------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates (technology ACE Limited Trustee and Chair consulting company) (insurance company); Captaris, Inc. (unified messaging provider); and Investment Company Institute -------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Trustee Formerly: Partner, law firm of Baker & McKenzie; and None Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) -------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Policy Trustee firm) Studies, Inc. and Van Gilder Insurance Corporation -------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business None Trustee corporations, including the Boss Group Ltd. (private investment and management); Continental Energy Services, LLC (oil and gas pipeline service); Reich & Tang Funds (registered investment company); Annuity and Life Re (Holdings), Ltd. (reinsurance company), and Homeowners of America Holding Corporation/Homeowners of America Insurance Company (property casualty company) Formerly: Director, CompuDyne Corporation (provider of product and services to the public security market); Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; Director of various public and private corporations -------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff Trustee (government affairs company); and Owner and Chief Executive Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate entertainment) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company); and Discovery Global Education Fund (non-profit) -------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich & Trustee Tang Funds) (15 portfolios) -------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None Trustee -------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee -------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, Jr. -- 1944 2005 Retired Trustee Formerly: Partner, Deloitte & Touche; and Director, Mainstay None VP Series Funds, Inc. (25 portfolios) --------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Flanagan is considered an interested person of the Trust because he is an officer of the advisor to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the advisor to the Trust. (2) Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. 28 AIM ASIA PACIFIC GROWTH FUND TRUSTEES AND OFFICERS--(CONTINUED)
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS -------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A Senior Vice President and Funds--Registered Trademark-- Senior Officer Formerly: Director of Compliance and Assistant General Counsel, ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. -------------------------------------------------------------------------------------------------------------------------------- John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc. Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice President and Secretary, Invesco Aim Distributors, Inc.; Director, Vice President and Secretary, Invesco Aim Investment Services, Inc. and INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Vice President and Secretary, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc.; Chief Operating Officer, Senior Vice President, General Counsel and Secretary, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company); Vice President and Secretary, PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker- dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator); General Counsel and Secretary, Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) -------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A Vice President AIM Family of Funds--Registered Trademark-- Formerly: Senior Vice President, Invesco Aim Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark--; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.; Vice President, Invesco Aim Investment Services, Inc. and Fund Management Company; and Senior Vice President and Compliance Director, Delaware Investments Family of Funds -------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited, IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO Funds Group, Inc.; Secretary, INVESCO North American Holdings, Inc.; and Vice President, The AIM Family of Funds--Registered Trademark-- Formerly: Director, Senior Vice President, Secretary and General Counsel, Invesco Aim Management Group, Inc. and Invesco Aim Advisors, Inc.; Senior Vice President, Invesco Aim Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc. and Invesco Aim Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; Director and Vice President, INVESCO Distributors, Inc. and Chief Executive Officer and President, INVESCO Funds Group, Inc. -------------------------------------------------------------------------------------------------------------------------------- Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President, and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. Officer and Invesco Aim Private Asset Management Inc. Formerly: Assistant Vice President and Assistant Treasurer, The AIM Family of Funds--Registered Trademark-- and Assistant Vice President, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. -------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed Income and Cash Management N/A Vice President Group; Director of Cash Management and Senior Vice President, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc; Executive Vice President, Invesco Aim Distributors, Inc.; Senior Vice President, Invesco Aim Management Group, Inc.; Vice President, The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); and President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only) Formerly President and Principal Executive Officer, Tax-Free Investments Trust; Director and President, Fund Management Company; Chief Cash Management Officer and Managing Director, Invesco Aim Capital Management, Inc.; and Vice President, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only) -------------------------------------------------------------------------------------------------------------------------------- Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc., Invesco Aim Private Asset Management, Inc. and The AIM Family of Funds--Registered Trademark-- Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company; and Manager of the Fraud Prevention Department, Invesco Aim Investment Services, Inc. -------------------------------------------------------------------------------------------------------------------------------- Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, The AIM Family of Funds--Registered Trademark--, Invesco Global Asset Management (N.A.), Inc. (registered investment advisor), Invesco Institutional (N.A.), Inc., (registered investment advisor), INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment advisor) and Invesco Senior Secured Management, Inc. (registered investment advisor); and Vice President, Invesco Aim Distributors, Inc. and Invesco Aim Investment Services, Inc. Formerly: Vice President, Invesco Aim Capital Management, Inc. and Fund Management Company; and Global Head of Product Development, AIG-Global Investment Group, Inc. --------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund's prospectus for information on the Fund's sub- advisors. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers Suite 100 Inc. Inc. LLP Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street Suite 100 Suite 100 Suite 2900 Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and & Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company 2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
29 AIM ASIA PACIFIC GROWTH FUND [GO PAPERLESS GRAPHIC] ==================================================================================================================================== GO PAPERLESS WITH EDELIVERY Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund reports and prospectuses with a service that's all about eeees: o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will trees used to produce paper. be sent via email as soon as they're available. o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer expenses and put more capital back in your fund's returns. with a few clicks of your mouse. This service is provided by Invesco Aim Investment Services, Inc. ==================================================================================================================================== FUND HOLDINGS AND PROXY VOTING INFORMATION The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC website at sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 942 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-06463 and 033-44611. 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 Invesco Aim website, invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is available at our website. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC website, sec.gov. If used after January 20, 2009, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the [INVESCO AIM LOGO] investment advisors for the products and services represented by Invesco Aim; they each provide -- SERVICE MARK -- investment advisory services to individual and institutional clients and do not sell securities. Please refer to each fund's prospectus for information on the fund's subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the retail mutual funds, exchange-traded funds and institutional money market funds and the subdistributor for the STIC Global Funds represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd. invescoaim.com APG-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM EUROPEAN GROWTH FUND -- SERVICE MARK -- Annual Report to Shareholders o October 31, 2008 [MOUNTAIN GRAPHIC] 2 Letters to Shareholders 4 Performance Summary 4 Management Discussion 6 Long-Term Fund Performance 8 Supplemental Information 9 Schedule of Investments 11 Financial Statements 14 Notes to Financial Statements 20 Financial Highlights 22 Auditor's Report 23 Fund Expenses 24 Approval of Investment Advisory Agreement 27 Tax Information 28 Trustees and Officers
Dear Shareholder: In previous reports, I've talked with you about short-term market volatility. I'd like to take this opportunity to update you on recent market developments and provide some perspective and encouragement to my fellow long-term investors. [TAYLOR PHOTO] MARKET OVERVIEW At the start of the fiscal year in November 2007, we saw warning signs of increasing economic ills -- a weakening housing market, rising inflation and Philip Taylor slowing job growth, among others. In response, the U.S. Federal Reserve Board (the Fed) repeatedly cut short-term interest rate targets to stimulate economic growth and expand market liquidity.(1) Also, Congress and the president worked together to enact an economic stimulus plan that included billions of dollars in rebates to taxpayers. These actions helped the economy and the U.S. stock market until the spring of 2008, when other factors came to the forefront -- triggering a severe correction that eventually drove major stock-market indexes to multi-year lows.(2) HOW WE GOT HERE The cause of this correction was years of lax lending associated with the recent housing boom. Mortgage loans of questionable quality were bundled into hard-to-value securities that were bought by, and traded among, financial institutions. As the value of those securities declined, financial institutions sought to unload them -- but there were few buyers. With the value of their assets falling and access to credit tightening, a number of well-established financial firms faced severe difficulties, and investor uncertainty and market volatility spiked. In October 2008, the administration and Congress enacted a plan, the Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury to purchase up to $700 billion in troubled mortgage-related assets -- the largest and most direct effort to resolve a credit crisis in the last half century. The Fed, in concert with other central banks, cut short-term interest rate targets and undertook other initiatives intended to restore investor confidence, expand lending and mitigate the effects of the global credit crisis. The recent volatility in the stock, fixed-income and credit markets has driven home the importance of three timeless investing principles. INVESTING IN VOLATILE MARKETS Through up markets and down, we believe history shows investors should: o INVEST FOR THE LONG TERM. Short-term fluctuations have always been a reality of the markets. We urge you to stick to your investment plan and stay focused on your long-term goals. o DIVERSIFY. Although diversification doesn't eliminate the risk of loss or guarantee a profit, a careful selection of complementary asset classes may cushion your portfolio against excessive volatility. o STAY FULLY INVESTED. Trying to time the market is a gamble, not an investment strategy. A sound investment strategy includes viewing market volatility as a matter of course, not a reason to panic. A trusted financial advisor can explain more fully the potential value of following these principles. An experienced advisor who knows your individual investment goals, financial situation and risk tolerance can be your most valuable asset during times of market volatility. Your advisor can provide guidance and can monitor your investments to ensure they're on course. It's also helpful to remember that many of history's significant buying opportunities resulted from short-term economic crises that, in their time, were considered unprecedented. We believe current market uncertainty may represent a buying opportunity for patient, long-term investors. Rest assured that Invesco Aim's portfolio managers are working diligently on your behalf to capitalize on this situation. MANAGING MONEY IS OUR FOCUS As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain markets. Our parent company, Invesco Ltd., is one of the world's largest and most diversified global investment managers. Invesco provides clients with diversified investment strategies from distinct management teams around the globe and a range of investment products. Invesco's single focus is asset management -- which means we focus on doing one thing well: managing your money. That can be reassuring in uncertain times. While market conditions change often, commitment to putting shareholders first, helping clients achieve their investment goals and providing excellent customer service remains constant. If you have questions about this report or your account, please contact one of our client service representatives at 800 959 4246. Thank you for your continued confidence, and we look forward to serving you.
Sincerely, /S/ PHILIP TAYLOR Philip Taylor Senior Managing Director, Invesco Ltd. CEO, Invesco Aim (1) U.S. Federal Reserve; (2) Lipper Inc. 2 AIM EUROPEAN GROWTH FUND Dear Fellow Shareholders: As I write this letter, turbulent financial markets are causing considerable investor anxiety, reminding us again that markets are cyclical and the correction of excess is often painful, at least in the short term. Your Board of Trustees [CROCKETT believes in the wisdom of a long-term perspective and consistent investment PHOTO] discipline. We continue to put your interests first in the effort to improve investment performance, contain shareholder costs and uphold the highest ethical standards. We remain enthusiastic about the global reach and investment expertise that Invesco, a leading independent global investment management company, brings to Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse investment strategies deployed throughout the worldwide network of Invesco investment centers has helped strengthen the management of many AIM Funds. The rebranding of the Funds' management company as Invesco Aim was followed by the launch of an upgraded, investor-friendly website (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and Investment News through the end of 2008. At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals." We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be interested to hear your thoughts on this policy. As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured that your comments are received, welcomed and heard in the interim. We look forward to hearing from you and to representing you.
Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair AIM Funds Board of Trustees 3 AIM EUROPEAN GROWTH FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ======================================================================================= PERFORMANCE SUMMARY financial market history.(1) Governments and central banks in Europe and the U.S. The volatility and weakness experienced by European equities over the fiscal year was found themselves bailing out banks, reflected in the performance of the Fund's Class A shares at net asset value, which shoring up depositors' confidence in their returned -49.14%. This is compared with the MSCI Europe Growth Index which returned savings accounts and pumping liquidity -43.98%.(triangle) Weak stock selection in the consumer discretionary sector was the into the financial system as the fallout key driver of these relative results. from the financial crisis continued to spread. Away from the financial crisis, Your Fund's long-term performance appears later in this report. investor sentiment remained fragile as weak corporate earnings offered little FUND VS. INDEXES support to equity markets. Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does Within this environment, the Fund's not include applicable contingent deferred sales charges (CDSC) or front-end sales Class A shares at net asset value returned charges, which would have reduced performance. -49.14% for the 12-months ending October 31, 2008, versus its style-specific Class A Shares -49.14% benchmark, the MSCI Europe Growth Index, Class B Shares -49.53 which returned -43.98%.(2) Class C Shares -49.51 Class R Shares -49.26 Detracting from both absolute and Class Y Shares* -49.14 relative returns was our stock selection Investor Class Shares -49.12 in the consumer discretionary sector. MSCI EAFE Index(triangle) (Broad Market Index) -46.62 Significant declines in several of our MSCI Europe Growth Index(triangle) (Style-Specific Index) -43.98 holdings, predominantly in the automobile, Lipper European Funds Index(triangle) (Peer Group Index) -49.06 hotels and leisure and media industries, negatively affected both absolute and (triangle) Lipper Inc. relative results. Fund holdings such as German automobile company PORSCHE, Greek * Share class incepted during the fiscal year. See page 7 for a detailed explanation gaming systems manufacturer INTRALOT, and of Fund performance. U.K. based INCHCAPE were each down more ======================================================================================= than 65% for the period. The Fund's lack of exposure to Volkswagen (not a Fund HOW WE INVEST primarily on a stock-by-stock basis. We holding) was a drag on relative results as focus on the strengths of individual well. Volkswagen rose by about 130% over When selecting stocks for your Fund, we companies rather than sectors, countries the period, strongly outperforming the employ a disciplined investment strategy or market-cap trends. declining European market. We believe this that emphasizes fundamental research, strong performance was not driven by supported by both quantitative analysis We believe disciplined sell decisions fundamental reasons. We are active, and portfolio construction techniques. Our are key to successful investing. We long-term investors and therefore do not "EQV" (Earnings, Quality, Valuation) consider selling a stock for one of the focus on the index weightings of strategy focuses primarily on identifying following reasons: individual stocks. quality companies that have experienced, or exhibit the potential for, accelerating o A company's fundamentals deteriorate, Elsewhere, energy stocks including or above average earnings growth but whose or it posts disappointing earnings. TOTAL (France) and ENI (Italy) also stock prices do not fully reflect these disappointed. We believe these stocks were attributes. o A stock's price seems overvalued. hit disproportionately hard as they offered nervous investors a chance to take While research responsibilities within o A more attractive opportunity becomes profits during periods of market stress. the portfolio management team are focused available by market capitalization, such as large- or mid/ small-cap, we select investments MARKET CONDITIONS AND YOUR FUND for the Fund by using a bottom-up investment approach, which means that we European equities ended the period at one construct the Fund of their lowest levels since January 2005, as the severity of the banking crisis heightened further at the end of one of the most turbulent years in ========================================== ========================================== ========================================== PORTFOLIO COMPOSITION TOP FIVE INDUSTRIES* TOP 10 EQUITY HOLDINGS* By sector Industrials 19.1% 1. United Kingdom 31.0% 1. Roche Holding A.G. 3.9% Consumer Staples 18.0 2. Switzerland 15.9 2. Nestle S.A. 3.4 Consumer Discretionary 14.2 3. Germany 12.8 3. Imperial Tobacco Group PLC 3.1 Health Care 13.7 4. France 6.5 4. Novo Nordisk A.S.-Class B 2.5 Financials 11.5 5. Netherlands 5.5 5. Aryzta A.G. 2.2 Energy 6.3 ========================================== 6. Total S.A. 2.2 Telecommunication Services 4.8 7. Reckitt Benckiser Group PLC 2.2 Materials 4.1 ========================================== 8. BNP Paribas 2.1 Information Technology 1.3 Total Net Assets $714.3 million 9. Deutsche Boerse A.G. 2.1 Utilities 1.3 Total Number of Holdings* 71 10. Shire PLC 2.0 Money Market Funds ========================================== ========================================== Plus Other Assets Less Liabilities 5.7 ========================================== The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. * Excluding money market fund holdings.
4 AIM EUROPEAN GROWTH FUND The Fund's relative results suffered and to all of our shareholders we would JASON HOLZER earlier in the fiscal year due to its like to express our appreciation for your Chartered Financial Analyst, significant underweight in the materials continued investment in AIM European [HOLZER senior portfolio manager, is sector. In our view, underlying Growth Fund. PHOTO] lead manager of AIM European assumptions used to justify the sector's Growth Fund with respect to dramatic price appreciation over the last (1) MSCI Inc. the Fund's small- and mid-cap investments. several years were unreasonably optimistic Mr. Holzer joined Invesco Aim in 1996. He and did not support extreme valuations. (2) Lipper Inc. earned a B.A. in quantitative economics The latter part of the fiscal year, and an M.S. in engineering economic however, brought a dramatic reversal of The views and opinions expressed in systems from Stanford University. this upward trend, as the sector declined management's discussion of Fund sharply as a result of falling commodity performance are those of Invesco Aim CLAS OLSSON prices. Our limited exposure to this Advisors, Inc. These views and opinions Senior portfolio manager and volatile sector, particularly to the are subject to change at any time based on [OLSSON head of Invesco Aim's metals and mining industry, contributed factors such as market and economic PHOTO] International Investments favorably to relative results. An conditions. These views and opinions may Management Unit, is lead underweight position in the weak not be relied upon as investment advice or manager of AIM European Growth Fund with information technology sector helped as recommendations, or as an offer for a respect to the Fund's large-cap well. particular security. The information is investments. Mr. Olsson joined Invesco not a complete analysis of every aspect of Aim in 1994. He became a commissioned Our strategy leads us away from any market, country, industry, security or naval officer at the Royal Swedish investing in what we call "glamour stocks" the Fund. Statements of fact are from Naval Academy in 1988. Mr. Olsson also -- high quality stocks that are in high sources considered reliable, but Invesco earned a B.B.A. from The University of demand regardless of stretched valuations. Aim Advisors, Inc. makes no representation Texas at Austin. Lack of exposure to weak index stocks like or warranty as to their completeness or SAP AG (not a Fund holding) and limited accuracy. Although historical performance MATTHEW DENNIS exposure to NOKIA (which we added to on is no guarantee of future results, these Chartered Financial Analyst, weakness later in the period) supported insights may help you understand our [DENNIS portfolio manager, is relative results. A 6% cash position, in a investment management philosophy. PHOTO] manager of AIM European declining market, was also a plus. Growth Fund. Mr. Dennis See important Fund and index disclosures joined Invesco Aim in 2000. He earned a Our overall "EQV" focused strategy later in this report. B.A. in economics from The University of remained the same, despite the volatile Texas at Austin. Mr. Dennis also earned nature of the markets. Over the period, an M.S. in finance from Texas A&M our exposure to the health care and University. consumer staples sectors, where we remained modestly underweight on a BORGE ENDRESEN relative basis, increased markedly as Chartered Financial Analyst, stocks with robust growth and reasonable [ENDRESEN portfolio manager, is valuations were added to the portfolio. In PHOTO] manager of AIM European contrast, our exposure to the financials Growth Fund. Mr. Endresen and materials sectors saw a significant joined Invesco Aim in 1999. He graduated reduction. We remained overweight in summa cum laude from the University of financials versus the MSCI Europe Growth Oregon with a B.S. in finance. Mr. Index. Endresen also earned an M.B.A. from The University of Texas at Austin. One of our largest sector weights remained in the consumer discretionary RICHARD NIELD sector. We were keenly aware of the Chartered Financial Analyst, challenges consumers faced, but strong [NIELD portfolio manager, is domestically focused companies trading at PHOTO] manager of AIM European decade-low valuations were increasingly Growth Fund. Mr. Nield more available in this consumer related joined Invesco Aim in 2000. He earned a sector. bachelor of commerce degree in finance and international business from McGill From a country perspective, we added to University in Montreal, Canada. our exposure in the United Kingdom and Switzerland. We also reduced our weighting Assisted by the Europe/Canada Teams in several markets including Germany, Ireland, Sweden and Greece. Volatile markets can test an investor's resolve, and 2008 has so far been one of the most turbulent periods in many years. However, it's always worth remembering that market turbulence can create investment opportunities. We welcome any new investors who have joined the Fund during the fiscal year,
5 AIM EUROPEAN GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE Past performance cannot guarantee Performance of an index of funds reflects shown in the chart. The vertical axis, comparable future results. fund expenses and management fees; the one that indicates the dollar value performance of a market index does not. of an investment, is constructed with The data shown in the chart include Performance shown in the chart and each segment representing a percent reinvested distributions, applicable sales table(s) does not reflect deduction of change in the value of the investment. In charges and Fund expenses including taxes a shareholder would pay on Fund this chart, each segment represents a management fees. Results for Class B distributions or sale of Fund shares. doubling, or 100% change, in the value of shares are calculated as if a hypothetical the investment. In other words, the space shareholder had liquidated his entire This chart, which is a logarithmic between $5,000 and $10,000 is the same investment in the Fund at the close of the chart, presents the fluctuations in the size as the space between $10,000 and reporting period and paid the applicable value of the Fund and its indexes. We $20,000, and so on. contingent deferred sales charges. Index believe that a logarithmic chart is more results include reinvested dividends, but effective than other types of charts in they do not reflect sales charges. illustrating changes in value during the early years
6 AIM EUROPEAN GROWTH FUND ==================================================================================================================================== [MOUNTAIN CHART] RESULTS OF A $10,000 INVESTMENT -- CLASS A, B AND C SHARES (OLDEST SHARE CLASSES WITH SALES CHARGES) Index data from 10/31/97, Fund data from 11/3/97 AIM European AIM European AIM European Growth Fund- Growth Fund- Growth Fund- MSCI Europe Lipper European Date Class A Shares Class B Shares Class C Shares MSCI EAFE Index(1) Growth Index(1) Funds Index(1) 10/31/97 $10000 $10000 $10000 11/97 $ 9233 $ 9770 $ 9770 9898 10139 10075 12/97 9592 10150 10150 9984 10508 10309 1/98 10026 10600 10600 10441 10964 10694 2/98 10972 11590 11590 11111 11898 11575 3/98 12172 12850 12850 11453 12431 12451 4/98 12910 13609 13609 11544 12652 12738 5/98 13789 14529 14538 11488 12882 13058 6/98 13855 14599 14608 11575 13172 13096 7/98 14535 15298 15308 11692 13270 13346 8/98 12551 13197 13198 10244 11889 11419 9/98 11842 12457 12458 9929 11415 10779 10/98 12248 12867 12878 10965 12436 11533 11/98 12900 13546 13558 11526 13065 12190 12/98 13489 14156 14168 11981 13940 12758 1/99 14322 15025 15038 11946 14004 12985 2/99 13593 14245 14257 11661 13455 12605 3/99 13063 13685 13697 12148 13166 12640 4/99 13195 13815 13818 12640 13029 13002 5/99 12797 13386 13388 11989 12536 12530 6/99 13185 13786 13788 12456 12737 12849 7/99 13904 14526 14538 12827 12607 13065 8/99 14244 14876 14878 12873 12802 13171 9/99 14528 15167 15169 13003 12748 13027 10/99 15530 16196 16209 13490 13456 13468 11/99 18594 19385 19399 13959 14279 14404 12/99 22473 23404 23419 15212 16049 16266 1/00 23676 24644 24669 14245 15279 15741 2/00 29521 30712 30728 14628 16493 17911 3/00 26852 27914 27929 15196 16722 17924 4/00 24130 25064 25088 14396 15939 16952 5/00 23307 24194 24218 14044 15194 16609 6/00 24043 24944 24968 14594 15410 17002 7/00 24375 25284 25308 13982 14788 16872 8/00 25038 25954 25979 14103 14519 16936 9/00 23921 24775 24799 13416 13709 16062 10/00 22323 23115 23140 13099 13389 15574 11/00 20082 20785 20810 12608 12682 14740 12/00 21737 22475 22500 13056 13378 15847 1/01 21528 22246 22270 13050 13230 15799 2/01 19164 19805 19821 12071 11777 14466 3/01 17064 17617 17640 11267 10773 13196 4/01 18001 18577 18600 12050 11602 14070 5/01 17841 18397 18419 11624 10917 13528 6/01 17377 17917 17939 11149 10446 12977 7/01 16970 17487 17508 10946 10416 12845 8/01 17036 17537 17559 10669 9959 12516 9/01 15135 15568 15589 9588 9054 11112 10/01 15627 16068 16089 9834 9453 11501 11/01 15996 16437 16450 10196 9896 11999 12/01 16365 16807 16830 10257 10142 12254 ====================================================================================================================================
(1) Lipper Inc. ==================================================================================================================================== [MOUNTAIN CHART] 1/02 15958 16377 16400 9712 9665 11717 2/02 16148 16577 16591 9780 9735 11725 3/02 16753 17187 17201 10356 10079 12312 4/02 17028 17446 17471 10377 9962 12279 5/02 17350 17776 17791 10509 9777 12286 6/02 17350 17765 17780 10090 9601 11957 7/02 15401 15767 15780 9094 8467 10708 8/02 15515 15866 15879 9074 8406 10636 9/02 14001 14306 14320 8099 7581 9318 10/02 14759 15076 15091 8534 8263 10032 11/02 14863 15176 15190 8922 8450 10506 12/02 14779 15075 15090 8622 8261 10119 1/03 14211 14486 14500 8262 7833 9677 2/03 14097 14366 14369 8072 7599 9308 3/03 14286 14555 14569 7914 7546 9194 4/03 15459 15734 15739 8689 8457 10350 5/03 16793 17084 17099 9216 8895 11112 6/03 16728 17014 17029 9439 8915 11201 7/03 16842 17115 17129 9667 8938 11415 8/03 16870 17144 17158 9900 8856 11502 9/03 17825 18094 18109 10206 9132 11758 10/03 18952 19223 19248 10842 9681 12502 11/03 19725 20003 20018 11083 10123 13052 12/03 21163 21453 21467 11949 10853 13979 1/04 22062 22352 22367 12118 11049 14387 2/04 23095 23383 23398 12397 11363 14835 3/04 22838 23111 23129 12467 10971 14357 4/04 22489 22742 22759 12185 10820 14128 5/04 22754 23001 23018 12226 10965 14274 6/04 23218 23461 23478 12494 11060 14549 7/04 22508 22722 22748 12088 10689 14040 8/04 22963 23172 23199 12142 10638 14079 9/04 24079 24291 24308 12459 11047 14696 10/04 24825 25029 25047 12884 11424 15216 11/04 26709 26909 26925 13764 12224 16309 12/04 28133 28327 28355 14368 12696 17067 1/05 28029 28208 28224 14104 12401 16871 2/05 29470 29647 29664 14714 12973 17829 3/05 28618 28766 28795 14344 12678 17313 4/05 27719 27857 27873 14007 12468 16867 5/05 27747 27868 27884 14014 12532 16857 6/05 28324 28429 28453 14200 12608 17232 7/05 29650 29748 29773 14635 13076 18074 8/05 30625 30708 30723 15005 13283 18663 9/05 30824 30877 30901 15673 13540 19068 10/05 29480 29519 29532 15215 13135 18258 11/05 30079 30097 30111 15587 13168 18625 12/05 31811 31807 31822 16313 13651 19438 1/06 34385 34355 34380 17314 14494 20931 2/06 34987 34942 34968 17276 14396 21139 3/06 36379 36312 36339 17845 15039 22039 4/06 38453 38367 38392 18698 15821 23298 5/06 37322 37201 37225 17971 15385 22325 6/06 37292 37145 37173 17970 15446 22159 7/06 37770 37605 37634 18148 15604 22384 8/06 38990 38805 38830 18647 16057 23038 9/06 38561 38355 38380 18676 16041 23172 10/06 40504 40261 40283 19402 16642 24198 11/06 42537 42250 42273 19982 17276 25241 12/06 44332 44012 44036 20609 17838 26235 1/07 45188 44822 44855 20749 18002 26722 2/07 44971 44584 44618 20916 17989 26565 3/07 47053 46635 46657 21450 18822 27753 4/07 49373 48888 48919 22402 19948 29339 5/07 50632 50120 50138 22795 20302 29987 6/07 49938 49403 49421 22823 20277 29975 7/07 49144 48583 48600 22487 19968 29285 ====================================================================================================================================
==================================================================================================================================== [MOUNTAIN CHART] 8/07 48766 48175 48202 22135 19876 29035 9/07 51014 50357 50385 23320 21035 30722 10/07 53402 52688 52708 24236 22000 32152 11/07 51201 50481 50500 23439 21681 30919 12/07 50628 49885 49904 22911 21324 30677 1/08 45287 44587 44604 20795 19276 27682 2/08 45880 45149 45161 21093 19823 27939 3/08 46261 45483 45496 20871 19840 27952 4/08 47390 46566 46578 22004 20512 28988 5/08 47982 47125 47137 22218 20929 29764 6/08 43659 42860 42871 20401 19468 27058 7/08 42375 41565 41577 19746 18944 26097 8/08 40417 39624 39635 18946 18076 24805 9/08 34836 34128 34142 16207 15389 21288 10/08 27156 27190 26620 12936 12324 16377 ====================================================================================================================================
========================================== ========================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS THE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT FUND As of 10/31/08, including maximum As of 9/30/08, the most recent calendar PROSPECTUS AS OF THE DATE OF THIS REPORT applicable sales charges quarter-end, including maximum applicable FOR CLASS A, CLASS B, CLASS C, CLASS R, sales charges CLASS Y AND INVESTOR CLASS SHARES WAS CLASS A SHARES 9.51% 1.48%, 2.23%, 2.23%, 1.73%, 1.23% AND Inception (11/3/97) 7.68 CLASS A SHARES 1.48%, RESPECTIVELY. THE EXPENSE RATIOS 10 Years 6.25 Inception (11/3/97) 12.12% PRESENTED ABOVE MAY VARY FROM THE EXPENSE 5 Years -51.94 10 Years 10.76 RATIOS PRESENTED IN OTHER SECTIONS OF THIS 1 Year 5 Years 13.04 REPORT THAT ARE BASED ON EXPENSES INCURRED 1 Year -35.49 DURING THE PERIOD COVERED BY THIS REPORT. CLASS B SHARES 9.53% Inception (11/3/97) 7.69 CLASS B SHARES CLASS A SHARE PERFORMANCE REFLECTS THE 10 Years 6.39 Inception (11/3/97) 12.13% MAXIMUM 5.50% SALES CHARGE, AND CLASS B 5 Years -51.84 10 Years 10.77 AND CLASS C SHARE PERFORMANCE REFLECTS THE 1 Year 5 Years 13.29 APPLICABLE CONTINGENT DEFERRED SALES 1 Year -35.33 CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE CLASS C SHARES 9.32% CDSC ON CLASS B SHARES DECLINES FROM 5% Inception (11/3/97) 7.53 CLASS C SHARES BEGINNING AT THE TIME OF PURCHASE TO 0% AT 10 Years 6.70 Inception (11/3/97) 11.92% THE BEGINNING OF THE SEVENTH YEAR. THE 5 Years -49.97 10 Years 10.61 CDSC ON CLASS C SHARES IS 1% FOR THE FIRST 1 Year 5 Years 13.53 YEAR AFTER PURCHASE. CLASS R SHARES DO NOT 1 Year -32.85 HAVE A FRONT-END SALES CHARGE; RETURNS CLASS R SHARES 8.09% SHOWN ARE AT NET ASSET VALUE AND DO NOT 10 Years 7.23 CLASS R SHARES REFLECT A 0.75% CDSC THAT MAY BE IMPOSED 5 Years -49.26 10 Years 11.18% ON A TOTAL REDEMPTION OF RETIREMENT PLAN 1 Year 5 Years 14.08 ASSETS WITHIN THE FIRST YEAR. CLASS Y 1 Year -31.90 SHARES AND INVESTOR CLASS SHARES DO NOT CLASS Y SHARES 8.29% HAVE A FRONT-END SALES CHARGE OR A CDSC; 10 Years 7.46 INVESTOR CLASS SHARES THEREFORE, PERFORMANCE IS AT NET ASSET 5 Years -49.14 10 Years 11.41% VALUE. 1 Year 5 Years 14.38 1 Year -31.69 THE PERFORMANCE OF THE FUND'S SHARE INVESTOR CLASS SHARES 8.31% ========================================== CLASSES WILL DIFFER PRIMARILY DUE TO 10 Years 7.52 DIFFERENT SALES CHARGE STRUCTURES AND 5 Years -49.12 INVESTOR CLASS SHARES' INCEPTION DATE CLASS EXPENSES. 1 Year IS SEPTEMBER 30, 2003. RETURNS SINCE THAT ========================================== DATE ARE HISTORICAL RETURNS. ALL OTHER A REDEMPTION FEE OF 2% WILL BE IMPOSED RETURNS ARE BLENDED RETURNS OF HISTORICAL ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF CLASS R SHARES' INCEPTION DATE IS JUNE 3, INVESTOR CLASS SHARE PERFORMANCE AND THE FUND WITHIN 31 DAYS OF PURCHASE. 2002. RETURNS SINCE THAT DATE ARE RESTATED CLASS A SHARE PERFORMANCE (FOR EXCEPTIONS TO THE REDEMPTION FEE ARE HISTORICAL RETURNS. ALL OTHER RETURNS ARE PERIODS PRIOR TO THE INCEPTION DATE OF LISTED IN THE FUND'S PROSPECTUS. BLENDED RETURNS OF HISTORICAL CLASS R INVESTOR CLASS SHARES) AT NET ASSET VALUE, SHARE PERFORMANCE AND RESTATED CLASS A WHICH RESTATED PERFORMANCE WILL REFLECT SHARE PERFORMANCE (FOR PERIODS PRIOR TO THE RULE 12B-1 FEES APPLICABLE TO CLASS A THE INCEPTION DATE OF CLASS R SHARES) AT SHARES FOR THE PERIOD USING BLENDED NET ASSET VALUE, ADJUSTED TO REFLECT THE RETURNS. CLASS A SHARES' INCEPTION DATE IS HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS NOVEMBER 3, 1997. R SHARES. CLASS A SHARES' INCEPTION DATE IS NOVEMBER 3, 1997. THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND CANNOT GUARANTEE CLASS Y SHARES' INCEPTION DATE IS COMPARABLE FUTURE RESULTS; CURRENT OCTOBER 3, 2008; RETURNS SINCE THAT DATE PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE ARE ACTUAL RETURNS. ALL OTHER RETURNS ARE VISIT INVESCOAIM.COM FOR THE MOST RECENT BLENDED RETURNS OF ACTUAL CLASS Y SHARE MONTH-END PERFORMANCE. PERFORMANCE FIGURES PERFORMANCE AND RESTATED CLASS A SHARE REFLECT REINVESTED DISTRIBUTIONS, CHANGES PERFORMANCE (FOR PERIODS PRIOR TO THE IN NET ASSET VALUE AND THE EFFECT OF THE INCEPTION DATE OF CLASS Y SHARES) AT NET MAXIMUM SALES CHARGE UNLESS OTHERWISE ASSET VALUE. THE RESTATED CLASS A SHARE STATED. INVESTMENT RETURN AND PRINCIPAL PERFORMANCE REFLECTS THE RULE 12B-1 FEES VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE APPLICABLE TO CLASS A SHARES AS WELL AS A GAIN OR LOSS WHEN YOU SELL SHARES. ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RECEIVED BY CLASS A SHARES. CLASS A SHARES INCEPTION DATE IS NOVEMBER 3, 1997.
7 AIM EUROPEAN GROWTH FUND AIM EUROPEAN GROWTH FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets. o Unless otherwise noted, all data provided by Invesco Aim. ABOUT SHARE CLASSES o The prices of securities held by the OTHER INFORMATION Fund may decline in response to market o Effective September 30, 2003, only risks. o The Chartered Financial Analyst--REGIS- previously established qualified plans TERED TRADEMARK-- (CFA--REGISTERED are eligible to purchase Class B shares o Although the Fund's returns during TRADEMARK--) designation is a globally of any AIM fund. certain periods were positively recognized standard for measuring the affected by its investments in initial competence and integrity of investment o Class R shares are available only to public offerings (IPOs), there can be professionals. certain retirement plans. Please see no assurance that the Fund will have the prospectus for more information. favorable IPO investment opportunities o The returns shown in management's in the future. discussion of Fund performance are o Class Y shares are available only to based on net asset values calculated certain investors. Please see the ABOUT INDEXES USED IN THIS REPORT for shareholder transactions. Generally prospectus for more information. accepted accounting principles require o The MSCI EAFE--REGISTERED TRADEMARK-- adjustments to be made to the net o All Investor Class shares are closed to INDEX is a free float-adjusted market assets of the Fund at period end for new investors. Contact your financial capitalization index that is designed financial reporting purposes, and as advisor about purchasing our other to measure developed market equity such, the net asset values for share classes. performance, excluding the U.S. and shareholder transactions and the Canada. returns based on those net asset values PRINCIPAL RISKS OF INVESTING IN THE FUND may differ from the net asset values o The MSCI EUROPE GROWTH INDEX is a free and returns reported in the Financial o Investing in developing countries can float-adjusted market capitalization Highlights. add additional risk, such as high rates index that represents the growth of inflation or sharply devalued segment in developed equity markets in o Industry classifications used in this currencies against the U.S. dollar. Europe. report are generally according to the Transaction costs are often higher, and Global Industry Classification there may be delays in settlement o The LIPPER EUROPEAN FUNDS INDEX is an Standard, which was developed by and is procedures. equally weighted representation of the the exclusive property and a service largest funds in the Lipper European mark of MSCI Inc. and Standard & o Prices of equity securities change in Funds category. These funds concentrate Poor's. response to many factors, including the their investments in equity securities historical and prospective earnings of whose primary trading markets or the issuer, the value of its assets, operations are concentrated in the general economic conditions, interest European region or a single country rates, investor perceptions and market within this region. liquidity. o The Fund is not managed to track the o Foreign securities have additional performance of any particular index, risks, including exchange rate changes, including the indexes defined here, and political and economic upheaval, consequently, the performance of the relative lack of information, Fund may deviate significantly from the relatively low market liquidity, and performance of the indexes. the potential lack of strict financial and accounting controls and standards. o A direct investment cannot be made in an index. Unless otherwise indicated, o Investing in a Fund that invests in index results include reinvested smaller companies involves risks not dividends, and they do not reflect associated with investing in more sales charges. Performance of an index established companies, such as business of funds reflects fund expenses; risk, stock price fluctuations and performance of a market index does not. illiquidity. ======================================================================================= ========================================== 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 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class R Shares AEDRX Class Y Shares AEDYX Investor Share Class EGINX ==========================================
8 AIM EUROPEAN GROWTH FUND SCHEDULE OF INVESTMENTS(a) October 31, 2008
SHARES VALUE ------------------------------------------------------------------------------ COMMON STOCKS & OTHER EQUITY INTERESTS-91.99% BELGIUM-1.50% InBev N.V. 265,465 $ 10,701,728 ============================================================================== CYPRUS-0.36% Bank of Cyprus PCL 493,778 2,596,645 ============================================================================== DENMARK-2.47% Novo Nordisk A.S.-Class B 330,066 17,666,042 ============================================================================== FINLAND-1.41% Nokia Oyj 214,222 3,267,154 ------------------------------------------------------------------------------ Nokian Renkaat Oyj 517,950 6,799,979 ============================================================================== 10,067,133 ============================================================================== FRANCE-6.50% Axa 473,640 9,126,124 ------------------------------------------------------------------------------ BNP Paribas 211,942 15,383,413 ------------------------------------------------------------------------------ Cap Gemini S.A. 192,431 6,195,610 ------------------------------------------------------------------------------ Total S.A. 286,292 15,722,675 ============================================================================== 46,427,822 ============================================================================== GERMANY-10.42% Bayer AG 261,596 14,388,592 ------------------------------------------------------------------------------ Deutsche Boerse AG 185,000 14,770,397 ------------------------------------------------------------------------------ Merck KGaA 91,962 8,154,523 ------------------------------------------------------------------------------ MTU Aero Engines Holding AG 396,753 7,781,716 ------------------------------------------------------------------------------ Puma AG Rudolf Dassler Sport 72,448 12,099,492 ------------------------------------------------------------------------------ Siemens AG 165,132 9,878,560 ------------------------------------------------------------------------------ Symrise AG 591,080 7,312,422 ============================================================================== 74,385,702 ============================================================================== GREECE-2.38% Intralot S.A. 2,226,503 11,522,770 ------------------------------------------------------------------------------ OPAP S.A.(b) 104,000 2,278,491 ------------------------------------------------------------------------------ OPAP S.A. 146,402 3,207,457 ============================================================================== 17,008,718 ============================================================================== IRELAND-2.06% CRH PLC 341,046 7,604,326 ------------------------------------------------------------------------------ Paddy Power PLC 417,196 7,097,856 ============================================================================== 14,702,182 ============================================================================== ITALY-2.71% Eni S.p.A. 577,877 13,768,296 ------------------------------------------------------------------------------ Finmeccanica S.p.A. 436,601 5,414,346 ------------------------------------------------------------------------------ Finmeccanica S.p.A.-Rts. expiring 11/11/08(c) 436,600 178,049 ============================================================================== 19,360,691 ============================================================================== LUXEMBOURG-0.04% Reinet Investments S.C.A.(c) 29,795 306,805 ============================================================================== NETHERLANDS-5.53% Aalberts Industries N.V. 1,009,744 9,321,903 ------------------------------------------------------------------------------ Heineken Holding N.V. 294,869 8,953,640 ------------------------------------------------------------------------------ Koninklijke BAM Groep N.V. 1,147,599 10,209,562 ------------------------------------------------------------------------------ TNT N.V. 306,277 6,411,545 ------------------------------------------------------------------------------ USG People N.V. 439,838 4,595,936 ============================================================================== 39,492,586 ============================================================================== NORWAY-1.33% Petroleum Geo-Services A.S.A.(c) 764,567 3,845,493 ------------------------------------------------------------------------------ TGS Nopec Geophysical Co. A.S.A.(c) 1,015,676 5,660,760 ============================================================================== 9,506,253 ============================================================================== RUSSIA-1.77% Vimpel-Communications-ADR 869,606 12,609,287 ============================================================================== SPAIN-2.33% Banco Santander S.A. 542,048 5,862,380 ------------------------------------------------------------------------------ Telefonica S.A. 584,407 10,808,614 ============================================================================== 16,670,994 ============================================================================== SWEDEN-2.78% Intrum Justitia A.B. 987,725 9,886,218 ------------------------------------------------------------------------------ Oriflame Cosmetics S.A.-SDR 320,013 9,994,719 ============================================================================== 19,880,937 ============================================================================== SWITZERLAND-15.88% Aryzta AG(c) 449,957 16,055,906 ------------------------------------------------------------------------------ Bucher Industries A.G. 71,700 7,807,669 ------------------------------------------------------------------------------ Compagnie Financiere Richemont S.A.-Class A 217,662 4,626,515 ------------------------------------------------------------------------------ Dufry Group 142,391 2,909,010 ------------------------------------------------------------------------------ Galenica AG 23,536 7,100,926 ------------------------------------------------------------------------------ Nestle S.A. 622,905 24,272,673 ------------------------------------------------------------------------------ Roche Holding AG 180,409 27,605,541 ------------------------------------------------------------------------------ Sonova Holding AG 205,843 8,649,139 ------------------------------------------------------------------------------ Syngenta AG 77,401 14,411,681 ============================================================================== 113,439,060 ==============================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 9 AIM EUROPEAN GROWTH FUND
SHARES VALUE ------------------------------------------------------------------------------ TURKEY-1.49% Haci Omer Sabanci Holding A.S. 1,879,210 $ 4,554,362 ------------------------------------------------------------------------------ Tupras-Turkiye Petrol Rafinerileri A.S. 475,398 6,085,716 ============================================================================== 10,640,078 ============================================================================== UNITED KINGDOM-31.03% Amlin PLC 2,826,229 14,552,176 ------------------------------------------------------------------------------ Aviva PLC 1,021,046 6,120,407 ------------------------------------------------------------------------------ Balfour Beatty PLC 1,766,700 7,077,020 ------------------------------------------------------------------------------ British American Tobacco PLC 133,065 3,652,948 ------------------------------------------------------------------------------ Bunzl PLC 1,360,864 13,639,268 ------------------------------------------------------------------------------ Capita Group PLC 926,604 9,537,734 ------------------------------------------------------------------------------ Compass Group PLC 1,624,742 7,597,992 ------------------------------------------------------------------------------ Homeserve PLC 678,386 13,860,181 ------------------------------------------------------------------------------ IG Group Holdings PLC 2,002,117 9,303,963 ------------------------------------------------------------------------------ Imperial Tobacco Group PLC 828,798 22,278,942 ------------------------------------------------------------------------------ Inchcape PLC 2,992,827 3,823,535 ------------------------------------------------------------------------------ Informa PLC 2,073,141 7,012,181 ------------------------------------------------------------------------------ International Power PLC 2,511,089 8,984,989 ------------------------------------------------------------------------------ Mitie Group PLC 3,720,824 11,320,615 ------------------------------------------------------------------------------ Reckitt Benckiser Group PLC 367,839 15,444,952 ------------------------------------------------------------------------------ Reed Elsevier PLC 1,058,525 9,280,811 ------------------------------------------------------------------------------ Shire PLC 1,105,300 14,605,779 ------------------------------------------------------------------------------ Tesco PLC 2,088,642 11,404,182 ------------------------------------------------------------------------------ Ultra Electronics Holdings PLC 547,110 9,721,369 ------------------------------------------------------------------------------ United Business Media Ltd. 823,027 5,319,346 ------------------------------------------------------------------------------ Vodafone Group PLC 5,479,322 10,550,143 ------------------------------------------------------------------------------ WPP Group PLC 1,087,128 6,558,435 ============================================================================== 221,646,968 ============================================================================== Total Common Stocks & Other Equity Interests (Cost $779,192,072) 657,109,631 ============================================================================== PREFERRED STOCKS-2.33% GERMANY-2.33% Henkel AG & Co. KGaA-Pfd. 189,776 5,491,947 ------------------------------------------------------------------------------ Porsche Automobil Holding S.E.-Pfd. 126,320 11,132,084 ============================================================================== Total Preferred Stocks (Cost $15,721,472) 16,624,031 ============================================================================== MONEY MARKET FUNDS-1.85% Liquid Assets Portfolio-Institutional Class(d) 6,615,932 6,615,932 ------------------------------------------------------------------------------ Premier Portfolio-Institutional Class(d) 6,615,932 6,615,932 ============================================================================== Total Money Market Funds (Cost $13,231,864) 13,231,864 ============================================================================== TOTAL INVESTMENTS-96.17% (Cost $808,145,408)(e) 686,965,526 ============================================================================== OTHER ASSETS LESS LIABILITIES-3.83% 27,328,530 ============================================================================== NET ASSETS-100.00% $714,294,056 ______________________________________________________________________________ ==============================================================================
Investment Abbreviations: ADR - American Depositary Receipt Pfd. - Preferred Rts. - Rights SDR - Swedish Depositary Receipt
Notes to Schedule of Investments: (a) Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor's. (b) Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The value of this security at October 31, 2008 represented 0.32% of the Fund's Net Assets. (c) Non-income producing security. (d) The money market fund and the Fund are affiliated by having the same investment advisor. (e) The majority of foreign securities were fair valued using adjusted closing market prices. See accompanying Notes to Financial Statements which are an integral part of the financial statements. 10 AIM EUROPEAN GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2008 ASSETS: Investments, at value (Cost $794,913,544) $ 673,733,662 ------------------------------------------------------- Investments in affiliated money market funds, at value and cost 13,231,864 ======================================================= Total investments (Cost $808,145,408) 686,965,526 ======================================================= Foreign currencies, at value (Cost $7,381,765) 7,309,628 ------------------------------------------------------- Receivables for: Investments sold 24,301,064 ------------------------------------------------------- Fund shares sold 324,480 ------------------------------------------------------- Dividends 1,127,047 ------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 62,744 ------------------------------------------------------- Other assets 68,054 ======================================================= Total assets 720,158,543 _______________________________________________________ ======================================================= LIABILITIES: Payables for: Investments purchased 3,250,701 ------------------------------------------------------- Fund shares reacquired 1,350,374 ------------------------------------------------------- Accrued fees to affiliates 676,047 ------------------------------------------------------- Accrued other operating expenses 432,604 ------------------------------------------------------- Trustee deferred compensation and retirement plans 154,761 ======================================================= Total liabilities 5,864,487 ======================================================= Net assets applicable to shares outstanding $ 714,294,056 _______________________________________________________ ======================================================= NET ASSETS CONSIST OF: Shares of beneficial interest $ 787,954,143 ------------------------------------------------------- Undistributed net investment income 21,880,876 ------------------------------------------------------- Undistributed net realized gain 26,112,605 ------------------------------------------------------- Unrealized appreciation (depreciation) (121,653,568) ======================================================= $ 714,294,056 _______________________________________________________ ======================================================= NET ASSETS: Class A $ 426,609,103 _______________________________________________________ ======================================================= Class B $ 48,020,734 _______________________________________________________ ======================================================= Class C $ 65,252,432 _______________________________________________________ ======================================================= Class R $ 14,030,249 _______________________________________________________ ======================================================= Class Y $ 5,176,644 _______________________________________________________ ======================================================= Investor Class $ 155,204,894 _______________________________________________________ ======================================================= SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 18,659,698 _______________________________________________________ ======================================================= Class B 2,246,922 _______________________________________________________ ======================================================= Class C 3,050,896 _______________________________________________________ ======================================================= Class R 618,131 _______________________________________________________ ======================================================= Class Y 226,391 _______________________________________________________ ======================================================= Investor Class 6,798,334 _______________________________________________________ ======================================================= Class A: Net asset value per share $ 22.86 ------------------------------------------------------- Maximum offering price per share (Net asset value of $22.86 divided by 94.50%) $ 24.19 _______________________________________________________ ======================================================= Class B: Net asset value and offering price per share $ 21.37 _______________________________________________________ ======================================================= Class C: Net asset value and offering price per share $ 21.39 _______________________________________________________ ======================================================= Class R: Net asset value and offering price per share $ 22.70 _______________________________________________________ ======================================================= Class Y: Net asset value and offering price per share $ 22.87 _______________________________________________________ ======================================================= Investor Class: Net asset value and offering price per share $ 22.83 _______________________________________________________ =======================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 11 AIM EUROPEAN GROWTH FUND STATEMENT OF OPERATIONS For the year ended October 31, 2008 INVESTMENT INCOME: Dividends (net of foreign withholding taxes of $3,552,168) $ 40,582,392 ------------------------------------------------------------------------------------------------ Dividends from affiliated money market funds (includes securities lending income of $831,123) 3,710,358 ================================================================================================ Total investment income 44,292,750 ================================================================================================ EXPENSES: Advisory fees 12,514,931 ------------------------------------------------------------------------------------------------ Administrative services fees 363,711 ------------------------------------------------------------------------------------------------ Custodian fees 835,043 ------------------------------------------------------------------------------------------------ Distribution fees: Class A 2,110,837 ------------------------------------------------------------------------------------------------ Class B 1,178,681 ------------------------------------------------------------------------------------------------ Class C 1,353,042 ------------------------------------------------------------------------------------------------ Class R 116,661 ------------------------------------------------------------------------------------------------ Investor Class 642,672 ------------------------------------------------------------------------------------------------ Transfer agent fees 3,005,159 ------------------------------------------------------------------------------------------------ Trustees' and officers' fees and benefits 55,579 ------------------------------------------------------------------------------------------------ Other 796,202 ================================================================================================ Total expenses 22,972,518 ================================================================================================ Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (196,791) ================================================================================================ Net expenses 22,775,727 ================================================================================================ Net investment income 21,517,023 ================================================================================================ REALIZED AND UNREALIZED GAIN (LOSS) FROM: Net realized gain from: Investment securities 57,487,350 ------------------------------------------------------------------------------------------------ Foreign currencies 407,723 ------------------------------------------------------------------------------------------------ Foreign currency contracts 220 ================================================================================================ 57,895,293 ================================================================================================ Change in net unrealized appreciation (depreciation) of: Investment securities (883,663,554) ------------------------------------------------------------------------------------------------ Foreign currencies (466,127) ================================================================================================ (884,129,681) ================================================================================================ Net realized and unrealized gain (loss) (826,234,388) ================================================================================================ Net increase (decrease) in net assets resulting from operations $(804,717,365) ________________________________________________________________________________________________ ================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 12 AIM EUROPEAN GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2008 and 2007
2008 2007 ----------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 21,517,023 $ 18,860,666 ----------------------------------------------------------------------------------------------------------- Net realized gain 57,895,293 145,210,344 ----------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) (884,129,681) 269,707,809 =========================================================================================================== Net increase (decrease) in net assets resulting from operations (804,717,365) 433,778,819 =========================================================================================================== Distributions to shareholders from net investment income: Class A (12,863,403) (5,963,573) ----------------------------------------------------------------------------------------------------------- Class B (1,030,323) (219,022) ----------------------------------------------------------------------------------------------------------- Class C (1,080,619) (147,072) ----------------------------------------------------------------------------------------------------------- Class R (257,858) (64,684) ----------------------------------------------------------------------------------------------------------- Investor Class (4,389,824) (2,147,850) =========================================================================================================== Total distributions from net investment income (19,622,027) (8,542,201) =========================================================================================================== Distributions to shareholders from net realized gains: Class A (75,070,177) (46,910,607) ----------------------------------------------------------------------------------------------------------- Class B (12,762,593) (10,134,545) ----------------------------------------------------------------------------------------------------------- Class C (13,385,625) (6,805,293) ----------------------------------------------------------------------------------------------------------- Class R (1,824,238) (701,284) ----------------------------------------------------------------------------------------------------------- Investor Class (25,620,101) (16,336,816) =========================================================================================================== Total distributions from net realized gains (128,662,734) (80,888,545) =========================================================================================================== Share transactions-net: Class A (98,203,135) 121,519,072 ----------------------------------------------------------------------------------------------------------- Class B (51,206,236) (19,627,696) ----------------------------------------------------------------------------------------------------------- Class C (24,754,581) 49,127,497 ----------------------------------------------------------------------------------------------------------- Class R 4,876,993 10,250,242 ----------------------------------------------------------------------------------------------------------- Class Y 6,361,082 -- ----------------------------------------------------------------------------------------------------------- Investor Class (26,960,849) 40,125,267 =========================================================================================================== Net increase (decrease) in net assets resulting from share transactions (189,886,726) 201,394,382 =========================================================================================================== Net increase (decrease) in net assets (1,142,888,852) 545,742,455 =========================================================================================================== NET ASSETS: Beginning of year 1,857,182,908 1,311,440,453 =========================================================================================================== End of year (includes undistributed net investment income of $21,880,876 and $19,476,052, respectively) $ 714,294,056 $1,857,182,908 ___________________________________________________________________________________________________________ ===========================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 13 AIM EUROPEAN GROWTH FUND NOTES TO FINANCIAL STATEMENTS October 31, 2008 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 assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The Fund's investment objective is long-term growth of capital. The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Investor Class. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waiver shares may be subject to contingent deferred sales charges ("CDSC"). Class B shares and Class C shares are sold with a CDSC. Class R, Class Y and Investor Class shares are sold at net asset value. Under certain circumstances, Class R shares are subject to a CDSC. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer's assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. 14 AIM EUROPEAN GROWTH FUND The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain/loss for investments no longer held and as unrealized gain/loss for investments still held. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment advisor may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund's taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. G. ACCOUNTING ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. J. SECURITIES LENDING -- The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. 15 AIM EUROPEAN GROWTH FUND K. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. L. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. Fluctuations in the value of these contracts are recorded as unrealized appreciation (depreciation) until the contracts are closed. When these contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. The Fund could be exposed to risk, which may be in excess of the amount reflected in the Statement of Assets and Liabilities, if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with Invesco Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Advisor based on the annual rate of the Fund's average daily net assets as follows:
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% ___________________________________________________________________ ===================================================================
Under the terms of a master sub-advisory agreement approved by shareholders of the Fund, effective May 1, 2008, between the Advisor and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Advisor(s). The Advisor has contractually agreed, through at least June 30, 2009, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Advisor receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds. For the year ended October 31, 2008, the Advisor waived advisory fees of $120,856. At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $19,744. The Trust has entered into a master administrative services agreement with Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees. The Trust has entered into a transfer agency and service agreement with Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has agreed to pay IAIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the course of providing such services. IAIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IAIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust's Board of Trustees. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees. 16 AIM EUROPEAN GROWTH FUND The Trust has entered into master distribution agreements with Invesco Aim Distributors, Inc. ("IADI") to serve as the distributor for the Class A, Class B, Class C, Class R, Class Y and 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 Plans, pays IADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. The Fund, pursuant to the Investor Class Plan, reimburses IADI 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 Investor Class shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority ("FINRA") impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the year ended October 31, 2008, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees. Front-end sales commissions and CDSC (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2008, IADI advised the Fund that IADI retained $151,395 in front-end sales commissions from the sale of Class A shares and $26,874, $168,871, $52,705 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed on redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of Invesco Aim, IAIS and/or IADI. NOTE 3--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2008, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $56,191. NOTE 4--TRUSTEES' AND OFFICERS' FEES AND BENEFITS "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officers' Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2008, the Fund paid legal fees of $6,242 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--CASH BALANCES The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco Aim, not to exceed the contractually agreed upon rate. NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED OCTOBER 31, 2008 AND 2007:
2008 2007 ------------------------------------------------------------------------------------------------------------- Ordinary income $ 19,622,027 $ 8,542,201 ------------------------------------------------------------------------------------------------------------- Long-term capital gain 128,662,734 80,888,545 ============================================================================================================= Total distributions $148,284,761 $89,430,746 _____________________________________________________________________________________________________________ =============================================================================================================
17 AIM EUROPEAN GROWTH FUND TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
2008 ------------------------------------------------------------------------------------------------ Undistributed ordinary income $ 22,039,792 ------------------------------------------------------------------------------------------------ Undistributed long-term gain 41,701,927 ------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) -- investments (121,179,882) ------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) -- other investments (473,686) ------------------------------------------------------------------------------------------------ Temporary book/tax differences (158,916) ------------------------------------------------------------------------------------------------ Capital loss carryforward (15,589,322) ------------------------------------------------------------------------------------------------ Shares of beneficial interest 787,954,143 ================================================================================================ Total net assets $ 714,294,056 ________________________________________________________________________________________________ ================================================================================================
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 temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited to utilizing $15,589,322 of capital loss carryforward in the fiscal year ended October 31, 2009. The Fund utilized $15,612,870 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2008 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* ----------------------------------------------------------------------------------------------- October 31, 2009 $15,589,322 _______________________________________________________________________________________________ ===============================================================================================
* 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 7--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended October 31, 2008 was $239,682,728 and $511,966,096, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 106,398,858 ------------------------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (227,578,740) ================================================================================================ Net unrealized appreciation (depreciation) of investment securities $(121,179,882) ________________________________________________________________________________________________ ================================================================================================ Cost of investments is the same for tax and financial statement purposes.
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of expired built in gains, proxy costs and foreign currency transactions, on October 31, 2008, undistributed net investment income was increased by $509,828, undistributed net realized gain was increased by $2,040,255 and shares of beneficial interest decreased by $2,550,083. This reclassification had no effect on the net assets of the Fund. 18 AIM EUROPEAN GROWTH FUND NOTE 9--SHARE INFORMATION
SUMMARY OF SHARE ACTIVITY ------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------- 2008(a) 2007 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------- Sold: Class A 3,185,613 $ 125,356,023 7,429,428 $ 326,433,361 ------------------------------------------------------------------------------------------------------------------------- Class B 349,883 12,996,414 805,068 33,359,939 ------------------------------------------------------------------------------------------------------------------------- Class C 572,829 21,478,824 1,737,422 72,577,972 ------------------------------------------------------------------------------------------------------------------------- Class R 331,350 12,586,181 330,881 14,633,542 ------------------------------------------------------------------------------------------------------------------------- Class Y(b) 227,374 6,384,402 -- -- ------------------------------------------------------------------------------------------------------------------------- Investor Class 371,888 14,365,709 2,049,154 89,305,816 ========================================================================================================================= Issued as reinvestment of dividends: Class A 1,929,620 80,986,148 1,142,498 46,054,107 ------------------------------------------------------------------------------------------------------------------------- Class B 326,385 12,892,190 256,770 9,795,785 ------------------------------------------------------------------------------------------------------------------------- Class C 334,603 13,223,510 167,911 6,410,837 ------------------------------------------------------------------------------------------------------------------------- Class R 49,697 2,075,369 18,964 761,034 ------------------------------------------------------------------------------------------------------------------------- Investor Class 690,306 28,923,829 441,910 17,782,444 ========================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 1,063,394 39,797,527 635,482 27,596,460 ------------------------------------------------------------------------------------------------------------------------- Class B (1,133,401) (39,797,527) (673,170) (27,596,460) ========================================================================================================================= Reacquired:(c) Class A(b) (9,785,932) (344,342,833) (6,243,240) (278,564,856) ------------------------------------------------------------------------------------------------------------------------- Class B (1,121,151) (37,297,313) (852,461) (35,186,960) ------------------------------------------------------------------------------------------------------------------------- Class C (1,790,312) (59,456,915) (725,001) (29,861,312) ------------------------------------------------------------------------------------------------------------------------- Class R (276,798) (9,784,557) (115,806) (5,144,334) ------------------------------------------------------------------------------------------------------------------------- Class Y(b) (983) (23,320) -- -- ------------------------------------------------------------------------------------------------------------------------- Investor Class(b) (1,932,319) (70,250,387) (1,523,014) (66,962,993) ========================================================================================================================= Net increase (decrease) in share activity (6,607,954) $(189,886,726) 4,882,796 $ 201,394,382 _________________________________________________________________________________________________________________________ =========================================================================================================================
(a) There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 26% of the outstanding shares of the Fund. IADI has an agreement with these entities to sell Fund shares. The Fund, Invesco Aim and/or Invesco Aim affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco Aim and/or Invesco Aim affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. (b) Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A and Investor Class shares into Class Y shares of the Fund:
CLASS SHARES AMOUNT ---------------------------------------------------------------------------------------------------------- Class Y 226,468 $ 6,361,494 ---------------------------------------------------------------------------------------------------------- Class A (216,596) (6,084,195) ---------------------------------------------------------------------------------------------------------- Investor Class (9,886) (277,299) __________________________________________________________________________________________________________ ==========================================================================================================
(c) Net of redemption fees of $52,812 and $92,948 allocated among the classes based on relative net assets of each class for the years ended October 31, 2008 and 2007, respectively. 19 AIM EUROPEAN GROWTH FUND NOTE 10--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
NET GAINS (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET NET ASSET BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END OF PERIOD (LOSS)(a) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD(b) --------------------------------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 $49.22 $ 0.63 $(23.02) $(22.39) $(0.58) $(3.39) $(3.97) $22.86 Year ended 10/31/07 39.83 0.56 11.52 12.08 (0.31) (2.38) (2.69) 49.22 Year ended 10/31/06 31.11 0.31 10.70 11.01 (0.21) (2.08) (2.29) 39.83 Year ended 10/31/05 26.23 0.21 4.70 4.91 (0.03) -- (0.03) 31.11 Year ended 10/31/04 20.02 0.05 6.17 6.22 (0.01) -- (0.01) 26.23 --------------------------------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 46.29 0.33 (21.59) (21.26) (0.27) (3.39) (3.66) 21.37 Year ended 10/31/07 37.63 0.22 10.87 11.09 (0.05) (2.38) (2.43) 46.29 Year ended 10/31/06 29.53 0.04 10.15 10.19 (0.01) (2.08) (2.09) 37.63 Year ended 10/31/05 25.03 0.01 4.49 4.50 -- -- -- 29.53 Year ended 10/31/04 19.23 (0.10) 5.90 5.80 -- -- -- 25.03 --------------------------------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 46.31 0.33 (21.59) (21.26) (0.27) (3.39) (3.66) 21.39 Year ended 10/31/07 37.65 0.22 10.87 11.09 (0.05) (2.38) (2.43) 46.31 Year ended 10/31/06 29.54 0.04 10.16 10.20 (0.01) (2.08) (2.09) 37.65 Year ended 10/31/05 25.05 0.01 4.48 4.49 -- -- -- 29.54 Year ended 10/31/04 19.24 (0.10) 5.91 5.81 -- -- -- 25.05 --------------------------------------------------------------------------------------------------------------------------------- CLASS R Year ended 10/31/08 48.90 0.53 (22.86) (22.33) (0.48) (3.39) (3.87) 22.70 Year ended 10/31/07 39.60 0.45 11.45 11.90 (0.22) (2.38) (2.60) 48.90 Year ended 10/31/06 30.96 0.22 10.66 10.88 (0.16) (2.08) (2.24) 39.60 Year ended 10/31/05 26.13 0.16 4.68 4.84 (0.01) -- (0.01) 30.96 Year ended 10/31/04 19.98 0.01 6.14 6.15 -- -- -- 26.13 --------------------------------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(f) 28.09 0.03 (5.25) (5.22) -- -- -- 22.87 --------------------------------------------------------------------------------------------------------------------------------- INVESTOR CLASS Year ended 10/31/08 49.14 0.64 (22.98) (22.34) (0.58) (3.39) (3.97) 22.83 Year ended 10/31/07 39.78 0.56 11.50 12.06 (0.32) (2.38) (2.70) 49.14 Year ended 10/31/06 31.08 0.32 10.69 11.01 (0.23) (2.08) (2.31) 39.78 Year ended 10/31/05 26.22 0.24 4.69 4.93 (0.07) -- (0.07) 31.08 Year ended 10/31/04 20.01 0.09 6.15 6.24 (0.03) -- (0.03) 26.22 _________________________________________________________________________________________________________________________________ ================================================================================================================================= RATIO OF RATIO OF EXPENSES TO EXPENSES AVERAGE NET TO AVERAGE ASSETS NET ASSETS WITHOUT FEE RATIO OF NET WITH FEE WAIVERS WAIVERS INVESTMENT NET ASSETS, AND/OR AND/OR INCOME (LOSS) TOTAL END OF PERIOD EXPENSES EXPENSES TO AVERAGE PORTFOLIO RETURN(c) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(d) -------------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 (49.17)% $ 426,609 1.49%(e) 1.50%(e) 1.66%(e) 18% Year ended 10/31/07 31.84 1,095,988 1.47 1.49 1.28 20 Year ended 10/31/06 37.44 768,769 1.58 1.60 0.87 28 Year ended 10/31/05 18.74 496,328 1.70 1.72 0.71 48 Year ended 10/31/04 31.06 407,566 1.87 1.87 0.19 60 -------------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 (49.56) 48,021 2.24(e) 2.25(e) 0.91(e) 18 Year ended 10/31/07 30.87 177,053 2.22 2.24 0.53 20 Year ended 10/31/06 36.39 161,405 2.33 2.35 0.12 28 Year ended 10/31/05 17.98 144,211 2.39 2.41 0.02 48 Year ended 10/31/04 30.16 130,863 2.52 2.52 (0.46) 60 -------------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 (49.53) 65,252 2.24(e) 2.25(e) 0.91(e) 18 Year ended 10/31/07 30.84 182,178 2.22 2.24 0.53 20 Year ended 10/31/06 36.41 103,675 2.33 2.35 0.12 28 Year ended 10/31/05 17.92 63,806 2.39 2.41 0.02 48 Year ended 10/31/04 30.20 45,222 2.52 2.52 (0.46) 60 -------------------------------------------------------------------------------------------------------------- CLASS R Year ended 10/31/08 (49.28) 14,030 1.74(e) 1.75(e) 1.41(e) 18 Year ended 10/31/07 31.53 25,129 1.72 1.74 1.03 20 Year ended 10/31/06 37.11 11,081 1.83 1.85 0.62 28 Year ended 10/31/05 18.52 4,767 1.89 1.91 0.52 48 Year ended 10/31/04 30.78 2,131 2.02 2.02 0.04 60 -------------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(f) (18.58) 5,177 1.34(e)(g) 1.35(e)(g) 1.81(e)(g) 18 -------------------------------------------------------------------------------------------------------------- INVESTOR CLASS Year ended 10/31/08 (49.14) 155,205 1.47(e) 1.48(e) 1.69(e) 18 Year ended 10/31/07 31.80 376,835 1.47 1.49 1.28 20 Year ended 10/31/06 37.50 266,510 1.55 1.57 0.91 28 Year ended 10/31/05 18.82 202,323 1.63 1.65 0.78 48 Year ended 10/31/04 31.20 184,832 1.71 1.74 0.35 60 ______________________________________________________________________________________________________________ ==============================================================================================================
(a) Calculated using average shares outstanding. (b) Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. (d) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. (e) Ratios are based on average daily net assets (000's omitted) of $844,335, $117,868, $135,304, $23,332, $5,178 and $283,145 for Class A, Class B, Class C, Class R, Class Y and Investor Class shares, respectively. (f) Commencement date of October 3, 2008. (g) Annualized. 20 AIM EUROPEAN GROWTH FUND NOTE 11--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On May 23, 2008, the Securities and Exchange Commission ("SEC") publicly posted its final approval of the Distribution Plans ("Distribution Plans") for the distribution of monies placed into two separate Fair Funds created pursuant to a settlement reached on October 8, 2004 between Invesco Funds Group, Inc. ("IFG"), Invesco Aim Advisors, Inc. ("Invesco Aim") and Invesco Aim Distributors, Inc. ("IADI") and the SEC (the "Order"). One of the Fair Funds consists of $325 million, plus interest and any contributions by other settling parties, for distribution to shareholders of certain mutual funds formerly advised by IFG who may have been harmed by market timing and related activity. The second Fair Fund consists of $50 million, plus interest and any contributions by other settling parties, for distribution to shareholders of mutual funds advised by Invesco Aim who may have been harmed by market timing and related activity. The Distribution Plans provide for the distribution to all eligible investors to compensate such investors for injury they may have suffered as a result of market timing in the affected funds. The Distribution Plans include a provision for any residual amounts in the Fair Funds to be distributed in the future to the affected funds. Because the distribution of the Fair Funds has not yet commenced, management of Invesco Aim and the Fund are unable to estimate the amount of distribution to be made to the Fund, if any. At the request of the trustees of the AIM Funds, Invesco Ltd. ("Invesco"), the parent company of IFG and Invesco Aim, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. PENDING LITIGATION AND REGULATORY INQUIRIES On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05- 1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into certain arrangements permitting market timing of the AIM Funds and failed to disclose these arrangements in the prospectuses for such Funds, and conclusions of law to the effect that Invesco Aim and IADI violated the West Virginia securities laws. The WVASC orders Invesco Aim and IADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. By agreement with the Commissioner of Securities, Invesco Aim's time to respond to that Order has been indefinitely suspended. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; and - that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid. The case pending in Illinois State Court regarding fair value pricing was dismissed with prejudice on May 6, 2008. All lawsuits based on allegations of market timing, late trading and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various Invesco Aim- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA purportedly brought on behalf of participants in the Invesco 401(k) plan. Based on orders issued by the MDL Court, all claims asserted against the AIM Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco defendants' motion to dismiss the Amended Class Action Complaint for Violations of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June 16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and remanded this lawsuit back to the MDL Court for further proceedings. IFG, Invesco Aim, IADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the future. At the present time, management of Invesco Aim and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund. 21 AIM EUROPEAN GROWTH FUND 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, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP December 16, 2008 Houston, Texas 22 AIM EUROPEAN GROWTH FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. With the exception of the actual ending account value and expenses of the Class Y Shares, the example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. The actual ending account and expenses of the Class Y shares in the below example are based on an investment of $1,000 invested as of close of business October 3, 2008 (commencement date) and held through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period (as of close of business October 3, 2008 through October 31, 2008 for the Class Y shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class Y shares, the ending account value and expense information may not provide a meaningful comparison to mutual funds that provide such information for a full six month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
--------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO --------------------------------------------------------------------------------------------------- A $1,000.00 $573.20 $6.09 $1,017.39 $ 7.81 1.54% --------------------------------------------------------------------------------------------------- B 1,000.00 571.00 9.04 1,013.62 11.59 2.29 --------------------------------------------------------------------------------------------------- C 1,000.00 571.30 9.04 1,013.62 11.59 2.29 --------------------------------------------------------------------------------------------------- R 1,000.00 572.60 7.08 1,016.14 9.07 1.79 --------------------------------------------------------------------------------------------------- Y 1,000.00 814.20 0.96 1,018.40 6.80 1.34 --------------------------------------------------------------------------------------------------- Investor 1,000.00 573.40 5.89 1,017.65 7.56 1.49 ---------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008 (as of close of business October 3, 2008, through October 31, 2008 for the Class Y shares), after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. For the Class Y shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 29 (as of close of business October 3, 2008, through October 31, 2008)/366. Because the Class Y shares have not been in existence for a full six month period, the actual ending account value and expense information shown may not provide a meaningful comparison to fund expense information of classes that show such data for a full six month period and, because the actual ending account value and expense information in the expense example covers a short time period, return and expense data may not be indicative of return and expense data for longer time periods. (3) Hypothetical expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect a one-half year period. The hypothetical ending account value and expenses may be used to compare ongoing costs of investing in Class Y shares of the Fund and other funds because such data is based on a full six month period. 23 AIM EUROPEAN GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT The Board of Trustees (the Board) of AIM their assigned funds. During the contract ated the information provided differently International Mutual Funds is required renewal process, the Trustees receive from one another and attributed different under the Investment Company Act of 1940 comparative performance and fee data weight to the various factors. The to approve annually the renewal of the AIM regarding the AIM Funds prepared by an Trustees recognized that the advisory European Growth Fund's (the Fund) independent company, Lipper, Inc. arrangements and resulting advisory fees investment advisory agreement with Invesco (Lipper), under the direction and for the Fund and the other AIM Funds are Aim Advisors, Inc. (Invesco Aim). During supervision of the independent Senior the result of years of review and contract renewal meetings held on June Officer who also prepares a separate negotiation between the Trustees and 18-19, 2008, the Board as a whole and the analysis of this information for the Invesco Aim, that the Trustees may focus disinterested or "independent" Trustees, Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of voting separately, approved the recommendations to the Investments these arrangements in some years than in continuance of the Fund's investment Committee regarding the performance, fees others, and that the Trustees' advisory agreement for another year, and expenses of their assigned funds. The deliberations and conclusions in a effective July 1, 2008. In doing so, the Investments Committee considers each particular year may be based in part on Board determined that the Fund's Sub-Committee's recommendations and makes their deliberations and conclusions of investment advisory agreement is in the its own recommendations regarding the these same arrangements throughout the best interests of the Fund and its performance, fees and expenses of the AIM year and in prior years. shareholders and that the compensation to Funds to the full Board. The Investments Invesco Aim under the Fund's investment Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF advisory agreement is fair and reasonable. Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION its annual recommendation to the Board The independent Trustees met separately whether to approve the continuance of each The discussion below serves as a summary during their evaluation of the Fund's AIM Fund's investment advisory agreement of the Senior Officer's independent investment advisory agreement with and sub-advisory agreements for another written evaluation with respect to the independent legal counsel from whom they year. Fund's investment advisory agreement as received independent legal advice, and the well as a discussion of the material independent Trustees also received The independent Trustees are assisted factors and related conclusions that assistance during their deliberations from in their annual evaluation of the Fund's formed the basis for the Board's approval the independent Senior Officer, a investment advisory agreement by the of the Fund's investment advisory full-time officer of the AIM Funds who independent Senior Officer. One agreement and sub-advisory agreements. reports directly to the independent responsibility of the Senior Officer is to Unless otherwise stated, information set Trustees. manage the process by which the AIM Funds' forth below is as of June 19, 2008 and proposed management fees are negotiated does not reflect any changes that may have THE BOARD'S FUND EVALUATION PROCESS during the annual contract renewal process occurred since that date, including but to ensure that they are negotiated in a not limited to changes to the Fund's The Board's Investments Committee has manner that is at arms' length and performance, advisory fees, expense established three Sub-Committees that are reasonable. Accordingly, the Senior limitations and/or fee waivers. responsible for overseeing the management Officer must either supervise a of a number of the series portfolios of competitive bidding process or prepare an I. Investment Advisory Agreement the AIM Funds. This Sub-Committee independent written evaluation. The Senior structure permits the Trustees to focus on Officer has recommended that an A. Nature, Extent and Quality of the performance of the AIM Funds that have independent written evaluation be provided Services Provided by Invesco Aim been assigned to them. The Sub-Committees and, at the direction of the Board, has meet throughout the year to review the prepared an independent written The Board reviewed the advisory services performance of their assigned funds, and evaluation. provided to the Fund by Invesco Aim under the Sub-Committees review monthly and the Fund's investment advisory agreement, quarterly comparative performance During the annual contract renewal the performance of Invesco Aim in information and periodic asset flow data process, the Board considered the factors providing these services, and the for their assigned funds. These materials discussed below under the heading "Factors credentials and experience of the officers are prepared under the direction and and Conclusions and Summary of Independent and employees of Invesco Aim who provide supervision of the independent Senior Written Fee Evaluation" in evaluating the these services. The Board's review of the Officer. Over the course of each year, the fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide Sub-Committees meet with portfolio investment advisory agreement and these services included the Board's managers for their assigned funds and sub-advisory agreements at the contract consideration of Invesco Aim's portfolio other members of management and review renewal meetings and at their meetings and product review process, various back with these individuals the performance, throughout the year as part of their office support functions provided by investment objective(s), policies, ongoing oversight of the Fund. The Fund's Invesco Aim, and Invesco Aim's equity and strategies and limitations of these funds. investment advisory agreement and fixed income trading operations. The Board sub-advisory agreements were considered concluded that the nature, extent and In addition to their meetings separately, although the Board also quality of the advisory services provided throughout the year, the Sub-Committees considered the common interests of all of to the Fund by Invesco Aim were meet at designated contract renewal the AIM Funds in their deliberations. The appropriate and that Invesco Aim currently meetings each year to conduct an in-depth Board considered all of the information is providing satisfactory advisory review of the performance, fees and provided to them and did not identify any services in accordance with the terms of expenses of particular factor that was controlling. the Fund's investment advisory agreement. Each Trustee may have evalu- In addition, based on their ongoing meetings throughout the year with the continued
24 AIM EUROPEAN GROWTH FUND Fund's portfolio manager or managers, the Fund performance through the most recent schedule or through advisory fee waivers Board concluded that these individuals are calendar year, the Board also reviewed or expense limitations. The Board noted competent and able to continue to carry more recent Fund performance and this that the Fund's contractual advisory fee out their responsibilities under the review did not change their conclusions. schedule includes seven breakpoints and Fund's investment advisory agreement. that the level of the Fund's advisory C. Advisory Fees and Fee Waivers fees, as a percentage of the Fund's net In determining whether to continue the assets, has decreased as net assets Fund's investment advisory agreement, the The Board compared the Fund's contractual increased because of the breakpoints. Board considered the prior relationship advisory fee rate to the contractual Based on this information, the Board between Invesco Aim and the Fund, as well advisory fee rates of funds in the Fund's concluded that the Fund's advisory fees as the Board's knowledge of Invesco Aim's expense group that are not managed by appropriately reflect economies of scale operations, and concluded that it was Invesco Aim, at a common asset level and at current asset levels. The Board also beneficial to maintain the current as of the end of the past calendar year. noted that the Fund shares directly in relationship, in part, because of such The Board noted that the Fund's economies of scale through lower fees knowledge. The Board also considered the contractual advisory fee rate was above charged by third party service providers steps that Invesco Aim and its affiliates the median contractual advisory fee rate based on the combined size of all of the have taken over the last several years to of funds in its expense group. The Board AIM Funds and affiliates. improve the quality and efficiency of the also reviewed the methodology used by services they provide to the AIM Funds in Lipper and noted that the contractual fee E. Profitability and Financial the areas of investment performance, rates shown by Lipper in determining Resources of Invesco Aim product line diversification, contractual fee rates. distribution, fund operations, shareholder The Board reviewed information from services and compliance. The Board The Board also compared the Fund's Invesco Aim concerning the costs of the concluded that the quality and efficiency effective fee rate (the advisory fee after advisory and other services that Invesco of the services Invesco Aim and its any advisory fee waivers and before any Aim and its affiliates provide to the Fund affiliates provide to the AIM Funds in expense limitations/waivers) to the and the profitability of Invesco Aim and each of these areas have generally advisory fee rates of other clients of its affiliates in providing these improved, and support the Board's approval Invesco Aim and its affiliates with services. The Board also reviewed of the continuance of the Fund's investment strategies comparable to those information concerning the financial investment advisory agreement. of the Fund, including one mutual fund condition of Invesco Aim and its advised by Invesco Aim. The Board noted affiliates. The Board also reviewed with B. Fund Performance that the Fund's rate was below the rate Invesco Aim the methodology used to for the other mutual fund. prepare the profitability information. The The Board compared the Fund's performance Board considered the overall profitability during the past one, three and five The Board noted that Invesco Aim has of Invesco Aim, as well as the calendar years to the performance of funds not proposed any advisory fee waivers or profitability of Invesco Aim in connection in the Fund's performance group that are expense limitations for the Fund; however with managing the Fund. The Board noted not managed by Invesco Aim, and against Invesco Aim informed the Board that it had that Invesco Aim continues to operate at a the performance of all funds in the Lipper analyzed the total expenses of the Fund, net profit, although increased expenses in European Region Funds Index. The Board which are impacted by transfer agent and recent years have reduced the also reviewed the criteria used by Invesco other fees being above the median, and profitability of Invesco Aim and its Aim to identify the funds in the Fund's determined that the total expenses are affiliates. The Board concluded that the performance group for inclusion in the currently appropriate. Based upon Fund's fees were fair and reasonable, and Lipper reports. The Board noted that the amendments to the Fund's contractual that the level of profits realized by Fund's performance was in the third advisory fee schedule in recent years, the Invesco Aim and its affiliates from quintile of its performance group for the Board concluded that it was not necessary providing services to the Fund was not one year period and the second quintile at this time to discuss with Invesco Aim excessive in light of the nature, quality for the three and five year periods (the whether to amend the contractual advisory and extent of the services provided. The first quintile being the best performing fee schedule or implement any fee waivers Board considered whether Invesco Aim is funds and the fifth quintile being the or expense limitations for the Fund. financially sound and has the resources worst performing funds). The Board noted necessary to perform its obligations under that the Fund's performance was below the After taking account of the Fund's the Fund's investment advisory agreement, performance of the Index for the one year contractual advisory fee rate, as well as and concluded that Invesco Aim has the period and above the performance for the the comparative advisory fee information financial resources necessary to fulfill three and five year periods. The Board discussed above, the Board concluded that these obligations. also considered the steps Invesco Aim has the Fund's advisory fees were fair and taken over the last several years to reasonable. F. Independent Written Evaluation of improve the quality and efficiency of the the Fund's Senior Officer services that Invesco Aim provides to the D. Economies of Scale and Breakpoints AIM Funds. The Board concluded that The Board noted that, at their direction, Invesco Aim continues to be responsive to The Board considered the extent to which the Senior Officer of the Fund, who is the Board's focus on fund performance. there are economies of scale in Invesco independent of Invesco Aim and Invesco Although the independent written Aim's provision of advisory services to Aim's affiliates, had prepared an evaluation of the Fund's Senior Officer the Fund. The Board also considered independent written evaluation to assist only considered whether the Fund benefits from such the Board in determining the economies of scale through contractual reasonableness of the proposed management breakpoints in the Fund's advisory fee fees of the AIM Funds, including the Fund. The continued
25 AIM EUROPEAN GROWTH FUND Board noted that they had relied upon the to procedures approved by the Board. The B. Fund Performance Senior Officer's written evaluation Board noted that Invesco Aim will receive instead of a competitive bidding process. advisory fees from these affiliated money The Board did not view Fund performance as In determining whether to continue the market funds attributable to such a relevant factor in considering whether Fund's investment advisory agreement, the investments, although Invesco Aim has to approve the sub-advisory agreements for Board considered the Senior Officer's contractually agreed to waive through at the Fund, as no Affiliated Sub-Adviser written evaluation. least June 30, 2009, the advisory fees manages any portion of the Fund's assets. payable by the Fund in an amount equal to G. Collateral Benefits to Invesco Aim 100% of the net advisory fees Invesco Aim C. Sub-Advisory Fees and its Affiliates receives from the affiliated money market funds with respect to the Fund's The Board considered the services to be The Board considered various other investment of uninvested cash, but not provided by the Affiliated Sub-Advisers benefits received by Invesco Aim and its cash collateral. The Board considered the pursuant to the sub-advisory agreements affiliates resulting from Invesco Aim's contractual nature of this fee waiver and and the services to be provided by Invesco relationship with the Fund, including the noted that it remains in effect until at Aim pursuant to the Fund's investment fees received by Invesco Aim and its least June 30, 2009. The Board concluded advisory agreement, as well as the affiliates for their provision of that the Fund's investment of uninvested allocation of fees between Invesco Aim and administrative, transfer agency and cash and cash collateral from any the Affiliated Sub-Advisers pursuant to distribution services to the Fund. The securities lending arrangements in the the sub-advisory agreements. The Board Board considered the performance of affiliated money market funds is in the noted that the sub-advisory fees have no Invesco Aim and its affiliates in best interests of the Fund and its direct effect on the Fund or its providing these services and the shareholders. shareholders, as they are paid by Invesco organizational structure employed by Aim to the Affiliated Sub-Advisers, and Invesco Aim and its affiliates to provide II. Sub-Advisory Agreements that Invesco Aim and the Affiliated these services. The Board also considered Sub-Advisers are affiliates. After taking that these services are provided to the A. Nature, Extent and Quality of account of the Fund's contractual Fund pursuant to written contracts which Services Provided by Affiliated sub-advisory fee rate, as well as other are reviewed and approved on an annual Sub-Advisers relevant factors, the Board concluded that basis by the Board. The Board concluded the Fund's sub-advisory fees were fair and that Invesco Aim and its affiliates were The Board reviewed the services to be reasonable. providing these services in a satisfactory provided by Invesco Trimark Ltd., Invesco manner and in accordance with the terms of Asset Management Deutschland, GmbH, D. Financial Resources of the their contracts, and were qualified to Invesco Asset Management Limited, Invesco Affiliated Sub-Advisers continue to provide these services to the Asset Management (Japan) Limited, Invesco Fund. Australia Limited, Invesco Global Asset The Board considered whether each Management (N.A.), Inc., Invesco Hong Kong Affiliated Sub-Adviser is financially The Board considered the benefits Limited, Invesco Institutional (N.A.), sound and has the resources necessary to realized by Invesco Aim as a result of Inc. and Invesco Senior Secured perform its obligations under its portfolio brokerage transactions executed Management, Inc. (collectively, the respective sub-advisory agreement, and through "soft dollar" arrangements. Under "Affiliated Sub-Advisers") under the concluded that each Affiliated Sub-Adviser these arrangements, portfolio brokerage sub-advisory agreements and the has the financial resources necessary to commissions paid by the Fund and/or other credentials and experience of the officers fulfill these obligations. funds advised by Invesco Aim are used to and employees of the Affiliated pay for research and execution services. Sub-Advisers who will provide these The Board noted that soft dollar services. The Board concluded that the arrangements shift the payment obligation nature, extent and quality of the services for the research and execution services to be provided by the Affiliated from Invesco Aim to the funds and Sub-Advisers were appropriate. The Board therefore may reduce Invesco Aim's noted that the Affiliated Sub-Advisers, expenses. The Board also noted that which have offices and personnel that are research obtained through soft dollar geographically dispersed in financial arrangements may be used by Invesco Aim in centers around the world, have been formed making investment decisions for the Fund in part for the purpose of researching and and may therefore benefit Fund compiling information and making shareholders. The Board concluded that recommendations on the markets and Invesco Aim's soft dollar arrangements economies of various countries and were appropriate. The Board also concluded securities of companies located in such that, based on their review and countries or on various types of representations made by Invesco Aim, these investments and investment techniques, and arrangements were consistent with providing investment advisory services. regulatory requirements. The Board concluded that the sub-advisory agreements will benefit the Fund and its The Board considered the fact that the shareholders by permitting Invesco Aim to Fund's uninvested cash and cash collateral utilize the additional resources and from any securities lending arrangements talent of the Affiliated Sub-Advisers in may be invested in money market funds managing the Fund. advised by Invesco Aim pursuant
26 AIM EUROPEAN GROWTH FUND TAX INFORMATION Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors. The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state's requirement. The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2008:
FEDERAL AND STATE INCOME TAX ---------------------------- Long-Term Capital Gain Dividends $128,662,734 Qualified Dividend Income* 100% Corporate Dividends Received Deduction* 0% Foreign Taxes 0.06 per Share Foreign Source Income 1.51 per Share
* The above percentages are based on ordinary income dividends paid to shareholders during the Fund's fiscal year. ADDITIONAL NON-RESIDENT ALIEN SHAREHOLDER INFORMATION The percentages of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008 and October 31, 2008 were 99.89%, 99.84%, 99.97%, and 96.69%, respectively. 27 AIM EUROPEAN GROWTH FUND TRUSTEES AND OFFICERS The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 103 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS -------------------------------------------------------------------------------------------------------------------------------- Martin L. 2007 Executive Director, Chief Executive Officer and President, None Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global Trustee investment management firm); Chairman, Invesco Aim Advisors, Inc. (registered investment advisor); Director, Chairman, Chief Executive Officer and President, IVZ Inc. (holding company); INVESCO North American Holdings, Inc. (holding company); and, INVESCO Group Services, Inc. (service provider); Trustee, The AIM Family of Funds--Registered Trademark--; Vice Chairman, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business Formerly: Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco Aim and a global investment management firm); Chairman, Investment Company Institute; President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) -------------------------------------------------------------------------------------------------------------------------------- Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim Advisors, Inc., and 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Aim Management Group, Inc. (financial services holding company) and Invesco Aim Capital Management, Inc. (registered investment advisor); Director and President, INVESCO Funds Group, Inc. (registered investment advisor and register transfer agent) and AIM GP Canada Inc. (general partner for a limited partnership); Director, Invesco Aim Distributors, Inc. (registered broker dealer); Director and Chairman, Invesco Aim Investment Services, Inc. (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, IVZ Callco Inc. (holding company), INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (formerly AIM Canada Holdings Inc.) (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (formerly AIM Trimark Global Fund Inc.) (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services) (registered investment advisor and registered transfer agent) and Invesco Trimark Dealer Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered broker dealer); Trustee, President and Principal Executive Officer of The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only); and Manager, Invesco PowerShares Capital Management LLC Formerly: President, Invesco Trimark Dealer Inc.; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Director and President, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services); Senior Managing Director, Invesco Holding Company Limited; Trustee and Executive Vice President, Tax-Free Investments Trust; Director and Chairman, Fund Management Company (registered broker dealer); President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; and Director, Trimark Trust (federally regulated Canadian Trust Company) -------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES -------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates (technology ACE Limited Trustee and Chair consulting company) (insurance company); Captaris, Inc. (unified messaging provider); and Investment Company Institute -------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Trustee Formerly: Partner, law firm of Baker & McKenzie; and None Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) -------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Policy Trustee firm) Studies, Inc. and Van Gilder Insurance Corporation -------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business None Trustee corporations, including the Boss Group Ltd. (private investment and management); Continental Energy Services, LLC (oil and gas pipeline service); Reich & Tang Funds (registered investment company); Annuity and Life Re (Holdings), Ltd. (reinsurance company), and Homeowners of America Holding Corporation/Homeowners of America Insurance Company (property casualty company) Formerly: Director, CompuDyne Corporation (provider of product and services to the public security market); Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; Director of various public and private corporations -------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff Trustee (government affairs company); and Owner and Chief Executive Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate entertainment) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company); and Discovery Global Education Fund (non-profit) -------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich & Trustee Tang Funds) (15 portfolios) -------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None Trustee -------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee -------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, Jr. -- 1944 2005 Retired Trustee Formerly: Partner, Deloitte & Touche; and Director, Mainstay None VP Series Funds, Inc. (25 portfolios) --------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Flanagan is considered an interested person of the Trust because he is an officer of the advisor to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the advisor to the Trust. (2) Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. 28 AIM EUROPEAN GROWTH FUND TRUSTEES AND OFFICERS--(CONTINUED)
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS -------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A Senior Vice President and Funds--Registered Trademark-- Senior Officer Formerly: Director of Compliance and Assistant General Counsel, ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. -------------------------------------------------------------------------------------------------------------------------------- John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc. Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice President and Secretary, Invesco Aim Distributors, Inc.; Director, Vice President and Secretary, Invesco Aim Investment Services, Inc. and INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Vice President and Secretary, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc.; Chief Operating Officer, Senior Vice President, General Counsel and Secretary, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company); Vice President and Secretary, PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker- dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator); General Counsel and Secretary, Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) -------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A Vice President AIM Family of Funds--Registered Trademark-- Formerly: Senior Vice President, Invesco Aim Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark--; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.; Vice President, Invesco Aim Investment Services, Inc. and Fund Management Company; and Senior Vice President and Compliance Director, Delaware Investments Family of Funds -------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited, IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO Funds Group, Inc.; Secretary, INVESCO North American Holdings, Inc.; and Vice President, The AIM Family of Funds--Registered Trademark-- Formerly: Director, Senior Vice President, Secretary and General Counsel, Invesco Aim Management Group, Inc. and Invesco Aim Advisors, Inc.; Senior Vice President, Invesco Aim Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc. and Invesco Aim Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; Director and Vice President, INVESCO Distributors, Inc. and Chief Executive Officer and President, INVESCO Funds Group, Inc. -------------------------------------------------------------------------------------------------------------------------------- Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President, and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. Officer and Invesco Aim Private Asset Management Inc. Formerly: Assistant Vice President and Assistant Treasurer, The AIM Family of Funds--Registered Trademark-- and Assistant Vice President, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. -------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed Income and Cash Management N/A Vice President Group; Director of Cash Management and Senior Vice President, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc; Executive Vice President, Invesco Aim Distributors, Inc.; Senior Vice President, Invesco Aim Management Group, Inc.; Vice President, The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); and President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only) Formerly President and Principal Executive Officer, Tax-Free Investments Trust; Director and President, Fund Management Company; Chief Cash Management Officer and Managing Director, Invesco Aim Capital Management, Inc.; and Vice President, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only) -------------------------------------------------------------------------------------------------------------------------------- Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc., Invesco Aim Private Asset Management, Inc. and The AIM Family of Funds--Registered Trademark-- Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company; and Manager of the Fraud Prevention Department, Invesco Aim Investment Services, Inc. -------------------------------------------------------------------------------------------------------------------------------- Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, The AIM Family of Funds--Registered Trademark--, Invesco Global Asset Management (N.A.), Inc. (registered investment advisor), Invesco Institutional (N.A.), Inc., (registered investment advisor), INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment advisor) and Invesco Senior Secured Management, Inc. (registered investment advisor); and Vice President, Invesco Aim Distributors, Inc. and Invesco Aim Investment Services, Inc. Formerly: Vice President, Invesco Aim Capital Management, Inc. and Fund Management Company; and Global Head of Product Development, AIG-Global Investment Group, Inc. --------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund's prospectus for information on the Fund's sub- advisors. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers Suite 100 Inc. Inc. LLP Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street Suite 100 Suite 100 Suite 2900 Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and & Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company 2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
29 AIM EUROPEAN GROWTH FUND [GO PAPERLESS GRAPHIC] ==================================================================================================================================== GO PAPERLESS WITH EDELIVERY Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund reports and prospectuses with a service that's all about eeees: o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will trees used to produce paper. be sent via email as soon as they're available. o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer expenses and put more capital back in your fund's returns. with a few clicks of your mouse. This service is provided by Invesco Aim Investment Services, Inc. ==================================================================================================================================== FUND HOLDINGS AND PROXY VOTING INFORMATION The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC website at sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 942 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-06463 and 033-44611. 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 Invesco Aim website, invescoaim. com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is available at our website. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC website, sec.gov. If used after January 20, 2009, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors for the products and services represented by Invesco Aim; they each provide [INVESCO AIM LOGO] investment advisory services to individual and institutional clients and do not sell securities. Please -- SERVICE MARK -- refer to each fund's prospectus for information on the fund's subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the retail mutual funds, exchange-traded funds and institutional money market funds and the subdistributor for the STIC Global Funds represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd. invescoaim.com EGR-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM GLOBAL GROWTH FUND -- SERVICE MARK -- Annual Report to Shareholders o October 31, 2008 [MOUNTAIN GRAPHIC] 2 Letters to Shareholders 4 Performance Summary 4 Management Discussion 6 Long-Term Fund Performance 8 Supplemental Information 9 Schedule of Investments 11 Financial Statements 14 Notes to Financial Statements 20 Financial Highlights 22 Auditor's Report 23 Fund Expenses 24 Approval of Investment Advisory Agreement 27 Tax Information 28 Trustees and Officers
Dear Shareholder: In previous reports, I've talked with you about short-term market volatility. I'd like to take this opportunity to update you on recent market developments and provide some perspective and encouragement to my fellow long-term investors. [TAYLOR PHOTO] MARKET OVERVIEW At the start of the fiscal year in November 2007, we saw warning signs of increasing economic ills -- a weakening housing market, rising inflation and slowing job growth, among others. In response, the U.S. Federal Reserve Board Philip Taylor (the Fed) repeatedly cut short-term interest rate targets to stimulate economic growth and expand market liquidity.(1) Also, Congress and the president worked together to enact an economic stimulus plan that included billions of dollars in rebates to taxpayers. These actions helped the economy and the U.S. stock market until the spring of 2008, when other factors came to the forefront -- triggering a severe correction that eventually drove major stock-market indexes to multi-year lows.(2) HOW WE GOT HERE The cause of this correction was years of lax lending associated with the recent housing boom. Mortgage loans of questionable quality were bundled into hard-to-value securities that were bought by, and traded among, financial institutions. As the value of those securities declined, financial institutions sought to unload them -- but there were few buyers. With the value of their assets falling and access to credit tightening, a number of well-established financial firms faced severe difficulties, and investor uncertainty and market volatility spiked. In October 2008, the administration and Congress enacted a plan, the Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury to purchase up to $700 billion in troubled mortgage-related assets -- the largest and most direct effort to resolve a credit crisis in the last half century. The Fed, in concert with other central banks, cut short-term interest rate targets and undertook other initiatives intended to restore investor confidence, expand lending and mitigate the effects of the global credit crisis. The recent volatility in the stock, fixed-income and credit markets has driven home the importance of three timeless investing principles. INVESTING IN VOLATILE MARKETS Through up markets and down, we believe history shows investors should: o INVEST FOR THE LONG TERM. Short-term fluctuations have always been a reality of the markets. We urge you to stick to your investment plan and stay focused on your long-term goals. o DIVERSIFY. Although diversification doesn't eliminate the risk of loss or guarantee a profit, a careful selection of complementary asset classes may cushion your portfolio against excessive volatility. o STAY FULLY INVESTED. Trying to time the market is a gamble, not an investment strategy. A sound investment strategy includes viewing market volatility as a matter of course, not a reason to panic. A trusted financial advisor can explain more fully the potential value of following these principles. An experienced advisor who knows your individual investment goals, financial situation and risk tolerance can be your most valuable asset during times of market volatility. Your advisor can provide guidance and can monitor your investments to ensure they're on course. It's also helpful to remember that many of history's significant buying opportunities resulted from short-term economic crises that, in their time, were considered unprecedented. We believe current market uncertainty may represent a buying opportunity for patient, long-term investors. Rest assured that Invesco Aim's portfolio managers are working diligently on your behalf to capitalize on this situation. MANAGING MONEY IS OUR FOCUS As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain markets. Our parent company, Invesco Ltd., is one of the world's largest and most diversified global investment managers. Invesco provides clients with diversified investment strategies from distinct management teams around the globe and a range of investment products. Invesco's single focus is asset management -- which means we focus on doing one thing well: managing your money. That can be reassuring in uncertain times. While market conditions change often, commitment to putting shareholders first, helping clients achieve their investment goals and providing excellent customer service remains constant. If you have questions about this report or your account, please contact one of our client service representatives at 800 959 4246. Thank you for your continued confidence, and we look forward to serving you.
Sincerely, /S/ PHILIP TAYLOR Philip Taylor Senior Managing Director, Invesco Ltd. CEO, Invesco Aim (1) U.S. Federal Reserve; (2) Lipper Inc. 2 AIM GLOBAL GROWTH FUND Dear Fellow Shareholders: As I write this letter, turbulent financial markets are causing considerable investor anxiety, reminding us again that markets are cyclical and the correction of excess is often painful, at least in the short term. Your Board of Trustees believes in the wisdom of a long-term perspective and consistent investment [CROCKETT discipline. We continue to put your interests first in the effort to improve PHOTO] investment performance, contain shareholder costs and uphold the highest ethical standards. We remain enthusiastic about the global reach and investment expertise that Invesco, a leading independent global investment management company, brings to Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse investment strategies deployed throughout the worldwide network of Invesco investment centers has helped strengthen the management of many AIM Funds. The rebranding of the Funds' management company as Invesco Aim was followed by the launch of an upgraded, investor-friendly website (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and Investment News through the end of 2008. At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals." We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be interested to hear your thoughts on this policy. As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured that your comments are received, welcomed and heard in the interim. We look forward to hearing from you and to representing you.
Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair AIM Funds Board of Trustees 3 AIM GLOBAL GROWTH FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ======================================================================================= PERFORMANCE SUMMARY availability. Additionally, record high crude oil prices, falling home values and The performance of global equity markets for the fiscal year ended October 31, 2008, the weak U.S. dollar placed significant was extremely turbulent, with most markets registering double-digit losses as global pressure on the purchasing power of the growth slowed and a number of financial institutions worldwide fell victim to the U.S. consumer. broadening scope of the credit crisis.(triangle) AIM Global Growth Fund was affected by this decline, modestly trailing its style-specific benchmark, the MSCI World Growth European equities remained under Index. Stock selection across the consumer discretionary sector was a key driver of both pressure over the period as further relative and absolute results. weakness in the macroeconomic outlook manifested itself and financial sector Your Fund's long-term performance appears later in this report. turmoil continued. Asian equities were volatile as well, falling sharply toward FUND VS. INDEXES the end of the period.(1) While there were sporadic attempts to rally, the dominant Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does trend during the period remained one of not include applicable contingent deferred sales charges (CDSC) or front-end sales weakness. charges, which would have reduced performance. The rise in concern over the economic Class A Shares -41.08% outlook was evident from the widespread Class B Shares -41.52 measures implemented by Asian Class C Shares -41.51 policy-makers, who just a few months ago Class Y Shares* -41.04 were predominantly focused upon the threat MSCI World Index(triangle) (Broad Market Index) -41.85 of inflation. Emerging markets stocks and MSCI World Growth Index(triangle) (Style-Specific Index) -40.86 currencies tumbled from the record highs Lipper Global Large-Cap Growth Funds Index(triangle) (Peer Group Index) -44.98 as global recession concerns deepened and commodity prices fell sharply.(1) There (triangle)Lipper Inc. were mounting concerns that some countries could start to default on their foreign * Share class incepted during the fiscal year. See page 7 for a detailed explanation loans. of Fund performance. ======================================================================================= AIM Global Growth Fund did not go unscathed from this global downturn, HOW WE INVEST We focus on the strengths of individual ending the period at NAV modestly behind companies rather than sectors, countries the MSCI World Growth Index.(1) However, When selecting stocks for your Fund, we or market-cap trends. the Fund fared somewhat better at NAV than employ a disciplined investment strategy its Lipper peer group.(1) that emphasizes fundamental research, We believe disciplined sell decisions supported by both quantitative analysis are key to successful investing. We Detracting from returns versus the MSCI and portfolio construction techniques. Our consider selling a stock for any of the World Growth Index was our stock selection "EQV" (Earnings, Quality, Valuation) following reasons: across the consumer discretionary and strategy focuses primarily on identifying consumer staples sectors. Fund holdings quality companies that have experienced, o A company's fundamentals deteriorate, such as German automobile company PORSCHE, or exhibit the potential for, accelerating or it posts disappointing earnings. sports apparel firm PUMA and Belgium or above average earnings growth but whose brewer INBEV, all experienced double digit stock prices do not fully reflect these o A stock's price seems overvalued. declines over the period. The Fund's lack attributes. of direct exposure to Volkswagen was a o A more attractive opportunity becomes drag on relative results as well. We are While research responsibilities within available. active, long-term investors, and therefore the portfolio management team are focused we by geographic region, we select MARKET CONDITIONS AND YOUR FUND investments for the Fund by using a bottom-up investment approach, which means Many factors contributed to the negative that we construct the Fund primarily on a performance of most major market indexes stock-by-stock basis. for the fiscal year ended October 31, 2008.(1) The chief catalyst was primarily the ongoing subprime loan crisis and its far-reaching effects on overall credit ========================================== ========================================== ========================================== PORTFOLIO COMPOSITION TOP FIVE COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector 1. United States 29.2% 1. Roche Holding AG 3.2% Consumer Staples 20.9% 2. United Kingdom 11.7 2. Teva Pharmaceutical Industries Health Care 19.3 3. Switzerland 9.2 Ltd 3.0 Information Technology 11.7 4. Germany 7.8 3. Johnson & Johnson 3.0 Consumer Discretionary 10.8 5. France 6.6 4. Imperial Tobacco Group PLC 2.9 Energy 10.2 ========================================== 5. Nestle S.A. 2.8 Industrials 7.3 6. Total S.A. 2.4 Financials 6.9 ========================================== 7. BNP Paribas 2.1 Materials 5.4 Total Net Assets $230.3 million 8. Novo Nordisk 2.1 Telecommunication Services 2.9 9. Eni S.p.A. 2.0 Money Market Funds Plus Total Number of Holdings* 81 10. Colgate-Palmolive Co. 2.0 Other Assets Less Liabilities 4.6 ========================================== ========================================== ========================================== 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.
4 AIM GLOBAL GROWTH FUND do not focus on the index weightings of Volatile markets can test an investor's MATTHEW DENNIS individual stocks. We believe Volkswagen's resolve, and 2008 was one of the most Chartered Financial Analyst, strong performance was not supported by turbulent periods in many years. However, [DENNIS portfolio manager, is lead company fundamentals. it's always worth remembering that market PHOTO] manager of AIM Global Growth turbulence can create investment Fund with respect to the Being overweight the financials sector opportunities. We welcome any new Fund's investments in Europe and Canada. earlier in the year, particularly in the investors who have invested in the Fund He has been in the investment business weak commercial banking industry, during the reporting period, and to all of since 1994. Mr. Dennis earned a B.A. in detracted from relative performance as our shareholders we would like to express economics from The University of Texas at well. The latter part of the period saw a our appreciation for your continued Austin. He also earned an M.S. in finance rebound in Fund holdings like BNP PARIBAS investment in AIM Global Growth Fund. from Texas A&M University. (France) and STANDARD BANK (South Africa). However, weakness earlier in the period (1) Lipper Inc. ROBERT LLOYD offset this upswing. In addition, being Chartered Financial Analyst, underweight in the U.S. proved detrimental The views and opinions expressed in [LLOYD senior portfolio manager, is as the domestic market was more resilient, management's discussion of Fund PHOTO] lead manager of AIM Global primarily due to the dollar's appreciation performance are those of Invesco Aim Growth Fund with respect to against a number of other major Advisors, Inc. These views and opinions the Fund's domestic investments. He joined currencies. are subject to change at any time based on Invesco Aim in 2000. Mr. Lloyd earned a factors such as market and economic B.B.A. from the University of Notre Dame The Fund's relative results suffered conditions. These views and opinions may and an M.B.A. from the University of earlier in the fiscal year due to the not be relied upon as investment advice or Chicago. Fund's significant underweight in the recommendations, or as an offer for a materials sector. In our view, underlying particular security. The information is BARRETT SIDES assumptions used to justify the sector's not a complete analysis of every aspect of Senior portfolio manager, is dramatic price appreciation over the last any market, country, industry, security or [SIDES lead manager of AIM Global several years were unreasonably optimistic the Fund. Statements of fact are from PHOTO] Growth Fund with respect to and did not support extreme valuations. sources considered reliable, but Invesco the Fund's investments in The latter part of the fiscal year, Aim Advisors, Inc. makes no representation Asia Pacific and Latin America. He joined however, brought a dramatic reversal of or warranty as to their completeness or Invesco Aim in 1990. Mr. Sides graduated this upward trend as the sector declined accuracy. Although historical performance with a B.S. in economics from Bucknell sharply as a result of falling commodity is no guarantee of future results, these University. He also earned a master's in prices. Our limited exposure to this insights may help you understand our international business from the University volatile sector, particularly to the investment management philosophy. of St. Thomas. metals and mining industry, contributed favorably to relative results. See important Fund and index disclosures CLAS OLSSON later in this report. Senior portfolio manager Our overall EQV focused strategy has [OLSSON and head of Invesco Aim's remained the same, despite the volatile PHOTO] International Investment nature of markets. Over the period, our Management Unit, is manager exposure to the health care and consumer of AIM Global Growth Fund. staples sectors, where we were overweight, He joined Invesco Aim in 1994. Mr. Olsson increased markedly as stocks with robust became a commissioned naval officer at growth and reasonable valuations were the Royal Swedish Naval Academy in 1988. added to the portfolio. In contrast, our He earned a B.B.A. from The University of exposure to the financials and industrials Texas at Austin. sectors, where we were underweight on a relative basis, witnessed a significant Assisted by the Asia Pacific/Latin reduction. In the wake of the sharp American Team, Europe/Canada Team and underperformance of most banks, we Large/ Multi-Cap Growth Team remained underweight in financials as we feel the sector has many headwinds still to overcome. From a regional perspective, we reduced our exposure in Europe, where we were overweight on a relative basis, as we trimmed back our exposure in Germany and Ireland. We did, however, add to our exposure in the U.K. Stock selection led to an increase in exposure in the Asia Pacific region. Select additions also resulted in an increase in our U.S. exposure.
5 AIM GLOBAL GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE Past performance cannot guarantee This chart, which is a logarithmic comparable future results. chart, presents the fluctuations in the value of the Fund and its indexes. We The data shown in the chart include believe that a logarithmic chart is more reinvested distributions, applicable sales effective than other types of charts in charges and Fund expenses including illustrating changes in value during the management fees. Results for Class B early years shown in the chart. The shares are calculated as if a hypothetical vertical axis, the one that indicates the shareholder had liquidated his entire dollar value of an investment, is investment in the Fund at the close of the constructed with each segment representing reporting period and paid the applicable a percent change in the value of the contingent deferred sales charges. Index investment. In this chart, each segment results include reinvested dividends, but represents a doubling, or 100% change, in they do not reflect sales charges. the value of the investment. In other Performance of an index of funds reflects words, the space between $5,000 and fund expenses and management fees; $10,000 is the same size as the space performance of a market index does not. between $10,000 and $20,000, and so on. 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.
6 AIM GLOBAL GROWTH FUND ==================================================================================================================================== [MOUNTAIN CHART] RESULTS OF A $10,000 INVESTMENT -- CLASS A AND B SHARES (OLDEST SHARE CLASSES WITH SALES CHARGES) Index data from 8/31/94, Fund data from 9/15/94 AIM Global Growth Fund-Class A AIM Global Growth MSCI World Growth Date Shares Fund-Class B Shares MSCI World Index(1) Index(1) 8/31/94 $10000 $10000 9/94 $ 9289 $ 9830 9735 9770 10/94 9667 10220 10010 10004 11/94 9261 9790 9573 9605 12/94 9227 9750 9664 9749 1/95 8991 9490 9516 9600 2/95 9332 9849 9653 9747 3/95 9710 10239 10116 10222 4/95 10013 10549 10466 10601 5/95 10287 10840 10553 10685 6/95 10750 11330 10548 10698 7/95 11487 12109 11073 11222 8/95 11384 11989 10824 10906 9/95 11658 12270 11137 11288 10/95 11649 12260 10959 11165 11/95 11876 12490 11337 11520 12/95 12005 12616 11666 11782 1/96 12217 12840 11875 11991 2/96 12477 13104 11945 12077 3/96 12698 13339 12141 12253 4/96 13141 13796 12424 12508 5/96 13391 14050 12432 12581 6/96 13429 14081 12493 12667 7/96 12746 13359 12049 12195 8/96 13093 13715 12185 12296 9/96 13612 14254 12659 12856 10/96 13660 14296 12745 12894 11/96 14353 15018 13457 13547 12/96 14391 15048 13239 13281 1/97 14681 15343 13396 13466 2/97 14691 15343 13547 13615 3/97 14325 14967 13277 13296 4/97 14517 15149 13708 13906 5/97 15459 16127 14552 14717 6/97 16190 16880 15275 15528 7/97 17191 17918 15976 16245 8/97 16094 16767 14905 15036 9/97 17287 18008 15712 15901 10/97 16016 16676 14883 14884 11/97 16199 16859 15144 15261 12/97 16383 17044 15326 15400 1/98 16580 17232 15750 16002 2/98 17834 18538 16813 17131 3/98 18772 19498 17520 17722 4/98 19029 19760 17689 17824 5/98 18939 19655 17465 17624 6/98 19284 19999 17876 18377 7/98 19531 20249 17845 18345 8/98 16640 17242 15463 16195 9/98 16897 17502 15734 16556 10/98 17686 18306 17153 17994 ====================================================================================================================================
(1) Lipper Inc. ==================================================================================================================================== [MOUNTAIN CHART] 11/98 18694 19340 18171 19152 12/98 20002 20682 19055 20549 1/99 20804 21509 19470 21271 2/99 20003 20673 18949 20423 3/99 20663 21338 19735 21175 4/99 20907 21575 20511 21137 5/99 20178 20814 19758 20397 6/99 21538 22210 20677 21649 7/99 21589 22252 20612 21407 8/99 21620 22275 20573 21668 9/99 22056 22716 20371 21702 10/99 23781 24476 21427 23121 11/99 26216 26968 22027 24474 12/99 30450 31310 23807 27273 1/00 28848 29657 22441 25562 2/00 31774 32646 22499 26448 3/00 31624 32476 24051 28022 4/00 29126 29894 23031 26140 5/00 27140 27847 22445 24588 6/00 29276 30019 23198 26089 7/00 28400 29100 22543 24775 8/00 30814 31568 23273 25652 9/00 28540 29225 22033 23378 10/00 26511 27142 21661 22395 11/00 22614 23135 20343 20666 12/00 23706 24237 20670 20275 1/01 23417 23931 21068 20887 2/01 19459 19882 19285 18221 3/01 17566 17944 18015 16745 4/01 18882 19282 19343 18095 5/01 18689 19078 19091 17730 6/01 18315 18692 18490 17110 7/01 17845 18193 18243 16856 8/01 17042 17366 17364 15816 9/01 15063 15358 15832 14501 10/01 15598 15880 16134 15118 11/01 16379 16674 17086 16266 12/01 16582 16868 17192 16345 1/02 16111 16380 16670 15811 2/02 15929 16198 16523 15853 3/02 16700 16970 17284 16244 4/02 16380 16628 16664 15548 5/02 16219 16470 16692 15464 6/02 15567 15802 15677 14570 7/02 14133 14339 14354 13542 8/02 14070 14271 14378 13538 9/02 12808 12978 12795 12194 10/02 13545 13727 13738 13142 11/02 13803 13977 14477 13619 12/02 13289 13455 13773 13093 1/03 12893 13046 13354 12620 2/03 12776 12921 13120 12484 3/03 12786 12921 13077 12591 4/03 13524 13669 14235 13489 5/03 14306 14453 15046 14044 6/03 14542 14691 15304 14241 7/03 14702 14838 15613 14516 8/03 14927 15065 15949 14807 9/03 15034 15167 16045 14891 10/03 15954 16087 16995 15777 11/03 16243 16370 17252 16000 12/03 16863 16982 18333 16769 1/04 17120 17243 18627 17112 2/04 17387 17504 18939 17320 3/04 17387 17493 18814 17146 4/04 17130 17220 18428 16804 5/04 17344 17436 18582 16970 ====================================================================================================================================
==================================================================================================================================== [MOUNTAIN CHART] 6/04 17644 17730 18978 17200 7/04 16851 16925 18358 16376 8/04 16841 16903 18439 16324 9/04 17409 17471 18788 16652 10/04 17827 17880 19248 17060 11/04 18864 18924 20259 17922 12/04 19496 19549 21032 18597 1/05 19079 19117 20558 18096 2/05 19764 19786 21210 18557 3/05 19347 19366 20800 18202 4/05 18759 18754 20345 17802 5/05 19036 19026 20706 18264 6/05 19432 19413 20885 18349 7/05 20223 20195 21615 19110 8/05 20458 20411 21778 19280 9/05 20812 20752 22344 19706 10/05 20352 20275 21801 19287 11/05 20983 20899 22528 19913 12/05 21765 21660 23027 20347 1/06 23047 22931 24055 21285 2/06 22854 22727 24019 21067 3/06 23478 23329 24548 21591 4/06 24102 23931 25293 22091 5/06 23015 22842 24429 21240 6/06 23004 22820 24422 21205 7/06 23112 22911 24574 21033 8/06 23844 23614 25212 21592 9/06 24059 23820 25513 21782 10/06 24706 24444 26449 22558 11/06 25623 25329 27097 23127 12/06 26281 25964 27648 23429 1/07 26736 26406 27974 23799 2/07 26271 25930 27828 23650 3/07 27201 26828 28338 24105 4/07 28509 28099 29588 25163 5/07 29213 28779 30417 25896 6/07 29105 28656 30182 25790 7/07 28209 27747 29514 25475 8/07 28121 27645 29491 25536 9/07 29364 28847 30894 26927 10/07 30477 29926 31841 27984 11/07 29298 28756 30540 27087 12/07 28937 28382 30146 26888 1/08 26478 25941 27842 24593 2/08 26337 25793 27681 24833 3/08 26240 25680 27415 24524 4/08 27368 26769 28856 25883 5/08 27866 27245 29296 26725 6/08 25687 25101 26960 24994 7/08 25112 24521 26301 24221 8/08 24451 23852 25932 23790 9/08 21828 21288 22847 20528 10/08 17949 18192 18515 16549 ====================================================================================================================================
========================================== ========================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS As of 10/31/08, including maximum As of 9/30/08, the most recent calendar applicable sales charges quarter-end, including maximum applicable sales charges CLASS A SHARES CLASS A SHARES Inception (9/15/94) 4.23% Inception (9/15/94) 5.71% 10 Years -0.42 10 Years -2.01 5 Years 1.24 5 Years 6.52 1 Year -44.32 1 Year -29.75 CLASS B SHARES CLASS B SHARES Inception (9/15/94) 4.33% Inception (9/15/94) 5.81% 10 Years -0.30 10 Years -2.12 5 Years 1.31 5 Years 6.70 1 Year -44.45 1 Year -29.89 CLASS C SHARES CLASS C SHARES Inception (8/4/97) -0.10% Inception (8/4/97) -1.67% 10 Years -0.45 10 Years -1.97 5 Years 1.70 5 Years 6.99 1 Year -42.09 1 Year -26.97 ========================================== CLASS Y SHARES 10 Years 0.15% 5 Years 2.41 1 Year -41.04 ========================================== CLASS Y SHARES' INCEPTION DATE IS OCTOBER REPORT THAT ARE BASED ON EXPENSES INCURRED 3, 2008; RETURNS SINCE THAT DATE ARE DURING THE PERIOD COVERED BY THIS REPORT. ACTUAL RETURNS. ALL OTHER RETURNS ARE BLENDED RETURNS OF ACTUAL CLASS Y SHARE CLASS A SHARE PERFORMANCE REFLECTS THE PERFORMANCE AND RESTATED CLASS A SHARE MAXIMUM 5.50% SALES CHARGE, AND CLASS B PERFORMANCE (FOR PERIODS PRIOR TO THE AND CLASS C SHARE PERFORMANCE REFLECTS THE INCEPTION DATE OF CLASS Y SHARES) AT NET APPLICABLE CONTINGENT DEFERRED SALES ASSET VALUE. THE RESTATED CLASS A SHARE CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE PERFORMANCE REFLECTS THE RULE 12B-1 FEES CDSC ON CLASS B SHARES DECLINES FROM 5% APPLICABLE TO CLASS A SHARES AS WELL AS BEGINNING AT THE TIME OF PURCHASE TO 0% AT ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS THE BEGINNING OF THE SEVENTH YEAR. THE RECEIVED BY CLASS A SHARES. CLASS A SHARES CDSC ON CLASS C SHARES IS 1% FOR THE FIRST INCEPTION DATE IS SEPTEMBER 15, 1994. YEAR AFTER PURCHASE. CLASS Y SHARES DO NOT HAVE A FRONT-END SALES CHARGE OR A CDSC; THE PERFORMANCE DATA QUOTED REPRESENT THEREFORE, PERFORMANCE IS AT NET ASSET PAST PERFORMANCE AND CANNOT GUARANTEE VALUE. COMPARABLE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE THE PERFORMANCE OF THE FUND'S SHARE VISIT INVESCOAIM.COM FOR THE MOST RECENT CLASSES WILL DIFFER PRIMARILY DUE TO MONTH-END PERFORMANCE. PERFORMANCE FIGURES DIFFERENT SALES CHARGE STRUCTURES AND REFLECT REINVESTED DISTRIBUTIONS, CHANGES CLASS EXPENSES. IN NET ASSET VALUE AND THE EFFECT OF THE MAXIMUM SALES CHARGE UNLESS OTHERWISE A REDEMPTION FEE OF 2% WILL BE IMPOSED STATED. INVESTMENT RETURN AND PRINCIPAL ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE THE FUND WITHIN 31 DAYS OF PURCHASE. A GAIN OR LOSS WHEN YOU SELL SHARES. EXCEPTIONS TO THE REDEMPTION FEE ARE LISTED IN THE FUND'S PROSPECTUS. THE TOTAL ANNUAL FUND OPERATING EXPENSE RATIO SET FORTH IN THE MOST RECENT FUND PROSPECTUS AS OF THE DATE OF THIS REPORT FOR CLASS A, CLASS B, CLASS C AND CLASS Y SHARES WAS 1.54%, 2.29%, 2.29% AND 1.29%, RESPECTIVELY. THE EXPENSE RATIOS PRESENTED ABOVE MAY VARY FROM THE EXPENSE RATIOS PRESENTED IN OTHER SECTIONS OF THIS
7 AIM GLOBAL GROWTH FUND AIM GLOBAL GROWTH FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets. o Unless otherwise noted, all data provided by Invesco Aim. ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION o Effective September 30, 2003, only o The MSCI WORLD INDEX--SERVICE MARK-- is o The Chartered Financial Analyst--REGIS- previously established qualified plans a free float-adjusted market TERED TRADEMARK-- (CFA--REGISTERED are eligible to purchase Class B shares capitalization index that is designed TRADEMARK--) designation is a globally of any AIM fund. to measure global developed market recognized standard for measuring the equity performance. competence and integrity of investment o Class Y shares are available to only professionals. certain investors. Please see the o The MSCI WORLD GROWTH INDEX is a free prospectus for more information. float-adjusted market capitalization o The returns shown in management's index that represents the growth discussion of Fund performance are PRINCIPAL RISKS OF INVESTING IN THE FUND segment in global developed market based on net asset values calculated equity performance. for shareholder transactions. Generally o Investing in developing countries can accepted accounting principles require add additional risk, such as high rates o The LIPPER GLOBAL LARGE-CAP GROWTH adjustments to be made to the net of inflation or sharply devalued FUNDS INDEX is an equally weighted assets of the Fund at period end for currencies against the U.S. dollar. representation of the largest funds in financial reporting purposes, and as Transaction costs are often higher, and the Lipper Global Large-Cap Growth such, the net asset values for there may be delays in settlement Funds category. These funds typically shareholder transactions and the procedures. have an above-average price-to-cash returns based on those net asset values flow ratio, price-to-book ratio, and may differ from the net asset values o Prices of equity securities change in three-year sales-per-share growth and returns reported in the Financial response to many factors, including the value, compared to the S&P/Citigroup Highlights. historical and prospective earnings of World BMI. the issuer, the value of its assets, o Industry classifications used in this general economic conditions, interest o The Fund is not managed to track the report are generally according to the rates, investor perceptions and market performance of any particular index, Global Industry Classification liquidity. including the indexes defined here, and Standard, which was developed by and is consequently, the performance of the the exclusive property and a service o Foreign securities have additional Fund may deviate significantly from the mark of MSCI Inc. and Standard & risks, including exchange rate changes, performance of the indexes. Poor's. political and economic upheaval, relative lack of information, o A direct investment cannot be made in relatively low market liquidity, and an index. Unless otherwise indicated, the potential lack of strict financial index results include reinvested and accounting controls and standards. dividends, and they do not reflect sales charges. Performance of an index o The prices of securities held by the of funds reflects fund expenses; Fund may decline in response to market performance of a market index does not. risks. ======================================================================================= ========================================== THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares AGGAX ======================================================================================= Class B Shares AGGBX Class C Shares AGGCX NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class Y Shares AGGYX ==========================================
8 AIM GLOBAL GROWTH FUND SCHEDULE OF INVESTMENTS(a) October 31, 2008
SHARES VALUE ------------------------------------------------------------------------------ COMMON STOCKS & OTHER EQUITY INTERESTS-92.67% AUSTRALIA-2.30% BHP Billiton Ltd. 164,874 $ 3,167,232 ------------------------------------------------------------------------------ Cochlear Ltd. 55,915 2,127,675 ============================================================================== 5,294,907 ============================================================================== BELGIUM-1.21% InBev N.V. 60,843 2,452,773 ------------------------------------------------------------------------------ KBC Groep N.V. 7,689 332,903 ============================================================================== 2,785,676 ============================================================================== CANADA-1.10% Suncor Energy, Inc. 106,300 2,541,775 ============================================================================== CHINA-0.88% China Mobile Ltd. 232,000 2,035,648 ============================================================================== DENMARK-2.05% Novo Nordisk A.S.-Class B 87,998 4,709,896 ============================================================================== FRANCE-6.55% Axa 129,748 2,499,992 ------------------------------------------------------------------------------ BNP Paribas 66,139 4,800,575 ------------------------------------------------------------------------------ Cap Gemini S.A. 69,602 2,240,943 ------------------------------------------------------------------------------ Total S.A. 100,746 5,532,801 ============================================================================== 15,074,311 ============================================================================== GERMANY-5.12% Bayer AG 76,475 4,206,362 ------------------------------------------------------------------------------ Merck KGaA 30,475 2,702,302 ------------------------------------------------------------------------------ Puma AG Rudolf Dassler Sport 11,184 1,867,832 ------------------------------------------------------------------------------ Siemens AG 50,516 3,021,979 ============================================================================== 11,798,475 ============================================================================== GREECE-0.51% OPAP S.A. 53,755 1,177,695 ============================================================================== HONG KONG-1.74% Hutchison Whampoa Ltd. 400,000 2,189,551 ------------------------------------------------------------------------------ Li & Fung Ltd. 906,000 1,821,772 ============================================================================== 4,011,323 ============================================================================== INDIA-2.12% Infosys Technologies Ltd. 41,466 1,180,638 ------------------------------------------------------------------------------ Infosys Technologies Ltd.-ADR 125,837 3,689,541 ============================================================================== 4,870,179 ============================================================================== INDONESIA-0.27% PT Astra International Tbk 714,500 612,523 ============================================================================== IRELAND-0.87% CRH PLC 90,251 2,012,333 ============================================================================== ISRAEL-3.01% Teva Pharmaceutical Industries Ltd.-ADR 161,554 6,927,436 ============================================================================== ITALY-2.80% Eni S.p.A. 193,560 4,611,693 ------------------------------------------------------------------------------ Finmeccanica S.p.A. 144,186 1,788,069 ------------------------------------------------------------------------------ Finmeccanica S.p.A.-Rts. expiring 11/11/08(b) 126,325 51,517 ============================================================================== 6,451,279 ============================================================================== JAPAN-6.17% Hoya Corp. 82,900 1,536,547 ------------------------------------------------------------------------------ Keyence Corp. 17,500 3,379,213 ------------------------------------------------------------------------------ Nidec Corp. 72,800 3,745,694 ------------------------------------------------------------------------------ Nintendo Co., Ltd. 5,200 1,639,940 ------------------------------------------------------------------------------ Toyota Motor Corp. 99,300 3,914,283 ============================================================================== 14,215,677 ============================================================================== LUXEMBOURG-0.04% Reinet Investments S.C.A.(b) 7,953 81,889 ============================================================================== MEXICO-1.30% Grupo Televisa S.A.-ADR 169,199 2,988,054 ============================================================================== NETHERLANDS-1.02% TNT N.V. 112,312 2,351,118 ============================================================================== SINGAPORE-0.74% United Overseas Bank Ltd. 191,000 1,701,082 ============================================================================== SOUTH AFRICA-0.18% Standard Bank Group Ltd. 50,734 405,391 ============================================================================== SPAIN-1.75% Banco Santander S.A. 152,813 1,652,709 ------------------------------------------------------------------------------ Telefonica S.A. 128,704 2,380,382 ============================================================================== 4,033,091 ============================================================================== SWITZERLAND-9.17% Compagnie Financiere Richemont S.A.-Class A 58,096 1,234,860 ------------------------------------------------------------------------------ Nestle S.A. 165,800 6,460,711 ------------------------------------------------------------------------------ Roche Holding AG 48,744 7,458,633 ------------------------------------------------------------------------------ Sonova Holding AG 37,853 1,590,512 ------------------------------------------------------------------------------ Syngenta AG 23,508 4,377,072 ============================================================================== 21,121,788 ============================================================================== TAIWAN-0.81% Taiwan Semiconductor Manufacturing Co. Ltd. 1,257,387 1,860,874 ==============================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 9 AIM GLOBAL GROWTH FUND
SHARES VALUE ------------------------------------------------------------------------------ UNITED KINGDOM-11.74% Aviva PLC 333,200 $ 1,997,285 ------------------------------------------------------------------------------ British American Tobacco PLC 35,516 974,998 ------------------------------------------------------------------------------ Compass Group PLC 452,190 2,114,635 ------------------------------------------------------------------------------ Imperial Tobacco Group PLC 250,357 6,729,853 ------------------------------------------------------------------------------ Reckitt Benckiser Group PLC 106,299 4,463,320 ------------------------------------------------------------------------------ Reed Elsevier PLC 298,411 2,616,373 ------------------------------------------------------------------------------ Tesco PLC 552,970 3,019,268 ------------------------------------------------------------------------------ Vodafone Group PLC 1,196,550 2,303,893 ------------------------------------------------------------------------------ WPP Group PLC 464,707 2,803,488 ============================================================================== 27,023,113 ============================================================================== UNITED STATES-29.22% Apple Inc.(b) 9,270 997,359 ------------------------------------------------------------------------------ Baxter International Inc. 21,233 1,284,384 ------------------------------------------------------------------------------ Chubb Corp. (The) 46,976 2,447,450 ------------------------------------------------------------------------------ Cisco Systems, Inc.(b) 64,549 1,147,036 ------------------------------------------------------------------------------ Coca-Cola Co. (The) 67,100 2,956,426 ------------------------------------------------------------------------------ Colgate-Palmolive Co. 72,667 4,560,581 ------------------------------------------------------------------------------ Exxon Mobil Corp. 25,895 1,919,338 ------------------------------------------------------------------------------ Foster Wheeler Ltd.(b) 37,284 1,021,582 ------------------------------------------------------------------------------ General Dynamics Corp. 36,231 2,185,454 ------------------------------------------------------------------------------ Gilead Sciences, Inc.(b) 70,846 3,248,289 ------------------------------------------------------------------------------ Google Inc.-Class A(b) 3,259 1,171,154 ------------------------------------------------------------------------------ Johnson & Johnson 111,882 6,862,842 ------------------------------------------------------------------------------ Kellogg Co. 43,368 2,186,615 ------------------------------------------------------------------------------ Kroger Co. (The) 154,228 4,235,101 ------------------------------------------------------------------------------ Microsoft Corp. 198,280 4,427,593 ------------------------------------------------------------------------------ Monsanto Co. 9,535 848,424 ------------------------------------------------------------------------------ Mosaic Co. (The) 49,935 1,967,938 ------------------------------------------------------------------------------ National-Oilwell Varco Inc.(b) 65,671 1,962,906 ------------------------------------------------------------------------------ Occidental Petroleum Corp. 49,684 2,759,449 ------------------------------------------------------------------------------ Peabody Energy Corp. 79,383 2,739,507 ------------------------------------------------------------------------------ PepsiCo, Inc. 59,332 3,382,517 ------------------------------------------------------------------------------ Precision Castparts Corp. 2,592 167,988 ------------------------------------------------------------------------------ Procter & Gamble Co. (The) 62,397 4,027,102 ------------------------------------------------------------------------------ Raytheon Co. 80,546 4,116,706 ------------------------------------------------------------------------------ St. Jude Medical, Inc.(b) 86,105 3,274,573 ------------------------------------------------------------------------------ Valero Energy Corp. 67,579 1,390,776 ============================================================================== 67,289,090 ============================================================================== Total Common Stocks & Other Equity Interests (Cost 241,850,421) 213,374,623 ============================================================================== FOREIGN PREFERRED STOCKS-2.69% GERMANY-2.69% Henkel AG & Co. KGaA-Pfd. 87,817 2,541,345 ------------------------------------------------------------------------------ Porsche Automobil Holding S.E.-Pfd. 41,370 3,645,775 ============================================================================== Total Foreign Preferred Stocks (Cost $7,157,240) 6,187,120 ============================================================================== MONEY MARKET FUNDS-1.53% Liquid Assets Portfolio-Institutional Class(c) 1,764,965 1,764,965 ------------------------------------------------------------------------------ Premier Portfolio-Institutional Class(c) 1,764,965 1,764,965 ============================================================================== Total Money Market Funds (Cost $3,529,930) 3,529,930 ============================================================================== TOTAL INVESTMENTS-96.89% (Cost $252,537,591) 223,091,673 ============================================================================== OTHER ASSETS LESS LIABILITIES-3.11% 7,159,742 ============================================================================== NET ASSETS-100.00% $230,251,415 ______________________________________________________________________________ ==============================================================================
Investment Abbreviations: ADR - American Depositary Receipt Pfd. - Preferred Rts. - Rights
Notes to Schedule of Investments: (a) Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor's. (b) Non-income producing security. (c) The money market fund and the Fund are affiliated by having the same investment advisor. See accompanying Notes to Financial Statements which are an integral part of the financial statements. 10 AIM GLOBAL GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2008 ASSETS: Investments, at value (Cost $249,007,661) $ 219,561,743 --------------------------------------------------------------------------------- Investments in affiliated money market funds, at value and cost 3,529,930 ================================================================================= Total investments (Cost $252,537,591) 223,091,673 ================================================================================= Cash 1,528,735 --------------------------------------------------------------------------------- Foreign currencies, at value (Cost $5,437,898) 5,390,088 --------------------------------------------------------------------------------- Receivables for: Investments sold 2,846,458 --------------------------------------------------------------------------------- Fund shares sold 46,867 --------------------------------------------------------------------------------- Dividends 480,636 --------------------------------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 35,979 --------------------------------------------------------------------------------- Other assets 46,469 ================================================================================= Total assets 233,466,905 _________________________________________________________________________________ ================================================================================= LIABILITIES: Payables for: Investments purchased 2,400,974 --------------------------------------------------------------------------------- Fund shares reacquired 330,646 --------------------------------------------------------------------------------- Accrued fees to affiliates 242,183 --------------------------------------------------------------------------------- Accrued other operating expenses 153,734 --------------------------------------------------------------------------------- Trustee deferred compensation and retirement plans 87,953 ================================================================================= Total liabilities 3,215,490 ================================================================================= Net assets applicable to shares outstanding $ 230,251,415 _________________________________________________________________________________ ================================================================================= NET ASSETS CONSIST OF: Shares of beneficial interest $ 457,580,876 --------------------------------------------------------------------------------- Undistributed net investment income 2,594,148 --------------------------------------------------------------------------------- Undistributed net realized gain (loss) (200,396,528) --------------------------------------------------------------------------------- Unrealized appreciation (depreciation) (29,527,081) ================================================================================= $ 230,251,415 _________________________________________________________________________________ ================================================================================= NET ASSETS: Class A $ 190,275,384 _________________________________________________________________________________ ================================================================================= Class B $ 25,426,318 _________________________________________________________________________________ ================================================================================= Class C $ 12,719,179 _________________________________________________________________________________ ================================================================================= Class Y $ 820,896 _________________________________________________________________________________ ================================================================================= Institutional Class $ 1,009,638 _________________________________________________________________________________ ================================================================================= SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 11,487,531 _________________________________________________________________________________ ================================================================================= Class B 1,649,271 _________________________________________________________________________________ ================================================================================= Class C 824,798 _________________________________________________________________________________ ================================================================================= Class Y 49,527 _________________________________________________________________________________ ================================================================================= Institutional Class 60,641 _________________________________________________________________________________ ================================================================================= Class A: Net asset value per share $ 16.56 --------------------------------------------------------------------------------- Maximum offering price per share (Net asset value of $16.56 divided by 94.50%) $ 17.52 _________________________________________________________________________________ ================================================================================= Class B: Net asset value and offering price per share $ 15.42 _________________________________________________________________________________ ================================================================================= Class C: Net asset value and offering price per share $ 15.42 _________________________________________________________________________________ ================================================================================= Class Y: Net asset value and offering price per share $ 16.57 _________________________________________________________________________________ ================================================================================= Institutional Class: Net asset value and offering price per share $ 16.65 _________________________________________________________________________________ =================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 11 AIM GLOBAL GROWTH FUND STATEMENT OF OPERATIONS For the year ended October 31, 2008 INVESTMENT INCOME: Dividends (net of foreign withholding taxes of $768,579) $ 8,703,344 ------------------------------------------------------------------------------------------------ Dividends from affiliated money market funds (includes securities lending income of $212,587) 744,501 ================================================================================================ Total investment income 9,447,845 ================================================================================================ EXPENSES: Advisory fees 2,896,085 ------------------------------------------------------------------------------------------------ Administrative services fees 114,633 ------------------------------------------------------------------------------------------------ Custodian fees 131,964 ------------------------------------------------------------------------------------------------ Distribution fees: Class A 725,816 ------------------------------------------------------------------------------------------------ Class B 529,575 ------------------------------------------------------------------------------------------------ Class C 212,343 ------------------------------------------------------------------------------------------------ Transfer agent fees -- A, B, C and Y 1,296,476 ------------------------------------------------------------------------------------------------ Transfer agent fees -- Institutional 308 ------------------------------------------------------------------------------------------------ Trustees' and officers' fees and benefits 26,383 ------------------------------------------------------------------------------------------------ Other 428,440 ================================================================================================ Total expenses 6,362,023 ================================================================================================ Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (60,112) ================================================================================================ Net expenses 6,301,911 ================================================================================================ Net investment income 3,145,934 ================================================================================================ REALIZED AND UNREALIZED GAIN (LOSS) FROM: Net realized gain (loss) from: Investment securities 13,848,765 ------------------------------------------------------------------------------------------------ Foreign currencies (124,603) ================================================================================================ 13,724,162 ================================================================================================ Change in net unrealized appreciation (depreciation) of: Investment securities (191,846,647) ------------------------------------------------------------------------------------------------ Foreign currencies (110,956) ================================================================================================ (191,957,603) ================================================================================================ Net realized and unrealized gain (loss) (178,233,441) ================================================================================================ Net increase (decrease) in net assets resulting from operations $(175,087,507) ________________________________________________________________________________________________ ================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 12 AIM GLOBAL GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2008 and 2007
2008 2007 --------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 3,145,934 $ 1,328,399 --------------------------------------------------------------------------------------------------------- Net realized gain 13,724,162 64,580,076 --------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) (191,957,603) 26,312,419 ========================================================================================================= Net increase (decrease) in net assets resulting from operations (175,087,507) 92,220,894 ========================================================================================================= Distributions to shareholders from net investment income: Class A (734,900) (1,365,758) --------------------------------------------------------------------------------------------------------- Institutional Class (24) -- ========================================================================================================= Total distributions from net investment income (734,924) (1,365,758) ========================================================================================================= Share transactions-net: Class A (24,085,270) (22,677,884) --------------------------------------------------------------------------------------------------------- Class B (29,896,760) (28,690,594) --------------------------------------------------------------------------------------------------------- Class C (5,039,894) (1,902,382) --------------------------------------------------------------------------------------------------------- Class Y 942,705 -- --------------------------------------------------------------------------------------------------------- Institutional Class 1,394,081 10,000 ========================================================================================================= Net increase (decrease) in net assets resulting from share transactions (56,685,138) (53,260,860) ========================================================================================================= Net increase (decrease) in net assets (232,507,569) 37,594,276 _________________________________________________________________________________________________________ ========================================================================================================= NET ASSETS: Beginning of year 462,758,984 425,164,708 ========================================================================================================= End of year (includes undistributed net investment income of $2,594,148 and $(203,635), respectively) $ 230,251,415 $462,758,984 _________________________________________________________________________________________________________ =========================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 13 AIM GLOBAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS October 31, 2008 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 assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The Fund's investment objective is long-term growth of capital. The Fund currently consists of five different classes of shares: Class A, Class B, Class C, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waiver shares may be subject to contingent deferred sales charges ("CDSC"). Class B shares and Class C shares are sold with a CDSC. Class Y and Institutional Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer's assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. 14 AIM GLOBAL GROWTH FUND The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain/loss for investments no longer held and as unrealized gain/loss for investments still held. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment advisor may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund's taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. G. ACCOUNTING ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, or exchanges of shares, within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. J. SECURITIES LENDING -- The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. K. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The 15 AIM GLOBAL GROWTH FUND combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. L. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. Fluctuations in the value of these contracts are recorded as unrealized appreciation (depreciation) until the contracts are closed. When these contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. The Fund could be exposed to risk, which may be in excess of the amount reflected in the Statement of Assets and Liabilities, if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with Invesco Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Advisor based on the annual rate of the Fund's average daily net assets as follows:
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% ___________________________________________________________________ ===================================================================
Under the terms of a master sub-advisory agreement approved by shareholders of the Fund, effective May 1, 2008, between the Advisor and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Advisor(s). The Advisor has contractually agreed, through at least June 30, 2009, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Advisor receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds. For the year ended October 31, 2008, the Advisor waived advisory fees of $20,797. At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $11,170. The Trust has entered into a transfer agency and service agreement with Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has agreed to pay IAIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the course of providing such services. IAIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IAIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust's Board of Trustees. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees. The Trust has entered into a master administrative services agreement with Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees. The Trust has entered into master distribution agreements with Invesco Aim Distributors, Inc. ("IADI") to serve as the distributor for the Class A, Class B, Class C, Class Y and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays IADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares 16 AIM GLOBAL GROWTH FUND of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority ("FINRA") impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the year ended October 31, 2008, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees. Front-end sales commissions and CDSC (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2008, IADI advised the Fund that IADI retained $26,823 in front-end sales commissions from the sale of Class A shares and $3,486, $48,456 and $1,705 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of Invesco Aim, IAIS and/or IADI. NOTE 3--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended October 31, 2008, the Fund engaged in securities purchases of $1,283,888. NOTE 4--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2008, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $28,145. NOTE 5--TRUSTEES' AND OFFICERS' FEES AND BENEFITS "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officers' Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2008, the Fund paid legal fees of $3,625 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 6--CASH BALANCES The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco Aim, not to exceed the contractually agreed upon rate. NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED OCTOBER 31, 2008 AND 2007:
2008 2007 ----------------------------------------------------------------------------------------------------- Ordinary income $734,924 $1,365,758 _____________________________________________________________________________________________________ =====================================================================================================
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
2008 ------------------------------------------------------------------------------------------------ Undistributed ordinary income $ 2,696,161 ------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) -- investments (29,457,777) ------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) -- other investments (81,163) ------------------------------------------------------------------------------------------------ Temporary book/tax differences (102,013) ------------------------------------------------------------------------------------------------ Capital loss carryforward (200,384,669) ------------------------------------------------------------------------------------------------ Shares of beneficial interest 457,580,876 ================================================================================================ Total net assets $ 230,251,415 ________________________________________________________________________________________________ ================================================================================================
17 AIM GLOBAL GROWTH FUND The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's net unrealized appreciation (depreciation) difference is attributable primarily to wash sales. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. The Fund utilized $13,347,657 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of October 31, 2008 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* ----------------------------------------------------------------------------------------------- October 31, 2009 $ 88,020,792 ----------------------------------------------------------------------------------------------- October 31, 2010 101,042,257 ----------------------------------------------------------------------------------------------- October 31, 2011 11,321,620 =============================================================================================== Total capital loss carryforward $200,384,669 _______________________________________________________________________________________________ ===============================================================================================
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. NOTE 8--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended October 31, 2008 was $175,243,259 and $219,024,572, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 27,036,455 ------------------------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (56,494,232) ================================================================================================ Net unrealized appreciation (depreciation) of investment securities $(29,457,777) ________________________________________________________________________________________________ ================================================================================================ Cost of investments for tax purposes is $252,549,450.
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of passive foreign investment companies, foreign currency transactions and proxy costs, on October 31, 2008, undistributed net investment income was increased by $386,773, undistributed net realized gain (loss) was decreased by $332,010 and shares of beneficial interest decreased by $54,763. This reclassification had no effect on the net assets of the Fund. 18 AIM GLOBAL GROWTH FUND NOTE 10--SHARE INFORMATION
SUMMARY OF SHARE ACTIVITY ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED OCTOBER 31, ----------------------------------------------------------- 2008(a) 2007 --------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------ Sold: Class A 1,497,410 $ 38,052,010 1,492,884 $ 38,189,676 ------------------------------------------------------------------------------------------------------------------------ Class B 165,799 3,692,774 318,141 7,617,739 ------------------------------------------------------------------------------------------------------------------------ Class C 92,945 2,106,168 179,687 4,375,879 ------------------------------------------------------------------------------------------------------------------------ Class Y(b) 50,102 951,733 -- -- ------------------------------------------------------------------------------------------------------------------------ Institutional Class(c) 63,782 1,460,315 369 10,000 ======================================================================================================================== Issued as reinvestment of dividends: Class A 26,223 694,393 52,921 1,281,756 ------------------------------------------------------------------------------------------------------------------------ Institutional Class 1 24 -- -- ======================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 883,035 20,709,283 607,071 15,540,256 ------------------------------------------------------------------------------------------------------------------------ Class B (945,599) (20,709,283) (646,541) (15,540,256) ======================================================================================================================== Reacquired:(d) Class A(b) (3,536,798) (83,540,956) (3,047,532) (77,689,572) ------------------------------------------------------------------------------------------------------------------------ Class B (579,696) (12,880,251) (866,955) (20,768,077) ------------------------------------------------------------------------------------------------------------------------ Class C (325,092) (7,146,062) (262,395) (6,278,261) ------------------------------------------------------------------------------------------------------------------------ Class Y(b) (575) (9,028) -- -- ------------------------------------------------------------------------------------------------------------------------ Institutional Class(c) (3,511) (66,258) -- -- ======================================================================================================================== Net increase (decrease) in share activity (2,611,974) $(56,685,138) (2,172,350) $(53,260,860) ________________________________________________________________________________________________________________________ ========================================================================================================================
(a) There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 19% of the outstanding shares of the Fund. The Fund and the Fund's principal underwriter or advisor, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco Aim and/or Invesco Aim affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco Aim and or Invesco Aim affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. (b) Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A shares into Class Y shares of the Fund:
CLASS SHARES AMOUNT -------------------------------------------------------------------------------------------------- Class Y 49,496 $ 940,433 -------------------------------------------------------------------------------------------------- Class A (49,496) ($940,433) __________________________________________________________________________________________________ ==================================================================================================
(c) Commencement date was September 28, 2007. (d) Net of redemption fees of $2,905 and $8,957 which were allocated among the classes based on relative net assets of each class for the years ended October 31, 2008 and 2007, respectively 19 AIM GLOBAL GROWTH FUND NOTE 11--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
NET GAINS (LOSSES) NET ASSET NET ON SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET NET ASSET NET ASSETS, BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT VALUE, END TOTAL END OF PERIOD OF PERIOD (LOSS)(a) UNREALIZED) OPERATIONS INCOME OF PERIOD(b) RETURN(c) (000S OMITTED) ------------------------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 $28.18 $ 0.24 $(11.80) $(11.56) $(0.06) $16.56 (41.11)% $190,275 Year ended 10/31/07 22.94 0.12 5.22 5.34 (0.10) 28.18 23.35 355,538 Year ended 10/31/06 19.02 0.06 3.99 4.05 (0.13) 22.94 21.39 310,028 Year ended 10/31/05 16.65 0.08(f) 2.29 2.37 -- 19.02 14.23 284,122 Year ended 10/31/04 14.91 (0.04) 1.78 1.74 -- 16.65 11.67 286,068 ------------------------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 26.37 0.06 (11.01) (10.95) -- 15.42 (41.52) 25,426 Year ended 10/31/07 21.54 (0.07) 4.90 4.83 -- 26.37 22.42 79,333 Year ended 10/31/06 17.87 (0.09) 3.76 3.67 -- 21.54 20.54 90,571 Year ended 10/31/05 15.76 (0.04)(f) 2.15 2.11 -- 17.87 13.39 105,368 Year ended 10/31/04 14.18 (0.11) 1.69 1.58 -- 15.76 11.14 139,061 ------------------------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 26.38 0.06 (11.02) (10.96) -- 15.42 (41.55) 12,719 Year ended 10/31/07 21.55 (0.07) 4.90 4.83 -- 26.38 22.41 27,878 Year ended 10/31/06 17.88 (0.09) 3.76 3.67 -- 21.55 20.52 24,565 Year ended 10/31/05 15.77 (0.04)(f) 2.15 2.11 -- 17.88 13.38 23,619 Year ended 10/31/04 14.18 (0.11) 1.70 1.59 -- 15.77 11.21 27,649 ------------------------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(g) 19.00 0.01 (2.44) (2.43) -- 16.57 (12.79) 821 ------------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS Year ended 10/31/08 28.19 0.30 (11.77) (11.47) (0.07) 16.65 (40.79) 1,010 Year ended 10/31/07(g) 27.11 0.02 1.06 1.08 -- 28.19 3.98 10 _________________________________________________________________________________________________________________________ ========================================================================================================================= RATIO OF RATIO OF EXPENSES EXPENSES TO AVERAGE TO AVERAGE NET RATIO OF NET NET ASSETS ASSETS WITHOUT INVESTMENT WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS) AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO ABSORBED ABSORBED NET ASSETS TURNOVER(d) --------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 1.59%(e) 1.60%(e) 1.00%(e) 48% Year ended 10/31/07 1.53 1.57 0.47 38 Year ended 10/31/06 1.62 1.68 0.28 42 Year ended 10/31/05 1.77 1.82 0.44(f) 51 Year ended 10/31/04 1.96 1.97 (0.24) 56 --------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 2.34(e) 2.35(e) 0.25(e) 48 Year ended 10/31/07 2.28 2.32 (0.28) 38 Year ended 10/31/06 2.37 2.43 (0.47) 42 Year ended 10/31/05 2.43 2.48 (0.22)(f) 51 Year ended 10/31/04 2.46 2.47 (0.74) 56 --------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 2.34(e) 2.35(e) 0.25(e) 48 Year ended 10/31/07 2.28 2.32 (0.28) 38 Year ended 10/31/06 2.37 2.43 (0.47) 42 Year ended 10/31/05 2.43 2.48 (0.22)(f) 51 Year ended 10/31/04 2.46 2.47 (0.74) 56 --------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(g) 1.45(e)(h) 1.46(e)(h) 1.14(e)(h) 48 --------------------------------------------------------------------------------- INSTITUTIONAL CLASS Year ended 10/31/08 1.08(e) 1.09(e) 1.51(e) 48 Year ended 10/31/07(g) 1.05(h) 1.05(h) 0.94(h) 38 _________________________________________________________________________________ =================================================================================
(a) Calculated using average shares outstanding. (b) Includes redemption fees added to shares of beneficial interest, which were less than $0.005 per share. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. (d) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. (e) Ratios are based on average daily net assets (000's omitted) of $290,326, $52,957, $21,234, $798 and $308 for Class A, Class B, Class C, Class Y and Institutional Class shares, respectively. (f) Net investment income (loss) per share and the ratio of net investment income (loss) to average net assets include a special cash dividend received 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 $0.05 and 0.27%, $(0.07) and (0.39)% and $(0.07) and (0.39)% for Class A, Class B, and Class C shares, respectively. (g) Commencement date for Class Y and Institutional Class shares was October 3, 2008 and September 28, 2007, respectively. (h) Annualized. 20 AIM GLOBAL GROWTH FUND NOTE 12--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On May 23, 2008, the Securities and Exchange Commission ("SEC") publicly posted its final approval of the Distribution Plans ("Distribution Plans") for the distribution of monies placed into two separate Fair Funds created pursuant to a settlement reached on October 8, 2004 between Invesco Funds Group, Inc. ("IFG"), Invesco Aim Advisors, Inc. ("Invesco Aim") and Invesco Aim Distributors, Inc. ("IADI") and the SEC (the "Order"). One of the Fair Funds consists of $325 million, plus interest and any contributions by other settling parties, for distribution to shareholders of certain mutual funds formerly advised by IFG who may have been harmed by market timing and related activity. The second Fair Fund consists of $50 million, plus interest and any contributions by other settling parties, for distribution to shareholders of mutual funds advised by Invesco Aim who may have been harmed by market timing and related activity. The Distribution Plans provide for the distribution to all eligible investors to compensate such investors for injury they may have suffered as a result of market timing in the affected funds. The Distribution Plans include a provision for any residual amounts in the Fair Funds to be distributed in the future to the affected funds. Because the distribution of the Fair Funds has not yet commenced, management of Invesco Aim and the Fund are unable to estimate the amount of distribution to be made to the Fund, if any. At the request of the trustees of the AIM Funds, Invesco Ltd. ("Invesco"), the parent company of IFG and Invesco Aim, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. PENDING LITIGATION AND REGULATORY INQUIRIES On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05- 1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into certain arrangements permitting market timing of the AIM Funds and failed to disclose these arrangements in the prospectuses for such Funds, and conclusions of law to the effect that Invesco Aim and IADI violated the West Virginia securities laws. The WVASC orders Invesco Aim and IADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. By agreement with the Commissioner of Securities, Invesco Aim's time to respond to that Order has been indefinitely suspended. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; and - that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid. The case pending in Illinois State Court regarding fair value pricing was dismissed with prejudice on May 6, 2008. All lawsuits based on allegations of market timing, late trading and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various Invesco Aim- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA purportedly brought on behalf of participants in the Invesco 401(k) plan. Based on orders issued by the MDL Court, all claims asserted against the AIM Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco defendants' motion to dismiss the Amended Class Action Complaint for Violations of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June 16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and remanded this lawsuit back to the MDL Court for further proceedings. IFG, Invesco Aim, IADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the future. At the present time, management of Invesco Aim and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund. 21 AIM GLOBAL GROWTH FUND 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, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP December 16, 2008 Houston, Texas 22 AIM GLOBAL GROWTH FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. With the exception of the actual ending account value and expenses of the Class Y Shares, the example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. The actual ending account and expenses of the Class Y shares in the below example are based on an investment of $1,000 invested as of close of business October 3, 2008 (commencement date) and held through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period (as of close of business October 3, 2008 through October 31, 2008 for the Class Y shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class Y shares, the ending account value and expense information may not provide a meaningful comparison to mutual funds that provide such information for a full six month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
--------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO --------------------------------------------------------------------------------------------------- A $1,000.00 $656.20 $ 6.99 $1,016.69 $ 8.52 1.68% --------------------------------------------------------------------------------------------------- B 1,000.00 653.70 10.10 1,012.92 12.30 2.43 --------------------------------------------------------------------------------------------------- C 1,000.00 653.80 10.10 1,012.92 12.30 2.43 --------------------------------------------------------------------------------------------------- Y 1,000.00 872.60 1.08 1,017.85 7.35 1.45 ---------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008 (as of close of business October 3, 2008, through October 31, 2008 for the Class Y shares), after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. For the Class Y shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 29 (as of close of business October 3, 2008, through October 31, 2008)/366. Because the Class Y shares have not been in existence for a full six month period, the actual ending account value and expense information shown may not provide a meaningful comparison to fund expense information of classes that show such data for a full six month period and, because the actual ending account value and expense information in the expense example covers a short time period, return and expense data may not be indicative of return and expense data for longer time periods. (3) Hypothetical expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect a one-half year period. The hypothetical ending account value and expenses may be used to compare ongoing costs of investing in Class Y shares of the Fund and other funds because such data is based on a full six month period. 23 AIM GLOBAL GROWTH FUND Supplement to Annual Report dated 10/31/08 AIM GLOBAL GROWTH FUND ========================================== INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS The total annual Fund operating expense For periods ended 10/31/08 ratio set forth in the most recent Fund The following information has been prospectus as of the date of this prepared to provide Institutional Class 10 Years 0.21% supplement for Institutional Class shares shareholders with a performance overview 5 Years 2.53 was 1.04%. The expense ratios presented specific to their holdings. Institutional 1 Year -40.79 above may vary from the expense ratios Class shares are offered exclusively to ========================================== presented in other sections of the actual institutional investors, including defined report that are based on expenses incurred contribution plans that meet certain ========================================== during the period covered by the report. criteria. AVERAGE ANNUAL TOTAL RETURNS For periods ended 9/30/08, most recent A redemption fee of 2% will be imposed calendar quarter-end on certain redemptions or exchanges out of the Fund within 31 days of purchase. 10 Years 2.65% Exceptions to the redemption fee are 5 Years 7.88 listed in the Fund's prospectus. 1 Year -25.19 ========================================== Please note that past performance is not indicative of future results. More Institutional Class shares' inception date recent returns may be more or less than is September 28, 2007. Returns since that those shown. All returns assume date are historical returns. All other reinvestment of distributions at NAV. returns are blended returns of historical Investment return and principal value will Institutional Class share performance and fluctuate so your shares, when redeemed, restated Class A share performance (for may be worth more or less than their periods prior to the inception date of original cost. See full report for Institutional Class shares) at net asset information on comparative benchmarks. value (NAV) and reflect the Rule 12b-1 Please consult your Fund prospectus for fees applicable to Class A shares. Class A more information. For the most current shares' inception date is September 15, month-end performance, please call 800 451 1994. 4246 or visit invescoaim.com. Institutional Class shares have no sales charge; therefore, performance is at NAV. Performance of Institutional Class shares will differ from performance of other share classes primarily due to differing sales charges and class expenses. ========================================== NASDAQ SYMBOL GGAIX ========================================== Over for information on your Fund's expenses. THIS SUPPLEMENT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. FOR INSTITUTIONAL INVESTOR USE ONLY This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use. [INVESCO AIM LOGO] invescoaim.com GLG-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
----------------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO ----------------------------------------------------------------------------------------------------------- Institutional $1,000.00 $656.30 $4.66 $1,019.51 $5.69 1.12% -----------------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. AIM GLOBAL GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT The Board of Trustees (the Board) of AIM their assigned funds. During the contract ated the information provided differently International Mutual Funds is required renewal process, the Trustees receive from one another and attributed different under the Investment Company Act of 1940 comparative performance and fee data weight to the various factors. The to approve annually the renewal of the AIM regarding the AIM Funds prepared by an Trustees recognized that the advisory Global Growth Fund's (the Fund) investment independent company, Lipper, Inc. arrangements and resulting advisory fees advisory agreement with Invesco Aim (Lipper), under the direction and for the Fund and the other AIM Funds are Advisors, Inc. (Invesco Aim). During supervision of the independent Senior the result of years of review and contract renewal meetings held on June Officer who also prepares a separate negotiation between the Trustees and 18-19, 2008, the Board as a whole and the analysis of this information for the Invesco Aim, that the Trustees may focus disinterested or "independent" Trustees, Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of voting separately, approved the recommendations to the Investments these arrangements in some years than in continuance of the Fund's investment Committee regarding the performance, fees others, and that the Trustees' advisory agreement for another year, and expenses of their assigned funds. The deliberations and conclusions in a effective July 1, 2008. In doing so, the Investments Committee considers each particular year may be based in part on Board determined that the Fund's Sub-Committee's recommendations and makes their deliberations and conclusions of investment advisory agreement is in the its own recommendations regarding the these same arrangements throughout the best interests of the Fund and its performance, fees and expenses of the AIM year and in prior years. shareholders and that the compensation to Funds to the full Board. The Investments Invesco Aim under the Fund's investment Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF advisory agreement is fair and reasonable. Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION its annual recommendation to the Board The independent Trustees met separately whether to approve the continuance of each The discussion below serves as a summary during their evaluation of the Fund's AIM Fund's investment advisory agreement of the Senior Officer's independent investment advisory agreement with and sub-advisory agreements for another written evaluation with respect to the independent legal counsel from whom they year. Fund's investment advisory agreement as received independent legal advice, and the well as a discussion of the material independent Trustees also received The independent Trustees are assisted factors and related conclusions that assistance during their deliberations from in their annual evaluation of the Fund's formed the basis for the Board's approval the independent Senior Officer, a investment advisory agreement by the of the Fund's investment advisory full-time officer of the AIM Funds who independent Senior Officer. One agreement and sub-advisory agreements. reports directly to the independent responsibility of the Senior Officer is to Unless otherwise stated, information set Trustees. manage the process by which the AIM Funds' forth below is as of June 19, 2008 and proposed management fees are negotiated does not reflect any changes that may have THE BOARD'S FUND EVALUATION PROCESS during the annual contract renewal process occurred since that date, including but to ensure that they are negotiated in a not limited to changes to the Fund's The Board's Investments Committee has manner that is at arms' length and performance, advisory fees, expense established three Sub-Committees that reasonable. Accordingly, the Senior limitations and/or fee waivers. are responsible for overseeing the Officer must either supervise a management of a number of the series competitive bidding process or prepare an I. Investment Advisory Agreement portfolios of the AIM Funds. This independent written evaluation. The Senior Sub-Committee structure permits the Officer has recommended that an A. Nature, Extent and Quality of Trustees to focus on the performance of independent written evaluation be provided Services Provided by Invesco Aim the AIM Funds that have been assigned to and, at the direction of the Board, has them. The Sub-Committees meet throughout prepared an independent written The Board reviewed the advisory services the year to review the performance of evaluation. provided to the Fund by Invesco Aim under their assigned funds, and the the Fund's investment advisory agreement, Sub-Committees review monthly and During the annual contract renewal the performance of Invesco Aim in quarterly comparative performance process, the Board considered the factors providing these services, and the information and periodic asset flow data discussed below under the heading "Factors credentials and experience of the officers for their assigned funds. These materials and Conclusions and Summary of Independent and employees of Invesco Aim who provide are prepared under the direction and Written Fee Evaluation" in evaluating the these services. The Board's review of the supervision of the independent Senior fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide Officer. Over the course of each year, the investment advisory agreement and these services included the Board's Sub-Committees meet with portfolio sub-advisory agreements at the contract consideration of Invesco Aim's portfolio managers for their assigned funds and renewal meetings and at their meetings and product review process, various back other members of management and review throughout the year as part of their office support functions provided by with these individuals the performance, ongoing oversight of the Fund. The Fund's Invesco Aim, and Invesco Aim's equity and investment objective(s), policies, investment advisory agreement and fixed income trading operations. The Board strategies and limitations of these funds. sub-advisory agreements were considered concluded that the nature, extent and separately, although the Board also quality of the advisory services provided In addition to their meetings considered the common interests of all of to the Fund by Invesco Aim were throughout the year, the Sub-Committees the AIM Funds in their deliberations. The appropriate and that Invesco Aim currently meet at designated contract renewal Board considered all of the information is providing satisfactory advisory meetings each year to conduct an in-depth provided to them and did not identify any services in accordance with the terms of review of the performance, fees and particular factor that was controlling. the Fund's investment advisory agreement. expenses of Each Trustee may have evalu- In addition, based on their ongoing meetings throughout the year with the continued
24 AIM GLOBAL GROWTH FUND Fund's portfolio manager or managers, the the Board also reviewed more recent Fund reflect economies of scale at current Board concluded that these individuals are performance and this review did not change asset levels. The Board also noted that competent and able to continue to carry their conclusions. the Fund shares directly in economies of out their responsibilities under the scale through lower fees charged by third Fund's investment advisory agreement. C. Advisory Fees and Fee Waivers party service providers based on the combined size of all of the AIM Funds and In determining whether to continue the The Board compared the Fund's contractual affiliates. Fund's investment advisory agreement, the advisory fee rate to the contractual Board considered the prior relationship advisory fee rates of funds in the Fund's E. Profitability and Financial between Invesco Aim and the Fund, as well expense group that are not managed by Resources of Invesco Aim as the Board's knowledge of Invesco Aim's Invesco Aim, at a common asset level and operations, and concluded that it was as of the end of the past calendar year. The Board reviewed information from beneficial to maintain the current The Board noted that the Fund's Invesco Aim concerning the costs of the relationship, in part, because of such contractual advisory fee rate was below advisory and other services that Invesco knowledge. The Board also considered the the median contractual advisory fee rate Aim and its affiliates provide to the Fund steps that Invesco Aim and its affiliates of funds in its expense group. The Board and the profitability of Invesco Aim and have taken over the last several years to also reviewed the methodology used by its affiliates in providing these improve the quality and efficiency of the Lipper and noted that the contractual fee services. The Board also reviewed services they provide to the AIM Funds in rates shown by Lipper in determining information concerning the financial the areas of investment performance, contractual fee rates. The Board noted condition of Invesco Aim and its product line diversification, that Invesco Aim does not serve as an affiliates. The Board also reviewed with distribution, fund operations, shareholder advisor to other mutual funds or other Invesco Aim the methodology used to services and compliance. The Board domestic clients with investment prepare the profitability information. The concluded that the quality and efficiency strategies comparable to those of the Board considered the overall profitability of the services Invesco Aim and its Fund. of Invesco Aim, as well as the affiliates provide to the AIM Funds in profitability of Invesco Aim in connection each of these areas have generally The Board noted that Invesco Aim has with managing the Fund. The Board noted improved, and support the Board's approval not proposed any advisory fee waivers or that Invesco Aim continues to operate at a of the continuance of the Fund's expense limitations for the Fund; however net profit, although increased expenses in investment advisory agreement. Invesco Aim informed the Board that it had recent years have reduced the analyzed the total expenses of the Fund, profitability of Invesco Aim and its B. Fund Performance which are impacted by transfer agent fees, affiliates. The Board concluded that the and determined that the total expenses are Fund's fees were fair and reasonable, and The Board compared the Fund's performance currently appropriate. Based upon that the level of profits realized by during the past one, three and five amendments to the Fund's contractual Invesco Aim and its affiliates from calendar years to the performance of funds advisory fee schedule in recent years, the providing services to the Fund was not in the Fund's performance group that are Board concluded that it was not necessary excessive in light of the nature, quality not managed by Invesco Aim, and against at this time to discuss with Invesco Aim and extent of the services provided. The the performance of all funds in the Lipper whether to amend the contractual advisory Board considered whether Invesco Aim is Global Large-Cap Growth Funds Index. The fee schedule or implement any fee waivers financially sound and has the resources Board also reviewed the criteria used by or expense limitations for the Fund. necessary to perform its obligations under Invesco Aim to identify the funds in the the Fund's investment advisory agreement, Fund's performance group for inclusion in After taking account of the Fund's and concluded that Invesco Aim has the the Lipper reports. The Board noted that contractual advisory fee rate, as well as financial resources necessary to fulfill the Fund's performance was in the third the comparative advisory fee information these obligations. quintile for the one and three year discussed above, the Board concluded that periods and the fourth quintile for the the Fund's advisory fees were fair and F. Independent Written Evaluation of five year period (the first quintile being reasonable. the Fund's Senior Officer the best performing funds and the fifth quintile being the worst performing D. Economies of Scale and Breakpoints The Board noted that, at their direction, funds). The Board noted that the Fund's the Senior Officer of the Fund, who is performance was below the performance of The Board considered the extent to which independent of Invesco Aim and Invesco the Index for the one, three and five year there are economies of scale in Invesco Aim's affiliates, had prepared an periods. The Board also considered the Aim's provision of advisory services to independent written evaluation to assist steps Invesco Aim has taken over the last the Fund. The Board also considered the Board in determining the several years to improve the quality and whether the Fund benefits from such reasonableness of the proposed management efficiency of the services that Invesco economies of scale through contractual fees of the AIM Funds, including the Fund. Aim provides to the AIM Funds. The Board breakpoints in the Fund's advisory fee The Board noted that they had relied upon concluded that Invesco Aim continues to be schedule or through advisory fee waivers the Senior Officer's written evaluation responsive to the Board's focus on fund or expense limitations. The Board noted instead of a competitive bidding process. performance. Although the independent that the Fund's contractual advisory fee In determining whether to continue the written evaluation of the Fund's Senior schedule includes seven breakpoints and Fund's investment advisory agreement, the Officer only considered Fund performance that the level of the Fund's advisory Board considered the Senior Officer's through the most recent calendar year, fees, as a percentage of the Fund's net written evaluation. assets, has decreased as net assets increased because of the breakpoints. Based on this information, the Board concluded that the Fund's advisory fees appropriately continued
25 AIM GLOBAL GROWTH FUND G. Collateral Benefits to Invesco Aim to 100% of the net advisory fees Invesco C. Sub-Advisory Fees and its Affiliates Aim receives from the affiliated money market funds with respect to the Fund's The Board considered the services to be The Board considered various other investment of uninvested cash, but not provided by the Affiliated Sub-Advisers benefits received by Invesco Aim and its cash collateral. The Board considered the pursuant to the sub-advisory agreements affiliates resulting from Invesco Aim's contractual nature of this fee waiver and and the services to be provided by Invesco relationship with the Fund, including the noted that it remains in effect until at Aim pursuant to the Fund's investment fees received by Invesco Aim and its least June 30, 2009. The Board concluded advisory agreement, as well as the affiliates for their provision of that the Fund's investment of uninvested allocation of fees between Invesco Aim and administrative, transfer agency and cash and cash collateral from any the Affiliated Sub-Advisers pursuant to distribution services to the Fund. The securities lending arrangements in the the sub-advisory agreements. The Board Board considered the performance of affiliated money market funds is in the noted that the sub-advisory fees have no Invesco Aim and its affiliates in best interests of the Fund and its direct effect on the Fund or its providing these services and the shareholders. shareholders, as they are paid by Invesco organizational structure employed by Aim to the Affiliated Sub-Advisers, and Invesco Aim and its affiliates to provide II. Sub-Advisory Agreements that Invesco Aim and the Affiliated these services. The Board also considered Sub-Advisers are affiliates. After taking that these services are provided to the A. Nature, Extent and Quality of account of the Fund's contractual Fund pursuant to written contracts which Services Provided by Affiliated sub-advisory fee rate, as well as other are reviewed and approved on an annual Sub-Advisers relevant factors, the Board concluded that basis by the Board. The Board concluded the Fund's sub-advisory fees were fair and that Invesco Aim and its affiliates were The Board reviewed the services to be reasonable. providing these services in a satisfactory provided by Invesco Trimark Ltd., Invesco manner and in accordance with the terms of Asset Management Deutschland, GmbH, D. Financial Resources of the their contracts, and were qualified to Invesco Asset Management Limited, Invesco Affiliated Sub-Advisers continue to provide these services to the Asset Management (Japan) Limited, Invesco Fund. Australia Limited, Invesco Global Asset The Board considered whether each Management (N.A.), Inc., Invesco Hong Kong Affiliated Sub-Adviser is financially The Board considered the benefits Limited, Invesco Institutional (N.A.), sound and has the resources necessary to realized by Invesco Aim as a result of Inc. and Invesco Senior Secured perform its obligations under its portfolio brokerage transactions executed Management, Inc. (collectively, the respective sub-advisory agreement, and through "soft dollar" arrangements. Under "Affiliated Sub-Advisers") under the concluded that each Affiliated Sub-Adviser these arrangements, portfolio brokerage sub-advisory agreements and the has the financial resources necessary to commissions paid by the Fund and/or other credentials and experience of the officers fulfill these obligations. funds advised by Invesco Aim are used to and employees of the Affiliated pay for research and execution services. Sub-Advisers who will provide these The Board noted that soft dollar services. The Board concluded that the arrangements shift the payment obligation nature, extent and quality of the services for the research and execution services to be provided by the Affiliated from Invesco Aim to the funds and Sub-Advisers were appropriate. The Board therefore may reduce Invesco Aim's noted that the Affiliated Sub-Advisers, expenses. The Board also noted that which have offices and personnel that are research obtained through soft dollar geographically dispersed in financial arrangements may be used by Invesco Aim in centers around the world, have been formed making investment decisions for the Fund in part for the purpose of researching and and may therefore benefit Fund compiling information and making shareholders. The Board concluded that recommendations on the markets and Invesco Aim's soft dollar arrangements economies of various countries and were appropriate. The Board also concluded securities of companies located in such that, based on their review and countries or on various types of representations made by Invesco Aim, these investments and investment techniques, and arrangements were consistent with providing investment advisory services. regulatory requirements. The Board concluded that the sub-advisory agreements will benefit the Fund and its The Board considered the fact that the shareholders by permitting Invesco Aim to Fund's uninvested cash and cash collateral utilize the additional resources and from any securities lending arrangements talent of the Affiliated Sub-Advisers in may be invested in money market funds managing the Fund. advised by Invesco Aim pursuant to procedures approved by the Board. The B. Fund Performance Board noted that Invesco Aim will receive advisory fees from these affiliated money The Board did not view Fund performance as market funds attributable to such a relevant factor in considering whether investments, although Invesco Aim has to approve the sub-advisory agreements for contractually agreed to waive through at the Fund, as no Affiliated Sub-Adviser least June 30, 2009, the advisory fees currently manages any portion of the payable by the Fund in an amount equal Fund's assets.
26 AIM GLOBAL GROWTH FUND TAX INFORMATION Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors. The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state's requirement. The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2008:
FEDERAL AND STATE INCOME TAX ---------------------------- Qualified Dividend Income* 98.78% Corporate Dividends Received Deduction* 100.00%
* The above percentages are based on ordinary income dividends paid to shareholders during the Fund's fiscal year. ADDITIONAL NON-RESIDENT ALIEN SHAREHOLDER INFORMATION The percentages of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008 and October 31, 2008 were 72.11%, 75.44%, 73.30%, and 70.80%, respectively. 27 AIM GLOBAL GROWTH FUND TRUSTEES AND OFFICERS The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 103 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS -------------------------------------------------------------------------------------------------------------------------------- Martin L. 2007 Executive Director, Chief Executive Officer and President, None Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global Trustee investment management firm); Chairman, Invesco Aim Advisors, Inc. (registered investment advisor); Director, Chairman, Chief Executive Officer and President, IVZ Inc. (holding company); INVESCO North American Holdings, Inc. (holding company); and, INVESCO Group Services, Inc. (service provider); Trustee, The AIM Family of Funds--Registered Trademark--; Vice Chairman, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business Formerly: Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco Aim and a global investment management firm); Chairman, Investment Company Institute; President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) -------------------------------------------------------------------------------------------------------------------------------- Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim Advisors, Inc., and 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Aim Management Group, Inc. (financial services holding company) and Invesco Aim Capital Management, Inc. (registered investment advisor); Director and President, INVESCO Funds Group, Inc. (registered investment advisor and register transfer agent) and AIM GP Canada Inc. (general partner for a limited partnership); Director, Invesco Aim Distributors, Inc. (registered broker dealer); Director and Chairman, Invesco Aim Investment Services, Inc. (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, IVZ Callco Inc. (holding company), INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (formerly AIM Canada Holdings Inc.) (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (formerly AIM Trimark Global Fund Inc.) (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services) (registered investment advisor and registered transfer agent) and Invesco Trimark Dealer Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered broker dealer); Trustee, President and Principal Executive Officer of The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only); and Manager, Invesco PowerShares Capital Management LLC Formerly: President, Invesco Trimark Dealer Inc.; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Director and President, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services); Senior Managing Director, Invesco Holding Company Limited; Trustee and Executive Vice President, Tax-Free Investments Trust; Director and Chairman, Fund Management Company (registered broker dealer); President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; and Director, Trimark Trust (federally regulated Canadian Trust Company) -------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES -------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates (technology ACE Limited Trustee and Chair consulting company) (insurance company); Captaris, Inc. (unified messaging provider); and Investment Company Institute -------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Trustee Formerly: Partner, law firm of Baker & McKenzie; and None Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) -------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Policy Trustee firm) Studies, Inc. and Van Gilder Insurance Corporation -------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business None Trustee corporations, including the Boss Group Ltd. (private investment and management); Continental Energy Services, LLC (oil and gas pipeline service); Reich & Tang Funds (registered investment company); Annuity and Life Re (Holdings), Ltd. (reinsurance company), and Homeowners of America Holding Corporation/Homeowners of America Insurance Company (property casualty company) Formerly: Director, CompuDyne Corporation (provider of product and services to the public security market); Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; Director of various public and private corporations -------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff Trustee (government affairs company); and Owner and Chief Executive Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate entertainment) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company); and Discovery Global Education Fund (non-profit) -------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich & Trustee Tang Funds) (15 portfolios) -------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None Trustee -------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee -------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, Jr. -- 1944 2005 Retired Trustee Formerly: Partner, Deloitte & Touche; and Director, Mainstay None VP Series Funds, Inc. (25 portfolios) --------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Flanagan is considered an interested person of the Trust because he is an officer of the advisor to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the advisor to the Trust. (2) Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. 28 AIM GLOBAL GROWTH FUND TRUSTEES AND OFFICERS--(CONTINUED)
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS -------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A Senior Vice President and Funds--Registered Trademark-- Senior Officer Formerly: Director of Compliance and Assistant General Counsel, ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. -------------------------------------------------------------------------------------------------------------------------------- John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc. Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice President and Secretary, Invesco Aim Distributors, Inc.; Director, Vice President and Secretary, Invesco Aim Investment Services, Inc. and INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Vice President and Secretary, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc.; Chief Operating Officer, Senior Vice President, General Counsel and Secretary, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company); Vice President and Secretary, PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker- dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator); General Counsel and Secretary, Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) -------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A Vice President AIM Family of Funds--Registered Trademark-- Formerly: Senior Vice President, Invesco Aim Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark--; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.; Vice President, Invesco Aim Investment Services, Inc. and Fund Management Company; and Senior Vice President and Compliance Director, Delaware Investments Family of Funds -------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited, IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO Funds Group, Inc.; Secretary, INVESCO North American Holdings, Inc.; and Vice President, The AIM Family of Funds--Registered Trademark-- Formerly: Director, Senior Vice President, Secretary and General Counsel, Invesco Aim Management Group, Inc. and Invesco Aim Advisors, Inc.; Senior Vice President, Invesco Aim Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc. and Invesco Aim Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; Director and Vice President, INVESCO Distributors, Inc. and Chief Executive Officer and President, INVESCO Funds Group, Inc. -------------------------------------------------------------------------------------------------------------------------------- Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President, and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. Officer and Invesco Aim Private Asset Management Inc. Formerly: Assistant Vice President and Assistant Treasurer, The AIM Family of Funds--Registered Trademark-- and Assistant Vice President, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. -------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed Income and Cash Management N/A Vice President Group; Director of Cash Management and Senior Vice President, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc; Executive Vice President, Invesco Aim Distributors, Inc.; Senior Vice President, Invesco Aim Management Group, Inc.; Vice President, The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); and President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only) Formerly President and Principal Executive Officer, Tax-Free Investments Trust; Director and President, Fund Management Company; Chief Cash Management Officer and Managing Director, Invesco Aim Capital Management, Inc.; and Vice President, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only) -------------------------------------------------------------------------------------------------------------------------------- Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc., Invesco Aim Private Asset Management, Inc. and The AIM Family of Funds--Registered Trademark-- Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company; and Manager of the Fraud Prevention Department, Invesco Aim Investment Services, Inc. -------------------------------------------------------------------------------------------------------------------------------- Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, The AIM Family of Funds--Registered Trademark--, Invesco Global Asset Management (N.A.), Inc. (registered investment advisor), Invesco Institutional (N.A.), Inc., (registered investment advisor), INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment advisor) and Invesco Senior Secured Management, Inc. (registered investment advisor); and Vice President, Invesco Aim Distributors, Inc. and Invesco Aim Investment Services, Inc. Formerly: Vice President, Invesco Aim Capital Management, Inc. and Fund Management Company; and Global Head of Product Development, AIG-Global Investment Group, Inc. --------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund's prospectus for information on the Fund's sub- advisors. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers Suite 100 Inc. Inc. LLP Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street Suite 100 Suite 100 Suite 2900 Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and & Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company 2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
29 AIM GLOBAL GROWTH FUND [GO PAPERLESS GRAPHIC] ==================================================================================================================================== GO PAPERLESS WITH EDELIVERY Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund reports and prospectuses with a service that's all about eeees: o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will trees used to produce paper. be sent via email as soon as they're available. o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer expenses and put more capital back in your fund's returns. with a few clicks of your mouse. This service is provided by Invesco Aim Investment Services, Inc. ==================================================================================================================================== FUND HOLDINGS AND PROXY VOTING INFORMATION The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC website at sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 942 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-06463 and 033-44611. 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 Invesco Aim website, invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is available at our website. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC website, sec.gov. If used after January 20, 2009, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the investment advisors for the products and services represented by Invesco Aim; they each provide [INVESCO AIM LOGO] investment advisory services to individual and institutional clients and do not sell securities. Please -- SERVICE MARK -- refer to each fund's prospectus for information on the fund's subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the retail mutual funds, exchange-traded funds and institutional money market funds and the subdistributor for the STIC Global Funds represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd. invescoaim.com GLG-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM GLOBAL SMALL & MID CAP GROWTH FUND -- SERVICE MARK -- Annual Report to Shareholders o October 31, 2008 Effective May 1, 2008, AIM Global Aggressive Growth Fund was renamed AIM Global Small & Mid Cap Growth Fund. [MOUNTAIN GRAPHIC] 2 Letters to Shareholders 4 Performance Summary 4 Management Discussion 6 Long-Term Fund Performance 8 Supplemental Information 9 Schedule of Investments 11 Financial Statements 14 Notes to Financial Statements 20 Financial Highlights 22 Auditor's Report 23 Fund Expenses 24 Approval of Investment Advisory Agreement 27 Tax Information 28 Trustees and Officers
Dear Shareholder: In previous reports, I've talked with you about short-term market volatility. I'd like to take this opportunity to update you on recent market developments and [TAYLOR provide some perspective and encouragement to my fellow long-term investors. PHOTO] MARKET OVERVIEW At the start of the fiscal year in November 2007, we saw warning signs of increasing economic ills -- a weakening housing market, rising inflation and Philip Taylor slowing job growth, among others. In response, the U.S. Federal Reserve Board (the Fed) repeatedly cut short-term interest rate targets to stimulate economic growth and expand market liquidity.(1) Also, Congress and the president worked together to enact an economic stimulus plan that included billions of dollars in rebates to taxpayers. These actions helped the economy and the U.S. stock market until the spring of 2008, when other factors came to the forefront -- triggering a severe correction that eventually drove major stock-market indexes to multi-year lows.(2) HOW WE GOT HERE The cause of this correction was years of lax lending associated with the recent housing boom. Mortgage loans of questionable quality were bundled into hard-to-value securities that were bought by, and traded among, financial institutions. As the value of those securities declined, financial institutions sought to unload them -- but there were few buyers. With the value of their assets falling and access to credit tightening, a number of well-established financial firms faced severe difficulties, and investor uncertainty and market volatility spiked. In October 2008, the administration and Congress enacted a plan, the Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury to purchase up to $700 billion in troubled mortgage-related assets -- the largest and most direct effort to resolve a credit crisis in the last half century. The Fed, in concert with other central banks, cut short-term interest rate targets and undertook other initiatives intended to restore investor confidence, expand lending and mitigate the effects of the global credit crisis. The recent volatility in the stock, fixed-income and credit markets has driven home the importance of three timeless investing principles. INVESTING IN VOLATILE MARKETS Through up markets and down, we believe history shows investors should: o INVEST FOR THE LONG TERM. Short-term fluctuations have always been a reality of the markets. We urge you to stick to your investment plan and stay focused on your long-term goals. o DIVERSIFY. Although diversification doesn't eliminate the risk of loss or guarantee a profit, a careful selection of complementary asset classes may cushion your portfolio against excessive volatility. o STAY FULLY INVESTED. Trying to time the market is a gamble, not an investment strategy. A sound investment strategy includes viewing market volatility as a matter of course, not a reason to panic. A trusted financial advisor can explain more fully the potential value of following these principles. An experienced advisor who knows your individual investment goals, financial situation and risk tolerance can be your most valuable asset during times of market volatility. Your advisor can provide guidance and can monitor your investments to ensure they're on course. It's also helpful to remember that many of history's significant buying opportunities resulted from short-term economic crises that, in their time, were considered unprecedented. We believe current market uncertainty may represent a buying opportunity for patient, long-term investors. Rest assured that Invesco Aim's portfolio managers are working diligently on your behalf to capitalize on this situation. MANAGING MONEY IS OUR FOCUS As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain markets. Our parent company, Invesco Ltd., is one of the world's largest and most diversified global investment managers. Invesco provides clients with diversified investment strategies from distinct management teams around the globe and a range of investment products. Invesco's single focus is asset management -- which means we focus on doing one thing well: managing your money. That can be reassuring in uncertain times. While market conditions change often, commitment to putting shareholders first, helping clients achieve their investment goals and providing excellent customer service remains constant. If you have questions about this report or your account, please contact one of our client service representatives at 800 959 4246. Thank you for your continued confidence, and we look forward to serving you.
Sincerely, /S/ PHILIP TAYLOR Philip Taylor Senior Managing Director, Invesco Ltd. CEO, Invesco Aim (1) U.S. Federal Reserve; (2) Lipper Inc. 2 AIM GLOBAL SMALL & MID CAP GROWTH FUND Dear Fellow Shareholders: As I write this letter, turbulent financial markets are causing considerable investor anxiety, reminding us again that markets are cyclical and the correction of excess is often painful, at least in the short term. Your Board of Trustees [CROCKETT believes in the wisdom of a long-term perspective and consistent investment PHOTO] discipline. We continue to put your interests first in the effort to improve investment performance, contain shareholder costs and uphold the highest ethical standards. We remain enthusiastic about the global reach and investment expertise that Invesco, a leading independent global investment management company, brings to Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse investment strategies deployed throughout the worldwide network of Invesco investment centers has helped strengthen the management of many AIM Funds. The rebranding of the Funds' management company as Invesco Aim was followed by the launch of an upgraded, investor-friendly website (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and Investment News through the end of 2008. At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals." We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be interested to hear your thoughts on this policy. As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured that your comments are received, welcomed and heard in the interim. We look forward to hearing from you and to representing you.
Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair AIM Funds Board of Trustees 3 AIM GLOBAL SMALL & MID CAP GROWTH FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ======================================================================================= MARKET CONDITIONS AND YOUR FUND PERFORMANCE SUMMARY Many factors contributed to the negative Global equity markets for the fiscal year ended October 31, 2008, were extremely performance of most major market indexes turbulent, with most markets registering double-digit losses as global growth slowed for the fiscal year ended October 31, and a number of financial institutions worldwide fell victim to the broadening scope of 2008. The chief catalyst was primarily the the credit crisis. Within this environment, investors' risk-averse nature caused them ongoing subprime loan crisis and its to shun mid- and small-cap companies. far-reaching effects on overall credit availability. Additionally, record high AIM Global Small & Mid Cap Growth Fund underperformed the MSCI World Growth Index. crude oil prices, falling home values and The Fund's mid- and small-cap bias versus its style-specific index, which maintains a the weak U.S. dollar placed significant larger cap focus, was a key detractor from relative results. pressure on the purchasing power of the U.S. consumer. Your Fund's long-term performance appears later in this report. European equities remained under FUND VS. INDEXES pressure over the period as further weakness in the macroeconomic outlook Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does manifested itself and financial sector not include applicable contingent deferred sales charges (CDSC) or front-end sales turmoil continued. Asian equities were charges, which would have reduced performance. volatile as well, falling sharply toward the end of the period.(1) While there were Class A Shares -49.70% sporadic attempts to rally, the dominant Class B Shares -50.07 trend during the period remained one of Class C Shares -50.05 weakness. Class Y Shares* -49.66 MSCI World Index(triangle) (Broad Market Index) -41.85 Emerging markets stocks and currencies MSCI World Growth Index(triangle) (Style-Specific Index) -40.86 tumbled from record highs(1) as global Lipper Global Small/Mid-Cap Funds Category Average(triangle) (Peer Group)** -47.25 recession concerns deepened and commodity prices fell sharply.(2) There also were (triangle) Lipper Inc. increased concerns that some countries could start to default on their foreign * Share class incepted during the fiscal year. See page 7 for a detailed loans. explanation of Fund performance. AIM Global Small & Mid Cap Growth Fund ** The Lipper peer group benchmark changed effective May 23, 2008, in response was not unscathed by this dramatic global to Lipper's refinement of its existing classifications to ensure meaningful downturn. It sustained double digit peer groups. For those funds where the new Lipper index has less than a declines over the fiscal year and lagged five-year history, the category average will be used until the Lipper index its style-specific benchmark, the MSCI has sufficient history. World Growth Index. A flight to liquidity ======================================================================================= and safety negatively affected the returns of small and mid-cap stocks, causing the HOW WE INVEST investments for the Fund by using a Fund to underperform its large-cap bottom-up investment approach, which means oriented style-specific index. When selecting stocks for your Fund, we that we construct the Fund primarily on a employ a disciplined investment strategy stock-by-stock basis. We focus on the The Fund underperformed by the widest that emphasizes fundamental research, strengths of individual companies rather margin in the consumer discretionary supported by both quantitative analysis than sectors, countries or market-cap sector, a segment that was hard hit due to and portfolio construction techniques. Our trends. reduced consumer spending. Our holdings in "EQV" (Earnings, Quality, Valuation) the automobile, hotels and leisure and strategy focuses primarily on identifying We believe disciplined sell decisions media industries tumbled, negatively quality companies that have experienced, are key to successful investing. We affecting both absolute or exhibit the potential for, accelerating consider selling a stock for any of the or above average earnings growth but whose following reasons: stock prices do not fully reflect these attributes. o A company's fundamentals deteriorate, or it posts disappointing earnings. While research responsibilities within the portfolio management team are focused o A stock's price seems overvalued. by geographic region, we select o A more attractive opportunity becomes available. ========================================== ========================================== ========================================== PORTFOLIO COMPOSITION TOP FIVE COUNTRIES* TOP 10 EQUITY HOLDINGS* By sector Consumer Discretionary 18.7% 1. United States 33.9% 1. Deutsche Boerse AG 2.2% Financials 15.8 2. United Kingdom 12.6 2. Vimpel Communications-ADR 2.1 Industrials 14.1 3. Canada 6.2 3. Syngenta AG 2.0 Health Care 7.4 4. Switzerland 5.7 4. Homeserve PLC 1.9 Information Technology 7.0 5. Germany 4.4 5. Shire PLC 1.9 Consumer Staples 5.9 ========================================== 6. Ayala Corp. 1.9 Materials 5.7 7. Intralot S.A. 1.9 Telecommunication Services 5.0 8. Hongkong Land Holdings Ltd. 1.6 Energy 4.9 ========================================== 9. Siam Commercial Bank PCL 1.6 Utilities 2.3 Total Net Assets $547.3 million 10. International Power PLC 1.5 Money Market Funds Total Number of Holdings* 100 ========================================== Plus Other Assets Less Liabilities 13.2 ========================================== ========================================== The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. * Excluding money market fund holdings.
4 AIM GLOBAL SMALL & MID CAP GROWTH FUND and relative results. Detractors included sector weight remained in the consumer SHUXIN CAO Finnish tire manufacturer NOKIAN RENKKAT, discretionary sector. All changes to the Chartered Financial Greek lottery and gaming systems Fund were based on our bottom-up stock [CAO Analyst, portfolio manager, manufacturer INTRALOT, German sports selection process of identifying high PHOTO] is lead manager of AIM Global apparel manufacturer PUMA and Brazilian quality growth companies trading at what Small & Mid Cap Growth Fund home builder GAFISA, which we sold. The we believe are attractive valuations. with respect to the Fund's investments in Fund's lack of exposure to Volkswagen (not Asia Pacific and Latin America. He joined a Fund holding) also was a drag on Volatile markets can test an investor's Invesco Aim in 1997. Mr. Cao graduated relative results. We are active, long-term resolve and 2008 was one of the most from Tianjin Foreign Language Institute investors, and therefore we do not focus turbulent periods for many years. However, with a B.A. in English. He also earned an on the index weightings of individual turbulent markets can create investment M.B.A. from Texas A&M University and is a stocks. Volkswagen rose by about 130% over opportunities. We welcome any new Certified Public Accountant. the period, strongly outperforming the investors who invested in the Fund during declining European market. We believe this the reporting period, and to all of our JASON HOLZER strong performance was not supported by shareholders, we would like to express our Chartered Financial Analyst, fundamental factors. appreciation to you for your continued [HOLZER senior portfolio manager, is investment in AIM Global Small & Mid Cap PHOTO] lead manager of AIM Global Another area of weakness for the Fund Growth Fund. Small & Mid Cap Growth Fund was the financials sector, where our with respect to the Fund's investments in holdings underperformed those of the MSCI (1) Lipper Inc. Europe and Canada. Mr. Holzer joined World Growth Index. The financials sector Invesco Aim in 1996. He earned a B.A. in was the weakest performing sector in the (2) Bloomberg L.P. quantitative economics and an M.S. in Index during the fiscal year, as the engineering economic systems from Stanford credit crisis intensified and a liquidity The views and opinions expressed in University. crisis emerged. Underperformance in the management's discussion of Fund health care sector was also driven by performance are those of Invesco Aim PAUL RASPLICKA stock selection. Two of the leading Advisors, Inc. These views and opinions Chartered Financial Analyst, detractors to Fund performance included are subject to change at any time based on [RASPLICKA is lead manager of AIM Global the Swiss health care equipment company factors such as market and economic PHOTO] Small & Mid Cap Growth Fund SONOVA HOLDINGS and HUMANA, one of the conditions. These views and opinions may with respect to the Fund's largest health insurers in the U.S. not be relied upon as investment advice or domestic investments. Mr. Rasplicka has recommendations, or as an offer for a been associated with the advisor and/or In contrast, the Fund fared better than particular security. The information is its affiliates since 1994. He began his the MSCI World Growth Index in the not a complete analysis of every aspect of investment career in 1982 as an equity information technology sector. Relative any market, country, industry, security or research analyst. A native of Denver, Mr. results were driven by a significant the Fund. Statements of fact are from Rasplicka is a magna cum laude graduate of underweight across the technology hardware sources considered reliable, but Invesco the University of Colorado in Boulder with and software segments of the market. An Aim Advisors, Inc. makes no representation a B.S. in business administration. He underweight exposure to the materials or warranty as to their completeness or earned an M.B.A. from the University of sector, particularly in the metals and accuracy. Although historical performance Chicago. He is a Chartered Investment mining industry, helped as well. is no guarantee of future results, these Counselor. insights may help you understand our On a country basis, stock selection in investment management philosophy. BORGE ENDRESEN the U.S., Germany and the U.K. detracted Chartered Financial Analyst, from both relative and absolute results. See important Fund and index disclosures portfolio manager, is manager An underweight exposure to the more later in this report. [ENDRESEN of AIM Global Small & Mid Cap resilient U.S. market hurt as well. In PHOTO] Growth Fund. He joined contrast, an underweight exposure in Invesco Aim in 1999 and Australia helped relative results. A graduated summa cum laude from the larger than usual cash position in a University of Oregon with a B.S. in declining market also contributed finance. He also earned an M.B.A. from The favorably to relative results. The level University of Texas at Austin. of cash at the close of the fiscal year should not be construed as a new defensive Assisted by the Asia Pacific/Latin America long-term position. Positive performing Team, Europe/Canada Team and Large/ stocks were scarce during the reporting Multi-Cap Growth Team period. One holding that held up well in this difficult environment was ITT EDUCATIONAL SERVICES, one of the largest U.S. providers of technical education. During the reporting period, the most significant additions to the portfolio were in the consumer staples and information technology sectors. Significant reductions were in the financials and consumer discretionary sectors. The Fund's largest
5 AIM GLOBAL SMALL & MID CAP GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE Past performance cannot guarantee Performance of an index of funds reflects shown in the chart. The vertical axis, the comparable future results. fund expenses and management fees; one that indicates the dollar value of an performance of a market index does not. investment, is constructed with each The data shown in the chart include Performance shown in the chart and segment representing a percent change in reinvested distributions, applicable sales table(s) does not reflect deduction of the value of the investment. In this charges and Fund expenses including taxes a shareholder would pay on Fund chart, each segment represents a doubling, management fees. Results for Class B distributions or sale of Fund shares. or 100% change, in the value of the shares are calculated as if a hypothetical investment. In other words, the space shareholder had liquidated his entire This chart, which is a logarithmic between $5,000 and $10,000 is the same investment in the Fund at the close of the chart, presents the fluctuations in the size as the space between $10,000 and reporting period and paid the applicable value of the Fund and its indexes. We $20,000, and so on. contingent deferred sales charges. Index believe that a logarithmic chart is more results include reinvested dividends, but effective than other types of charts in they do not reflect sales charges. illustrating changes in value during the early years
6 AIM GLOBAL SMALL & MID CAP GROWTH FUND ==================================================================================================================================== [MOUNTAIN CHART] RESULTS OF A $10,000 INVESTMENT -- CLASS A AND B SHARES (OLDEST SHARE CLASSES WITH SALES CHARGES) Index data from 8/31/94, Fund data from 9/15/94 AIM Global Small AIM Global Small & Mid Cap Growth & Mid Cap Growth Lipper Global Small/ Fund-Class A Fund-Class B MSCI World Mid-Cap Funds Date Shares Shares MSCI World Index(1) Growth Index(1) Category Average(1)* 8/31/94 $10000 $10000 $10000 9/94 $ 9459 $10010 9735 9770 9946 10/94 9658 10210 10010 10004 10063 11/94 9431 9970 9573 9605 9673 12/94 9516 10060 9664 9749 9695 1/95 9185 9710 9516 9600 9338 2/95 9516 10050 9653 9747 9414 3/95 9865 10420 10116 10222 9604 4/95 10224 10789 10466 10601 9910 5/95 10592 11169 10553 10685 10069 6/95 11320 11939 10548 10698 10381 7/95 12415 13079 11073 11222 11109 8/95 12255 12909 10824 10906 11099 9/95 12576 13239 11137 11288 11281 10/95 12369 13020 10959 11165 11015 11/95 12426 13069 11337 11520 11073 12/95 12575 13217 11666 11782 11285 1/96 12754 13407 11875 11991 11487 2/96 13400 14079 11945 12077 11851 3/96 13684 14360 12141 12253 12110 4/96 14584 15304 12424 12508 12762 5/96 15248 15996 12432 12581 13039 6/96 14945 15674 12493 12667 12895 7/96 13901 14571 12049 12195 12202 8/96 14621 15314 12185 12296 12575 9/96 15171 15886 12659 12856 12797 10/96 14944 15635 12745 12894 12634 11/96 15380 16097 13457 13547 12859 12/96 15532 16237 13239 13281 12971 1/97 15893 16609 13396 13466 13145 2/97 15475 16167 13547 13615 12978 3/97 14925 15585 13277 13296 12557 4/97 14716 15363 13708 13906 12461 5/97 16187 16889 14552 14717 13435 6/97 17078 17813 15275 15528 14001 7/97 17770 18515 15976 16245 14364 8/97 16963 17672 14905 15036 14058 9/97 18102 18846 15712 15901 14791 10/97 16386 17059 14883 14884 13816 11/97 15930 16568 15144 15261 13427 12/97 16158 16798 15326 15400 13426 1/98 15712 16336 15750 16002 13292 2/98 17248 17922 16813 17131 14477 3/98 18225 18915 17520 17722 15318 4/98 18575 19286 17689 17824 15638 5/98 18157 18835 17465 17624 15217 6/98 17948 18614 17876 18377 15101 7/98 17645 18292 17845 18345 14655 ==================================================================================================================================== (1) Lipper Inc. * The Lipper peer group benchmark changed effective May 23, 2008, in response to Lipper's refinement of its existing classifications to ensure meaningful peer groups. For those funds where the new Lipper index has less than a five-year history, the category average will be used until the Lipper index has sufficient history.
==================================================================================================================================== [MOUNTAIN CHART] 8/98 14222 14731 15463 16195 12136 9/98 14222 14731 15734 16556 12061 10/98 15046 15574 17153 17994 12514 11/98 15900 16447 18171 19152 13251 12/98 16790 17360 19055 20549 14003 1/99 17216 17791 19470 21271 14243 2/99 16051 16586 18949 20423 13548 3/99 16611 17158 19735 21175 14065 4/99 17294 17852 20511 21137 14925 5/99 16905 17439 19758 20397 14807 6/99 18260 18834 20677 21649 15905 7/99 18478 19045 20612 21407 16214 8/99 18677 19236 20573 21668 16332 9/99 19180 19747 20371 21702 16441 10/99 20810 21424 21427 23121 17021 11/99 24167 24865 22027 24474 19585 12/99 28640 29450 23807 27273 22911 1/00 29250 30065 22441 25562 23021 2/00 36758 37759 22499 26448 27442 3/00 33579 34485 24051 28022 26291 4/00 29589 30374 23031 26140 23717 5/00 26651 27343 22445 24588 22212 6/00 28919 29665 23198 26089 24242 7/00 28269 28985 22543 24775 23261 8/00 30708 31466 23273 25652 25027 9/00 27868 28540 22033 23378 24136 10/00 25858 26474 21661 22395 22379 11/00 21690 22203 20343 20666 19983 12/00 22343 22865 20670 20275 21016 1/01 23851 24386 21068 20887 21588 2/01 20056 20499 19285 18221 19633 3/01 18033 18428 18015 16745 17566 4/01 19578 20002 19343 18095 19115 5/01 19641 20056 19091 17730 19402 6/01 19226 19625 18490 17110 19021 7/01 18371 18738 18243 16856 18164 8/01 17340 17675 17364 15816 17482 9/01 15091 15376 15832 14501 14986 10/01 15808 16102 16134 15118 15725 11/01 16323 16626 17086 16266 16652 12/01 16625 16922 17192 16345 17286 1/02 16361 16640 16670 15811 16946 2/02 16109 16384 16523 15853 16639 3/02 16837 17124 17284 16244 17746 4/02 16750 17016 16664 15548 17681 5/02 16662 16923 16692 15464 17589 6/02 15909 16156 15677 14570 16543 7/02 14477 14689 14354 13542 14841 8/02 14427 14635 14378 13538 14682 9/02 13496 13679 12795 12194 13591 10/02 13823 14016 13738 13142 13817 11/02 14275 14460 14477 13619 14480 12/02 13872 14043 13773 13093 13840 1/03 13584 13747 13354 12620 13530 2/03 13320 13478 13120 12484 13159 3/03 13332 13478 13077 12591 13111 4/03 14175 14339 14235 13489 14192 5/03 15180 15334 15046 14044 15495 6/03 15506 15656 15304 14241 16016 7/03 15996 16154 15613 14516 16780 8/03 16586 16745 15949 14807 17762 9/03 16776 16919 16045 14891 17834 10/03 17945 18090 16995 15777 19129 11/03 18372 18521 17252 16000 19501 12/03 19314 19461 18333 16769 20250 1/04 20056 20187 18627 17112 20902 2/04 20710 20845 18939 17320 21388 ====================================================================================================================================
==================================================================================================================================== [MOUNTAIN CHART] 3/04 20722 20858 18814 17146 21578 4/04 20119 20238 18428 16804 20977 5/04 20395 20508 18582 16970 20902 6/04 20733 20830 18978 17200 21401 7/04 19440 19526 18358 16376 20401 8/04 19665 19740 18439 16324 20362 9/04 20495 20562 18788 16652 21195 10/04 21350 21423 19248 17060 21706 11/04 22857 22916 20259 17922 23205 12/04 24025 24074 21032 18597 24221 1/05 23722 23766 20558 18096 24042 2/05 24690 24721 21210 18557 24847 3/05 23962 23994 20800 18202 24342 4/05 23121 23121 20345 17802 23392 5/05 23687 23671 20706 18264 24069 6/05 24353 24329 20885 18349 24782 7/05 25471 25431 21615 19110 25940 8/05 26135 26090 21778 19280 26268 9/05 26927 26857 22344 19706 26945 10/05 25885 25793 21801 19287 25923 11/05 27016 26910 22528 19913 26929 12/05 28200 28073 23027 20347 27954 1/06 30334 30178 24055 21285 29913 2/06 30677 30504 24019 21067 29878 3/06 31809 31605 24548 21591 31007 4/06 33008 32778 25293 22091 31991 5/06 31282 31041 24429 21240 30224 6/06 30728 30476 24422 21205 29723 7/06 30664 30390 24574 21033 29066 8/06 31467 31168 25212 21592 29814 9/06 31599 31281 25513 21782 30102 10/06 33062 32707 26449 22558 31362 11/06 34497 34107 27097 23127 32593 12/06 35580 35157 27648 23429 33358 1/07 36093 35632 27974 23799 33998 2/07 36230 35746 27828 23650 34138 3/07 37436 36908 28338 24105 35136 4/07 38990 38428 29588 25163 36278 5/07 40889 40277 30417 25896 37689 6/07 40468 39834 30182 25790 37578 7/07 40059 39407 29514 25475 37005 8/07 39759 39080 29491 25536 36291 9/07 41989 41253 30894 26927 37639 10/07 44508 43687 31841 27984 39510 11/07 42532 41726 30540 27087 36579 12/07 42205 41375 30146 26888 36522 1/08 38031 37271 27842 24593 33318 2/08 37856 37062 27681 24833 33200 3/08 36500 35724 27415 24524 32546 4/08 37997 37174 28856 25883 33945 5/08 39076 38186 29296 26725 34890 6/08 35649 34825 26960 24994 32235 7/08 34223 33415 26301 24221 31134 8/08 33303 32479 25932 23790 30569 9/08 28780 28052 22847 20528 26575 10/08 22402 22691 18515 16549 20517 ====================================================================================================================================
========================================== ========================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS As of 10/31/08, including maximum As of 9/30/08, the most recent calendar applicable sales charges quarter-end, including maximum applicable sales charges CLASS A SHARES Inception (9/15/94) 5.88% CLASS A SHARES 10 Years 3.47 Inception (9/15/94) 7.82% 5 Years 3.35 10 Years 6.70 1 Year -52.46 5 Years 10.13 1 Year -35.24 CLASS B SHARES Inception (9/15/94) 5.97% CLASS B SHARES 10 Years 3.58 Inception (9/15/94) 7.92% 5 Years 3.52 10 Years 6.82 1 Year -52.21 5 Years 10.38 1 Year -34.91 CLASS C SHARES Inception (8/4/97) 1.50% CLASS C SHARES 10 Years 3.43 Inception (8/4/97) 3.83% 5 Years 3.82 10 Years 6.66 1 Year -50.48 5 Years 10.64 1 Year -32.56 CLASS Y SHARES ========================================== 10 Years 4.06% 5 Years 4.54 1 Year -49.66 ========================================== CLASS Y SHARES' INCEPTION DATE IS OCTOBER THE TOTAL ANNUAL FUND OPERATING EXPENSE A REDEMPTION FEE OF 2% WILL BE IMPOSED 3, 2008; RETURNS SINCE THAT DATE ARE RATIO SET FORTH IN THE MOST RECENT FUND ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF ACTUAL RETURNS. ALL OTHER RETURNS ARE PROSPECTUS AS OF THE DATE OF THIS REPORT THE FUND WITHIN 31 DAYS OF PURCHASE. BLENDED RETURNS OF ACTUAL CLASS Y SHARE FOR CLASS A, CLASS B, CLASS C AND CLASS Y EXCEPTIONS TO THE REDEMPTION FEE ARE PERFORMANCE AND RESTATED CLASS A SHARE SHARES WAS 1.43%, 2.18%, 2.18% AND 1.18%, LISTED IN THE FUND'S PROSPECTUS. PERFORMANCE (FOR PERIODS PRIOR TO THE RESPECTIVELY. THE EXPENSE RATIOS PRESENTED INCEPTION DATE OF CLASS Y SHARES) AT NET ABOVE MAY VARY FROM THE EXPENSE RATIOS ASSET VALUE. THE RESTATED CLASS A SHARE PRESENTED IN OTHER SECTIONS OF THIS REPORT PERFORMANCE REFLECTS THE RULE 12B-1 FEES THAT ARE BASED ON EXPENSES INCURRED DURING APPLICABLE TO CLASS A SHARES AS WELL AS THE PERIOD COVERED BY THIS REPORT. ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS RECEIVED BY CLASS A SHARES. CLASS A SHARES CLASS A SHARE PERFORMANCE REFLECTS THE INCEPTION DATE IS SEPTEMBER 15, 1994. MAXIMUM 5.50% SALES CHARGE, AND CLASS B AND CLASS C SHARE PERFORMANCE REFLECTS THE THE PERFORMANCE DATA QUOTED REPRESENT APPLICABLE CONTINGENT DEFERRED SALES PAST PERFORMANCE AND CANNOT GUARANTEE CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE COMPARABLE FUTURE RESULTS; CURRENT CDSC ON CLASS B SHARES DECLINES FROM 5% PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE BEGINNING AT THE TIME OF PURCHASE TO 0% AT VISIT INVESCOAIM.COM FOR THE MOST RECENT THE BEGINNING OF THE SEVENTH YEAR. THE MONTH-END PERFORMANCE. PERFORMANCE FIGURES CDSC ON CLASS C SHARES IS 1% FOR THE FIRST REFLECT REINVESTED DISTRIBUTIONS, CHANGES YEAR AFTER PURCHASE. CLASS Y SHARES DO NOT IN NET ASSET VALUE AND THE EFFECT OF THE HAVE A FRONT-END SALES CHARGE OR A CDSC; MAXIMUM SALES CHARGE UNLESS OTHERWISE THEREFORE, PERFORMANCE IS AT NET ASSET STATED. INVESTMENT RETURN AND PRINCIPAL VALUE. VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. THE PERFORMANCE OF THE FUND'S SHARE CLASSES WILL DIFFER PRIMARILY DUE TO DIFFERENT SALES CHARGE STRUCTURES AND CLASS EXPENSES.
7 AIM GLOBAL SMALL & MID CAP GROWTH FUND AIM GLOBAL SMALL & MID CAP GROWTH FUND'S INVESTMENT OBJECTIVE IS ABOVE-AVERAGE, LONG-TERM GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets. o Unless otherwise noted, all data provided by Invesco Aim. ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION o Effective September 30, 2003, only o The MSCI WORLD INDEX--SERVICE MARK-- is o The Chartered Financial previously established qualified plans a free float-adjusted market Analyst--REGISTERED TRADEMARK-- are eligible to purchase Class B shares capitalization index that is designed (CFA--REGISTERED TRADEMARK--) of any AIM fund. to measure global developed market designation is a globally recognized equity performance. standard for measuring the competence o Class Y shares are available to only and integrity of investment certain investors. Please see the o The MSCI WORLD GROWTH INDEX is a free professionals. prospectus for more information. float-adjusted market capitalization index that represents the growth o CPA--REGISTERED TRADEMARK-- and PRINCIPAL RISKS OF INVESTING IN THE FUND segment in global developed market Certified Public Accountant--REGISTERED equity performance. TRADEMARK-- are trademarks owned by the o Investing in developing countries can American Institute of Certified Public add additional risk, such as high rates o The LIPPER GLOBAL SMALL/MID-CAP FUNDS Accountants. of inflation or sharply devalued CATEGORY AVERAGE represents an average currencies against the U.S. dollar. of all of the funds in the Lipper o The returns shown in management's Transaction costs are often higher, and Global Small/Mid-Cap Funds category. discussion of Fund performance are there may be delays in settlement These funds invest at least 75% of based on net asset values calculated procedures. their equity assets in companies both for shareholder transactions. Generally inside and outside of the U.S. with accepted accounting principles require o Prices of equity securities change in market capitalizations (on a three-year adjustments to be made to the net response to many factors, including the weighted basis) below Lipper's global assets of the Fund at period end for historical and prospective earnings of large-cap floor. The Lipper peer group financial reporting purposes, and as the issuer, the value of its assets, Benchmark changed effective May 23, such, the net asset values for general economic conditions, interest 2008, in response to Lipper's shareholder transactions and the rates, investor perceptions and market refinement of its existing returns based on those net asset values liquidity. o Foreign securities have classifications to ensure meaningful may differ from the net asset values additional risks, including exchange peer groups. For those funds where the and returns reported in the Financial rate changes, political and economic new Lipper index has less than a Highlights. upheaval, relative lack of information, five-year history, the category average relatively low market liquidity, and will be used until the Lipper index has o Industry classifications used in this the potential lack of strict financial sufficient history. report are generally according to the and accounting controls and standards. Global Industry Classification o The Fund is not managed to track the Standard, which was developed by and is o Small- and mid-capitalization companies performance of any particular index, the exclusive property and a service tend to be more vulnerable to adverse including the indexes defined here, and mark of MSCI Inc. and Standard & developments and more volatile than consequently, the performance of the Poor's. larger companies. Investments in these Fund may deviate significantly from the sized companies may involve special performance of the indexes. risks, including those associated with dependence on a small management group, o A direct investment cannot be made in little or no operating history, little an index. Unless otherwise indicated, or no track record of success, limited index results include reinvested product lines, less publicly available dividends, and they do not reflect information, illiquidity, restricted sales charges. Performance of an index resale or less frequent trading. of funds reflects fund expenses; performance of a market index does not. o The prices of securities held by the Fund may decline in response to market risks. ======================================================================================= THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. ========================================== INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. FUND NASDAQ SYMBOLS ======================================================================================= Class A Shares AGAAX NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class B Shares AGABX Class C Shares AGACX Class Y Shares AGAYX ==========================================
8 AIM GLOBAL SMALL & MID CAP GROWTH FUND SCHEDULE OF INVESTMENTS October 31, 2008
SHARES VALUE ------------------------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-86.83% CANADA-6.19% Astral Media Inc. 158,400 $ 3,648,683 ------------------------------------------------------------------------------- Gildan Activewear Inc.(a) 224,011 5,200,768 ------------------------------------------------------------------------------- Groupe Aeroplan, Inc. 633,900 5,505,107 ------------------------------------------------------------------------------- Onex Corp. 306,300 5,287,193 ------------------------------------------------------------------------------- Power Financial Corp. 263,200 6,539,455 ------------------------------------------------------------------------------- Sherritt International Corp. 750,184 2,326,777 ------------------------------------------------------------------------------- Shoppers Drug Mart Corp.(a)(b)(c) 138,284 5,380,158 =============================================================================== 33,888,141 =============================================================================== CYPRUS-0.32% Bank of Cyprus PCL 334,163 1,757,273 =============================================================================== FINLAND-1.03% Nokian Renkaat Oyj 431,050 5,659,101 =============================================================================== GERMANY-4.41% Deutsche Boerse AG 150,400 12,007,934 ------------------------------------------------------------------------------- Puma AG Rudolf Dassler Sport(c) 3,935 657,182 ------------------------------------------------------------------------------- Puma AG Rudolf Dassler Sport 38,700 6,463,261 ------------------------------------------------------------------------------- Symrise AG 404,510 5,004,310 =============================================================================== 24,132,687 =============================================================================== GREECE-2.59% Intralot S.A. 1,953,016 10,107,399 ------------------------------------------------------------------------------- OPAP S.A.(c) 185,417 4,062,220 =============================================================================== 14,169,619 =============================================================================== HONG KONG-2.16% Hongkong Land Holdings Ltd. 3,327,000 8,923,636 ------------------------------------------------------------------------------- Regal Hotels International Holdings Ltd. 15,416,200 2,887,090 =============================================================================== 11,810,726 =============================================================================== INDONESIA-0.28% PT Astra International Tbk 1,760,500 1,509,234 =============================================================================== IRELAND-0.76% DCC PLC 267,605 4,170,868 =============================================================================== ISRAEL-1.00% Israel Discount Bank-Class A 5,533,781 5,501,729 =============================================================================== JAPAN-1.79% EXEDY Corp. 441,600 6,282,226 ------------------------------------------------------------------------------- Suzuki Motor Corp. 241,400 3,496,417 =============================================================================== 9,778,643 =============================================================================== MEXICO-0.98% America Movil S.A.B. de C.V.-Series L-ADR 173,500 5,368,090 =============================================================================== NETHERLANDS-1.75% Koninklijke BAM Groep N.V. 629,935 5,604,188 ------------------------------------------------------------------------------- USG People N.V. 378,409 3,954,055 =============================================================================== 9,558,243 =============================================================================== NORWAY-0.48% Petroleum Geo-Services A.S.A.(a) 526,240 2,646,795 =============================================================================== PHILIPPINES-2.61% Ayala Corp. 2,125,044 10,173,908 ------------------------------------------------------------------------------- PNOC Energy Development Corp. 62,317,000 3,792,078 ------------------------------------------------------------------------------- PNOC Energy Development Corp.(c) 5,262,000 320,200 =============================================================================== 14,286,186 =============================================================================== RUSSIA-2.14% Vimpel-Communications-ADR 807,898 11,714,521 =============================================================================== SOUTH AFRICA-0.59% Standard Bank Group Ltd. 404,308 3,230,627 =============================================================================== SOUTH KOREA-0.57% Hyundai Development Co. 114,970 3,094,217 =============================================================================== SWEDEN-1.10% Oriflame Cosmetics S.A.-SDR 193,275 6,036,409 =============================================================================== SWITZERLAND-5.67% Aryzta AG(a) 193,713 6,912,300 ------------------------------------------------------------------------------- Galenica AG 19,489 5,879,927 ------------------------------------------------------------------------------- Sonova Holding AG 173,455 7,288,255 ------------------------------------------------------------------------------- Syngenta AG 58,772 10,943,053 =============================================================================== 31,023,535 =============================================================================== TAIWAN-1.27% Taiwan Mobile Co., Ltd. 4,984,079 6,937,326 =============================================================================== THAILAND-1.58% Siam Commercial Bank PCL(b) 5,621,600 8,647,401 =============================================================================== TURKEY-1.06% Tupras-Turkiye Petrol Rafinerileri A.S. 452,062 5,786,984 =============================================================================== UNITED KINGDOM-12.63% Bunzl PLC 799,533 8,013,324 ------------------------------------------------------------------------------- Capita Group PLC 574,337 5,911,774 ------------------------------------------------------------------------------- Homeserve PLC 519,854 10,621,195 ------------------------------------------------------------------------------- IG Group Holdings PLC 1,623,859 7,546,175 ------------------------------------------------------------------------------- Inchcape PLC 1,954,720 2,497,284 ------------------------------------------------------------------------------- Informa PLC 1,187,305 4,015,934 ------------------------------------------------------------------------------- International Power PLC 2,300,903 8,232,917 ------------------------------------------------------------------------------- Shire PLC 789,500 10,432,699 -------------------------------------------------------------------------------
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 9 AIM GLOBAL SMALL & MID CAP GROWTH FUND
SHARES VALUE ------------------------------------------------------------------------------- UNITED KINGDOM-(CONTINUED) Ultra Electronics Holdings PLC 171,071 $ 3,039,689 ------------------------------------------------------------------------------- United Business Media Ltd. 415,030 2,682,401 ------------------------------------------------------------------------------- VT Group PLC 766,118 6,147,052 =============================================================================== 69,140,444 =============================================================================== UNITED STATES-33.87% Aeropostale, Inc.(a) 131,736 3,189,329 ------------------------------------------------------------------------------- Alliance Data Systems Corp.(a) 72,753 3,649,291 ------------------------------------------------------------------------------- Allied Waste Industries, Inc.(a) 394,142 4,106,960 ------------------------------------------------------------------------------- Altera Corp. 227,515 3,947,385 ------------------------------------------------------------------------------- Amdocs Ltd.(a) 172,047 3,881,380 ------------------------------------------------------------------------------- American Tower Corp.-Class A(a) 110,500 3,570,255 ------------------------------------------------------------------------------- Amphenol Corp.-Class A 101,936 2,920,466 ------------------------------------------------------------------------------- ANSYS, Inc.(a) 133,332 3,817,295 ------------------------------------------------------------------------------- Apollo Group Inc.-Class A(a) 77,744 5,403,985 ------------------------------------------------------------------------------- Bucyrus International, Inc. 104,733 2,527,207 ------------------------------------------------------------------------------- Chattem, Inc.(a) 56,377 4,266,048 ------------------------------------------------------------------------------- Church & Dwight Co., Inc. 84,768 5,008,941 ------------------------------------------------------------------------------- CommScope, Inc.(a) 123,042 1,809,948 ------------------------------------------------------------------------------- Continental Resources, Inc.(a) 73,964 2,395,694 ------------------------------------------------------------------------------- Corrections Corp. of America(a) 236,559 4,520,643 ------------------------------------------------------------------------------- Crown Holdings, Inc.(a) 254,806 5,141,985 ------------------------------------------------------------------------------- DaVita, Inc.(a) 63,022 3,576,499 ------------------------------------------------------------------------------- Estee Lauder Cos. Inc. (The)-Class A 131,381 4,734,971 ------------------------------------------------------------------------------- Express Scripts, Inc.(a) 42,236 2,559,924 ------------------------------------------------------------------------------- Fifth Third Bancorp 357,890 3,883,107 ------------------------------------------------------------------------------- Flowserve Corp. 53,699 3,056,547 ------------------------------------------------------------------------------- FMC Technologies, Inc.(a) 90,111 3,152,984 ------------------------------------------------------------------------------- GameStop Corp.-Class A(a) 116,156 3,181,513 ------------------------------------------------------------------------------- Hanesbrands, Inc.(a) 188,658 3,295,855 ------------------------------------------------------------------------------- Humana Inc.(a) 108,809 3,219,658 ------------------------------------------------------------------------------- Hunt (J.B.) Transport Services, Inc. 136,304 3,875,123 ------------------------------------------------------------------------------- IHS Inc.-Class A(a) 95,118 3,366,226 ------------------------------------------------------------------------------- Intersil Corp.-Class A 199,530 2,731,566 ------------------------------------------------------------------------------- ITT Educational Services, Inc.(a) 47,624 4,174,244 ------------------------------------------------------------------------------- Jarden Corp.(a) 271,026 4,824,263 ------------------------------------------------------------------------------- Juniper Networks, Inc.(a) 203,229 3,808,511 ------------------------------------------------------------------------------- Lam Research Corp.(a) 151,283 3,382,688 ------------------------------------------------------------------------------- Landstar System, Inc. 114,163 4,405,550 ------------------------------------------------------------------------------- LKQ Corp.(a) 308,537 3,529,663 ------------------------------------------------------------------------------- McAfee Inc.(a) 175,249 5,704,355 ------------------------------------------------------------------------------- McGraw-Hill Cos., Inc. (The) 137,050 3,678,422 ------------------------------------------------------------------------------- Moody's Corp. 157,000 4,019,200 ------------------------------------------------------------------------------- MSCI Inc.-Class A(a) 160,660 2,769,778 ------------------------------------------------------------------------------- NetApp, Inc.(a) 210,343 2,845,941 ------------------------------------------------------------------------------- Noble Corp. 117,372 3,780,552 ------------------------------------------------------------------------------- Owens-Illinois, Inc.(a) 156,856 3,588,865 ------------------------------------------------------------------------------- Pactiv Corp.(a) 179,241 4,222,918 ------------------------------------------------------------------------------- Pharmaceutical Product Development, Inc. 138,334 4,285,587 ------------------------------------------------------------------------------- Robert Half International, Inc. 145,872 2,752,605 ------------------------------------------------------------------------------- Scientific Games Corp.-Class A(a) 193,609 3,484,962 ------------------------------------------------------------------------------- Shaw Group Inc. (The)(a) 74,057 1,324,880 ------------------------------------------------------------------------------- SLM Corp.(a) 276,897 2,954,491 ------------------------------------------------------------------------------- Southwestern Energy Co.(a) 157,093 5,595,653 ------------------------------------------------------------------------------- TD Ameritrade Holding Corp.(a) 250,815 3,333,331 ------------------------------------------------------------------------------- Ulta Salon, Cosmetics & Fragrance, Inc.(a) 345,555 3,047,795 ------------------------------------------------------------------------------- Waters Corp.(a) 70,153 3,072,701 =============================================================================== 185,377,740 =============================================================================== Total Common Stocks & Other Equity Interests (Cost $602,402,175) 475,226,539 =============================================================================== MONEY MARKET FUNDS-12.56% Liquid Assets Portfolio-Institutional Class(d) 34,363,268 34,363,268 ------------------------------------------------------------------------------- Premier Portfolio-Institutional Class(d) 34,363,268 34,363,268 =============================================================================== Total Money Market Funds (Cost $68,726,536) 68,726,536 =============================================================================== TOTAL INVESTMENTS-99.39% (Cost $671,128,711) 543,953,075 =============================================================================== OTHER ASSETS LESS LIABILITIES-0.61% 3,361,166 =============================================================================== NET ASSETS-100.00% $547,314,241 _______________________________________________________________________________ ===============================================================================
Investment Abbreviations: ADR - American Depositary Receipt SDR - Swedish Depositary Receipt
Notes to Schedule of Investments: (a) Non-income producing security. (b) Security fair valued in good faith in accordance with the procedures established by the Board of Trustees. The aggregate value of these securities at October 31, 2008 was $14,027,559, which represented 2.56% of the Fund's Net Assets. See Note 1A. (c) Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at October 31, 2008 was $10,419,760, which represented 1.90% of the Fund's Net Assets. (d) The money market fund and the Fund are affiliated by having the same investment advisor. See accompanying Notes to Financial Statements which are an integral part of the financial statements. 10 AIM GLOBAL SMALL & MID CAP GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2008 ASSETS: Investments, at value (Cost $602,402,175) $ 475,226,539 ------------------------------------------------------- Investments in affiliated money market funds, at value and cost 68,726,536 ======================================================= Total investments (Cost $671,128,711) 543,953,075 ======================================================= Receivables for: Investments sold 7,629,435 ------------------------------------------------------- Fund shares sold 1,358,718 ------------------------------------------------------- Dividends 651,595 ------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 47,338 ------------------------------------------------------- Other assets 63,142 ======================================================= Total assets 553,703,303 _______________________________________________________ ======================================================= LIABILITIES: Payables for: Investments purchased 3,938,442 ------------------------------------------------------- Fund shares reacquired 692,819 ------------------------------------------------------- Amount due custodian 491,589 ------------------------------------------------------- Accrued fees to affiliates 499,483 ------------------------------------------------------- Accrued other operating expenses 602,589 ------------------------------------------------------- Trustee deferred compensation and retirement plans 164,140 ======================================================= Total liabilities 6,389,062 ======================================================= Net assets applicable to shares outstanding $ 547,314,241 _______________________________________________________ ======================================================= NET ASSETS CONSIST OF: Shares of beneficial interest $ 626,274,483 ------------------------------------------------------- Undistributed net investment income 5,677,118 ------------------------------------------------------- Undistributed net realized gain 42,882,868 ------------------------------------------------------- Unrealized appreciation (depreciation) (127,520,228) ======================================================= $ 547,314,241 _______________________________________________________ =======================================================
NET ASSETS: Class A $464,060,259 ______________________________________________________ ====================================================== Class B $ 44,391,637 ______________________________________________________ ====================================================== Class C $ 19,689,542 ______________________________________________________ ====================================================== Class Y $ 1,579,564 ______________________________________________________ ====================================================== Institutional Class $ 17,593,239 ______________________________________________________ ====================================================== SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 36,071,224 ______________________________________________________ ====================================================== Class B 3,884,782 ______________________________________________________ ====================================================== Class C 1,722,256 ______________________________________________________ ====================================================== Class Y 122,688 ______________________________________________________ ====================================================== Institutional Class 1,360,263 ______________________________________________________ ====================================================== Class A: Net asset value per share $ 12.87 ------------------------------------------------------ Maximum offering price per share (Net asset value of $12.87 divided by 94.50%) $ 13.62 ______________________________________________________ ====================================================== Class B: Net asset value and offering price per share $ 11.43 ______________________________________________________ ====================================================== Class C: Net asset value and offering price per share $ 11.43 ______________________________________________________ ====================================================== Class Y: Net asset value and offering price per share $ 12.87 ______________________________________________________ ====================================================== Institutional Class: Net asset value and offering price per share $ 12.93 ______________________________________________________ ======================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 11 AIM GLOBAL SMALL & MID CAP GROWTH FUND STATEMENT OF OPERATIONS For the year ended October 31, 2008 INVESTMENT INCOME: Dividends (net of foreign withholding taxes of $1,438,343) $ 18,068,313 ------------------------------------------------------------------------------------------------ Dividends from affiliated money market funds (includes securities lending income of $159,270) 2,299,463 ================================================================================================ Total investment income 20,367,776 ================================================================================================ EXPENSES: Advisory fees 7,366,345 ------------------------------------------------------------------------------------------------ Administrative services fees 249,100 ------------------------------------------------------------------------------------------------ Custodian fees 624,285 ------------------------------------------------------------------------------------------------ Distribution fees: Class A 2,012,557 ------------------------------------------------------------------------------------------------ Class B 941,153 ------------------------------------------------------------------------------------------------ Class C 352,269 ------------------------------------------------------------------------------------------------ Transfer agent fees -- A, B, C, and Y 2,511,004 ------------------------------------------------------------------------------------------------ Transfer agent fees -- Institutional 877 ------------------------------------------------------------------------------------------------ Trustees' and officers' fees and benefits 43,274 ------------------------------------------------------------------------------------------------ Other 630,513 ================================================================================================ Total expenses 14,731,377 ================================================================================================ Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (159,361) ================================================================================================ Net expenses 14,572,016 ================================================================================================ Net investment income 5,795,760 ================================================================================================ REALIZED AND UNREALIZED GAIN (LOSS) FROM: Net realized gain from: Investment securities (includes net gains (losses) from securities sold to affiliates of $(1,550,716)) 41,518,631 ------------------------------------------------------------------------------------------------ Foreign currencies 714,814 ================================================================================================ 42,233,445 ================================================================================================ Change in net unrealized appreciation (depreciation) of: Investment securities (net of foreign taxes on holdings of $785,558) (621,680,057) ------------------------------------------------------------------------------------------------ Foreign currencies (392,102) ================================================================================================ (622,072,159) ================================================================================================ Net realized and unrealized gain (loss) (579,838,714) ================================================================================================ Net increase (decrease) in net assets resulting from operations $(574,042,954) ________________________________________________________________________________________________ ================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 12 AIM GLOBAL SMALL & MID CAP GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS For the year ended October 31, 2008 and 2007
2008 2007 ----------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 5,795,760 $ 3,913,712 ----------------------------------------------------------------------------------------------------------- Net realized gain 42,233,445 148,327,110 ----------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) (622,072,159) 164,908,934 =========================================================================================================== Net increase (decrease) in net assets resulting from operations (574,042,954) 317,149,756 =========================================================================================================== Distributions to shareholders from net investment income: Class A (3,279,248) (1,205,150) ----------------------------------------------------------------------------------------------------------- Institutional Class (38) -- =========================================================================================================== Total distributions from net investment income (3,279,286) (1,205,150) =========================================================================================================== Distributions to shareholders from net realized gains: Class A (124,528,488) (106,746,300) ----------------------------------------------------------------------------------------------------------- Class B (18,165,019) (18,600,411) ----------------------------------------------------------------------------------------------------------- Class C (5,926,773) (4,153,281) ----------------------------------------------------------------------------------------------------------- Institutional Class (1,295) -- =========================================================================================================== Total distributions from net realized gains (148,621,575) (129,499,992) =========================================================================================================== Share transactions-net: Class A 54,639,250 52,827,687 ----------------------------------------------------------------------------------------------------------- Class B (19,773,676) (15,509,574) ----------------------------------------------------------------------------------------------------------- Class C 3,273,208 9,179,068 ----------------------------------------------------------------------------------------------------------- Class Y 1,887,143 -- ----------------------------------------------------------------------------------------------------------- Institutional Class 29,962,298 10,000 =========================================================================================================== Net increase in net assets resulting from share transactions 69,988,223 46,507,181 =========================================================================================================== Net increase (decrease) in net assets (655,955,592) 232,951,795 =========================================================================================================== NET ASSETS: Beginning of year 1,203,269,833 970,318,038 =========================================================================================================== End of year (includes undistributed net investment income of $5,677,118 and $3,677,140, respectively) $ 547,314,241 $1,203,269,833 ___________________________________________________________________________________________________________ ===========================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 13 AIM GLOBAL SMALL & MID CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS October 31, 2008 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM Global Small & Mid Cap Growth Fund, formerly 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 assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The Fund's investment objective is above-average long-term growth of capital. The Fund currently consists of five different classes of shares: Class A, Class B, Class C, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waiver shares may be subject to contingent deferred sales charges ("CDSC"). Class B shares and Class C shares are sold with a CDSC. Class Y and Institutional Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer's assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. 14 AIM GLOBAL SMALL & MID CAP GROWTH FUND The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain/loss for investments no longer held and as unrealized gain/loss for investments still held. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment advisor may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund's taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. G. ACCOUNTING ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. J. SECURITIES LENDING -- The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. K. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated 15 AIM GLOBAL SMALL & MID CAP GROWTH FUND into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. L. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. Fluctuations in the value of these contracts are recorded as unrealized appreciation (depreciation) until the contracts are closed. When these contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. The Fund could be exposed to risk, which may be in excess of the amount reflected in the Statement of Assets and Liabilities, if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with Invesco Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Advisor based on the annual rate of the Fund's average daily net assets as follows:
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% ___________________________________________________________________ ===================================================================
Under the terms of a master sub-advisory agreement approved by shareholders of the Fund, effective May 1, 2008, between the Advisor and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Advisor(s). The Advisor has contractually agreed, through at least June 30, 2009, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Advisor receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds. For the year ended October 31, 2008, the Advisor waived advisory fees of $83,262. At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $17,988. The Trust has entered into a master administrative services agreement with Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees. The Trust has entered into a transfer agency and service agreement with Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has agreed to pay IAIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the course of providing such services. IAIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IAIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust's Board of Trustees. For the year ended October 31, 2008, the expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees. The Trust has entered into master distribution agreements with Invesco Aim Distributors, Inc. ("IADI") to serve as the distributor for the Class A, Class B, Class C and Class Y shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays IADI compensation at the annual rate of 0.25% of the Fund's average daily net 16 AIM GLOBAL SMALL & MID CAP GROWTH FUND assets of Class A shares and 1.00% of the average daily net assets of each class of Class B and Class C shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority ("FINRA") impose a cap on the total sales charges, including asset- based sales charges that may be paid by any class of shares of the Fund. For the year ended October 31, 2008, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees. Front-end sales commissions and CDSC (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2008, IADI advised the Fund that IADI retained $106,746 in front-end sales commissions from the sale of Class A shares and $31,676, $87,966 and $14,612 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of Invesco Aim, IAIS and/or IADI. NOTE 3--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended October 31, 2008, the Fund engaged in securities purchases of $2,092,288 and securities sales of $13,049,932, which resulted in net realized gains (losses) of $(1,550,716). NOTE 4--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2008, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $58,111. NOTE 5--TRUSTEES' AND OFFICERS' FEES AND BENEFITS "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officers' Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2008, the Fund paid legal fees of $5,022 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 6--CASH BALANCES The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco Aim, not to exceed the contractually agreed upon rate. 17 AIM GLOBAL SMALL & MID CAP GROWTH FUND NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED OCTOBER 31, 2008 AND 2007:
2008 2007 --------------------------------------------------------------------------------------------------------- Ordinary income $ 13,086,720 $ 18,919,147 --------------------------------------------------------------------------------------------------------- Long-term capital gain 138,814,141 111,785,995 ========================================================================================================= Total distributions $151,900,861 $130,705,142 _________________________________________________________________________________________________________ =========================================================================================================
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
2008 ------------------------------------------------------------------------------------------------ Undistributed ordinary income $ 5,859,756 ------------------------------------------------------------------------------------------------ Undistributed long-term gain 43,980,080 ------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) -- investments (128,272,848) ------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) -- other investments (344,592) ------------------------------------------------------------------------------------------------ Temporary book/tax differences (182,638) ------------------------------------------------------------------------------------------------ Shares of beneficial interest 626,274,483 ================================================================================================ Total net assets $ 547,314,241 ________________________________________________________________________________________________ ================================================================================================
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's net unrealized appreciation (depreciation) difference is attributable primarily to wash sales. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits. The Fund does not have a capital loss carryforward at period-end. NOTE 8--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended October 31, 2008 was $656,104,097 and $747,254,999, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 57,880,801 ------------------------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (186,153,649) ================================================================================================ Net unrealized appreciation (depreciation) of investment securities $(128,272,848) ________________________________________________________________________________________________ ================================================================================================ Cost of investments for tax purposes is $672,225,923.
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of foreign currency transactions and partnership investments, on October 31, 2008, undistributed net investment income was decreased by $516,496, undistributed net realized gain was increased by $729,741 and shares of beneficial interest decreased by $213,245. This reclassification had no effect on the net assets of the Fund. 18 AIM GLOBAL SMALL & MID CAP GROWTH FUND NOTE 10--SHARE INFORMATION
SUMMARY OF SHARE ACTIVITY ------------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------------- 2008(a) 2007 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------- Sold: Class A 3,396,688 $ 73,505,607 3,294,830 $ 85,718,374 ------------------------------------------------------------------------------------------------------------------------- Class B 619,633 12,261,678 574,427 13,604,361 ------------------------------------------------------------------------------------------------------------------------- Class C 574,014 11,574,066 554,747 13,179,399 ------------------------------------------------------------------------------------------------------------------------- Class Y(b) 123,048 1,892,082 -- -- ------------------------------------------------------------------------------------------------------------------------- Institutional Class(c) 1,431,392 31,168,520 359 10,000 ========================================================================================================================= Issued as reinvestment of dividends: Class A 5,040,494 121,173,499 4,430,561 103,852,344 ------------------------------------------------------------------------------------------------------------------------- Class B 768,768 16,528,499 838,662 17,922,196 ------------------------------------------------------------------------------------------------------------------------- Class C 224,268 4,821,771 186,184 3,980,622 ------------------------------------------------------------------------------------------------------------------------- Institutional Class(c) 56 1,333 -- -- ========================================================================================================================= Automatic conversion of Class B shares to Class A shares: Class A 1,373,312 28,439,129 851,037 21,773,304 ------------------------------------------------------------------------------------------------------------------------- Class B (1,539,739) (28,439,129) (934,951) (21,773,304) ========================================================================================================================= Reacquired:(d) Class A(b) (8,391,072) (168,478,985) (6,164,601) (158,516,335) ------------------------------------------------------------------------------------------------------------------------- Class B (1,082,487) (20,124,724) (1,078,502) (25,262,827) ------------------------------------------------------------------------------------------------------------------------- Class C (712,803) (13,122,629) (340,093) (7,980,953) ------------------------------------------------------------------------------------------------------------------------- Class Y(b) (360) (4,939) -- -- ------------------------------------------------------------------------------------------------------------------------- Institutional Class(c) (71,544) (1,207,555) -- -- ========================================================================================================================= Net increase in share activity 1,753,668 $ 69,988,223 2,212,660 $ 46,507,181 _________________________________________________________________________________________________________________________ =========================================================================================================================
(a) There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 21% of the outstanding shares of the Fund. IADI has an agreement with these entities to sell Fund shares. The Fund, Invesco Aim and/or Invesco Aim affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco Aim and/or Invesco Aim affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. (b) Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A into Class Y shares of the Fund:
CLASS SHARES AMOUNT ---------------------------------------------------------------------------------------------------- Class Y 122,242 $ 1,880,082 ---------------------------------------------------------------------------------------------------- Class A (122,242) (1,880,082) ____________________________________________________________________________________________________ ====================================================================================================
(c) Institutional Class shares commenced on September 28, 2007. (d) Net of redemption fees of $22,457 and $25,122, which were allocated among the classes based on relative net assets of each class for the years ended October 31, 2008 and 2007, respectively. 19 AIM GLOBAL SMALL & MID CAP GROWTH FUND NOTE 11--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
NET GAINS NET ASSET NET ON SECURITIES DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET FROM NET NET ASSET BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD(a) --------------------------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 $29.51 $ 0.15(d) $(13.09) $(12.94) $(0.10) $(3.60) $(3.70) $12.87 Year ended 10/31/07 25.10 0.12 7.68 7.80 (0.04) (3.35) (3.39) 29.51 Year ended 10/31/06 20.60 0.13(d) 5.39 5.52 (0.07) (0.95) (1.02) 25.10 Year ended 10/31/05 16.99 (0.00)(d) 3.61 3.61 -- -- -- 20.60 Year ended 10/31/04 14.28 (0.13)(d) 2.84 2.71 -- -- -- 16.99 --------------------------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 26.73 (0.01)(d) (11.69) (11.70) -- (3.60) (3.60) 11.43 Year ended 10/31/07 23.15 (0.07) 7.00 6.93 -- (3.35) (3.35) 26.73 Year ended 10/31/06 19.18 (0.04)(d) 5.01 4.97 (0.05) (0.95) (1.00) 23.15 Year ended 10/31/05 15.93 (0.12)(d) 3.37 3.25 -- -- -- 19.18 Year ended 10/31/04 13.45 (0.19)(d) 2.67 2.48 -- -- -- 15.93 --------------------------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 26.74 (0.01)(d) (11.70) (11.71) -- (3.60) (3.60) 11.43 Year ended 10/31/07 23.16 (0.07) 7.00 6.93 -- (3.35) (3.35) 26.74 Year ended 10/31/06 19.19 (0.04)(d) 5.01 4.97 (0.05) (0.95) (1.00) 23.16 Year ended 10/31/05 15.93 (0.12)(d) 3.38 3.26 -- -- -- 19.19 Year ended 10/31/04 13.46 (0.19)(d) 2.66 2.47 -- -- -- 15.93 --------------------------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(f) 15.38 0.01(d) (2.52) (2.51) -- -- -- 12.87 --------------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS Year ended 10/31/08 29.53 0.23(d) (13.12) (12.89) (0.11) (3.60) (3.71) 12.93 Year ended 10/31/07(f) 27.82 0.02 1.69 1.71 -- -- -- 29.53 ___________________________________________________________________________________________________________________________ =========================================================================================================================== RATIO OF RATIO OF EXPENSES EXPENSES TO AVERAGE TO AVERAGE NET RATIO OF NET NET ASSETS ASSETS WITHOUT INVESTMENT NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS) TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO RETURN(b) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(c) ----------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 (49.68)% $ 464,060 1.45%(e) 1.46%(e) 0.70%(e) 74% Year ended 10/31/07 34.57 1,022,682 1.42 1.50 0.47 43 Year ended 10/31/06 27.71 809,309 1.51 1.64 0.56 64 Year ended 10/31/05 21.25 676,291 1.65 1.76 (0.02) 67 Year ended 10/31/04 18.98 566,573 2.02 2.03 (0.81) 68 ----------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 (50.07) 44,392 2.20(e) 2.21(e) (0.05)(e) 74 Year ended 10/31/07 33.58 136,818 2.17 2.25 (0.28) 43 Year ended 10/31/06 26.80 132,391 2.26 2.39 (0.19) 64 Year ended 10/31/05 20.40 152,878 2.31 2.42 (0.68) 67 Year ended 10/31/04 18.44 257,230 2.52 2.53 (1.31) 68 ----------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 (50.09) 19,690 2.20(e) 2.21(e) (0.05)(e) 74 Year ended 10/31/07 33.56 43,760 2.17 2.25 (0.28) 43 Year ended 10/31/06 26.79 28,619 2.26 2.39 (0.19) 64 Year ended 10/31/05 20.47 22,488 2.31 2.42 (0.68) 67 Year ended 10/31/04 18.35 21,059 2.52 2.53 (1.31) 68 ----------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(f) (16.32) 1,580 1.24(e)(g) 1.26(e)(g) 0.91(e)(g) 74 ----------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS Year ended 10/31/08 (49.46) 17,593 0.93(e) 0.94(e) 1.22(e) 74 Year ended 10/31/07(f) 6.15 11 1.00(g) 1.00(g) 0.90(g) 43 ___________________________________________________________________________________________________________ ===========================================================================================================
(a) Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. (b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. (c) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. (d) Calculated using average shares outstanding. (e) Ratios are based on average daily net assets (000's omitted) of $805,023, $94,115, $35,227, $1,571, and $15,043 for Class A, Class B, Class C, Class Y and Institutional Class shares, respectively. (f) Commencement date of Class Y and Institutional Class shares was October 3, 2008 and September 28, 2007, respectively. (g) Annualized. 20 AIM GLOBAL SMALL & MID CAP GROWTH FUND NOTE 12--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On May 23, 2008, the Securities and Exchange Commission ("SEC") publicly posted its final approval of the Distribution Plans ("Distribution Plans") for the distribution of monies placed into two separate Fair Funds created pursuant to a settlement reached on October 8, 2004 between Invesco Funds Group, Inc. ("IFG"), Invesco Aim Advisors, Inc. ("Invesco Aim") and Invesco Aim Distributors, Inc. ("IADI") and the SEC (the "Order"). One of the Fair Funds consists of $325 million, plus interest and any contributions by other settling parties, for distribution to shareholders of certain mutual funds formerly advised by IFG who may have been harmed by market timing and related activity. The second Fair Fund consists of $50 million, plus interest and any contributions by other settling parties, for distribution to shareholders of mutual funds advised by Invesco Aim who may have been harmed by market timing and related activity. The Distribution Plans provide for the distribution to all eligible investors to compensate such investors for injury they may have suffered as a result of market timing in the affected funds. The Distribution Plans include a provision for any residual amounts in the Fair Funds to be distributed in the future to the affected funds. Because the distribution of the Fair Funds has not yet commenced, management of Invesco Aim and the Fund are unable to estimate the amount of distribution to be made to the Fund, if any. At the request of the trustees of the AIM Funds, Invesco Ltd. ("Invesco"), the parent company of IFG and Invesco Aim, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. PENDING LITIGATION AND REGULATORY INQUIRIES On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05- 1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into certain arrangements permitting market timing of the AIM Funds and failed to disclose these arrangements in the prospectuses for such Funds, and conclusions of law to the effect that Invesco Aim and IADI violated the West Virginia securities laws. The WVASC orders Invesco Aim and IADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. By agreement with the Commissioner of Securities, Invesco Aim's time to respond to that Order has been indefinitely suspended. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; and - that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid. The case pending in Illinois State Court regarding fair value pricing was dismissed with prejudice on May 6, 2008. All lawsuits based on allegations of market timing, late trading and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various Invesco Aim- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA purportedly brought on behalf of participants in the Invesco 401(k) plan. Based on orders issued by the MDL Court, all claims asserted against the AIM Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco defendants' motion to dismiss the Amended Class Action Complaint for Violations of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June 16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and remanded this lawsuit back to the MDL Court for further proceedings. IFG, Invesco Aim, IADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the future. At the present time, management of Invesco Aim and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund. 21 AIM GLOBAL SMALL & MID CAP GROWTH FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of AIM International Mutual Funds and Shareholders of AIM Global Small & Mid Cap 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 Small & Mid Cap Growth Fund, formerly known as AIM Global Aggressive Growth Fund (one of the funds constituting AIM International Mutual Funds, hereafter referred to as the "Fund") at October 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP December 16, 2008 Houston, Texas 22 AIM GLOBAL SMALL & MID CAP GROWTH FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. With the exception of the actual ending account value and expenses of the Class Y Shares, the example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. The actual ending account and expenses of the Class Y shares in the below example are based on an investment of $1,000 invested as of close of business October 3, 2008 (the date the share class commenced operations) and held through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period (as of close of business October 3, 2008 through October 31, 2008 for the Class Y shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class Y shares, the ending account value and expense information may not provide a meaningful comparison to mutual funds that provide such information for a full six month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
--------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO --------------------------------------------------------------------------------------------------- A $1,000.00 $589.30 $5.99 $1,017.60 $ 7.61 1.50% --------------------------------------------------------------------------------------------------- B 1,000.00 586.80 8.97 1,013.83 11.39 2.25 --------------------------------------------------------------------------------------------------- C 1,000.00 587.30 8.98 1,013.83 11.39 2.25 --------------------------------------------------------------------------------------------------- Y 1,000.00 837.50 0.90 1,018.90 6.29 1.24 ---------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008 (as of close of business October 3, 2008 through October 31, 2008 for the Class Y shares), after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. For the Class Y shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 29 (as of close of business October 3, 2008, through October 31, 2008)/366. Because the Class Y shares have not been in existence for a full six month period, the actual ending account value and expense information shown may not provide a meaningful comparison to fund expense information of classes that show such data for a full six month period and, because the actual ending account value and expense information in the expense example covers a short time period, return and expense data may not be indicative of return and expense data for longer time periods. (3) Hypothetical expenses are equal to the annualized as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. The hypothetical ending account value and expenses may be used to compare ongoing costs of investing the Institutional Class shares of the Fund and other funds because such data is based on a full six month period. 23 AIM GLOBAL SMALL & MID CAP GROWTH FUND Supplement to Annual Report dated 10/31/08 AIM GLOBAL SMALL & MID CAP GROWTH FUND ========================================== INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS The total annual Fund operating expense For periods ended 10/31/08 ratio set forth in the most recent Fund The following information has been prospectus as of the date of this supple- prepared to provide Institutional Class 10 Years 4.13% ment for Institutional Class shares was shareholders with a performance overview 5 Years 4.67 1.02%. The expense ratios presented above specific to their holdings. Institutional 1 Year -49.43 may vary from the expense ratios presented Class shares are offered exclusively to ========================================== in other sections of the actual report institutional investors, including defined that are based on expenses incurred during contribution plans that meet certain ========================================== the period covered by the report. criteria. AVERAGE ANNUAL TOTAL RETURNS For periods ended 9/30/08, most recent A redemption fee of 2% will be imposed calendar quarter-end on certain redemptions or exchanges out of the Fund within 31 days of purchase. 10 Years 7.37% Exceptions to the redemption fee are 5 Years 11.53 listed in the Fund's prospectus. 1 Year -31.05 ========================================== Please note that past performance is not indicative of future results. More Institutional Class shares' inception date recent returns may be more or less than is September 28, 2007. Returns since that those shown. All returns assume date are historical returns. All other reinvestment of distributions at NAV. returns are blended returns of historical Investment return and principal value will Institutional Class share performance and fluctuate so your shares, when redeemed, restated Class A share performance (for may be worth more or less than their periods prior to the inception date of original cost. See full report for infor- Institutional Class shares) at net asset mation on comparative benchmarks. Please value (NAV) and reflect the Rule 12b-1 consult your Fund prospectus for more fees applicable to Class A shares. Class A information. For the most current shares' inception date is September 15, month-end performance, please call 800 451 1994. 4246 or visit invescoaim.com. Institutional Class shares have no sales charge; therefore, performance is at NAV. Performance of Institutional Class shares will differ from performance of other share classes primarily due to differing sales charges and class expenses. ========================================== NASDAQ SYMBOL GAIIX ========================================== Over for information on your Fund's expenses. THIS SUPPLEMENT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. FOR INSTITUTIONAL INVESTOR USE ONLY This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use. [INVESCO AIM LOGO] invescoaim.com GSMG-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
----------------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO ----------------------------------------------------------------------------------------------------------- Institutional $1,000.00 $590.90 $3.80 $1,020.36 $4.82 0.95% -----------------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. AIM GLOBAL SMALL & MID CAP GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT The Board of Trustees (the Board) of AIM renewal process, the Trustees receive from one another and attributed different International Mutual Funds is required comparative performance and fee data weight to the various factors. The under the Investment Company Act of 1940 regarding the AIM Funds prepared by an Trustees recognized that the advisory to approve annually the renewal of the AIM independent company, Lipper, Inc. arrangements and resulting advisory fees Global Small & Mid Cap Growth Fund's (the (Lipper), under the direction and for the Fund and the other AIM Funds are Fund) investment advisory agreement with supervision of the independent Senior the result of years of review and Invesco Aim Advisors, Inc. (Invesco Aim). Officer who also prepares a separate negotiation between the Trustees and During contract renewal meetings held on analysis of this information for the Invesco Aim, that the Trustees may focus June 18-19, 2008, the Board as a whole and Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of the disinterested or "independent" recommendations to the Investments these arrangements in some years than in Trustees, voting separately, approved the Committee regarding the performance, fees others, and that the Trustees' continuance of the Fund's investment and expenses of their assigned funds. The deliberations and conclusions in a advisory agreement for another year, Investments Committee considers each particular year may be based in part on effective July 1, 2008. In doing so, the Sub-Committee's recommendations and makes their deliberations and conclusions of Board determined that the Fund's its own recommendations regarding the these same arrangements throughout the investment advisory agreement is in the performance, fees and expenses of the AIM year and in prior years. best interests of the Fund and its Funds to the full Board. The Investments shareholders and that the compensation to Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF Invesco Aim under the Fund's investment SubCommittee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION advisory agreement is fair and reasonable. its annual recommendation to the Board whether to approve the continuance of each The discussion below serves as a summary The independent Trustees met separately AIM Fund's investment advisory agreement of the Senior Officer's independent during their evaluation of the Fund's and sub-advisory agreements for another written evaluation with respect to the investment advisory agreement with year. Fund's investment advisory agreement as independent legal counsel from whom they well as a discussion of the material received independent legal advice, and the The independent Trustees are assisted factors and related conclusions that independent Trustees also received in their annual evaluation of the Fund's formed the basis for the Board's approval assistance during their deliberations from investment advisory agreement by the of the Fund's investment advisory the independent Senior Officer, a independent Senior Officer. One agreement and sub-advisory agreements. full-time officer of the AIM Funds who responsibility of the Senior Officer is to Unless otherwise stated, information set reports directly to the independent manage the process by which the AIM Funds' forth below is as of June 19, 2008 and Trustees. proposed management fees are negotiated does not reflect any changes that may have during the annual contract renewal process occurred since that date, including but THE BOARD'S FUND EVALUATION PROCESS to ensure that they are negotiated in a not limited to changes to the Fund's manner that is at arms' length and performance, advisory fees, expense The Board's Investments Committee has reasonable. Accordingly, the Senior limitations and/or fee waivers. established three Sub-Committees that are Officer must either supervise a responsible for overseeing the management competitive bidding process or prepare an I. Investment Advisory Agreement of a number of the series portfolios of independent written evaluation. The Senior the AIM Funds. This Sub-Committee Officer has recommended that an A. Nature, Extent and Quality of structure permits the Trustees to focus on independent written evaluation be provided the performance of the AIM Funds that have and, at the direction of the Board, has Services Provided by Invesco Aim The been assigned to them. The Sub-Committees prepared an independent written Board reviewed the advisory services meet throughout the year to review the evaluation. provided to the Fund by Invesco Aim under performance of their assigned funds, and the Fund's investment advisory agreement, the Sub-Committees review monthly and During the annual contract renewal the performance of Invesco Aim in quarterly comparative performance process, the Board considered the factors providing these services, and the information and periodic asset flow data discussed below under the heading "Factors credentials and experience of the officers for their assigned funds. These materials and Conclusions and Summary of Independent and employees of Invesco Aim who provide are prepared under the direction and Written Fee Evaluation" in evaluating the these services. The Board's review of the supervision of the independent Senior fairness and reasonableness of the Fund's qualifications of Invesco Aim to provide Officer. Over the course of each year, the investment advisory agreement and these services included the Board's Sub-Committees meet with portfolio sub-advisory agreements at the contract consideration of Invesco Aim's portfolio managers for their assigned funds and renewal meetings and at their meetings and product review process, various back other members of management and review throughout the year as part of their office support functions provided by with these individuals the performance, ongoing oversight of the Fund. The Fund's Invesco Aim, and Invesco Aim's equity and investment objective(s), policies, investment advisory agreement and fixed income trading operations. The Board strategies and limitations of these funds. sub-advisory agreements were considered concluded that the nature, extent and In addition to their meetings throughout separately, although the Board also quality of the advisory services provided the year, the Sub-Committees meet at considered the common interests of all of to the Fund by Invesco Aim were designated contract renewal meetings each the AIM Funds in their deliberations. The appropriate and that Invesco Aim currently year to conduct an in-depth review of the Board considered all of the information is providing satisfactory advisory performance, fees and expenses of their provided to them and did not identify any services in accordance with the terms of assigned funds. During the contract particular factor that was controlling. the Fund's investment advisory agreement. Each Trustee may have evaluated the In addition, based on their ongoing information provided differently meetings throughout the year with the Fund's portfolio manager or managers, continued
24 AIM GLOBAL SMALL & MID CAP GROWTH FUND the Board concluded that these individuals C. Advisory Fees and Fee Waivers and the profitability of Invesco Aim and are competent and able to continue to its affiliates in providing these carry out their responsibilities under the The Board compared the Fund's contractual services. The Board also reviewed Fund's investment advisory agreement. advisory fee rate to the contractual information concerning the financial advisory fee rates of funds in the Fund's condition of Invesco Aim and its In determining whether to continue the expense group that are not managed by affiliates. The Board also reviewed with Fund's investment advisory agreement, the Invesco Aim, at a common asset level and Invesco Aim the methodology used to Board considered the prior relationship as of the end of the past calendar year. prepare the profitability information. The between Invesco Aim and the Fund, as well The Board noted that the Fund's Board considered the overall profitability as the Board's knowledge of Invesco Aim's contractual advisory fee rate was below of Invesco Aim, as well as the operations, and concluded that it was the median contractual advisory fee rate profitability of Invesco Aim in connection beneficial to maintain the current of funds in its expense group. The Board with managing the Fund. The Board noted relationship, in part, because of such also reviewed the methodology used by that Invesco Aim continues to operate at a knowledge. The Board also considered the Lipper in determining contractual fee net profit, although increased expenses in steps that Invesco Aim and its affiliates rates. The Board noted that Invesco Aim recent years have reduced the have taken over the last several years to does not serve as an advisor to other profitability of Invesco Aim and its improve the quality and efficiency of the mutual funds or other clients with affiliates. The Board concluded that the services they provide to the AIM Funds in investment strategies comparable to those Fund's fees were fair and reasonable, and the areas of investment performance, of the Fund. that the level of profits realized by product line diversification, Invesco Aim and its affiliates from distribution, fund operations, shareholder The Board concluded that it was not providing services to the Fund was not services and compliance. The Board necessary at this time to discuss with excessive in light of the nature, quality concluded that the quality and efficiency Invesco Aim whether to implement any fee and extent of the services provided. The of the services Invesco Aim and its waivers or expense limitations because the Board considered whether Invesco Aim is affiliates provide to the AIM Funds in Fund's total expenses were below the financially sound and has the resources each of these areas have generally median total expenses of the funds in the necessary to perform its obligations under improved, and support the Board's approval Fund's Lipper expense group that are not the Fund's investment advisory agreement, of the continuance of the Fund's managed by Invesco Aim. and concluded that Invesco Aim has the investment advisory agreement. financial resources necessary to fulfill After taking account of the Fund's these obligations. B. Fund Performance contractual advisory fee rate, as well as the comparative advisory fee information F. Independent Written Evaluation of The Board compared the Fund's performance discussed above, the Board concluded that the Fund's Senior Officer during the past one, three and five the Fund's advisory fees were fair and calendar years to the performance of funds reasonable. The Board noted that, at their direction, in the Fund's performance group that are the Senior Officer of the Fund, who is not managed by Invesco Aim, and against D. Economies of Scale and Breakpoints independent of Invesco Aim and Invesco the performance of all funds in the MSCI Aim's affiliates, had prepared an World Growth Index. The Board also The Board considered the extent to which independent written evaluation to assist reviewed the criteria used by Invesco Aim there are economies of scale in Invesco the Board in determining the to identify the funds in the Fund's Aim's provision of advisory services to reasonableness of the proposed management performance group for inclusion in the the Fund. The Board also considered fees of the AIM Funds, including the Fund. Lipper reports. The Board noted that the whether the Fund benefits from such The Board noted that they had relied upon Fund's performance was in the first economies of scale through contractual the Senior Officer's written evaluation quintile of its performance group for the breakpoints in the Fund's advisory fee instead of a competitive bidding process. one, three and five year periods (the schedule or through advisory fee waivers In determining whether to continue the first quintile being the best performing or expense limitations. The Board noted Fund's investment advisory agreement, the funds and the fifth quintile being the that the Fund's contractual advisory fee Board considered the Senior Officer's worst performing funds). The Board noted schedule includes seven breakpoints and written evaluation. that the Fund's performance was above the that the level of the Fund's advisory performance of the Index for the one, fees, as a percentage of the Fund's net G. Collateral Benefits to Invesco Aim three and five year periods. The Board assets, has decreased as net assets and its Affiliates also considered the steps Invesco Aim has increased because of the breakpoints. taken over the last several years to Based on this information, the Board The Board considered various other improve the quality and efficiency of the concluded that the Fund's advisory fees benefits received by Invesco Aim and its services that Invesco Aim provides to the appropriately reflect economies of scale affiliates resulting from Invesco Aim's AIM Funds. The Board concluded that at current asset levels. The Board also relationship with the Fund, including the Invesco Aim continues to be responsive to noted that the Fund shares directly in fees received by Invesco Aim and its the Board's focus on fund performance. economies of scale through lower fees affiliates for their provision of Although the independent written charged by third party service providers administrative, transfer agency and evaluation of the Fund's Senior Officer based on the combined size of all of the distribution services to the Fund. The only considered Fund performance through AIM Funds and affiliates. Board considered the performance of the most recent calendar year, the Board Invesco Aim and its affiliates in also reviewed more recent Fund performance E. Profitability and Financial providing these services and the and this review did not change their Resources of Invesco Aim organizational structure employed by conclusions. Invesco Aim and its affiliates to provide The Board reviewed information from these services. The Board also considered Invesco Aim concerning the costs of the that these services are provided to the advisory and other services that Invesco Fund pursuant to written contracts Aim and its affiliates provide to the Fund continued
25 AIM GLOBAL SMALL & MID CAP GROWTH FUND which are reviewed and approved on an II. Sub-Advisory Agreements its shareholders, as they are paid by annual basis by the Board. The Board Invesco Aim to the Affiliated concluded that Invesco Aim and its A. Nature, Extent and Quality of Sub-Advisers, and that Invesco Aim and the affiliates were providing these services Services Provided by Affiliated Affiliated Sub-Advisers are affiliates. in a satisfactory manner and in accordance Sub-Advisers After taking account of the Fund's with the terms of their contracts, and contractual sub-advisory fee rate, as well were qualified to continue to provide The Board reviewed the services to be as other relevant factors, the Board these services to the Fund. provided by Invesco Trimark Ltd., Invesco concluded that the Fund's sub-advisory Asset Management Deutschland, GmbH, fees were fair and reasonable. The Board considered the benefits Invesco Asset Management Limited, Invesco realized by Invesco Aim as a result of Asset Management (Japan) Limited, Invesco D. Financial Resources of the portfolio brokerage transactions executed Australia Limited, Invesco Global Asset Affiliated Sub-Advisers through "soft dollar" arrangements. Under Management (N.A.), Inc., Invesco Hong Kong these arrangements, portfolio brokerage Limited, Invesco Institutional (N.A.), The Board considered whether each commissions paid by the Fund and/or other Inc. and Invesco Senior Secured Affiliated Sub-Adviser is financially funds advised by Invesco Aim are used to Management, Inc. (collectively, the sound and has the resources necessary to pay for research and execution services. "Affiliated Sub-Advisers") under the perform its obligations under its The Board noted that soft dollar sub-advisory agreements and the respective sub-advisory agreement, and arrangements shift the payment obligation credentials and experience of the officers concluded that each Affiliated Sub-Adviser for the research and execution services and employees of the Affiliated has the financial resources necessary to from Invesco Aim to the funds and Sub-Advisers who will provide these fulfill these obligations. therefore may reduce Invesco Aim's services. The Board concluded that the expenses. The Board also noted that nature, extent and quality of the services research obtained through soft dollar to be provided by the Affiliated arrangements may be used by Invesco Aim in Sub-Advisers were appropriate. The Board making investment decisions for the Fund noted that the Affiliated Sub-Advisers, and may therefore benefit Fund which have offices and personnel that are shareholders. The Board concluded that geographically dispersed in financial Invesco Aim's soft dollar arrangements centers around the world, have been formed were appropriate. The Board also concluded in part for the purpose of researching and that, based on their review and compiling information and making representations made by Invesco Aim, these recommendations on the markets and arrangements were consistent with economies of various countries and regulatory requirements. securities of companies located in such countries or on various types of The Board considered the fact that the investments and investment techniques, and Fund's uninvested cash and cash collateral providing investment advisory services. from any securities lending arrangements The Board concluded that the sub-advisory may be invested in money market funds agreements will benefit the Fund and its advised by Invesco Aim pursuant to shareholders by permitting Invesco Aim to procedures approved by the Board. The utilize the additional resources and Board noted that Invesco Aim will receive talent of the Affiliated Sub-Advisers in advisory fees from these affiliated money managing the Fund. market funds attributable to such investments, although Invesco Aim has B. Fund Performance contractually agreed to waive through at least June 30, 2009, the advisory fees The Board did not view Fund performance as payable by the Fund in an amount equal to a relevant factor in considering whether 100% of the net advisory fees Invesco Aim to approve the sub-advisory agreements for receives from the affiliated money market the Fund, as no Affiliated Sub-Adviser funds with respect to the Fund's currently manages any portion of the investment of uninvested cash, but not Fund's assets. cash collateral. The Board considered the contractual nature of this fee waiver and C. Sub-Advisory Fees noted that it remains in effect until at least June 30, 2009. The Board concluded The Board considered the services to be that the Fund's investment of uninvested provided by the Affiliated Sub-Advisers cash and cash collateral from any pursuant to the sub-advisory agreements securities lending arrangements in the and the services to be provided by Invesco affiliated money market funds is in the Aim pursuant to the Fund's investment best interests of the Fund and its advisory agreement, as well as the shareholders. allocation of fees between Invesco Aim and the Affiliated Sub-Advisers pursuant to the sub-advisory agreements. The Board noted that the sub-advisory fees have no direct effect on the Fund or
26 AIM GLOBAL SMALL & MID CAP GROWTH FUND TAX INFORMATION Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors. The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state's requirement. The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2008:
FEDERAL AND STATE INCOME TAX ---------------------------- Long-Term Capital Gain Dividends $138,814,141 Qualified Dividend Income* 80.61% Corporate Dividends Received Deduction* 9.07%
* The above percentages are based on ordinary income dividends paid to shareholders during the Fund's fiscal year. NON-RESIDENT ALIEN SHAREHOLDER INFORMATION The percentages of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008 and October 31, 2008 were 69.93%, 67.85%, 66.56%, and 66.26%, respectively. 27 AIM GLOBAL SMALL & MID CAP GROWTH FUND TRUSTEES AND OFFICERS The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 103 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS -------------------------------------------------------------------------------------------------------------------------------- Martin L. 2007 Executive Director, Chief Executive Officer and President, None Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global Trustee investment management firm); Chairman, Invesco Aim Advisors, Inc. (registered investment advisor); Director, Chairman, Chief Executive Officer and President, IVZ Inc. (holding company); INVESCO North American Holdings, Inc. (holding company); and, INVESCO Group Services, Inc. (service provider); Trustee, The AIM Family of Funds--Registered Trademark--; Vice Chairman, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business Formerly: Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco Aim and a global investment management firm); Chairman, Investment Company Institute; President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) -------------------------------------------------------------------------------------------------------------------------------- Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim Advisors, Inc., and 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Aim Management Group, Inc. (financial services holding company) and Invesco Aim Capital Management, Inc. (registered investment advisor); Director and President, INVESCO Funds Group, Inc. (registered investment advisor and register transfer agent) and AIM GP Canada Inc. (general partner for a limited partnership); Director, Invesco Aim Distributors, Inc. (registered broker dealer); Director and Chairman, Invesco Aim Investment Services, Inc. (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, IVZ Callco Inc. (holding company), INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (formerly AIM Canada Holdings Inc.) (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (formerly AIM Trimark Global Fund Inc.) (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services) (registered investment advisor and registered transfer agent) and Invesco Trimark Dealer Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered broker dealer); Trustee, President and Principal Executive Officer of The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only); and Manager, Invesco PowerShares Capital Management LLC Formerly: President, Invesco Trimark Dealer Inc.; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Director and President, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services); Senior Managing Director, Invesco Holding Company Limited; Trustee and Executive Vice President, Tax-Free Investments Trust; Director and Chairman, Fund Management Company (registered broker dealer); President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; and Director, Trimark Trust (federally regulated Canadian Trust Company) -------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES -------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates (technology ACE Limited Trustee and Chair consulting company) (insurance company); Captaris, Inc. (unified messaging provider); and Investment Company Institute -------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Trustee Formerly: Partner, law firm of Baker & McKenzie; and None Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) -------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Policy Trustee firm) Studies, Inc. and Van Gilder Insurance Corporation -------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business None Trustee corporations, including the Boss Group Ltd. (private investment and management); Continental Energy Services, LLC (oil and gas pipeline service); Reich & Tang Funds (registered investment company); Annuity and Life Re (Holdings), Ltd. (reinsurance company), and Homeowners of America Holding Corporation/Homeowners of America Insurance Company (property casualty company) Formerly: Director, CompuDyne Corporation (provider of product and services to the public security market); Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; Director of various public and private corporations -------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff Trustee (government affairs company); and Owner and Chief Executive Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate entertainment) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company); and Discovery Global Education Fund (non-profit) -------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich & Trustee Tang Funds) (15 portfolios) -------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None Trustee -------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee -------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, Jr. -- 1944 2005 Retired Trustee Formerly: Partner, Deloitte & Touche; and Director, Mainstay None VP Series Funds, Inc. (25 portfolios) --------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Flanagan is considered an interested person of the Trust because he is an officer of the advisor to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the advisor to the Trust. (2) Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. 28 AIM GLOBAL SMALL & MID CAP GROWTH FUND TRUSTEES AND OFFICERS--(CONTINUED)
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS -------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A Senior Vice President and Funds--Registered Trademark-- Senior Officer Formerly: Director of Compliance and Assistant General Counsel, ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. -------------------------------------------------------------------------------------------------------------------------------- John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc. Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice President and Secretary, Invesco Aim Distributors, Inc.; Director, Vice President and Secretary, Invesco Aim Investment Services, Inc. and INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Vice President and Secretary, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc.; Chief Operating Officer, Senior Vice President, General Counsel and Secretary, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company); Vice President and Secretary, PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker- dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator); General Counsel and Secretary, Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) -------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A Vice President AIM Family of Funds--Registered Trademark-- Formerly: Senior Vice President, Invesco Aim Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark--; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.; Vice President, Invesco Aim Investment Services, Inc. and Fund Management Company; and Senior Vice President and Compliance Director, Delaware Investments Family of Funds -------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited, IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO Funds Group, Inc.; Secretary, INVESCO North American Holdings, Inc.; and Vice President, The AIM Family of Funds--Registered Trademark-- Formerly: Director, Senior Vice President, Secretary and General Counsel, Invesco Aim Management Group, Inc. and Invesco Aim Advisors, Inc.; Senior Vice President, Invesco Aim Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc. and Invesco Aim Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; Director and Vice President, INVESCO Distributors, Inc. and Chief Executive Officer and President, INVESCO Funds Group, Inc. -------------------------------------------------------------------------------------------------------------------------------- Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President, and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. Officer and Invesco Aim Private Asset Management Inc. Formerly: Assistant Vice President and Assistant Treasurer, The AIM Family of Funds--Registered Trademark-- and Assistant Vice President, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. -------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed Income and Cash Management N/A Vice President Group; Director of Cash Management and Senior Vice President, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc; Executive Vice President, Invesco Aim Distributors, Inc.; Senior Vice President, Invesco Aim Management Group, Inc.; Vice President, The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); and President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only) Formerly President and Principal Executive Officer, Tax-Free Investments Trust; Director and President, Fund Management Company; Chief Cash Management Officer and Managing Director, Invesco Aim Capital Management, Inc.; and Vice President, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only) -------------------------------------------------------------------------------------------------------------------------------- Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc., Invesco Aim Private Asset Management, Inc. and The AIM Family of Funds--Registered Trademark-- Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company; and Manager of the Fraud Prevention Department, Invesco Aim Investment Services, Inc. -------------------------------------------------------------------------------------------------------------------------------- Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, The AIM Family of Funds--Registered Trademark--, Invesco Global Asset Management (N.A.), Inc. (registered investment advisor), Invesco Institutional (N.A.), Inc., (registered investment advisor), INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment advisor) and Invesco Senior Secured Management, Inc. (registered investment advisor); and Vice President, Invesco Aim Distributors, Inc. and Invesco Aim Investment Services, Inc. Formerly: Vice President, Invesco Aim Capital Management, Inc. and Fund Management Company; and Global Head of Product Development, AIG-Global Investment Group, Inc. --------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund's prospectus for information on the Fund's sub- advisors. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers Suite 100 Inc. Inc. LLP Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street Suite 100 Suite 100 Suite 2900 Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and & Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company 2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
29 AIM GLOBAL SMALL & MID CAP GROWTH FUND [GO PAPERLESS GRAPHIC] ==================================================================================================================================== GO PAPERLESS WITH EDELIVERY Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund reports and prospectuses with a service that's all about eeees: o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will trees used to produce paper. be sent via email as soon as they're available. o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer expenses and put more capital back in your fund's returns. with a few clicks of your mouse. This service is provided by Invesco Aim Investment Services, Inc. ==================================================================================================================================== FUND HOLDINGS AND PROXY VOTING INFORMATION The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your Fund from the dropdown menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC website at sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 942 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-06463 and 033-44611. 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 Invesco Aim website, invescoaim. com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is available at our website. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC website, sec.gov. If used after January 20, 2009, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the [INVESCO AIM LOGO] investment advisors for the products and services represented by Invesco Aim; they each provide -- SERVICE MARK -- investment advisory services to individual and institutional clients and do not sell securities. Please refer to each fund's prospectus for information on the fund's subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the retail mutual funds, exchange-traded funds and institutional money market funds and the subdistributor for the STIC Global Funds represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd. invescoaim.com GSMG-AR-1 Aim Distributors, Inc.
[INVESCO AIM LOGO] INTERNATIONAL CORE EQUITY FUND -- SERVICE MARK -- Annual Report to Shareholders o October 31, 2008 [MOUNTAIN GRAPHIC] 2 Letters to Shareholders 4 Performance Summary 4 Management Discussion 6 Long-Term Fund Performance 8 Supplemental Information 9 Schedule of Investments 12 Financial Statements 15 Notes to Financial Statements 21 Financial Highlights 23 Auditor's Report 24 Fund Expenses 25 Approval of Investment Advisory Agreement 28 Tax Information 29 Trustees and Officers
Dear Shareholder: In previous reports, I've talked with you about short-term market volatility. I'd like to take this opportunity to update you on recent market developments and [TAYLOR provide some perspective and encouragement to my fellow long-term investors. PHOTO] MARKET OVERVIEW At the start of the fiscal year in November 2007, we saw warning signs of increasing economic ills -- a weakening housing market, rising inflation and Philip Taylor slowing job growth, among others. In response, the U.S. Federal Reserve Board (the Fed) repeatedly cut short-term interest rate targets to stimulate economic growth and expand market liquidity.(1) Also, Congress and the president worked together to enact an economic stimulus plan that included billions of dollars in rebates to taxpayers. These actions helped the economy and the U.S. stock market until the spring of 2008, when other factors came to the forefront -- triggering a severe correction that eventually drove major stock-market indexes to multi-year lows.(2) HOW WE GOT HERE The cause of this correction was years of lax lending associated with the recent housing boom. Mortgage loans of questionable quality were bundled into hard-to-value securities that were bought by, and traded among, financial institutions. As the value of those securities declined, financial institutions sought to unload them -- but there were few buyers. With the value of their assets falling and access to credit tightening, a number of well-established financial firms faced severe difficulties, and investor uncertainty and market volatility spiked. In October 2008, the administration and Congress enacted a plan, the Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury to purchase up to $700 billion in troubled mortgage-related assets -- the largest and most direct effort to resolve a credit crisis in the last half century. The Fed, in concert with other central banks, cut short-term interest rate targets and undertook other initiatives intended to restore investor confidence, expand lending and mitigate the effects of the global credit crisis. The recent volatility in the stock, fixed-income and credit markets has driven home the importance of three timeless investing principles. INVESTING IN VOLATILE MARKETS Through up markets and down, we believe history shows investors should: o INVEST FOR THE LONG TERM. Short-term fluctuations have always been a reality of the markets. We urge you to stick to your investment plan and stay focused on your long-term goals. o DIVERSIFY. Although diversification doesn't eliminate the risk of loss or guarantee a profit, a careful selection of complementary asset classes may cushion your portfolio against excessive volatility. o STAY FULLY INVESTED. Trying to time the market is a gamble, not an investment strategy. A sound investment strategy includes viewing market volatility as a matter of course, not a reason to panic. A trusted financial advisor can explain more fully the potential value of following these principles. An experienced advisor who knows your individual investment goals, financial situation and risk tolerance can be your most valuable asset during times of market volatility. Your advisor can provide guidance and can monitor your investments to ensure they're on course. It's also helpful to remember that many of history's significant buying opportunities resulted from short-term economic crises that, in their time, were considered unprecedented. We believe current market uncertainty may represent a buying opportunity for patient, long-term investors. Rest assured that Invesco Aim's portfolio managers are working diligently on your behalf to capitalize on this situation. MANAGING MONEY IS OUR FOCUS As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain markets. Our parent company, Invesco Ltd., is one of the world's largest and most diversified global investment managers. Invesco provides clients with diversified investment strategies from distinct management teams around the globe and a range of investment products. Invesco's single focus is asset management -- which means we focus on doing one thing well: managing your money. That can be reassuring in uncertain times. While market conditions change often, commitment to putting shareholders first, helping clients achieve their investment goals and providing excellent customer service remains constant. If you have questions about this report or your account, please contact one of our client service representatives at 800 959 4246. Thank you for your continued confidence, and we look forward to serving you.
Sincerely, /S/ PHILIP TAYLOR Philip Taylor Senior Managing Director, Invesco Ltd. CEO, Invesco Aim (1) U.S. Federal Reserve; (2) Lipper Inc. 2 AIM INTERNATIONAL CORE EQUITY FUND Dear Fellow Shareholders: As I write this letter, turbulent financial markets are causing considerable investor anxiety, reminding us again that markets are cyclical and the correction of excess is often painful, at least in the short term. Your Board of Trustees believes in the wisdom of a long-term perspective and consistent investment [CROCKETT discipline. We continue to put your interests first in the effort to improve PHOTO] investment performance, contain shareholder costs and uphold the highest ethical standards. We remain enthusiastic about the global reach and investment expertise that Invesco, a leading independent global investment management company, brings to the management of AIM Funds as the parent company of the advisors. The diverse Bruce Crockett investment strategies deployed throughout the worldwide network of Invesco investment centers has helped strengthen the management of many AIM Funds. The rebranding of the Funds' management company as Invesco Aim was followed by the launch of an upgraded, investor-friendly website (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and Investment News through the end of 2008. At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals." We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be interested to hear your thoughts on this policy. As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured that your comments are received, welcomed and heard in the interim. We look forward to hearing from you and to representing you.
Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair AIM Funds Board of Trustees 3 AIM INTERNATIONAL CORE EQUITY FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ======================================================================================= provided downside protection relative to PERFORMANCE SUMMARY the MSCI EAFE Index and benefited from its quality orientation in stock selection. For the fiscal year ended October 31, 2008, Class A shares of AIM International Core Equity Fund, at net asset value, outperformed the MSCI EAFE Index and the Lipper Our stock selection within the International Large-Cap Core Funds Index.(triangle) industrials sector of the market made the largest contribution to the Fund's Our focus on investing in what we believe are well-established large capitalization relative results. While financials companies with superior financial attributes contributed to the Fund's outperformance. detracted significantly from absolute Stock selections in the industrials sector of the market helped relative performance returns, our stock selection and the most while holdings in consumer discretionary were the largest detractors. underweight position in the sector benefited Fund performance relative to the Your Fund's long-term performance appears later in this report. benchmark as did our stock selection in telecommunication services. The largest FUND VS. INDEXES contributor to overall performance was Japanese consumer staples company SEVEN & Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does I HOLDINGS CO. LTD. NTT DOCOMO INC, a not include applicable contingent deferred sales charges (CDSC) or front-end sales Japanese telecommunications services charges, which would have reduced performance. company, was also among the largest contributors to performance during the Class A Shares -43.45% fiscal year. In addition, our small cash Class B Shares -43.79 position helped the Fund's performance Class C Shares -43.80 versus the MSCI EAFE Index in a falling Class R Shares -43.55 market environment. Class Y Shares* -43.44 Investor Class Shares -43.44 On an absolute basis, all sectors MSCI EAFE Index(triangle) (Broad Market/Style-Specific Index) -46.62 posted double-digit declines during the Lipper International Large-Cap Core Funds Index(triangle) (Peer Group Index) -46.67 period with our financials and consumer discretionary holdings detracting the most (triangle) Lipper Inc. from overall performance. In terms of relative performance, our stock selection * Share class incepted during the fiscal year. See page 7 for a detailed in the consumer discretionary sector was explanation of Fund performance. the largest detractor. Our underweight ======================================================================================= position in utilities also detracted from Fund results versus the MSCI EAFE Index. HOW WE INVEST level of overall portfolio Among the largest detractors from diversification. However, individual performance during the fiscal year were The Fund invests primarily in the stocks holdings are selected based on their own global financial services company BARCLAYS of larger-capitalization foreign companies merits, not on projections of country or and world leader in the cell phone with a record of stable earnings and sector performance. industry, NOKIA. strong balance sheets. Our research efforts target a long time horizon that MARKET CONDITIONS AND YOUR FUND From a geographical perspective, all permits return potential from individual international regions in the Fund declined investments to be driven by a higher share International markets declined sharply during the period with the United Kingdom price associated with the embedded growth during the fiscal year as a number of and Japan detracting the most from of the underlying business, in addition to financial institutions worldwide fell absolute returns. Our stock selec- the prospect of valuation-based multiple victim to the broadening scope of the expansion. credit crisis.(1) All developed countries within the MSCI EAFE Index finished the We strive to maintain a consistent period in negative territory while investment discipline through varying emerging markets like China posted even market conditions and an appropriate larger declines. In this environment, the Fund ========================================== ========================================== ========================================== PORTFOLIO COMPOSITION TOP FIVE COUNTRIES TOP 10 EQUITY HOLDINGS* By sector 1. Japan 23.3% 1. Sanofi-Aventis 3.0% Financials 17.2% 2. United Kingdom 21.8 2. Heineken N.V. 2.7 Energy 12.4 3. Switzerland 9.6 3. Telefonaktiebolaget LM Information Technology 12.1 4. France 8.7 Ericsson-Class B 2.7 Industrials 9.1 5. Netherlands 7.9 4. Zurich Financial Services AG 2.5 Consumer Staples 8.8 ========================================== 5. BP PLC 2.5 Health Care 8.8 6. SMC Corp. 2.5 Consumer Discretionary 8.3 7. HSBC Holdings PLC-ADR 2.4 Telecommunication Services 8.0 ========================================== 8. Vodafone Group PLC 2.4 Materials 5.8 Total Net Assets $308.8 million 9. National Grid PLC 2.4 Utilities 5.0 10. Unilever N.V. 2.3 Money Market Funds Plus Other Total Number of Holdings* 96 ========================================== Assets Less Liabilities 4.5 ========================================== ========================================== The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. * Excluding money market fund holdings.
4 AIM INTERNATIONAL CORE EQUITY FUND tion in Germany and France hurt Fund INGRID BAKER performance relative to the MSCI EAFE Chartered Financial Index. Conversely, our stock selection and [BAKER Analyst, portfolio manager, overweight positions in Switzerland and PHOTO] is manager of AIM Japan helped Fund performance versus the International Core Equity benchmark. Fund. Ms. Baker began her investment career in 1990 and joined While extraordinary government Invesco Ltd. in 1999. She graduated with a intervention efforts domestically and B.A. in international politics from abroad may lead to more stability in Oberlin College and earned an M.B.A. in capital markets, we believe the underlying finance from the University of Navarra in weakness in housing and credit conditions Spain. may weigh on the broader global economy for some time. Although global equity W. LINDSAY DAVIDSON prices have already experienced declines Portfolio manager, is similar to prior bear markets, we cannot manager of AIM International rule out the prospect of further declines [DAVIDSON Core Equity Fund. due to the severity of current conditions. PHOTO] Mr. Davidson began his We believe our investment methodology has investment career in 1974 provided attractive relative returns in and has served as a portfolio manager with this type of climate, given our preference Invesco Ltd. and its affiliates since for investing in companies with proven 1984. A native of St. Andrews, Scotland, financial strength. Mr. Davidson earned his degree in economics with honors from Edinburgh We welcome any new investors who have University. joined the Fund during the fiscal year, and to all of our shareholders we would MICHELE GARREN like to say thank you for your continued Chartered Financial investment in AIM International Core Analyst, portfolio manager, Equity Fund. [GARREN is manager of AIM PHOTO] International Core Equity (1) Lipper Inc. Fund. Ms. Garren began her investment career in 1987 The views and opinions expressed in and joined Invesco Ltd. in 1997. She management's discussion of Fund earned a B.B.A. in finance from Southern performance are those of Invesco Aim Methodist University and an M.B.A. in Advisors, Inc. These views and opinions finance from New York University. are subject to change at any time based on factors such as market and economic ERIK GRANADE conditions. These views and opinions may Chartered Financial Analyst, not be relied upon as investment advice or portfolio manager, is manager recommendations, or as an offer for a [GRANADE of AIM International Core particular security. The information is PHOTO] Equity Fund. Mr. Granade not a complete analysis of every aspect of began his investment career any market, country, industry, security or in 1986 and has been a portfolio manager the Fund. Statements of fact are from with Invesco Ltd. and its affiliates since sources considered reliable, but Invesco 1996. He earned a B.A. in economics from Aim Advisors, Inc. makes no representation Trinity College in Hartford, Connecticut or warranty as to their completeness or accuracy. Although historical performance KENT STARKE is no guarantee of future results, these Portfolio manager, is insights may help you understand our manager of AIM International investment management philosophy. [STARKE Core Equity Fund. Mr. Starke PHOTO] began his investment career See important Fund and index disclosures in 1983 and joined Invesco later in this report. Ltd. in 1992. He has been with the international equity product since its inception. Mr. Starke earned a B.B.A. from the University of Georgia and an M.S. in finance from Georgia State University.
5 AIM INTERNATIONAL CORE EQUITY FUND YOUR FUND'S LONG-TERM PERFORMANCE Past performance cannot guarantee Class C shares. The performance of the taxes a shareholder would pay on Fund comparable future results. Fund's other share classes will differ distributions or sale of Fund shares. primarily due to different sales charge The performance data shown in the first structures and class expenses and may be Both charts above are logarithmic chart above is that of the Fund's Investor greater than or less than the performance charts, which present the fluctuation in Class shares. The performance of the of the Fund's Class C shares. The data the value of the Fund's share class and Fund's other share classes will differ shown in this chart includes reinvested its indexes. We believe that a logarithmic primarily due to different sales charge distributions, applicable sales charges chart is more effective than other types structures and class expenses and may be and Fund expenses including management of charts in illustrating changes in value greater than or less than the performance fees. Index results include reinvested during the early years shown in the chart. of the Fund's Investor Class shares. The dividends, but they do not reflect sales The vertical axis, the one that indicates data shown in this chart includes charges. the dollar value of an investment, is reinvested distributions and Fund expenses constructed with each segment representing including management fees. Index results Performance of an index of funds a percent change in the value of the include reinvested dividends. reflects fund expenses and management investment. fees; performance of a market index does The performance data shown in the not. Performance shown in the charts and second chart above is that of the Fund's table does not reflect deduction of
6 AIM INTERNATIONAL CORE EQUITY FUND ==================================================================================================================================== [MOUNTAIN CHART] RESULTS OF A $10,000 INVESTMENT -- INVESTOR CLASS SHARES (OLDEST SHARE CLASS) Fund data from 10/28/98, index data from 10/31/98 AIM International Lipper Core Equity Fund- International Investor Class Large-Cap Core Date Shares MSCI EAFE Index(1) Funds Index(1) 10/28/98 $10000 10/98 10020 $10000 $10000 11/98 10340 10512 10509 12/98 10650 10927 10790 1/99 10429 10895 10876 2/99 10109 10635 10578 3/99 10379 11079 10977 4/99 10589 11528 11495 5/99 10329 10934 11014 6/99 10680 11361 11557 7/99 10780 11698 11860 8/99 10850 11741 11945 9/99 10840 11859 11993 10/99 11199 12303 12428 11/99 11686 12731 13333 12/99 13146 13873 14993 1/00 12043 12992 14125 2/00 12486 13342 15065 3/00 12682 13859 15218 4/00 12002 13130 14298 5/00 11919 12809 14039 6/00 12620 13310 14700 7/00 12126 12752 14252 8/00 12424 12862 14441 9/00 11672 12236 13600 10/00 11497 11947 13213 11/00 11103 11499 12778 12/00 11555 11908 13318 1/01 11950 11902 13288 2/01 11239 11009 12430 3/01 10540 10276 11542 4/01 11273 10990 12271 5/01 11070 10602 11910 6/01 10686 10168 11529 7/01 10392 9983 11210 8/01 10200 9730 10982 9/01 9208 8745 9859 10/01 9228 8969 10073 11/01 9623 9299 10450 12/01 9668 9354 10610 1/02 9352 8857 10105 2/02 9566 8920 10275 3/02 10120 9445 10815 4/02 10391 9464 10836 5/02 10572 9584 10963 6/02 10154 9203 10571 7/02 9092 8294 9477 8/02 9160 8275 9492 9/02 8054 7387 8488 10/02 8303 7784 8992 11/02 8720 8137 9399 ====================================================================================================================================
(1) Lipper Inc. ==================================================================================================================================== [MOUNTAIN CHART] 12/02 8529 7863 9066 1/03 8156 7535 8652 2/03 7930 7362 8438 3/03 7783 7218 8255 4/03 8461 7925 9024 5/03 8913 8405 9548 6/03 9026 8608 9758 7/03 9218 8817 9996 8/03 9388 9030 10240 9/03 9523 9308 10437 10/03 9998 9888 11040 11/03 10311 10108 11248 12/03 11106 10898 12031 1/04 11220 11052 12277 2/04 11492 11307 12554 3/04 11436 11370 12575 4/04 11220 11113 12183 5/04 11311 11151 12161 6/04 11696 11395 12325 7/04 11322 11025 11873 8/04 11356 11074 11971 9/04 11663 11363 12332 10/04 12083 11751 12703 11/04 12741 12553 13523 12/04 13251 13104 14097 1/05 12919 12864 13797 2/05 13537 13419 14422 3/05 13205 13082 14037 4/05 12920 12775 13713 5/05 12885 12781 13758 6/05 12988 12950 13914 7/05 13274 13347 14398 8/05 13594 13685 14854 9/05 14120 14294 15387 10/05 13766 13877 14944 11/05 14005 14216 15290 12/05 14616 14878 16049 1/06 15293 15791 17118 2/06 15305 15756 17013 3/06 15863 16275 17649 4/06 16647 17053 18475 5/06 16076 16391 17614 6/06 16028 16389 17559 7/06 16348 16552 17701 8/06 16752 17007 18195 9/06 16824 17033 18211 10/06 17359 17696 18895 11/06 17693 18224 19464 12/06 18191 18796 20078 1/07 18377 18924 20308 2/07 18340 19076 20244 3/07 18812 19563 20806 4/07 19494 20431 21572 5/07 19904 20790 22192 6/07 19954 20815 22239 7/07 19557 20509 21818 8/07 19557 20188 21659 9/07 20339 21268 22895 10/07 21059 22104 23976 11/07 20029 21377 23030 12/07 19819 20896 22590 1/08 18239 18966 20703 2/08 17953 19237 20750 3/08 17775 19035 20641 4/08 18973 20068 21744 5/08 19205 20264 22111 6/08 17273 18606 20295 ====================================================================================================================================
==================================================================================================================================== [MOUNTAIN CHART] 7/08 16905 18009 19520 8/08 16578 17279 18631 9/08 14810 14781 16220 10/08 11906 11798 12785 ====================================================================================================================================
==================================================================================================================================== [MOUNTAIN CHART] RESULTS OF A $10,000 INVESTMENT -- CLASS C SHARES (OLDEST SHARE CLASS WITH SALES CHARGES) Index data from 1/31/00, Fund data from 2/14/00 Lipper AIM International International Core Equity Fund- Large-Cap Core Date Class C Shares MSCI EAFE Index(1) Funds Index(1) 1/31/00 $10000 $10000 2/00 $10008 10269 10666 3/00 10323 10667 10774 4/00 9651 10106 10122 5/00 9286 9859 9939 6/00 10141 10245 10407 7/00 9635 9815 10090 8/00 10074 9900 10224 9/00 9452 9418 9628 10/00 9105 9196 9354 11/00 8955 8851 9046 12/00 9246 9166 9428 1/01 9455 9161 9407 2/01 9001 8474 8800 3/01 8420 7909 8171 4/01 9001 8459 8687 5/01 8819 8160 8432 6/01 8502 7827 8162 7/01 8257 7684 7936 8/01 8084 7489 7775 9/01 7303 6731 6980 10/01 7322 6903 7132 11/01 7621 7158 7398 12/01 7648 7200 7512 1/02 7394 6818 7154 2/02 7539 6865 7274 3/02 7984 7270 7657 4/02 8184 7285 7672 5/02 8302 7377 7762 6/02 7965 7083 7484 7/02 7121 6384 6709 8/02 7185 6370 6720 9/02 6322 5686 6009 10/02 6503 5991 6366 11/02 6812 6263 6654 12/02 6657 6053 6419 1/03 6348 5800 6125 2/03 6176 5667 5974 3/03 6058 5555 5844 4/03 6576 6100 6389 5/03 6930 6469 6760 6/03 7012 6626 6908 7/03 7157 6786 7077 8/03 7285 6950 7250 9/03 7384 7164 7389 10/03 7748 7611 7816 11/03 7987 7780 7963 12/03 8597 8388 8517 1/04 8688 8507 8692 2/04 8889 8703 8888 3/04 8844 8752 8903 ====================================================================================================================================
(1) Lipper Inc. ==================================================================================================================================== [MOUNTAIN CHART] 4/04 8689 8554 8625 5/04 8752 8583 8610 6/04 9044 8771 8726 7/04 8753 8486 8405 8/04 8771 8524 8475 9/04 8999 8746 8730 10/04 9318 9045 8993 11/04 9819 9662 9574 12/04 10201 10086 9980 1/05 9937 9901 9768 2/05 10411 10329 10210 3/05 10146 10070 9938 4/05 9927 9833 9708 5/05 9890 9838 9740 6/05 9964 9968 9850 7/05 10174 10274 10193 8/05 10420 10533 10516 9/05 10813 11002 10894 10/05 10529 10681 10580 11/05 10712 10942 10825 12/05 11175 11451 11362 1/06 11675 12155 12119 2/06 11675 12128 12045 3/06 12099 12527 12495 4/06 12693 13126 13080 5/06 12250 12616 12470 6/06 12212 12615 12431 7/06 12448 12740 12531 8/06 12740 13090 12881 9/06 12787 13111 12892 10/06 13184 13620 13377 11/06 13429 14027 13780 12/06 13802 14468 14214 1/07 13929 14566 14377 2/07 13900 14683 14332 3/07 14243 15058 14730 4/07 14752 15726 15272 5/07 15045 16002 15711 6/07 15075 16022 15744 7/07 14762 15786 15446 8/07 14751 15539 15334 9/07 15339 16370 16209 10/07 15868 17014 16974 11/07 15084 16454 16304 12/07 14921 16084 15993 1/08 13711 14598 14657 2/08 13497 14807 14690 3/08 13358 14651 14613 4/08 14246 15447 15394 5/08 14407 15597 15654 6/08 12952 14321 14368 7/08 12674 13862 13820 8/08 12416 13300 13190 9/08 11089 11377 11483 10/08 8916 9081 9051 ====================================================================================================================================
========================================== ========================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS As of 10/31/08, including maximum As of 9/30/08, the most recent calendar applicable sales charges quarter-end, including maximum applicable sales charges CLASS A SHARES Inception (3/28/02) 1.46% CLASS A SHARES 5 Years 2.37 Inception (3/28/02) 4.95% 1 Year -46.57 5 Years 7.96 1 Year -31.10 CLASS B SHARES Inception (3/28/02) 1.73% CLASS B SHARES 5 Years 2.46 Inception (3/28/02) 5.22% 1 Year -46.37 5 Years 8.12 1 Year -31.02 CLASS C SHARES Inception (2/14/00) -1.31% CLASS C SHARES 5 Years 2.85 Inception (2/14/00) 1.21% 1 Year -44.32 5 Years 8.47 1 Year -28.36 CLASS R SHARES Inception (11/24/03) 3.00% CLASS R SHARES 1 Year -43.55 Inception (11/24/03) 7.78% 1 Year -27.37 CLASS Y SHARES 10 Years 1.74% INVESTOR CLASS SHARES 5 Years 3.56 Inception (10/28/98) 4.03% 1 Year -43.44 5 Years 9.23 1 Year -27.19 INVESTOR CLASS SHARES ========================================== Inception (10/28/98) 1.76% 10 Years 1.74 5 Years 3.56 1 Year -43.44 ========================================== CLASS Y SHARES' INCEPTION DATE IS OCTOBER THE TOTAL ANNUAL FUND OPERATING EXPENSE WITHIN THE FIRST YEAR. CLASS Y SHARES AND 3, 2008; RETURNS SINCE THAT DATE ARE RATIO SET FORTH IN THE MOST RECENT FUND INVESTOR CLASS SHARES DO NOT HAVE A ACTUAL RETURNS. ALL OTHER RETURNS ARE PROSPECTUS AS OF THE DATE OF THIS REPORT FRONT-END SALES CHARGE OR A CDSC; BLENDED RETURNS OF ACTUAL CLASS Y SHARE FOR CLASS A, CLASS B, CLASS C, CLASS R, THEREFORE, PERFORMANCE IS AT NET ASSET PERFORMANCE AND RESTATED INVESTOR CLASS CLASS Y AND INVESTOR CLASS SHARES WAS VALUE. SHARE PERFORMANCE (FOR PERIODS PRIOR TO 1.41%, 2.16%, 2.16%, 1.66%, 1.16% AND THE INCEPTION DATE OF CLASS Y SHARES) AT 1.41%, RESPECTIVELY. THE EXPENSE RATIOS THE PERFORMANCE OF THE FUND'S SHARE NET ASSET VALUE. THE RESTATED INVESTOR PRESENTED ABOVE MAY VARY FROM THE EXPENSE CLASSES WILL DIFFER PRIMARILY DUE TO CLASS SHARE PERFORMANCE REFLECTS THE RULE RATIOS PRESENTED IN OTHER SECTIONS OF THIS DIFFERENT SALES CHARGE STRUCTURES AND 12B-1 FEES APPLICABLE TO INVESTOR CLASS REPORT THAT ARE BASED ON EXPENSES INCURRED CLASS EXPENSES. SHARES AS WELL AS ANY FEE WAIVERS OR DURING THE PERIOD COVERED BY THIS REPORT. EXPENSE REIMBURSEMENTS RECEIVED BY HAD THE ADVISOR NOT WAIVED FEES AND/OR INVESTOR CLASS SHARES. INVESTOR CLASS CLASS A SHARE PERFORMANCE REFLECTS THE REIMBURSED EXPENSES IN THE PAST ON CLASS C SHARES INCEPTION DATE IS OCTOBER 28, 1998. MAXIMUM 5.50% SALES CHARGE, AND CLASS B SHARES, PERFORMANCE WOULD HAVE BEEN LOWER. AND CLASS C SHARE PERFORMANCE REFLECTS THE THE PERFORMANCE DATA QUOTED REPRESENT APPLICABLE CONTINGENT DEFERRED SALES A REDEMPTION FEE OF 2% WILL BE IMPOSED PAST PERFORMANCE AND CANNOT GUARANTEE CHARGE (CDSC) FOR THE PERIOD INVOLVED. THE ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF COMPARABLE FUTURE RESULTS; CURRENT CDSC ON CLASS B SHARES DECLINES FROM 5% THE FUND WITHIN 31 DAYS OF PURCHASE. PERFORMANCE MAY BE LOWER OR HIGHER. PLEASE BEGINNING AT THE TIME OF PURCHASE TO 0% AT EXCEPTIONS TO THE REDEMPTION FEE ARE VISIT INVESCOAIM.COM FOR THE MOST RECENT THE BEGINNING OF THE SEVENTH YEAR. THE LISTED IN THE FUND'S PROSPECTUS. MONTH-END PERFORMANCE. PERFORMANCE FIGURES CDSC ON CLASS C SHARES IS 1% FOR THE FIRST REFLECT REINVESTED DISTRIBUTIONS, CHANGES YEAR AFTER PURCHASE. CLASS R SHARES DO NOT IN NET ASSET VALUE AND THE EFFECT OF THE HAVE A FRONT-END SALES CHARGE; RETURNS MAXIMUM SALES CHARGE UNLESS OTHERWISE SHOWN ARE AT NET ASSET VALUE AND DO NOT STATED. INVESTMENT RETURN AND PRINCIPAL REFLECT A 0.75% CDSC THAT MAY BE IMPOSED VALUE WILL FLUCTUATE SO THAT YOU MAY HAVE ON A TOTAL REDEMPTION OF RETIREMENT PLAN A GAIN OR LOSS WHEN YOU SELL SHARES. ASSETS
7 AIM INTERNATIONAL CORE EQUITY FUND AIM INTERNATIONAL CORE EQUITY FUND'S INVESTMENT OBJECTIVE IS TOTAL RETURN. o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets. o Unless otherwise noted, all data provided by Invesco Aim. ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION o Effective September 30, 2003, only o The MSCI EAFE--REGISTERED TRADEMARK-- o The Chartered Financial previously established qualified plans INDEX is a free float-adjusted market Analyst--REGISTERED TRADEMARK-- are eligible to purchase Class B shares capitalization index that is designed (CFA--REGISTERED TRADEMARK--) of any AIM fund. to measure developed market equity designation is a globally recognized performance, excluding the U.S. and standard for measuring the competence o Class R shares are available only to Canada. and integrity of investment certain retirement plans. Please see professionals. the prospectus for more information. o The LIPPER INTERNATIONAL LARGE-CAP CORE FUNDS INDEX is an equally weighted o The returns shown in management's o Class Y shares are available only to representation of the largest funds in discussion of Fund performance are certain investors. Please see the the Lipper International Large-Cap Core based on net asset values calculated prospectus for more information. Funds category. These funds typically for shareholder transactions. Generally have an average price-to-cash flow accepted accounting principles require o All Investor Class shares are closed to ratio, price-to-book ratio, and adjustments to be made to the net new investors. Contact your financial three-year sales-per-share growth assets of the Fund at period end for advisor about purchasing our other value, compared to the S&P/Citigroup financial reporting purposes, and as share classes. World ex-U.S. BMI. such, the net asset values for shareholder transactions and the PRINCIPAL RISKS OF INVESTING IN THE FUND o The Fund is not managed to track the returns based on those net asset values performance of any particular index, may differ from the net asset values o Investing in developing countries can including the indexes defined here, and and returns reported in the Financial add additional risk, such as high rates consequently, the performance of the Highlights. of inflation or sharply devalued Fund may deviate significantly from the currencies against the U.S. dollar. performance of the indexes. o Industry classifications used in this Transaction costs are often higher, and report are generally according to the there may be delays in settlement o A direct investment cannot be made in Global Industry Classification procedures. an index. Unless otherwise indicated, Standard, which was developed by and is index results include reinvested the exclusive property and a service o Prices of equity securities change in dividends, and they do not reflect mark of MSCI Inc. and Standard & response to many factors, including the sales charges. Performance of an index Poor's. historical and prospective earnings of of funds reflects fund expenses; the issuer, the value of its assets, performance of a market index does not. general economic conditions, interest rates, investor perceptions and market liquidity. o Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, relative lack of information, relatively low market liquidity, and the potential lack of strict financial and accounting controls and standards. o The prices of securities held by the Fund may decline in response to market risks. ======================================================================================= ========================================== THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares IBVAX ======================================================================================= Class B Shares IBVBX Class C Shares IBVCX NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class R Shares IIBRX Class Y Shares IBVYX Investor Class Shares IIBCX ==========================================
8 AIM INTERNATIONAL CORE EQUITY FUND SCHEDULE OF INVESTMENTS(a) October 31, 2008
SHARES VALUE ------------------------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-95.44% AUSTRALIA-1.23% BHP Billiton Ltd. 197,680 $ 3,797,436 =============================================================================== BRAZIL-0.84% Companhia Energetica de Minas Gerais S.A.-ADR 39,447 599,989 ------------------------------------------------------------------------------- Companhia Vale do Rio Doce-ADR 35,080 460,250 ------------------------------------------------------------------------------- Empresa Brasileira de Aeronautica S.A.-ADR 23,800 497,896 ------------------------------------------------------------------------------- Natura Cosmeticos S.A. 52,600 455,590 ------------------------------------------------------------------------------- Petroleo Brasileiro S.A.-ADR 21,765 585,261 =============================================================================== 2,598,986 =============================================================================== CANADA-1.11% EnCana Corp. 67,500 3,416,174 =============================================================================== CHINA-0.28% China COSCO Holdings Co. Ltd.-Class H 430,000 234,723 ------------------------------------------------------------------------------- CNOOC Ltd. 775,800 635,400 =============================================================================== 870,123 =============================================================================== DENMARK-0.91% Danske Bank A.S. 189,290 2,807,937 =============================================================================== EGYPT-0.10% Orascom Telecom Holding S.A.E.-GDR 9,858 308,725 =============================================================================== FINLAND-2.20% Nokia Oyj 446,228 6,805,536 =============================================================================== FRANCE-8.71% Credit Agricole S.A. 263,991 3,848,513 ------------------------------------------------------------------------------- Publicis Groupe(b) 175,888 3,956,277 ------------------------------------------------------------------------------- Sanofi-Aventis 147,121 9,267,680 ------------------------------------------------------------------------------- Societe Generale-ADR(b) 329,900 3,562,920 ------------------------------------------------------------------------------- Total S.A.-ADR 113,100 6,270,264 =============================================================================== 26,905,654 =============================================================================== GERMANY-4.52% BASF S.E. 151,306 5,083,866 ------------------------------------------------------------------------------- Bayerische Motoren Werke AG 127,995 3,312,800 ------------------------------------------------------------------------------- Commerzbank AG(b) 284,259 3,053,849 ------------------------------------------------------------------------------- E.ON AG 65,528 2,500,694 =============================================================================== 13,951,209 =============================================================================== HONG KONG-2.24% Cheung Kong (Holdings) Ltd. 216,000 2,103,414 ------------------------------------------------------------------------------- Denway Motors Ltd. 2,064,000 504,256 ------------------------------------------------------------------------------- Hutchison Whampoa Ltd. 786,100 4,303,015 =============================================================================== 6,910,685 =============================================================================== HUNGARY-0.03% OTP Bank Nyrt.(b)(c) 6,413 106,976 =============================================================================== INDIA-0.24% Reliance Communications Ltd. 57,200 258,830 ------------------------------------------------------------------------------- State Bank of India-GDR(b) 10,650 489,900 =============================================================================== 748,730 =============================================================================== INDONESIA-0.20% PT Astra International Tbk 282,000 241,752 ------------------------------------------------------------------------------- PT Telekomunikasi Indonesia 785,500 389,976 =============================================================================== 631,728 =============================================================================== ISRAEL-0.34% Makhteshim-Agan Industries Ltd. 89,400 338,905 ------------------------------------------------------------------------------- Teva Pharmaceutical Industries Ltd.-ADR 16,600 711,808 =============================================================================== 1,050,713 =============================================================================== ITALY-1.62% Eni S.p.A.-ADR(b) 103,900 4,992,395 =============================================================================== JAPAN-23.31% Canon Inc. 194,500 6,692,533 ------------------------------------------------------------------------------- East Japan Railway Co. 445 3,161,962 ------------------------------------------------------------------------------- FUJIFILM Holdings Corp. 264,800 5,864,166 ------------------------------------------------------------------------------- Mitsubishi UFJ Financial Group, Inc. 1,068,900 6,581,770 ------------------------------------------------------------------------------- Murata Manufacturing Co., Ltd.(b) 134,000 4,643,545 ------------------------------------------------------------------------------- Nippon Telegraph and Telephone Corp. 973 3,993,138 ------------------------------------------------------------------------------- Nissan Motor Co., Ltd. 553,900 2,897,033 ------------------------------------------------------------------------------- NOK Corp.(b) 247,300 2,404,394 ------------------------------------------------------------------------------- NTT DoCoMo, Inc. 3,400 5,393,885 ------------------------------------------------------------------------------- Seven & I Holdings Co., Ltd. 132,600 3,713,493 ------------------------------------------------------------------------------- SMC Corp.(b) 79,800 7,621,302 ------------------------------------------------------------------------------- Sony Corp.-ADR 162,600 3,778,824 ------------------------------------------------------------------------------- Sumitomo Chemical Co., Ltd. 1,248,000 3,782,595 ------------------------------------------------------------------------------- Takeda Pharmaceutical Co. Ltd. 94,000 4,737,016 ------------------------------------------------------------------------------- Tokyo Electron Ltd. 92,700 3,064,408 ------------------------------------------------------------------------------- Toyota Motor Corp. 92,200 3,634,409 =============================================================================== 71,964,473 ===============================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 9 AIM INTERNATIONAL CORE EQUITY FUND
SHARES VALUE ------------------------------------------------------------------------------- MEXICO-0.24% Cemex S.A.B. de C.V.-CPO(d) 494,100 $ 370,569 ------------------------------------------------------------------------------- Fomento Economico Mexicano, S.A.B. de C.V.-ADR 14,000 354,060 =============================================================================== 724,629 =============================================================================== NETHERLANDS-7.89% Heineken N.V.(b) 245,922 8,297,534 ------------------------------------------------------------------------------- Koninklijke (Royal) Philips Electronics N.V. 85,211 1,573,015 ------------------------------------------------------------------------------- Koninklijke (Royal) Philips Electronics N.V.-New York Shares 116,200 2,149,700 ------------------------------------------------------------------------------- TNT N.V. 245,968 5,149,048 ------------------------------------------------------------------------------- Unilever N.V. 298,928 7,205,657 =============================================================================== 24,374,954 =============================================================================== NORWAY-0.99% StatoilHydro A.S.A. 153,300 3,065,594 =============================================================================== RUSSIA-0.39% Evraz Group S.A.-GDR, REGS(e) 14,550 226,796 ------------------------------------------------------------------------------- Gazprom-ADR 26,450 533,761 ------------------------------------------------------------------------------- LUKOIL-ADR 11,300 438,440 =============================================================================== 1,198,997 =============================================================================== SOUTH AFRICA-0.48% Barloworld Ltd. 80,000 466,318 ------------------------------------------------------------------------------- Sasol Ltd. 12,500 374,331 ------------------------------------------------------------------------------- Standard Bank Group Ltd. 79,200 632,848 =============================================================================== 1,473,497 =============================================================================== SOUTH KOREA-0.90% Daelim Industrial Co., Ltd. 11,958 342,483 ------------------------------------------------------------------------------- Hyundai Motor Co. 11,538 530,142 ------------------------------------------------------------------------------- LG Electronics Inc. 5,640 417,254 ------------------------------------------------------------------------------- Lotte Shopping Co., Ltd. 2,400 331,716 ------------------------------------------------------------------------------- POSCO 1,915 520,130 ------------------------------------------------------------------------------- Samsung Electronics Co., Ltd. 1,514 632,894 =============================================================================== 2,774,619 =============================================================================== SPAIN-1.02% Repsol YPF, S.A.-ADR 164,970 3,154,226 =============================================================================== SWEDEN-3.39% Nordea Bank A.B. 271,693 2,178,011 ------------------------------------------------------------------------------- Telefonaktiebolaget LM Ericsson-Class B 1,174,366 8,278,655 =============================================================================== 10,456,666 =============================================================================== SWITZERLAND-9.59% Credit Suisse Group AG 157,700 6,016,923 ------------------------------------------------------------------------------- Holcim Ltd.(b) 57,921 3,301,098 ------------------------------------------------------------------------------- Novartis AG 107,755 5,449,422 ------------------------------------------------------------------------------- Swisscom AG 22,980 7,025,765 ------------------------------------------------------------------------------- Zurich Financial Services AG 38,653 7,815,992 =============================================================================== 29,609,200 =============================================================================== TAIWAN-0.56% AU Optronics Corp.-ADR 66,643 459,837 ------------------------------------------------------------------------------- Chinatrust Financial Holding Co. Ltd. 982,113 284,187 ------------------------------------------------------------------------------- HTC Corp. 53,300 636,025 ------------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd.-ADR 43,464 359,012 =============================================================================== 1,739,061 =============================================================================== THAILAND-0.22% PTT PCL(f) 145,300 673,491 =============================================================================== TURKEY-0.10% Turkiye Is Bankasi-Class C 105,407 296,413 =============================================================================== UNITED KINGDOM-21.79% BAE Systems PLC 463,940 2,602,941 ------------------------------------------------------------------------------- Barclays PLC 1,917,398 5,644,725 ------------------------------------------------------------------------------- BP PLC 945,636 7,811,911 ------------------------------------------------------------------------------- Centrica PLC 1,021,678 5,020,509 ------------------------------------------------------------------------------- Diageo PLC 256,813 3,929,034 ------------------------------------------------------------------------------- GlaxoSmithKline PLC 365,440 7,037,178 ------------------------------------------------------------------------------- HSBC Holdings PLC-ADR 127,645 7,531,055 ------------------------------------------------------------------------------- Kingfisher PLC 2,034,568 3,731,345 ------------------------------------------------------------------------------- Morrison (William) Supermarkets PLC 722,979 3,087,821 ------------------------------------------------------------------------------- National Grid PLC 641,269 7,278,633 ------------------------------------------------------------------------------- Reed Elsevier PLC 1 8 ------------------------------------------------------------------------------- Royal Dutch Shell PLC-ADR 111,050 6,197,700 ------------------------------------------------------------------------------- Vodafone Group PLC 3,849,621 7,412,241 =============================================================================== 67,285,101 =============================================================================== Total Common Stocks & Other Equity Interests (Cost $389,354,351) 294,693,928 =============================================================================== PREFERRED STOCKS-0.10% BRAZIL-0.10% Banco Bradesco S.A., Pfd. (Cost $350,340) 24,996 290,482 =============================================================================== MONEY MARKET FUNDS-1.99% Liquid Assets Portfolio-Institutional Class(g) 3,074,002 3,074,002 ------------------------------------------------------------------------------- Premier Portfolio-Institutional Class(g) 3,074,003 3,074,003 =============================================================================== Total Money Market Funds (Cost $6,148,005) 6,148,005 =============================================================================== TOTAL INVESTMENTS (excluding investments purchased with cash collateral from securities on loan)-97.53% (Cost $395,852,696) 301,132,415 ===============================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 10 AIM INTERNATIONAL CORE EQUITY FUND
SHARES VALUE ------------------------------------------------------------------------------- INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES ON LOAN MONEY MARKET FUNDS-3.61% Liquid Assets Portfolio-Institutional Class (Cost $11,153,038)(g)(h) 11,153,038 $ 11,153,038 =============================================================================== TOTAL INVESTMENTS-101.14% (Cost $407,005,734)(i) 312,285,453 =============================================================================== OTHER ASSETS LESS LIABILITIES-(1.14)% (3,522,526) =============================================================================== NET ASSETS-100.00% $308,762,927 _______________________________________________________________________________ ===============================================================================
Investment Abbreviations: ADR - American Depositary Receipt CPO - Certificates of Ordinary Participation GDR - Global Depositary Receipt Pfd. - Preferred REGS - Regulation S
Notes to Schedule of Investments: (a) Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor's. (b) All or a portion of this security was out on loan at October 31, 2008. (c) Non-income producing security. (d) Each unit represents two Series A shares and one Series B share. (e) Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The value of this security at October 31, 2008 represented 0.07% 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, 2008 represented 0.22% of the Fund's Net Assets. See Note 1A. (g) The money market fund and the Fund are affiliated by having the same investment advisor. (h) The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrower's return of the securities loaned. See Note 1J. (i) A majority of foreign securities were fair valued using adjusted closing market prices. See accompanying Notes to Financial Statements which are an integral part of the financial statements. 11 AIM INTERNATIONAL CORE EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2008 ASSETS: Investments, at value (Cost $389,704,691)* $294,984,410 ------------------------------------------------------ Investments in affiliated money market funds, at value and cost 17,301,043 ====================================================== Total investments (Cost $407,005,734) 312,285,453 ====================================================== Foreign currencies, at value (Cost $3,050,732) 2,968,368 ------------------------------------------------------ Receivables for: Investments sold 15,293,939 ------------------------------------------------------ Fund shares sold 1,190,455 ------------------------------------------------------ Dividends 1,452,238 ------------------------------------------------------ Investment for trustee deferred compensation and retirement plans 32,403 ------------------------------------------------------ Other assets 30,854 ====================================================== Total assets 333,253,710 ______________________________________________________ ====================================================== LIABILITIES: Payables for: Investments purchased 2,765,446 ------------------------------------------------------ Fund shares reacquired 10,244,361 ------------------------------------------------------ Collateral upon return of securities loaned 11,153,038 ------------------------------------------------------ Accrued fees to affiliates 118,048 ------------------------------------------------------ Accrued other operating expenses 146,407 ------------------------------------------------------ Trustee deferred compensation and retirement plans 63,483 ====================================================== Total liabilities 24,490,783 ====================================================== Net assets applicable to shares outstanding $308,762,927 ______________________________________________________ ====================================================== NET ASSETS CONSIST OF: Shares of beneficial interest $420,311,758 ------------------------------------------------------ Undistributed net investment income 11,480,157 ------------------------------------------------------ Undistributed net realized gain (loss) (28,118,945) ------------------------------------------------------ Unrealized appreciation (depreciation) (94,910,043) ====================================================== $308,762,927 ______________________________________________________ ====================================================== NET ASSETS: Class A $ 45,099,892 ______________________________________________________ ====================================================== Class B $ 10,873,456 ______________________________________________________ ====================================================== Class C $ 21,323,364 ______________________________________________________ ====================================================== Class R $ 2,076,755 ______________________________________________________ ====================================================== Class Y $ 185,081 ______________________________________________________ ====================================================== Investor Class $ 19,710,111 ______________________________________________________ ====================================================== Institutional Class $209,494,268 ______________________________________________________ ====================================================== SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 5,223,417 ______________________________________________________ ====================================================== Class B 1,273,955 ______________________________________________________ ====================================================== Class C 2,561,144 ______________________________________________________ ====================================================== Class R 241,272 ______________________________________________________ ====================================================== Class Y 21,147 ______________________________________________________ ====================================================== Investor Class 2,251,576 ______________________________________________________ ====================================================== Institutional Class 24,077,919 ______________________________________________________ ====================================================== Class A: Net asset value per share $ 8.63 ------------------------------------------------------ Maximum offering price per share (Net asset value of $8.63 divided by 94.50%) $ 9.13 ______________________________________________________ ====================================================== Class B: Net asset value and offering price per share $ 8.54 ______________________________________________________ ====================================================== Class C: Net asset value and offering price per share $ 8.33 ______________________________________________________ ====================================================== Class R: Net asset value and offering price per share $ 8.61 ______________________________________________________ ====================================================== Class Y: Net asset value and offering price per share $ 8.75 ______________________________________________________ ====================================================== Investor Class: Net asset value and offering price per share $ 8.75 ______________________________________________________ ====================================================== Institutional Class: Net asset value and offering price per share $ 8.70 ______________________________________________________ ======================================================
* At October 31, 2008, securities with an aggregate value of $10,983,389 were on loan to brokers. See accompanying Notes to Financial Statements which are an integral part of the financial statements. 12 AIM INTERNATIONAL CORE EQUITY FUND STATEMENT OF OPERATIONS For the year ended October 31, 2008 INVESTMENT INCOME: Dividends (net of foreign withholding taxes of $1,760,036) $ 17,757,372 ------------------------------------------------------------------------------------------------ Dividends from affiliated money market funds (includes securities lending income of $471,334) 911,232 ================================================================================================ Total investment income 18,668,604 ================================================================================================ EXPENSES: Advisory fees 3,887,442 ------------------------------------------------------------------------------------------------ Administrative services fees 170,574 ------------------------------------------------------------------------------------------------ Custodian fees 187,709 ------------------------------------------------------------------------------------------------ Distribution fees: Class A 193,460 ------------------------------------------------------------------------------------------------ Class B 231,020 ------------------------------------------------------------------------------------------------ Class C 390,066 ------------------------------------------------------------------------------------------------ Class R 17,133 ------------------------------------------------------------------------------------------------ Investor Class 81,972 ------------------------------------------------------------------------------------------------ Transfer agent fees -- A, B, C, R, Y and Investor 570,050 ------------------------------------------------------------------------------------------------ Transfer agent fees -- Institutional 6,918 ------------------------------------------------------------------------------------------------ Trustees' and officers' fees and benefits 29,943 ------------------------------------------------------------------------------------------------ Other 298,961 ================================================================================================ Total expenses 6,065,248 ================================================================================================ Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (38,432) ================================================================================================ Net expenses 6,026,816 ================================================================================================ Net investment income 12,641,788 ================================================================================================ REALIZED AND UNREALIZED GAIN (LOSS) FROM: Net realized gain (loss) from: Investment securities (net of foreign taxes of $68,708) (24,605,884) ------------------------------------------------------------------------------------------------ Foreign currencies (1,006,806) ================================================================================================ (25,612,690) ================================================================================================ Change in net unrealized appreciation (depreciation) of: Investment securities (net of foreign taxes on holdings of $238,062) (249,202,614) ------------------------------------------------------------------------------------------------ Foreign currencies (181,823) ================================================================================================ (249,384,437) ================================================================================================ Net realized and unrealized gain (loss) (274,997,127) ================================================================================================ Net increase (decrease) in net assets resulting from operations $(262,355,339) ________________________________________________________________________________________________ ================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 13 AIM INTERNATIONAL CORE EQUITY FUND STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2008 and 2007
2008 2007 --------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 12,641,788 $ 8,874,996 --------------------------------------------------------------------------------------------------------- Net realized gain (loss) (25,612,690) 48,137,852 --------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) (249,384,437) 46,550,005 ========================================================================================================= Net increase (decrease) in net assets resulting from operations (262,355,339) 103,562,853 ========================================================================================================= Distributions to shareholders from net investment income: Class A (1,010,463) (1,798,478) --------------------------------------------------------------------------------------------------------- Class B (116,149) (254,290) --------------------------------------------------------------------------------------------------------- Class C (190,541) (355,963) --------------------------------------------------------------------------------------------------------- Class R (35,689) (47,445) --------------------------------------------------------------------------------------------------------- Investor Class (445,058) (650,769) --------------------------------------------------------------------------------------------------------- Institutional Class (6,488,116) (4,195,321) ========================================================================================================= Total distributions from net investment income (8,286,016) (7,302,266) ========================================================================================================= Distributions to shareholders from net realized gains: Class A (7,093,976) (3,441,389) --------------------------------------------------------------------------------------------------------- Class B (2,367,978) (918,917) --------------------------------------------------------------------------------------------------------- Class C (3,884,583) (1,286,326) --------------------------------------------------------------------------------------------------------- Class R (320,786) (107,574) --------------------------------------------------------------------------------------------------------- Investor Class (3,124,071) (1,245,248) --------------------------------------------------------------------------------------------------------- Institutional Class (30,160,311) (5,950,013) ========================================================================================================= Total distributions from net realized gains (46,951,705) (12,949,467) ========================================================================================================= Share transactions-net: Class A (4,997,804) (36,808,747) --------------------------------------------------------------------------------------------------------- Class B (7,914,020) (3,979,276) --------------------------------------------------------------------------------------------------------- Class C (5,450,831) 483,898 --------------------------------------------------------------------------------------------------------- Class R (127,497) 136,060 --------------------------------------------------------------------------------------------------------- Class Y 220,834 -- --------------------------------------------------------------------------------------------------------- Investor Class (4,636,476) (6,878,996) --------------------------------------------------------------------------------------------------------- Institutional Class 15,254,153 161,884,459 ========================================================================================================= Net increase (decrease) in net assets resulting from share transactions (7,651,641) 114,837,398 ========================================================================================================= Net increase (decrease) in net assets (325,244,701) 198,148,518 _________________________________________________________________________________________________________ ========================================================================================================= NET ASSETS: Beginning of year 634,007,628 435,859,110 ========================================================================================================= End of year (includes undistributed net investment income of $11,480,157 and $8,208,638, respectively) $ 308,762,927 $634,007,628 _________________________________________________________________________________________________________ =========================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 14 AIM INTERNATIONAL CORE EQUITY FUND NOTES TO FINANCIAL STATEMENTS October 31, 2008 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 assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The Fund's investment objective is total return. The Fund currently consists of seven different classes of shares: Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class. Investor Class shares of the Fund are offered only to certain grandfathered investors. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waiver shares may be subject to contingent deferred sales charges ("CDSC"). Class B shares and Class C shares are sold with a CDSC. Class R, Class Y, Investor Class and Institutional Class shares are sold at net asset value. Under certain circumstances, Class R shares are subject to a CDSC. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer's assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. 15 AIM INTERNATIONAL CORE EQUITY FUND B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain/loss for investments no longer held and as unrealized gain/loss for investments still held. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment advisor may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund's taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. G. ACCOUNTING ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. J. SECURITIES LENDING -- The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. 16 AIM INTERNATIONAL CORE EQUITY FUND K. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. L. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. Fluctuations in the value of these contracts are recorded as unrealized appreciation (depreciation) until the contracts are closed. When these contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. The Fund could be exposed to risk, which may be in excess of the amount reflected in the Statement of Assets and Liabilities, if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with Invesco Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Advisor based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ------------------------------------------------------------------- First $500 million 0.75% ------------------------------------------------------------------- Next $500 million 0.65% ------------------------------------------------------------------- From $1 billion 0.55% ------------------------------------------------------------------- From $2 billion 0.45% ------------------------------------------------------------------- From $4 billion 0.40% ------------------------------------------------------------------- From $6 billion 0.375% ------------------------------------------------------------------- Over $8 billion 0.35% ___________________________________________________________________ ===================================================================
Under the terms of a master sub-advisory agreement approved by shareholders of the Fund, effective May 1, 2008, between the Advisor and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Advisor(s). The Advisor has contractually agreed, through at least June 30, 2009, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Advisor receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds. For the year ended October 31, 2008, the Advisor waived advisory fees of $17,270. At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $7,216. The Trust has entered into a master administrative services agreement with Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees. The Trust has entered into a transfer agency and service agreement with Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has agreed to pay IAIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the course of providing such services. IAIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IAIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust's Board of Trustees. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees. The Trust has entered into master distribution agreements with Invesco Aim Distributors, Inc. ("IADI") to serve as the distributor for the Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with 17 AIM INTERNATIONAL CORE EQUITY FUND 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 IADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares, 0.50% of the average daily net assets of Class R shares and 0.25% of the average daily net assets of Investor Class shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority ("FINRA") impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the year ended October 31, 2008, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees. Front-end sales commissions and CDSC (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2008, IADI advised the Fund that IADI retained $28,866 in front-end sales commissions from the sale of Class A shares and $19, $25,907, $2,253 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed on redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of Invesco Aim, IAIS and/or IADI. NOTE 3--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2008, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $13,946. NOTE 4--TRUSTEES' AND OFFICERS' FEES AND BENEFITS "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officers' Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2008, the Fund paid legal fees of $3,966 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust. NOTE 5--CASH BALANCES The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco Aim, not to exceed the contractually agreed upon rate. NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED OCTOBER 31, 2008 AND 2007:
2008 2007 -------------------------------------------------------------------------------------------------------- Ordinary income $13,490,254 $ 7,302,266 -------------------------------------------------------------------------------------------------------- Long-term capital gain 41,747,467 12,949,467 ======================================================================================================== Total distributions $55,237,721 $20,251,733 ________________________________________________________________________________________________________ ========================================================================================================
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
2008 ------------------------------------------------------------------------------------------------ Undistributed ordinary income $ 11,550,263 ------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) -- investments (102,356,527) ------------------------------------------------------------------------------------------------ Net unrealized appreciation (depreciation) -- other investments (189,763) ------------------------------------------------------------------------------------------------ Temporary book/tax differences (70,106) ------------------------------------------------------------------------------------------------ Capital loss carryforward (20,482,698) ------------------------------------------------------------------------------------------------ Shares of beneficial interest 420,311,758 ================================================================================================ Total net assets $ 308,762,927 ________________________________________________________________________________________________ ================================================================================================
18 AIM INTERNATIONAL CORE EQUITY FUND The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's net unrealized appreciation (depreciation) difference is attributable primarily to wash sales. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. The Fund has a capital loss carryforward as of October 31, 2008 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* ----------------------------------------------------------------------------------------------- October 31, 2016 $20,482,698 _______________________________________________________________________________________________ ===============================================================================================
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. NOTE 7--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended October 31, 2008 was $193,702,777 and $238,846,227, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 15,488,838 ------------------------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (117,845,365) ================================================================================================ Net unrealized appreciation (depreciation)of investment securities $(102,356,527) ________________________________________________________________________________________________ ================================================================================================ Cost of investments for tax purposes is $414,641,980.
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of proxy costs, foreign currency transactions, distributions and foreign capital gain tax reclassification on October 31, 2008, undistributed net investment income was decreased by $1,084,253, undistributed net realized gain (loss) was increased by $1,093,805 and shares of beneficial interest decreased by $9,552. This reclassification had no effect on the net assets of the Fund. 19 AIM INTERNATIONAL CORE EQUITY FUND NOTE 9--SHARE INFORMATION
Summary of Share Activity ------------------------------------------------------------------------------------------------------------------------ Year ended October 31, ----------------------------------------------------------- 2008(a) 2007 --------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------------ Sold: Class A 1,258,513 $ 15,391,387 1,666,371 $ 25,586,988 ------------------------------------------------------------------------------------------------------------------------ Class B 195,522 2,626,561 417,879 6,375,636 ------------------------------------------------------------------------------------------------------------------------ Class C 413,950 5,368,044 609,993 9,091,270 ------------------------------------------------------------------------------------------------------------------------ Class R 87,512 1,134,582 90,603 1,370,606 ------------------------------------------------------------------------------------------------------------------------ Class Y(b) 21,147 220,834 -- -- ------------------------------------------------------------------------------------------------------------------------ Investor Class 221,379 3,011,516 503,651 7,714,028 ------------------------------------------------------------------------------------------------------------------------ Institutional Class 2,334,532 31,993,859 10,754,022 164,159,007 ======================================================================================================================== Issued as reinvestment of dividends: Class A 540,511 7,691,470 347,103 5,005,221 ------------------------------------------------------------------------------------------------------------------------ Class B 165,714 2,346,512 76,591 1,099,843 ------------------------------------------------------------------------------------------------------------------------ Class C 266,194 3,676,142 104,895 1,471,676 ------------------------------------------------------------------------------------------------------------------------ Class R 25,086 356,475 10,757 155,018 ------------------------------------------------------------------------------------------------------------------------ Investor Class 243,237 3,507,479 127,008 1,854,317 ------------------------------------------------------------------------------------------------------------------------ Institutional Class 2,570,016 36,648,427 701,614 10,145,334 ======================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 348,838 4,453,923 240,372 3,684,068 ------------------------------------------------------------------------------------------------------------------------ Class B (351,740) (4,453,923) (242,298) (3,684,068) ======================================================================================================================== Reacquired:(c) Class A(b) (2,707,360) (32,534,584) (4,707,002) (71,085,024) ------------------------------------------------------------------------------------------------------------------------ Class B (700,875) (8,433,170) (512,615) (7,770,687) ------------------------------------------------------------------------------------------------------------------------ Class C (1,218,068) (14,495,017) (683,859) (10,079,048) ------------------------------------------------------------------------------------------------------------------------ Class R (127,697) (1,618,554) (92,184) (1,389,564) ------------------------------------------------------------------------------------------------------------------------ Investor Class(b) (830,023) (11,155,471) (1,070,467) (16,447,341) ------------------------------------------------------------------------------------------------------------------------ Institutional Class (4,833,881) (53,388,133) (785,070) (12,419,882) ======================================================================================================================== Net increase (decrease) in share activity (2,077,493) $ (7,651,641) 7,557,364 $114,837,398 ________________________________________________________________________________________________________________________ ========================================================================================================================
(a) 67% of the outstanding shares of the Fund are owned by affiliated mutual funds. Affiliated mutual funds are other mutual funds that are also advised by Invesco Aim. (b) Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A and Investor Class shares into Class Y shares of the Fund:
CLASS SHARES AMOUNT -------------------------------------------------------------------------------------------------- Class Y 20,128 $ 210,334 -------------------------------------------------------------------------------------------------- Class A (8,830) (91,033) -------------------------------------------------------------------------------------------------- Investor Class (11,416) (119,301) __________________________________________________________________________________________________ ==================================================================================================
(c) Net of redemption fees of $3,240 and $10,733 which were allocated among the classes based on relative net assets of each class for the years ended October 31, 2008 and 2007, respectively. 20 AIM INTERNATIONAL CORE EQUITY FUND NOTE 10--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
NET GAINS (LOSSES) NET ASSET ON SECURITIES DIVIDENDS DISTRIBUTIONS VALUE, NET (BOTH TOTAL FROM FROM NET FROM NET NET ASSET BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END OF PERIOD INCOME(a) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD(b) --------------------------------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 $16.77 $0.28 $(7.01) $(6.73) $(0.18) $(1.23) $(1.41) $ 8.63 Year ended 10/31/07 14.44 0.22 2.75 2.97 (0.22) (0.42) (0.64) 16.77 Year ended 10/31/06 11.90 0.25 2.77 3.02 (0.10) (0.38) (0.48) 14.44 Year ended 10/31/05 10.52 0.14 1.32 1.46 (0.08) -- (0.08) 11.90 Year ended 10/31/04 8.74 0.09 1.72 1.81 (0.03) -- (0.03) 10.52 --------------------------------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 16.58 0.18 (6.93) (6.75) (0.06) (1.23) (1.29) 8.54 Year ended 10/31/07 14.30 0.11 2.71 2.82 (0.12) (0.42) (0.54) 16.58 Year ended 10/31/06 11.79 0.14 2.76 2.90 (0.01) (0.38) (0.39) 14.30 Year ended 10/31/05 10.43 0.06 1.31 1.37 (0.01) -- (0.01) 11.79 Year ended 10/31/04 8.72 0.02 1.71 1.73 (0.02) -- (0.02) 10.43 --------------------------------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 16.21 0.18 (6.77) (6.59) (0.06) (1.23) (1.29) 8.33 Year ended 10/31/07 13.98 0.11 2.66 2.77 (0.12) (0.42) (0.54) 16.21 Year ended 10/31/06 11.54 0.14 2.69 2.83 (0.01) (0.38) (0.39) 13.98 Year ended 10/31/05 10.22 0.06 1.28 1.34 (0.02) -- (0.02) 11.54 Year ended 10/31/04 8.53 0.04 1.67 1.71 (0.02) -- (0.02) 10.22 --------------------------------------------------------------------------------------------------------------------------------- CLASS R Year ended 10/31/08 16.72 0.24 (6.98) (6.74) (0.14) (1.23) (1.37) 8.61 Year ended 10/31/07 14.40 0.18 2.74 2.92 (0.18) (0.42) (0.60) 16.72 Year ended 10/31/06 11.87 0.21 2.77 2.98 (0.07) (0.38) (0.45) 14.40 Year ended 10/31/05 10.51 0.12 1.31 1.43 (0.07) -- (0.07) 11.87 Year ended 10/31/04(f) 8.90 0.08 1.56 1.64 (0.03) -- (0.03) 10.51 --------------------------------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(f) 10.45 0.01 (1.71) (1.70) -- -- -- 8.75 --------------------------------------------------------------------------------------------------------------------------------- INVESTOR CLASS Year ended 10/31/08 16.98 0.28 (7.10) (6.82) (0.18) (1.23) (1.41) 8.75 Year ended 10/31/07 14.61 0.23 2.78 3.01 (0.22) (0.42) (0.64) 16.98 Year ended 10/31/06 12.04 0.25 2.80 3.05 (0.10) (0.38) (0.48) 14.61 Year ended 10/31/05 10.64 0.15 1.33 1.48 (0.08) -- (0.08) 12.04 Year ended 10/31/04 8.83 0.09 1.75 1.84 (0.03) -- (0.03) 10.64 --------------------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS Year ended 10/31/08 16.89 0.35 (7.05) (6.70) (0.26) (1.23) (1.49) 8.70 Year ended 10/31/07 14.54 0.31 2.75 3.06 (0.29) (0.42) (0.71) 16.89 Year ended 10/31/06 11.97 0.33 2.78 3.11 (0.16) (0.38) (0.54) 14.54 Year ended 10/31/05 10.56 0.21 1.32 1.53 (0.12) -- (0.12) 11.97 Year ended 10/31/04(f) 9.78 0.09 0.69 0.78 -- -- -- 10.56 _________________________________________________________________________________________________________________________________ ================================================================================================================================= RATIO OF RATIO OF EXPENSES EXPENSES RATIO OF NET TO AVERAGE TO AVERAGE NET INVESTMENT NET ASSETS ASSETS WITHOUT INCOME NET ASSETS, WITH FEE WAIVERS FEE WAIVERS TO AVERAGE TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES NET PORTFOLIO RETURN(c) (000S OMITTED) ABSORBED ABSORBED ASSETS TURNOVER(d) ---------------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 (43.45)% $ 45,100 1.45%(e) 1.45%(e) 2.13%(e) 38% Year ended 10/31/07 21.26 96,961 1.41 1.41 1.46 27 Year ended 10/31/06 26.12 118,943 1.52 1.52 1.88 21 Year ended 10/31/05 13.89 90,022 1.56 1.56 1.20 21 Year ended 10/31/04 20.78 60,603 1.84 1.86 0.94 69 ---------------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 (43.79) 10,873 2.20(e) 2.20(e) 1.38(e) 38 Year ended 10/31/07 20.25 32,592 2.16 2.16 0.71 27 Year ended 10/31/06 25.28 31,818 2.27 2.27 1.13 21 Year ended 10/31/05 13.11 28,785 2.25 2.25 0.51 21 Year ended 10/31/04 19.92 23,812 2.53 2.57 0.25 69 ---------------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 (43.80) 21,323 2.20(e) 2.20(e) 1.38(e) 38 Year ended 10/31/07 20.36 50,234 2.16 2.16 0.71 27 Year ended 10/31/06 25.22 42,906 2.27 2.27 1.13 21 Year ended 10/31/05 13.11 38,108 2.25 2.25 0.51 21 Year ended 10/31/04 20.13 36,490 2.41 2.46 0.37 69 ---------------------------------------------------------------------------------------------------------------- CLASS R Year ended 10/31/08 (43.55) 2,077 1.70(e) 1.70(e) 1.88(e) 38 Year ended 10/31/07 20.97 4,286 1.66 1.66 1.21 27 Year ended 10/31/06 25.86 3,560 1.77 1.77 1.63 21 Year ended 10/31/05 13.64 2,622 1.75 1.75 1.01 21 Year ended 10/31/04(f) 18.49 2,118 1.91(g) 1.93(g) 0.87(g) 69 ---------------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(f) (16.27) 185 1.30(e)(g) 1.30(e)(g) 2.28(e)(g) 38 ---------------------------------------------------------------------------------------------------------------- INVESTOR CLASS Year ended 10/31/08 (43.44) 19,710 1.45(e) 1.45(e) 2.13(e) 38 Year ended 10/31/07 21.29 44,428 1.41 1.41 1.46 27 Year ended 10/31/06 26.11 44,674 1.52 1.52 1.88 21 Year ended 10/31/05 13.92 46,988 1.50 1.50 1.26 21 Year ended 10/31/04 20.84 44,345 1.84 1.89 0.94 69 ---------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS Year ended 10/31/08 (43.08) 209,494 0.87(e) 0.87(e) 2.71(e) 38 Year ended 10/31/07 21.89 405,507 0.88 0.88 1.99 27 Year ended 10/31/06 26.86 193,959 0.95 0.95 2.45 21 Year ended 10/31/05 14.53 73,018 0.98 0.98 1.78 21 Year ended 10/31/04(f) 7.97 16,421 1.07(g) 1.07(g) 1.71(g) 69 ________________________________________________________________________________________________________________ ================================================================================================================
(a) Calculated using average shares outstanding. (b) Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. (d) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. (e) Ratios are based on average daily net assets (000's omitted) of $77,384, $23,102, $39,007, $3,427, $184, $32,789 and $345,424 for Class A, Class B, Class C, Class R, Class Y, Investor Class and Institutional Class shares, respectively. (f) Class R, Class Y and Institutional Class shares commenced on November 24, 2003, October 3, 2008 and April 30, 2004, respectively. (g) Annualized. 21 AIM INTERNATIONAL CORE EQUITY FUND NOTE 11 -- LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On May 23, 2008, the Securities and Exchange Commission ("SEC") publicly posted its final approval of the Distribution Plans ("Distribution Plans") for the distribution of monies placed into two separate Fair Funds created pursuant to a settlement reached on October 8, 2004 between Invesco Funds Group, Inc. ("IFG"), Invesco Aim Advisors, Inc. ("Invesco Aim") and Invesco Aim Distributors, Inc. ("IADI") and the SEC (the "Order"). One of the Fair Funds consists of $325 million, plus interest and any contributions by other settling parties, for distribution to shareholders of certain mutual funds formerly advised by IFG who may have been harmed by market timing and related activity. The second Fair Fund consists of $50 million, plus interest and any contributions by other settling parties, for distribution to shareholders of mutual funds advised by Invesco Aim who may have been harmed by market timing and related activity. The Distribution Plans provide for the distribution to all eligible investors to compensate such investors for injury they may have suffered as a result of market timing in the affected funds. The Distribution Plans include a provision for any residual amounts in the Fair Funds to be distributed in the future to the affected funds. Because the distribution of the Fair Funds has not yet commenced, management of Invesco Aim and the Fund are unable to estimate the amount of distribution to be made to the Fund, if any. At the request of the trustees of the AIM Funds, Invesco Ltd. ("Invesco"), the parent company of IFG and Invesco Aim, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. PENDING LITIGATION AND REGULATORY INQUIRIES On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05- 1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into certain arrangements permitting market timing of the AIM Funds and failed to disclose these arrangements in the prospectuses for such Funds, and conclusions of law to the effect that Invesco Aim and IADI violated the West Virginia securities laws. The WVASC orders Invesco Aim and IADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. By agreement with the Commissioner of Securities, Invesco Aim's time to respond to that Order has been indefinitely suspended. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; and - that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid. The case pending in Illinois State Court regarding fair value pricing was dismissed with prejudice on May 6, 2008. All lawsuits based on allegations of market timing, late trading and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various Invesco Aim- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA purportedly brought on behalf of participants in the Invesco 401(k) plan. Based on orders issued by the MDL Court, all claims asserted against the AIM Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco defendants' motion to dismiss the Amended Class Action Complaint for Violations of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June 16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and remanded this lawsuit back to the MDL Court for further proceedings. IFG, Invesco Aim, IADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the future. At the present time, management of Invesco Aim and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund. 22 AIM INTERNATIONAL CORE EQUITY FUND 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, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP December 16, 2008 Houston, Texas 23 AIM 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 or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. With the exception of the actual ending account value and expenses of the Class Y Shares, the example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. The actual ending account and expenses of the Class Y shares in the below example are based on an investment of $1,000 invested as of close of business October 3, 2008 (commencement date) and held through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period (as of close of business October 3, 2008 through October 31, 2008 for the Class Y shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class Y shares, the ending account value and expense information may not provide a meaningful comparison to mutual funds that provide such information for a full six month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
--------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO --------------------------------------------------------------------------------------------------- Class A $1,000.00 $627.60 $6.01 $1,017.75 $ 7.46 1.47% --------------------------------------------------------------------------------------------------- Class B 1,000.00 626.10 9.07 1,013.98 11.24 2.22 --------------------------------------------------------------------------------------------------- Class C 1,000.00 625.80 9.07 1,013.98 11.24 2.22 --------------------------------------------------------------------------------------------------- Class R 1,000.00 627.50 7.04 1,016.49 8.72 1.72 --------------------------------------------------------------------------------------------------- Class Y 1,000.00 837.30 0.95 1,018.60 6.60 1.30 --------------------------------------------------------------------------------------------------- Investor Class 1,000.00 627.70 6.01 1,017.75 7.46 1.47 ---------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008 (as of close of business October 3, 2008, through October 31, 2008 for the Class Y shares), after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. For the Class Y shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 29 (as of close of business October 3, 2008, through October 31, 2008)/366. Because the Class Y shares have not been in existence for a full six month period, the actual ending account value and expense information shown may not provide a meaningful comparison to fund expense information of classes that show such data for a full six month period and, because the actual ending account value and expense information in the expense example covers a short time period, return and expense data may not be indicative of return and expense data for longer time periods. (3) Hypothetical expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect a one-half year period. The hypothetical ending account value and expenses may be used to compare ongoing costs of investing in Class Y shares of the Fund and other funds because such data is based on a full six month period. 24 AIM INTERNATIONAL CORE EQUITY FUND Supplement to Annual Report dated 10/31/08 AIM INTERNATIONAL CORE EQUITY FUND ========================================== INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS A redemption fee of 2% will be imposed For periods ended 10/31/08 on certain redemptions or exchanges out of The following information has been the Fund within 31 days of purchase. prepared to provide Institutional Class Inception (4/30/04) 1.90% Exceptions to the redemption fee are shareholders with a performance overview 1 Year -43.08 listed in the Fund's prospectus. specific to their holdings. Institutional ========================================== Class shares are offered exclusively to Please note that past performance is institutional investors, including defined ========================================== not indicative of future results. More contribution plans that meet certain AVERAGE ANNUAL TOTAL RETURNS recent returns may be more or less than criteria. For periods ended 9/30/08, most recent those shown. All returns assume calendar quarter-end reinvestment of distributions at NAV. Investment return and principal value will Inception (4/30/04) 7.07% fluctuate so your shares, when redeemed, 1 Year -26.77 may be worth more or less than their ========================================== original cost. See full report for information on comparative benchmarks. Institutional Class shares have no sales Please consult your Fund prospectus for charge; therefore, performance is at net more information. For the most current asset value (NAV). Performance of month-end performance, please call 800 451 Institutional Class shares will differ 4246 or visit invescoaim.com. from performance of other share classes primarily due to differing sales charges and class expenses. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this supplement for Institutional Class shares was 0.87%. The expense ratios presented above may vary from the expense ratios presented in other sections of the actual report that are based on expenses incurred during the period covered by the report. ========================================== NASDAQ SYMBOL IBVIX ========================================== Over for information on your Fund's expenses. THIS SUPPLEMENT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. FOR INSTITUTIONAL INVESTOR USE ONLY This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use. [INVESCO AIM LOGO] invescoaim.com I-ICE-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
----------------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO ----------------------------------------------------------------------------------------------------------- Institutional $1,000.00 $630.00 $3.61 $1,020.71 $4.47 0.88% -----------------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. AIM INTERNATIONAL CORE EQUITY FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT The Board of Trustees (the Board) of AIM regarding the AIM Funds prepared by an the result of years of review and International Mutual Funds is required independent company, Lipper, Inc. negotiation between the Trustees and under the Investment Company Act of 1940 (Lipper), under the direction and Invesco Aim, that the Trustees may focus to approve annually the renewal of the AIM supervision of the independent Senior to a greater extent on certain aspects of International Core Equity Fund's (the Officer who also prepares a separate these arrangements in some years than in Fund) investment advisory agreement with analysis of this information for the others, and that the Trustees' Invesco Aim Advisors, Inc. (Invesco Aim). Trustees. Each Sub-Committee then makes deliberations and conclusions in a During contract renewal meetings held on recommendations to the Investments particular year may be based in part on June 18-19, 2008, the Board as a whole and Committee regarding the performance, fees their deliberations and conclusions of the disinterested or "independent" and expenses of their assigned funds. The these same arrangements throughout the Trustees, voting separately, approved the Investments Committee considers each year and in prior years. continuance of the Fund's investment Sub-Committee's recommendations and makes advisory agreement for another year, its own recommendations regarding the FACTORS AND CONCLUSIONS AND SUMMARY OF effective July 1, 2008. In doing so, the performance, fees and expenses of the AIM INDEPENDENT WRITTEN FEE EVALUATION Board determined that the Fund's Funds to the full Board. The Investments investment advisory agreement is in the Committee also considers each The discussion below serves as a best interests of the Fund and its SubCommittee's recommendations in making summary of the Senior Officer's shareholders and that the compensation to its annual recommendation to the Board independent written evaluation with Invesco Aim under the Fund's investment whether to approve the continuance of each respect to the Fund's investment advisory advisory agreement is fair and reasonable. AIM Fund's investment advisory agreement agreement as well as a discussion of the and sub-advisory agreements for another material factors and related conclusions The independent Trustees met separately year. that formed the basis for the Board's during their evaluation of the Fund's approval of the Fund's investment advisory investment advisory agreement with The independent Trustees are assisted agreement and sub-advisory agreements. independent legal counsel from whom they in their annual evaluation of the Fund's Unless otherwise stated, information set received independent legal advice, and the investment advisory agreement by the forth below is as of June 19, 2008 and independent Trustees also received independent Senior Officer. One does not reflect any changes that may have assistance during their deliberations from responsibility of the Senior Officer is to occurred since that date, including but the independent Senior Officer, a manage the process by which the AIM Funds' not limited to changes to the Fund's full-time officer of the AIM Funds who proposed management fees are negotiated performance, advisory fees, expense reports directly to the independent during the annual contract renewal process limitations and/or fee waivers. Trustees. to ensure that they are negotiated in a manner that is at arms' length and I. Investment Advisory Agreement THE BOARD'S FUND EVALUATION PROCESS reasonable. Accordingly, the Senior Officer must either supervise a A. Nature, Extent and Quality of The Board's Investments Committee has competitive bidding process or prepare an Services Provided by Invesco Aim established three Sub-Committees that are independent written evaluation. The Senior responsible for overseeing the management Officer has recommended that an The Board reviewed the advisory services of a number of the series portfolios of independent written evaluation be provided provided to the Fund by Invesco Aim under the AIM Funds. This Sub-Committee and, at the direction of the Board, has the Fund's investment advisory agreement, structure permits the Trustees to focus on prepared an independent written the performance of Invesco Aim in the performance of the AIM Funds that have evaluation. providing these services, and the been assigned to them. The Sub-Committees credentials and experience of the officers meet throughout the year to review the During the annual contract renewal and employees of Invesco Aim who provide performance of their assigned funds, and process, the Board considered the factors these services. The Board's review of the the Sub-Committees review monthly and discussed below under the heading "Factors qualifications of Invesco Aim to provide quarterly comparative performance and Conclusions and Summary of Independent these services included the Board's information and periodic asset flow data Written Fee Evaluation" in evaluating the consideration of Invesco Aim's portfolio for their assigned funds. These materials fairness and reasonableness of the Fund's and product review process, various back are prepared under the direction and investment advisory agreement and office support functions provided by supervision of the independent Senior sub-advisory agreements at the contract Invesco Aim and its affiliates, and Officer. Over the course of each year, the renewal meetings and at their meetings Invesco Aim's equity and fixed income Sub-Committees meet with portfolio throughout the year as part of their trading operations. The Board concluded managers for their assigned funds and ongoing oversight of the Fund. The Fund's that the nature, extent and quality of the other members of management and review investment advisory agreement and advisory services provided to the Fund by with these individuals the performance, sub-advisory agreements were considered Invesco Aim were appropriate and that investment objective(s), policies, separately, although the Board also Invesco Aim currently is providing strategies and limitations of these funds. considered the common interests of all of satisfactory advisory services in the AIM Funds in their deliberations. The accordance with the terms of the Fund's In addition to their meetings Board considered all of the information investment advisory agreement. In throughout the year, the Sub-Committees provided to them and did not identify any addition, based on their ongoing meetings meet at designated contract renewal particular factor that was controlling. throughout the year with the Fund's meetings each year to conduct an in-depth Each Trustee may have evaluated the portfolio manager or managers, the Board review of the performance, fees and information provided differently from one concluded that these individuals are expenses of their assigned funds. During another and attributed different weight to competent and able to continue to carry the contract renewal process, the Trustees the various factors. The Trustees out their responsibilities under the receive comparative performance and fee recognized that the advisory arrangements Fund's investment advisory agreement. data and resulting advisory fees for the Fund and the other AIM Funds are In determining whether to continue the Fund's investment advisory agreement, the Board considered the prior relationship between Invesco Aim and the continued
25 AIM INTERNATIONAL CORE EQUITY FUND Fund, as well as the Board's knowledge of change their conclusions. D. Economies of Scale and Breakpoints Invesco Aim's operations, and concluded that it was beneficial to maintain the C. Advisory Fees and Fee Waivers The Board considered the extent to which current relationship, in part, because of there are economies of scale in Invesco such knowledge. The Board also considered The Board compared the Fund's contractual Aim's provision of advisory services to the steps that Invesco Aim and its advisory fee rate to the contractual the Fund. The Board also considered affiliates have taken over the last advisory fee rates of funds in the Fund's whether the Fund benefits from such several years to improve the quality and Lipper expense group that are not managed economies of scale through contractual efficiency of the services they provide to by Invesco Aim, at a common asset level breakpoints in the Fund's advisory fee the AIM Funds in the areas of investment and as of the end of the past calendar schedule or through advisory fee waivers performance, product line diversification, year. The Board noted that the Fund's or expense limitations. The Board noted distribution, fund operations, shareholder contractual advisory fee rate was below that the Fund's contractual advisory fee services and compliance. The Board the median contractual advisory fee rate schedule includes six breakpoints and that concluded that the quality and efficiency of funds in its expense group. The Board the level of the Fund's advisory fees, as of the services Invesco Aim and its also reviewed the methodology used by a percentage of the Fund's net assets, has affiliates provide to the AIM Funds in Lipper in determining contractual fee decreased as net assets increased because each of these areas generally have rates. of the breakpoint. Based on this improved, and support the Board's approval information, the Board concluded that the of the continuance of the Fund's The Board also compared the Fund's Fund's advisory fees appropriately reflect investment advisory agreement. effective fee rate (the advisory fee after economies of scale at current asset any advisory fee waivers and before any levels. The Board also noted that the Fund B. Fund Performance expense limitations/waivers) to the shares directly in economies of scale advisory fees fee rates of other clients through lower fees charged by third party The Board compared the Fund's performance of Invesco Aim and its affiliates with service providers based on the combined during the past one, three and five investment strategies comparable to those size of all of the AIM Funds and calendar years to the performance of funds of the Fund, including one mutual fund affiliates. in the Fund's performance group that are sub-advised by an Invesco Aim affiliate. not managed by Invesco Aim, and against The Board noted that the Fund's rate was E. Profitability and Financial the performance of all funds in the Lipper above the sub-advisory fee rate for the Resources of Invesco Aim International Large-Cap Core Funds Index. sub-advised mutual fund. The Board also reviewed the criteria used The Board reviewed information from by Invesco Aim to identify the funds in Additionally, the Board compared the Invesco Aim concerning the costs of the the Fund's performance group for inclusion Fund's effective fee rate to the total advisory and other services that Invesco in the Lipper reports. The Board noted advisory fees paid by numerous separately Aim and its affiliates provide to the Fund that the Fund's performance was in the managed accounts/wrap accounts advised by and the profitability of Invesco Aim and fifth quintile of its performance group Invesco Aim affiliates. The Board noted its affiliates in providing these for the one and three year periods and the that the Fund's rate was generally above services. The Board also reviewed fourth quintile for the five year period the rates for the separately managed information concerning the financial (the first quintile being the best accounts/wrap accounts. The Board condition of Invesco Aim and its performing funds and the fifth quin-tile considered that management of the affiliates. The Board also reviewed with being the worst performing funds). The separately managed accounts/wrap accounts Invesco Aim the methodology used to Board noted that the Fund's performance by the Invesco Aim affiliates involves prepare the profitability information. The was below the performance of the Index for different levels of services and different Board considered the overall profitability the one, three and five year periods. The operational and regulatory requirements of Invesco Aim, as well as the Board also noted that Invesco Aim than Invesco Aim's management of the Fund. profitability of Invesco Aim in connection acknowledges the Fund's underperformance The Board concluded that these differences with managing the Fund. The Board noted and is focused on the longer term and are appropriately reflected in the fee that Invesco Aim continues to operate at a business issues that affect the Fund's structure for the Fund. net profit, although increased expenses in performance. The Board also considered the recent years have reduced the steps Invesco Aim has taken over the last The Board noted that Invesco Aim has profitability of Invesco Aim and its several years to improve the quality and not proposed any advisory fee waivers or affiliates. The Board concluded that the efficiency of the services that Invesco expense limitations for the Fund. The Fund's fees were fair and reasonable, and Aim provides to the AIM Funds. The Board Board concluded that it was not necessary that the level of profits realized by concluded that Invesco Aim continues to be at this time to discuss with Invesco Aim Invesco Aim and its affiliates from responsive to the Board's focus on fund whether to implement any such waivers or providing services to the Fund was not performance. However, due to the Fund's expense limitations because the Fund's excessive in light of the nature, quality underperformance, the Board also contractual advisory fee was below the and extent of the services provided. The concluded that it would be appropriate for median contractual advisory fee and, other Board considered whether In-vesco Aim is the Board to continue to monitor more than transfer agent fees, the total financially sound and has the resources closely the performance of the Fund. expenses for most classes of the Fund were necessary to perform its obligations under Although the independent written below the median total expenses of the the Fund's investment advisory agreement, evaluation of the Fund's Senior Officer funds in the Fund's Lipper expense group and concluded that Invesco Aim has the only considered Fund performance through that are not managed by Invesco Aim. financial resources necessary to fulfill the most recent calendar year, the Board these obligations. also reviewed more recent Fund performance After taking account of the Fund's and this review did not contractual advisory fee rate, as well as F. Independent Written Evaluation of the comparative advisory fee information the Fund's Senior Officer discussed above, the Board concluded that the Fund's advisory fees were fair and The Board noted that, at their direction, reasonable. the Senior Officer of the Fund, who is independent of Invesco Aim and Invesco Aim's affiliates, had prepared an inde- continued
26 AIM INTERNATIONAL CORE EQUITY FUND pendent written evaluation to assist the advised by Invesco Aim pursuant to a relevant factor in considering whether Board in determining the reasonableness of procedures approved by the Board. The to approve the sub-advisory agreements for the proposed management fees of the AIM Board noted that Invesco Aim will receive the Fund, as one of the Affiliated Funds, including the Fund. The Board noted advisory fees from these affiliated money Sub-Advisers currently manages the Fund's that they had relied upon the Senior market funds attributable to such assets. The Board compared the Fund's Officer's written evaluation instead of a investments, although Invesco Aim has performance during the past one, three and competitive bidding process. In contractually agreed to waive through at five calendar years to the performance of determining whether to continue the Fund's least June 30, 2009, the advisory fees funds in the Fund's performance group that investment advisory agreement, the Board payable by the Fund in an amount equal to are not managed by Invesco Aim, and considered the Senior Officer's written 100% of the net advisory fees Invesco Aim against the performance of all funds in evaluation. receives from the affiliated money market the Lipper International Large-Cap Core funds with respect to the Fund's Funds Index. The Board also reviewed the G. Collateral Benefits to Invesco Aim investment of uninvested cash, but not criteria used by Invesco Aim to identify and its Affiliates cash collateral. The Board considered the the funds in the Fund's performance group contractual nature of this fee waiver and for inclusion in the Lipper reports. The The Board considered various other noted that it remains in effect until at Board noted that the Fund's performance benefits received by Invesco Aim and its least June 30, 2009. The Board concluded was in the fifth quintile of its affiliates resulting from Invesco Aim's that the Fund's investment of uninvested performance group for the one and three relationship with the Fund, including the cash and cash collateral from any year periods and the fourth quintile for fees received by Invesco Aim and its securities lending arrangements in the the five year period (the first quintile affiliates for their provision of affiliated money market funds is in the being the best performing funds and the administrative, transfer agency and best interests of the Fund and its fifth quintile being the worst performing distribution services to the Fund. The shareholders. funds). The Board noted that the Fund's Board considered the performance of performance was below the performance of Invesco Aim and its affiliates in II. Sub-Advisory Agreements the Index for the one, three and five year providing these services and the periods. The Board also considered the organizational structure employed by A. Nature, Extent and Quality of steps Invesco Aim has taken over the last Invesco Aim and its affiliates to provide Services Provided by Affiliated several years to improve the quality and these services. The Board also considered Sub-Advisers efficiency of the services that Invesco that these services are provided to the Aim provides to the AIM Funds. The Board Fund pursuant to written contracts which The Board reviewed the services to be concluded that Invesco Aim continues to be are reviewed and approved on an annual provided by Invesco Trimark Ltd., Invesco responsive to the Board's focus on fund basis by the Board. The Board concluded Asset Management Deutschland, GmbH, performance. that Invesco Aim and its affiliates were Invesco Asset Management Limited, Invesco providing these services in a satisfactory Asset Management (Japan) Limited, Invesco C. Sub-Advisory Fees manner and in accordance with the terms of Australia Limited, Invesco Global Asset their contracts, and were qualified to Management (N.A.), Inc., Invesco Hong Kong The Board considered the services to be continue to provide these services to the Limited, Invesco Institutional (N.A.), provided by the Affiliated Sub-Advisers Fund. Inc. and Invesco Senior Secured pursuant to the sub-advisory agreements Management, Inc. (collectively, the and the services to be provided by Invesco The Board considered the benefits "Affiliated Sub-Advisers") under the Aim pursuant to the Fund's investment realized by Invesco Aim as a result of sub-advisory agreements and the advisory agreement, as well as the portfolio brokerage transactions executed credentials and experience of the officers allocation of fees between Invesco Aim and through "soft dollar" arrangements. Under and employees of the Affiliated the Affiliated Sub-Advisers pursuant to these arrangements, portfolio brokerage Sub-Advisers who will provide these the sub-advisory agreements. The Board commissions paid by the Fund and/or other services. The Board concluded that the noted that the sub-advisory fees have no funds advised by Invesco Aim are used to nature, extent and quality of the services direct effect on the Fund or its pay for research and execution services. to be provided by the Affiliated shareholders, as they are paid by Invesco The Board noted that soft dollar Sub-Advisers were appropriate. The Board Aim to the Affiliated Sub-Advisers, and arrangements shift the payment obligation noted that the Affiliated Sub-Advisers, that Invesco Aim and the Affiliated for the research and execution services which have offices and personnel that are Sub-Advisers are affiliates. After taking from Invesco Aim to the funds and geographically dispersed in financial account of the Fund's contractual therefore may reduce Invesco Aim's centers around the world, have been formed sub-advisory fee rate, as well as other expenses. The Board also noted that in part for the purpose of researching and relevant factors, the Board concluded that research obtained through soft dollar compiling information and making the Fund's sub-advisory fees were fair and arrangements may be used by Invesco Aim in recommendations on the markets and reasonable. making investment decisions for the Fund economies of various countries and and may therefore benefit Fund securities of companies located in such D. Financial Resources of the shareholders. The Board concluded that countries or on various types of Affiliated Sub-Advisers Invesco Aim's soft dollar arrangements investments and investment techniques, and were appropriate. The Board also concluded providing investment advisory services. The Board considered whether each that, based on their review and The Board concluded that the sub-advisory Affiliated Sub-Adviser is financially representations made by Invesco Aim, these agreements will benefit the Fund and its sound and has the resources necessary to arrangements were consistent with shareholders by permitting Invesco Aim to perform its obligations under its regulatory requirements. utilize the additional resources and respective sub-advisory agreement, and talent of the Affiliated Sub-Advisers in concluded that each Affiliated Sub-Adviser The Board considered the fact that the managing the Fund. has the financial resources necessary to Fund's uninvested cash and cash collateral fulfill these obligations. from any securities lending arrangements B. Fund Performance may be invested in money market funds The Board did view Fund performance as
27 AIM INTERNATIONAL CORE EQUITY FUND TAX INFORMATION Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors. The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state's requirement. The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2008:
FEDERAL AND STATE INCOME TAX ---------------------------- Long-Term Capital Gain Dividends $ 41,747,467 Qualified Dividend Income* 80.27% Corporate Dividends Received Deduction* 0% U.S. Treasury Obligations* 0% Foreign Taxes 0.0450 per share Foreign Source Income 0.2903 per share
* The above percentages are based on ordinary income dividends paid to shareholders during the Fund's fiscal year. NON-RESIDENT ALIEN SHAREHOLDER INFORMATION The percentages of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008 and October 31, 2008 were 99.95%, 99.95%, 99.99%, and 98.99%, respectively. 28 AIM INTERNATIONAL CORE EQUITY FUND TRUSTEES AND OFFICERS The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 103 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS -------------------------------------------------------------------------------------------------------------------------------- Martin L. 2007 Executive Director, Chief Executive Officer and President, None Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global Trustee investment management firm); Chairman, Invesco Aim Advisors, Inc. (registered investment advisor); Director, Chairman, Chief Executive Officer and President, IVZ Inc. (holding company); INVESCO North American Holdings, Inc. (holding company); and, INVESCO Group Services, Inc. (service provider); Trustee, The AIM Family of Funds--Registered Trademark--; Vice Chairman, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business Formerly: Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco Aim and a global investment management firm); Chairman, Investment Company Institute; President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) -------------------------------------------------------------------------------------------------------------------------------- Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim Advisors, Inc., and 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Aim Management Group, Inc. (financial services holding company) and Invesco Aim Capital Management, Inc. (registered investment advisor); Director and President, INVESCO Funds Group, Inc. (registered investment advisor and register transfer agent) and AIM GP Canada Inc. (general partner for a limited partnership); Director, Invesco Aim Distributors, Inc. (registered broker dealer); Director and Chairman, Invesco Aim Investment Services, Inc. (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, IVZ Callco Inc. (holding company), INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (formerly AIM Canada Holdings Inc.) (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (formerly AIM Trimark Global Fund Inc.) (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services) (registered investment advisor and registered transfer agent) and Invesco Trimark Dealer Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered broker dealer); Trustee, President and Principal Executive Officer of The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only); and Manager, Invesco PowerShares Capital Management LLC Formerly: President, Invesco Trimark Dealer Inc.; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Director and President, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services); Senior Managing Director, Invesco Holding Company Limited; Trustee and Executive Vice President, Tax-Free Investments Trust; Director and Chairman, Fund Management Company (registered broker dealer); President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; and Director, Trimark Trust (federally regulated Canadian Trust Company) -------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES -------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates (technology ACE Limited Trustee and Chair consulting company) (insurance company); Captaris, Inc. (unified messaging provider); and Investment Company Institute -------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Trustee Formerly: Partner, law firm of Baker & McKenzie; and None Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) -------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Policy Trustee firm) Studies, Inc. and Van Gilder Insurance Corporation -------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business None Trustee corporations, including the Boss Group Ltd. (private investment and management); Continental Energy Services, LLC (oil and gas pipeline service); Reich & Tang Funds (registered investment company); Annuity and Life Re (Holdings), Ltd. (reinsurance company), and Homeowners of America Holding Corporation/Homeowners of America Insurance Company (property casualty company) Formerly: Director, CompuDyne Corporation (provider of product and services to the public security market); Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; Director of various public and private corporations -------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff Trustee (government affairs company); and Owner and Chief Executive Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate entertainment) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company); and Discovery Global Education Fund (non-profit) -------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich & Trustee Tang Funds) (15 portfolios) -------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None Trustee -------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee -------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, Jr. -- 1944 2005 Retired Trustee Formerly: Partner, Deloitte & Touche; and Director, Mainstay None VP Series Funds, Inc. (25 portfolios) --------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Flanagan is considered an interested person of the Trust because he is an officer of the advisor to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the advisor to the Trust. (2) Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. 29 AIM INTERNATIONAL CORE EQUITY FUND TRUSTEES AND OFFICERS--(CONTINUED)
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS -------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A Senior Vice President and Funds--Registered Trademark-- Senior Officer Formerly: Director of Compliance and Assistant General Counsel, ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. -------------------------------------------------------------------------------------------------------------------------------- John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc. Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice President and Secretary, Invesco Aim Distributors, Inc.; Director, Vice President and Secretary, Invesco Aim Investment Services, Inc. and INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Vice President and Secretary, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc.; Chief Operating Officer, Senior Vice President, General Counsel and Secretary, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company); Vice President and Secretary, PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker- dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator); General Counsel and Secretary, Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) -------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A Vice President AIM Family of Funds--Registered Trademark-- Formerly: Senior Vice President, Invesco Aim Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark--; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.; Vice President, Invesco Aim Investment Services, Inc. and Fund Management Company; and Senior Vice President and Compliance Director, Delaware Investments Family of Funds -------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited, IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO Funds Group, Inc.; Secretary, INVESCO North American Holdings, Inc.; and Vice President, The AIM Family of Funds--Registered Trademark-- Formerly: Director, Senior Vice President, Secretary and General Counsel, Invesco Aim Management Group, Inc. and Invesco Aim Advisors, Inc.; Senior Vice President, Invesco Aim Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc. and Invesco Aim Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; Director and Vice President, INVESCO Distributors, Inc. and Chief Executive Officer and President, INVESCO Funds Group, Inc. -------------------------------------------------------------------------------------------------------------------------------- Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President, and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. Officer and Invesco Aim Private Asset Management Inc. Formerly: Assistant Vice President and Assistant Treasurer, The AIM Family of Funds--Registered Trademark-- and Assistant Vice President, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. -------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed Income and Cash Management N/A Vice President Group; Director of Cash Management and Senior Vice President, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc; Executive Vice President, Invesco Aim Distributors, Inc.; Senior Vice President, Invesco Aim Management Group, Inc.; Vice President, The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); and President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only) Formerly President and Principal Executive Officer, Tax-Free Investments Trust; Director and President, Fund Management Company; Chief Cash Management Officer and Managing Director, Invesco Aim Capital Management, Inc.; and Vice President, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only) -------------------------------------------------------------------------------------------------------------------------------- Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc., Invesco Aim Private Asset Management, Inc. and The AIM Family of Funds--Registered Trademark-- Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company; and Manager of the Fraud Prevention Department, Invesco Aim Investment Services, Inc. -------------------------------------------------------------------------------------------------------------------------------- Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, The AIM Family of Funds--Registered Trademark--, Invesco Global Asset Management (N.A.), Inc. (registered investment advisor), Invesco Institutional (N.A.), Inc., (registered investment advisor), INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment advisor) and Invesco Senior Secured Management, Inc. (registered investment advisor); and Vice President, Invesco Aim Distributors, Inc. and Invesco Aim Investment Services, Inc. Formerly: Vice President, Invesco Aim Capital Management, Inc. and Fund Management Company; and Global Head of Product Development, AIG-Global Investment Group, Inc. --------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund's prospectus for information on the Fund's sub- advisors. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza Invesco Aim Advisors, Invesco Aim Distributors, PricewaterhouseCoopers Suite 100 Inc. Inc. LLP Houston, TX 77046-1173 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street Suite 100 Suite 100 Suite 2900 Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE TRANSFER AGENT CUSTODIAN Stradley Ronon Stevens INDEPENDENT TRUSTEES Invesco Aim Investment State Street Bank and & Young, LLP Kramer, Levin, Naftalis & Services, Inc. Trust Company 2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103 1177 Avenue of the Houston, TX 77210-4739 Boston, MA 02110-2801 Americas New York, NY 10036-2714
30 AIM INTERNATIONAL CORE EQUITY FUND [GO PAPERLESS GRAPHIC] ==================================================================================================================================== GO PAPERLESS WITH EDELIVERY Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund reports and prospectuses with a service that's all about eeees: o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents trees used to produce paper. will be sent via email as soon as they're available. o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home expenses and put more capital back in your fund's returns. computer with a few clicks of your mouse. This service is provided by Invesco Aim Investment Services, Inc. ==================================================================================================================================== FUND HOLDINGS AND PROXY VOTING INFORMATION The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC website at sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 942 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-06463 and 033-44611. 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 Invesco Aim website, invescoaim. com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is available at our website. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC website, sec.gov. If used after January 20, 2009, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the [INVESCO AIM LOGO] investment advisors for the products and services represented by Invesco Aim; they each provide -- SERVICE MARK -- investment advisory services to individual and institutional clients and do not sell securities. Please refer to each fund's prospectus for information on the fund's subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the retail mutual funds, exchange-traded funds and institutional money market funds and the subdistributor for the STIC Global Funds represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd. invescoaim.com I-ICE-AR-1 Invesco Aim Distributors, Inc.
[INVESCO AIM LOGO] AIM INTERNATIONAL GROWTH FUND -- SERVICE MARK -- Annual Report to Shareholders o October 31, 2008 [MOUNTAIN GRAPHIC] 2 Letters to Shareholders 4 Performance Summary 4 Management Discussion 6 Long-Term Fund Performance 8 Supplemental Information 9 Schedule of Investments 11 Financial Statements 14 Notes to Financial Statements 20 Financial Highlights 22 Auditor's Report 23 Fund Expenses 24 Approval of Investment Advisory Agreement 27 Tax Information 28 Trustees and Officers
Dear Shareholder: In previous reports, I've talked with you about short-term market volatility. I'd like to take this opportunity to update you on recent market developments and provide some perspective and encouragement to my fellow long-term investors. [TAYLOR PHOTO] MARKET OVERVIEW At the start of the fiscal year in November 2007, we saw warning signs of increasing economic ills -- a weakening housing market, rising inflation and slowing job growth, among others. In response, the U.S. Federal Reserve Board Philip Taylor (the Fed) repeatedly cut short-term interest rate targets to stimulate economic growth and expand market liquidity.(1) Also, Congress and the president worked together to enact an economic stimulus plan that included billions of dollars in rebates to taxpayers. These actions helped the economy and the U.S. stock market until the spring of 2008, when other factors came to the forefront -- triggering a severe correction that eventually drove major stock-market indexes to multi-year lows.(2) HOW WE GOT HERE The cause of this correction was years of lax lending associated with the recent housing boom. Mortgage loans of questionable quality were bundled into hard-to-value securities that were bought by, and traded among, financial institutions. As the value of those securities declined, financial institutions sought to unload them -- but there were few buyers. With the value of their assets falling and access to credit tightening, a number of well-established financial firms faced severe difficulties, and investor uncertainty and market volatility spiked. In October 2008, the administration and Congress enacted a plan, the Troubled Assets Relief Program, authorizing the U.S. Department of the Treasury to purchase up to $700 billion in troubled mortgage-related assets -- the largest and most direct effort to resolve a credit crisis in the last half century. The Fed, in concert with other central banks, cut short-term interest rate targets and undertook other initiatives intended to restore investor confidence, expand lending and mitigate the effects of the global credit crisis. The recent volatility in the stock, fixed-income and credit markets has driven home the importance of three timeless investing principles. INVESTING IN VOLATILE MARKETS Through up markets and down, we believe history shows investors should: o INVEST FOR THE LONG TERM. Short-term fluctuations have always been a reality of the markets. We urge you to stick to your investment plan and stay focused on your long-term goals. o DIVERSIFY. Although diversification doesn't eliminate the risk of loss or guarantee a profit, a careful selection of complementary asset classes may cushion your portfolio against excessive volatility. o STAY FULLY INVESTED. Trying to time the market is a gamble, not an investment strategy. A sound investment strategy includes viewing market volatility as a matter of course, not a reason to panic. A trusted financial advisor can explain more fully the potential value of following these principles. An experienced advisor who knows your individual investment goals, financial situation and risk tolerance can be your most valuable asset during times of market volatility. Your advisor can provide guidance and can monitor your investments to ensure they're on course. It's also helpful to remember that many of history's significant buying opportunities resulted from short-term economic crises that, in their time, were considered unprecedented. We believe current market uncertainty may represent a buying opportunity for patient, long-term investors. Rest assured that Invesco Aim's portfolio managers are working diligently on your behalf to capitalize on this situation. MANAGING MONEY IS OUR FOCUS As 2008 draws to a close, I believe Invesco Aim is uniquely positioned to navigate current uncertain markets. Our parent company, Invesco Ltd., is one of the world's largest and most diversified global investment managers. Invesco provides clients with diversified investment strategies from distinct management teams around the globe and a range of investment products. Invesco's single focus is asset management -- which means we focus on doing one thing well: managing your money. That can be reassuring in uncertain times. While market conditions change often, commitment to putting shareholders first, helping clients achieve their investment goals and providing excellent customer service remains constant. If you have questions about this report or your account, please contact one of our client service representatives at 800 959 4246. Thank you for your continued confidence, and we look forward to serving you.
Sincerely, /S/ PHILIP TAYLOR Philip Taylor Senior Managing Director, Invesco Ltd. CEO, Invesco Aim (1) U.S. Federal Reserve; (2) Lipper Inc. 2 AIM INTERNATIONAL GROWTH FUND Dear Fellow Shareholders: As I write this letter, turbulent financial markets are causing considerable investor anxiety, reminding us again that markets are cyclical and the correction of excess is often painful, at least in the short term. Your Board of Trustees [CROCKETT believes in the wisdom of a long-term perspective and consistent investment PHOTO] discipline. We continue to put your interests first in the effort to improve investment performance, contain shareholder costs and uphold the highest ethical standards. We remain enthusiastic about the global reach and investment expertise that Invesco, a leading independent global investment management company, brings to Bruce Crockett the management of AIM Funds as the parent company of the advisors. The diverse investment strategies deployed throughout the worldwide network of Invesco investment centers has helped strengthen the management of many AIM Funds. The rebranding of the Funds' management company as Invesco Aim was followed by the launch of an upgraded, investor-friendly website (invescoaim.com); a new mountain logo using a Himalayan peak to symbolize stability, endurance, strength and longevity; and a new ad campaign. Emphasizing Invesco Aim's focus and investment quality, the ads will appear in financial publications such as Barron's and Investment News through the end of 2008. At its June meeting, your Board reviewed and renewed the investment advisory contracts between the AIM Funds and Invesco Aim Advisors, Inc. You can find the results of this rigorous annual process at invescoaim.com. Go to "Products & Performance" and click on "Investment Advisory Agreement Renewals." We have recently completed another active proxy voting season during which we acted on your behalf to double the number of votes in favor of separating the roles of chairman and CEO at the companies whose shares your Funds hold. We also continued to support the movement for shareholders to have a bigger role in approving executive compensation, initiatives known as "say on pay." Like virtually all other mutual fund complexes, AIM Funds abstain from voting on social issues as a matter of policy, and I would be interested to hear your thoughts on this policy. As always, you are welcome to email your questions or comments to me at bruce@brucecrockett.com. The dialogue that has been established in this way has been instructive for your Board, and we want it to continue. Although the production schedule for Fund annual reports and prospectuses allows me to write these letters of general report and response just twice a year, please be assured that your comments are received, welcomed and heard in the interim. We look forward to hearing from you and to representing you.
Sincerely, /S/ BRUCE L. CROCKETT Bruce L. Crockett Independent Chair AIM Funds Board of Trustees 3 AIM INTERNATIONAL GROWTH FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ======================================================================================= PERFORMANCE SUMMARY MARKET CONDITIONS AND YOUR FUND The performance of global equity markets over the 12-months ended October 31, 2008 was Many factors contributed to the negative extremely turbulent, with most markets registering double-digit losses as global growth performance of most major market indexes slowed and a number of financial institutions worldwide fell victim to the broadening for the fiscal year ended October 31, scope of the credit crisis. For the fiscal year ended October 31, 2008, Class A shares 2008.(1) The chief catalyst was the of AIM International Growth Fund, at net asset value, delivered a return of -44.62%. ongoing sub-prime loan crisis and its This is compared with the MSCI EAFE Growth Index and the MSCI EAFE Index, which far-reaching effects on overall credit returned -44.85% and -46.62%, respectively.(triangle) Stock selection across the availability. Additionally, record high consumer discretionary sector was a key driver of both absolute and relative results. crude oil prices, falling home values and the weak U.S. dollar placed significant Your Fund's long-term performance appears later in this report. pressure on the purchasing power of the U.S. consumer. FUND VS. INDEXES European equities remained under Total returns, 10/31/07 to 10/31/08, at net asset value (NAV). Performance shown does pressure over the fiscal year as further not include applicable contingent deferred sales charges (CDSC) or front-end sales weakness in the macroeconomic outlook charges, which would have reduced performance. manifested itself and financial sector turmoil continued. Asian equities were Class A Shares -44.62% volatile as well, falling sharply toward Class B Shares -45.05 the end of the period.(1) While there were Class C Shares -45.07 sporadic attempts to rally, the dominant Class R Shares -44.78 trend during a volatile 12 months remained Class Y Shares* -44.62 one of weakness. MSCI EAFE Index(triangle) (Broad Market Index) -46.62 MSCI EAFE Growth Index(triangle) (Style-Specific Index) -44.85 Emerging markets stocks tumbled from Lipper International Multi-Cap Growth Funds Index(triangle) record highs(1) as global recession (Peer Group Index) -49.72 concerns deepened and commodity prices fell sharply.(2) There were mounting (triangle)Lipper Inc. concerns that some countries could start * Share class incepted during the fiscal year. See page 7 for a detailed explanation to default on their foreign debt loans. of Fund performance. ======================================================================================= AIM International Growth Fund did not go unscathed by this global downturn, HOW WE INVEST investments for the Fund by using a delivering double-digit declines over the bottom-up investment approach, which means 12-months ending October 31, 2008. When selecting stocks for your Fund, we that we construct the Fund primarily on a However, the Fund fared better than both employ a disciplined investment strategy stock-by-stock basis. We focus on the its style-specific and broad market that emphasizes fundamental research, strengths of individual companies rather benchmarks, the MSCI EAFE Growth Index and supported by both quantitative analysis than sectors, countries or market-cap the MSCI EAFE Index.(1) and portfolio construction techniques. Our trends. EQV (Earnings, Quality, Valuation) The Fund's relative results suffered strategy focuses primarily on identifying We believe disciplined sell decisions earlier in the fiscal year due to its quality companies that have experienced, are key to successful investing. We significant underweight in the materials or exhibit the potential for, accelerating consider selling a stock for one of the sector versus the MSCI EAFE Growth Index, or above average earnings growth but whose following reasons: the Fund's style-specific index. In our stock prices do not fully reflect these view, underlying assumptions used to attributes. o A company's fundamentals deteriorate, justify the sector's dramatic price or it posts disappointing earnings. appreciation over the last several years While research responsibilities within the portfolio management team are focused o A stock's price seems overvalued. by geographic region, we select o A more attractive opportunity becomes available. ========================================== ========================================== ========================================== PORTFOLIO COMPOSITION TOP FIVE COUNTRIES TOP 10 EQUITY HOLDINGS* By sector 1. Roche Holding AG 3.6% Health Care 15.1% 1. United Kingdom 16.8% 2. Nestle S.A. 3.0 Consumer Discretionary 14.1 2. United States 10.0 3. Teva Pharmaceutical Industries Consumer Staples 13.3 3. Switzerland 9.9 Ltd.- ADR 2.9 Information Technology 10.5 4. Japan 8.7 4. Imperial Tobacco Group PLC 2.9 Industrials 9.5 5. Germany 8.5 5. Infosys Technologies Ltd. 2.2 Financials 7.1 ========================================== 6. Telefonica S.A. 2.1 Telecommunication Services 6.8 7. BNP Paribas 1.9 Energy 6.6 8. Total S.A. 1.9 Materials 4.1 ========================================== 9. Syngenta AG 1.9 Utilities 0.9 Total Net Assets $2.2 billion 10. Bayer AG 1.9. Money Market Funds Plus Total Number of Holdings* 77 ========================================== Other Assets Less Liabilities 12.0 ========================================== ========================================== The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security. * Excluding money market fund holdings.
4 AIM INTERNATIONAL GROWTH FUND were unreasonably optimistic and did not sectors, where we were underweight on a CLAS OLSSON support extreme valuations. The latter relative basis, saw a significant Senior portfolio manager and part of the fiscal year, however, brought reduction. [OLSSON head of Invesco Aim's a dramatic reversal of this upward trend, PHOTO] International Investment as the sector declined sharply as a result From a regional perspective, we added Management Unit, is lead of falling commodity prices. Our limited to our exposure in Europe, where we were manager of AIM International Growth Fund exposure to this volatile sector, underweight on a relative basis, as we with respect to the Fund's investments in particularly to the metals and mining found attractive stock selections in the Europe and Canada. Mr. Olsson joined industry, contributed favorably to U.K. We reduced our weighting in emerging Invesco Aim in 1994. He became a relative results. Asia by selling holdings in South Korea, commissioned naval officer at the Royal Taiwan and India as valuations became Swedish Naval Academy in 1988. Mr. Being underweight in the financials stretched. We trimmed back our exposure in Olsson also earned a B.B.A. from The sector versus the style-specific index Japan as well. Japan's economic growth University of Texas at Austin. toward the end of the fiscal year, record since the start of 2007 has been particularly in the weak banking industry, rather poor, and we believe prospects for BARRETT SIDES was beneficial to relative performance. any near-term improvement are relatively Senior portfolio manager, is Severe declines in the markets made bleak. The Fund's overall emerging markets [SIDES lead manager of AIM positive stock performers few and far exposure saw a modest increase over the PHOTO] International Growth Fund between. period. with respect to the Fund's investments in the Asia Pacific Region and Although positive performers were few Volatile markets can test an investor's Latin America. Mr. Sides joined Invesco and far between, we did have exposure to a resolve, and 2008 has so far been one of Aim in 1990. He graduated with a B.S. in few stocks that held up well over the the most turbulent periods in many years. economics from Bucknell University. Mr. period such as UK-based tobacco company However, it's always worth remembering Sides also earned an M.B.A. in BRITISH AMERICAN TOBACCO and French luxury that market turbulence can create international business from the University goods manufacturer RICHEMONT. A 12% cash investment opportunities. We welcome any of St. Thomas. position in a declining market contributed new investors who have joined the Fund favorably as well. The current level of during the fiscal year, and to all of our SHUXIN CAO cash should not be seen as a new defensive shareholders we would like to express our Chartered Financial long-term position. appreciation for your continued investment [CAO Analyst, senior portfolio in AIM International Growth Fund. PHOTO] manager, is manager of AIM Holding back returns was our stock International Growth Fund. selection across the consumer (1) Lipper Inc. Mr. Cao joined Invesco Aim discretionary and consumer staples in 1997. He graduated from Tianjin Foreign sectors. Fund holdings such as German (2) Bloomberg L.P. Language Institute with a B.A. in English. automobile company PORSCHE, sports apparel Mr. Cao also earned an M.B.A. from Texas manufacturer PUMA, and Belgium brewer The views and opinions expressed in A&M University and is a certified public INBEV all disappointed over the period. management's discussion of Fund accountant. The Fund's lack of exposure to Volkswagen performance are those of Invesco Aim (not a Fund holding) was a drag on Advisors, Inc. These views and opinions MATTHEW DENNIS relative results as well. Volkswagen rose are subject to change at any time based on Chartered Financial by about 130% over the period, strongly factors such as market and economic [DENNIS Analyst, portfolio manager, outperforming the declining European conditions. These views and opinions may PHOTO] is manager of AIM market. We believe this strong performance not be relied upon as investment advice or International Growth Fund. was not supported by fundamental factors. recommendations, or as an offer for a Mr. Dennis joined Invesco Aim in 2000. He We are active, long-term investors, and particular security. The information is graduated with a B.A. in economics from therefore we do not focus on the index not a complete analysis of every aspect of The University of Texas at Austin. Mr. weightings of individual stocks. any market, country, industry, security or Dennis also earned an M.S. in finance from the Fund. Statements of fact are from Texas A&M University. Elsewhere, Singapore marine rig sources considered reliable, but Invesco manufacture KEPPEL CORP and oil and gas Aim Advisors, Inc. makes no representation JASON HOLZER company PETROLEUM GEO SERVICES or warranty as to their completeness or Chartered Financial disappointed as well. We believe these accuracy. Although historical performance [HOLZER Analyst, senior portfolio stocks were hit disproportionately hard as is no guarantee of future results, these PHOTO] manager, is manager of AIM they offered concerned investors better insights may help you understand our International Growth Fund. levels of liquidity during periods of investment management philosophy. Mr. Holzer joined Invesco market stress. Aim in 1996. He earned a B.A. in See important Fund and index disclosures quantitative economics and an M.S. in Our overall "EQV" focused strategy later in this report. engineering economic systems from Stanford remained the same, despite the volatile University. nature of markets. Over the fiscal year, our exposure to the telecommunication Assisted by the Asia Pacific/Latin America services and health care sectors, where we and Europe/Canada Teams were overweight on a relative basis, increased markedly as stocks with robust growth and reasonable valuations were added to the portfolio. In contrast, our exposure to the financials and industrials
5 AIM INTERNATIONAL GROWTH FUND YOUR FUND'S LONG-TERM PERFORMANCE Past performance cannot guarantee shown in the chart and table(s) does not one that indicates the dollar value of an comparable future results. reflect deduction of taxes a shareholder investment, is constructed with each would pay on Fund distributions or sale of segment representing a percent change in The data shown in the chart include Fund shares. the value of the investment. In this reinvested distributions, applicable sales chart, each segment represents a doubling, charges and Fund expenses including This chart, which is a logarithmic or 100% change, in the value of the management fees. Index results include chart, presents the fluctuations in the investment. In other words, the space reinvested dividends, but they do not value of the Fund and its indexes. We between $5,000 and $10,000 is the same reflect sales charges. Performance of an believe that a logarithmic chart is more size as the space between $10,000 and index of funds reflects fund expenses and effective than other types of charts in $20,000, and so on. management fees; performance of a market illustrating changes in value during the index does not. Performance early years shown in the chart. The vertical axis, the
6 AIM INTERNATIONAL GROWTH FUND ==================================================================================================================================== [MOUNTAIN CHART] RESULTS OF A $10,000 INVESTMENT -- CLASS A SHARES (OLDEST SHARE CLASS) Index data from 3/31/92, Fund data from 4/7/92 AIM International Growth Fund-Class MSCI EAFE Date A Shares MSCI EAFE Index(1) Growth Index(1) 3/31/92 $10000 $10000 4/92 $ 9710 10047 9777 5/92 10293 10720 10508 6/92 10185 10211 10042 7/92 9796 9950 9884 8/92 9959 10574 10658 9/92 9775 10365 10437 10/92 9602 9822 9895 11/92 9634 9914 10034 12/92 9702 9965 10046 1/93 9723 9964 9955 2/93 9940 10265 10239 3/93 10524 11160 10966 4/93 11034 12219 11852 5/93 11369 12477 12201 6/93 11142 12282 12091 7/93 11445 12712 12444 8/93 12289 13399 13079 9/93 12420 13097 12760 10/93 13189 13501 13163 11/93 12810 12320 11872 12/93 14144 13210 12572 1/94 14739 14327 13517 2/94 14284 14287 13415 3/94 13525 13672 12755 4/94 13981 14252 13281 5/94 13851 14170 13126 6/94 13633 14370 13251 7/94 14154 14509 13367 8/94 14555 14852 13670 9/94 14197 14384 13213 10/94 14630 14863 13584 11/94 13762 14149 12973 12/94 13670 14238 13140 1/95 12892 13691 12636 2/95 13220 13651 12632 3/95 13705 14503 13426 4/95 14134 15048 14020 5/95 14460 14869 13859 6/95 14709 14608 13572 7/95 15521 15518 14437 8/95 15204 14926 13830 9/95 15486 15217 14146 10/95 15396 14808 13764 11/95 15453 15220 14143 12/95 15913 15833 14635 1/96 16295 15898 14645 2/96 16631 15952 14696 3/96 16920 16291 15049 4/96 17465 16764 15413 5/96 17545 16456 15091 ====================================================================================================================================
(1) Lipper Inc. ==================================================================================================================================== [MOUNTAIN CHART] 6/96 17905 16549 15144 7/96 17024 16065 14654 8/96 17419 16100 14668 9/96 17895 16528 15070 10/96 17825 16359 14945 11/96 18659 17010 15423 12/96 18929 16791 15142 1/97 18882 16203 14511 2/97 19097 16468 14735 3/97 18943 16528 14823 4/97 18895 16615 14971 5/97 20029 17697 15851 6/97 21069 18673 16773 7/97 21892 18975 17174 8/97 20007 17558 15849 9/97 21726 18541 16897 10/97 19864 17116 15298 11/97 19876 16942 15265 12/97 20011 17089 15461 1/98 20203 17871 16160 2/98 21581 19018 17232 3/98 22960 19603 17465 4/98 23295 19758 17640 5/98 23715 19662 17516 6/98 23739 19811 17758 7/98 24147 20012 17838 8/98 20802 17533 15922 9/98 20264 16995 15474 10/98 21078 18767 17044 11/98 21953 19728 17868 12/98 22697 20507 18894 1/99 22965 20446 18993 2/99 21916 19959 18376 3/99 22282 20792 18625 4/99 23001 21634 18815 5/99 22159 20520 17998 6/99 23573 21320 18695 7/99 24049 21954 19054 8/99 24073 22034 19161 9/99 24598 22256 19465 10/99 26502 23090 20508 11/99 30003 23892 22010 12/99 35200 26036 24460 1/00 32771 24382 23084 2/00 36074 25038 24364 3/00 34959 26009 24821 4/00 32138 24640 23181 5/00 30200 24038 21745 6/00 31580 24978 22521 7/00 30794 23931 21110 8/00 31998 24139 21334 9/00 29352 22963 19922 10/00 27338 22421 19001 11/00 25034 21580 18124 12/00 26153 22347 18464 1/01 26535 22336 18412 2/01 23536 20661 16542 3/01 21886 19284 15397 4/01 23140 20624 16452 5/01 22800 19896 15789 6/01 22554 19083 15022 7/01 22035 18735 14658 8/01 21244 18261 13989 9/01 19228 16411 12665 10/01 19691 16831 13169 11/01 19910 17452 13845 12/01 20304 17555 13926 ====================================================================================================================================
==================================================================================================================================== [MOUNTAIN CHART] 1/02 19486 16623 13175 2/02 19732 16739 13352 3/02 20562 17726 13922 4/02 20589 17762 13933 5/02 20820 17987 13961 6/02 20384 17271 13601 7/02 18395 15566 12151 8/02 18408 15530 12057 9/02 16473 13863 11008 10/02 17290 14608 11630 11/02 17589 15271 11972 12/02 17412 14757 11694 1/03 16745 14141 11115 2/03 16514 13816 10876 3/03 16268 13545 10761 4/03 17236 14873 11693 5/03 18258 15774 12297 6/03 18639 16155 12511 7/03 18747 16546 12675 8/03 19047 16946 12907 9/03 19483 17468 13344 10/03 20750 18557 14111 11/03 21132 18969 14441 12/03 22252 20451 15435 1/04 22962 20740 15736 2/04 23588 21219 16034 3/04 23520 21339 16047 4/04 23014 20856 15648 5/04 23191 20926 15608 6/04 23532 21385 15817 7/04 22782 20691 15174 8/04 22959 20782 15191 9/04 23846 21325 15566 10/04 24788 22052 16087 11/04 26314 23559 17195 12/04 27459 24592 17924 1/05 27009 24141 17510 2/05 28222 25184 18212 3/05 27581 24551 17765 4/05 26748 23974 17422 5/05 26967 23986 17474 6/05 27636 24304 17614 7/05 28808 25049 18151 8/05 29776 25682 18672 9/05 30484 26826 19458 10/05 29503 26042 18926 11/05 30580 26679 19283 12/05 32268 27921 20303 1/06 34739 29635 21554 2/06 34479 29569 21309 3/06 35482 30544 22133 4/06 37090 32003 23140 5/06 35205 30760 22161 6/06 35149 30758 22190 7/06 35494 31062 22293 8/06 36633 31916 22831 9/06 36812 31966 22703 10/06 38270 33209 23476 11/06 39824 34201 24159 12/06 41270 35275 24837 1/07 41604 35514 25036 2/07 41034 35800 25229 3/07 42700 36713 26065 4/07 44865 38343 27186 5/07 46152 39016 27731 6/07 46568 39064 27802 7/07 46000 38489 27576 ====================================================================================================================================
==================================================================================================================================== [MOUNTAIN CHART] 8/07 45848 37887 27305 9/07 48301 39914 29005 10/07 50740 41482 30171 11/07 48101 40118 29552 12/07 47279 39215 28923 1/08 43057 35593 26262 2/08 43354 36103 26976 3/08 43146 35723 26563 4/08 44591 37662 27873 5/08 45166 38028 28516 6/08 41494 34918 26568 7/08 40507 33797 25641 8/08 38988 32428 24422 9/08 34855 27739 20744 10/08 28115 22142 16640 ====================================================================================================================================
========================================== ========================================== AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS As of 10/31/08, including maximum As of 9/30/08, the most recent calendar applicable sales charges quarter-end, including maximum applicable sales charges CLASS A SHARES CLASS A SHARES Inception (4/7/92) 6.44% Inception (4/7/92) 7.87% 10 Years 2.35 10 Years 4.99 5 Years 5.06 5 Years 11.09 1 Year -47.67 1 Year -31.81 CLASS B SHARES CLASS B SHARES Inception (9/15/94) 4.33% Inception (9/15/94) 5.97% 10 Years 2.33 10 Years 4.97 5 Years 5.16 5 Years 11.28 1 Year -47.63 1 Year -31.74 CLASS C SHARES CLASS C SHARES Inception (8/4/97) 1.67% Inception (8/4/97) 3.68% 10 Years 2.17 10 Years 4.82 5 Years 5.48 5 Years 11.54 1 Year -45.58 1 Year -29.05 CLASS R SHARES CLASS R SHARES 10 Years 2.66% 10 Years 5.31% 5 Years 5.99 5 Years 12.04 1 Year -44.78 1 Year -28.03 ========================================== CLASS Y SHARES 10 Years 2.92% 5 Years 6.26 1 Year -44.62 ========================================== GUARANTEE COMPARABLE FUTURE RESULTS; DEFERRED SALES CHARGE (CDSC) FOR THE CLASS R SHARES' INCEPTION DATE IS JUNE 3, CURRENT PERFORMANCE MAY BE LOWER OR PERIOD INVOLVED. THE CDSC ON CLASS B 2002. RETURNS SINCE THAT DATE ARE HIGHER. PLEASE VISIT INVESCOAIM.COM FOR SHARES DECLINES FROM 5% BEGINNING AT THE HISTORICAL RETURNS. ALL OTHER RETURNS ARE THE MOST RECENT MONTH-END PERFORMANCE. TIME OF PURCHASE TO 0% AT THE BEGINNING OF BLENDED RETURNS OF HISTORICAL CLASS R PERFORMANCE FIGURES REFLECT REINVESTED THE SEVENTH YEAR. THE CDSC ON CLASS C SHARE PERFORMANCE AND RESTATED CLASS A DISTRIBUTIONS, CHANGES IN NET ASSET VALUE SHARES IS 1% FOR THE FIRST YEAR AFTER SHARE PERFORMANCE (FOR PERIODS PRIOR TO AND THE EFFECT OF THE MAXIMUM SALES CHARGE PURCHASE. CLASS R SHARES DO NOT HAVE A THE INCEPTION DATE OF CLASS R SHARES) AT UNLESS OTHERWISE STATED. INVESTMENT RETURN FRONT-END SALES CHARGE; RETURNS SHOWN ARE NET ASSET VALUE, ADJUSTED TO REFLECT THE AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AT NET ASSET VALUE AND DO NOT REFLECT A HIGHER RULE 12B-1 FEES APPLICABLE TO CLASS YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL 0.75% CDSC THAT MAY BE IMPOSED ON A TOTAL R SHARES. CLASS A SHARES' INCEPTION DATE SHARES. REDEMPTION OF RETIREMENT PLAN ASSETS IS APRIL 7, 1992. WITHIN THE FIRST YEAR. CLASS Y SHARES DO THE TOTAL ANNUAL FUND OPERATING EXPENSE NOT HAVE A FRONT-END SALES CHARGE OR A CLASS Y SHARES' INCEPTION DATE IS RATIO SET FORTH IN THE MOST RECENT FUND CDSC; THEREFORE, PERFORMANCE IS AT NET OCTOBER 3, 2008; RETURNS SINCE THAT DATE PROSPECTUS AS OF THE DATE OF THIS REPORT ASSET VALUE. ARE ACTUAL RETURNS. ALL OTHER RETURNS ARE FOR CLASS A, CLASS B, CLASS C, CLASS R AND BLENDED RETURNS OF ACTUAL CLASS Y SHARE CLASS Y SHARES WAS 1.45%, 2.20%, 2.20%, THE PERFORMANCE OF THE FUND'S SHARE PERFORMANCE AND RESTATED CLASS A SHARE 1.70% AND 1.20%, RESPECTIVELY. THE EXPENSE CLASSES WILL DIFFER PRIMARILY DUE TO PERFORMANCE (FOR PERIODS PRIOR TO THE RATIOS PRESENTED ABOVE MAY VARY FROM THE DIFFERENT SALES CHARGE STRUCTURES AND INCEPTION DATE OF CLASS Y SHARES) AT NET EXPENSE RATIOS PRESENTED IN OTHER SECTIONS CLASS EXPENSES. ASSET VALUE. THE RESTATED CLASS A SHARE OF THIS REPORT THAT ARE BASED ON EXPENSES PERFORMANCE REFLECTS THE RULE 12B-1 FEES INCURRED DURING THE PERIOD COVERED BY THIS A REDEMPTION FEE OF 2% WILL BE IMPOSED APPLICABLE TO CLASS A SHARES AS WELL AS REPORT. ON CERTAIN REDEMPTIONS OR EXCHANGES OUT OF ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS THE FUND WITHIN 31 DAYS OF PURCHASE. RECEIVED BY CLASS A SHARES. CLASS A SHARES CLASS A SHARE PERFORMANCE REFLECTS THE EXCEPTIONS TO THE REDEMPTION FEE ARE INCEPTION DATE IS APRIL 7, 1992. MAXIMUM 5.50% SALES CHARGE, AND CLASS B LISTED IN THE FUND'S PROSPECTUS. AND CLASS C SHARE PERFORMANCE REFLECTS THE THE PERFORMANCE DATA QUOTED REPRESENT APPLICABLE CONTINGENT PAST PERFORMANCE AND CANNOT
7 AIM INTERNATIONAL GROWTH FUND AIM INTERNATIONAL GROWTH FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. o Unless otherwise stated, information presented in this report is as of October 31, 2008, and is based on total net assets. o Unless otherwise noted, all data provided by Invesco Aim. ABOUT SHARE CLASSES ABOUT INDEXES USED IN THIS REPORT OTHER INFORMATION o Effective September 30, 2003, only o The MSCI EAFE--REGISTERED TRADEMARK-- o The Chartered Financial Analyst previously established qualified plans INDEX is a free float-adjusted market --REGISTERED TRADEMARK-- (CFA are eligible to purchase Class B shares capitalization index that is designed --REGISTERED TRADEMARK--) designation of any AIM fund. to measure developed market equity is a globally recognized standard for performance, excluding the U.S. and measuring the competence and integrity o Class R shares are available only to Canada. of investment professionals. certain retirement plans. Please see the prospectus for more information. o The MSCI EAFE--REGISTERED TRADEMARK-- o The returns shown in management's GROWTH INDEX is an unmanaged index discussion of Fund performance are o Class Y shares are available only to considered representative of growth based on net asset values calculated certain investors. Please see the stocks of Europe, Australasia and the for shareholder transactions. Generally prospectus for more information. Far East. accepted accounting principles require adjustments to be made to the net PRINCIPAL RISKS OF INVESTING IN THE FUND o The LIPPER INTERNATIONAL MULTI-CAP assets of the Fund at period end for GROWTH FUNDS INDEX is an equally financial reporting purposes, and as o Investing in developing countries can weighted representation of the largest such, the net asset values for add additional risk, such as high rates funds in the Lipper International shareholder transactions and the of inflation or sharply devalued Multi-Cap Growth Funds category. These returns based on those net asset values currencies against the U.S. dollar. funds typically have an above-average may differ from the net asset values Transaction costs are often higher, and price-to-cash flow ratio, price-to-book and returns reported in the Financial there may be delays in settlement ratio, and three-year sales-per-share Highlights. procedures. growth value, compared to the S&P/Citigroup World ex-U.S. BMI. o Industry classifications used in this o Prices of equity securities change in report are generally according to the response to many factors, including the o The Fund is not managed to track the Global Industry Classification historical and prospective earnings of performance of any particular index, Standard, which was developed by and is the issuer, the value of its assets, including the indexes defined here, and the exclusive property and a service general economic conditions, interest consequently, the performance of the mark of MSCI Inc. and Standard & rates, investor perceptions and market Fund may deviate significantly from the Poor's. liquidity. performance of the indexes. o Foreign securities have additional o A direct investment cannot be made in risks, including exchange rate changes, an index. Unless otherwise indicated, political and economic upheaval, index results include reinvested relative lack of information, dividends, and they do not reflect relatively low market liquidity, and sales charges. Performance of an index the potential lack of strict financial of funds reflects fund expenses; and accounting controls and standards. performance of a market index does not. o The prices of securities held by the Fund may decline in response to market risks. ======================================================================================= ========================================== THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, FUND NASDAQ SYMBOLS WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. Class A Shares AIIEX ======================================================================================= Class B Shares AIEBX Class C Shares AIECX NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Class R Shares AIERX Class Y Shares AIIYX ==========================================
8 AIM INTERNATIONAL GROWTH FUND SCHEDULE OF INVESTMENTS(a) October 31, 2008
SHARES VALUE ---------------------------------------------------------------------------------- COMMON STOCKS & OTHER EQUITY INTERESTS-84.75% AUSTRALIA-2.56% BHP Billiton Ltd. 1,611,179 $ 30,950,772 ---------------------------------------------------------------------------------- Cochlear Ltd. 681,139 25,918,673 ================================================================================== 56,869,445 ================================================================================== BELGIUM-1.41% InBev N.V. 696,197 28,065,888 ---------------------------------------------------------------------------------- KBC Groep N.V. 76,355 3,305,868 ================================================================================== 31,371,756 ================================================================================== CANADA-2.93% Canadian National Railway Co. 545,600 23,583,025 ---------------------------------------------------------------------------------- Canadian Natural Resources Ltd. 391,700 19,626,307 ---------------------------------------------------------------------------------- Suncor Energy, Inc. 913,800 21,850,178 ================================================================================== 65,059,510 ================================================================================== CHINA-0.90% China Mobile Ltd. 2,269,350 19,912,055 ================================================================================== DENMARK-1.72% Novo Nordisk A.S.-Class B 713,612 38,194,481 ================================================================================== FINLAND-0.96% Nokia Oyj 1,392,452 21,236,637 ================================================================================== FRANCE-5.55% Axa 1,204,171 23,202,040 ---------------------------------------------------------------------------------- BNP Paribas 594,941 43,182,678 ---------------------------------------------------------------------------------- Cap Gemini S.A. 420,184 13,528,465 ---------------------------------------------------------------------------------- Total S.A. 785,273 43,125,871 ================================================================================== 123,039,054 ================================================================================== GERMANY-6.00% Bayer AG 763,361 41,987,224 ---------------------------------------------------------------------------------- Deutsche Boerse AG 158,244 12,634,199 ---------------------------------------------------------------------------------- Merck KGaA 380,760 33,763,037 ---------------------------------------------------------------------------------- Puma AG Rudolf Dassler Sport 128,530 21,465,709 ---------------------------------------------------------------------------------- Siemens AG 389,407 23,295,185 ================================================================================== 133,145,354 ================================================================================== GREECE-0.48% OPAP S.A. 483,355 10,589,613 ================================================================================== HONG KONG-3.09% Esprit Holdings Ltd. 3,793,400 21,296,284 ---------------------------------------------------------------------------------- Hutchison Whampoa Ltd. 5,753,000 31,491,217 ---------------------------------------------------------------------------------- Li & Fung Ltd. 7,840,000 15,764,561 ================================================================================== 68,552,062 ================================================================================== INDIA-2.89% Bharat Heavy Electricals Ltd. 606,648 16,091,489 ---------------------------------------------------------------------------------- Infosys Technologies Ltd. 1,689,518 48,104,705 ================================================================================== 64,196,194 ================================================================================== INDONESIA-0.46% PT Telekomunikasi Indonesia 20,647,500 10,250,847 ================================================================================== IRELAND-0.75% CRH PLC 744,506 16,600,301 ================================================================================== ISRAEL-2.92% Teva Pharmaceutical Industries Ltd.-ADR 1,512,906 64,873,409 ================================================================================== ITALY-2.77% Eni S.p.A. 1,663,601 39,636,379 ---------------------------------------------------------------------------------- Finmeccanica S.p.A. 1,703,521 21,125,585 ---------------------------------------------------------------------------------- Finmeccanica S.p.A.-Rts. expiring 11/11/08(b) 1,451,325 591,862 ================================================================================== 61,353,826 ================================================================================== JAPAN-8.74% Denso Corp. 171,000 3,376,614 ---------------------------------------------------------------------------------- Fanuc Ltd. 460,600 31,259,286 ---------------------------------------------------------------------------------- Hoya Corp. 1,223,100 22,670,085 ---------------------------------------------------------------------------------- Keyence Corp. 175,100 33,811,443 ---------------------------------------------------------------------------------- Nidec Corp. 719,900 37,040,181 ---------------------------------------------------------------------------------- Nintendo Co., Ltd. 52,200 16,462,477 ---------------------------------------------------------------------------------- Suzuki Motor Corp. 926,500 13,419,346 ---------------------------------------------------------------------------------- Toyota Motor Corp. 908,200 35,800,114 ================================================================================== 193,839,546 ================================================================================== LUXEMBOURG-0.04% Reinet Investments S.C.A.(b) 79,012 813,594 ================================================================================== MEXICO-3.95% America Movil S.A.B. de C.V.-Series L-ADR 1,234,799 38,204,681 ---------------------------------------------------------------------------------- Desarrolladora Homex S.A. de C.V.-ADR(b)(c) 583,842 13,591,842 ---------------------------------------------------------------------------------- Grupo Televisa S.A.-ADR 1,681,764 29,699,952 ---------------------------------------------------------------------------------- Urbi, Desarrollos Urbanos, S.A. de C.V.(b) 4,113,400 6,163,617 ================================================================================== 87,660,092 ==================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 9 AIM INTERNATIONAL GROWTH FUND
SHARES VALUE ---------------------------------------------------------------------------------- NETHERLANDS-2.13% Heineken Holding N.V. 780,295 $ 23,693,507 ---------------------------------------------------------------------------------- TNT N.V. 1,124,250 23,534,839 ================================================================================== 47,228,346 ================================================================================== NORWAY-0.34% Petroleum Geo-Services A.S.A.(b) 1,486,138 7,474,732 ================================================================================== SINGAPORE-2.18% Keppel Corp. Ltd. 4,606,000 14,188,296 ---------------------------------------------------------------------------------- Singapore Technologies Engineering Ltd. 641,000 1,014,638 ---------------------------------------------------------------------------------- United Overseas Bank Ltd. 3,729,000 33,211,180 ================================================================================== 48,414,114 ================================================================================== SOUTH AFRICA-0.16% Standard Bank Group Ltd. 452,692 3,617,240 ================================================================================== SPAIN-2.72% Banco Santander S.A. 1,243,802 13,452,018 ---------------------------------------------------------------------------------- Telefonica S.A. 2,539,705 46,971,872 ================================================================================== 60,423,890 ================================================================================== SWITZERLAND-9.88% Compagnie Financiere Richemont S.A.-Class A 577,203 12,268,740 ---------------------------------------------------------------------------------- Nestle S.A. 1,689,454 65,832,774 ---------------------------------------------------------------------------------- Roche Holding AG 515,527 78,884,102 ---------------------------------------------------------------------------------- Sonova Holding AG 478,244 20,094,920 ---------------------------------------------------------------------------------- Syngenta AG 226,733 42,216,555 ================================================================================== 219,297,091 ================================================================================== TAIWAN-1.84% Hon Hai Precision Industry Co., Ltd. 5,880,051 14,265,044 ---------------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd. 18,014,548 26,660,692 ================================================================================== 40,925,736 ================================================================================== TURKEY-0.55% Akbank T.A.S. 3,575,363 12,283,091 ================================================================================== UNITED KINGDOM-16.83% Aviva PLC 2,286,416 13,705,354 ---------------------------------------------------------------------------------- British American Tobacco PLC 352,868 9,687,058 ---------------------------------------------------------------------------------- Capita Group PLC 2,303,993 23,715,494 ---------------------------------------------------------------------------------- Compass Group PLC 6,860,394 32,082,151 ---------------------------------------------------------------------------------- Imperial Tobacco Group PLC 2,393,737 64,346,111 ---------------------------------------------------------------------------------- Informa PLC 3,652,069 12,352,739 ---------------------------------------------------------------------------------- International Power PLC 5,519,871 19,750,785 ---------------------------------------------------------------------------------- Reckitt Benckiser Group PLC 970,628 40,755,067 ---------------------------------------------------------------------------------- Reed Elsevier PLC 3,469,532 30,419,753 ---------------------------------------------------------------------------------- Shire PLC 2,420,877 31,990,223 ---------------------------------------------------------------------------------- Tesco PLC 7,544,730 41,194,936 ---------------------------------------------------------------------------------- Vodafone Group PLC 18,150,913 34,948,619 ---------------------------------------------------------------------------------- WPP Group PLC 3,086,436 18,619,878 ================================================================================== 373,568,168 ================================================================================== Total Common Stocks & Other Equity Interests (Cost $2,131,517,743) 1,880,790,184 ================================================================================== PREFERRED STOCKS-3.21% BRAZIL-0.70% Petroleo Brasileiro S.A.-Pfd.-ADR 703,566 15,527,702 ================================================================================== GERMANY-2.51% Henkel AG & Co. KGaA-Pfd. 710,926 20,573,559 ---------------------------------------------------------------------------------- Porsche Automobile Holding S.E.-Pfd. 399,002 35,162,475 ================================================================================== 55,736,034 ================================================================================== Total Preferred Stocks (Cost $73,622,898) 71,263,736 ================================================================================== MONEY MARKET FUNDS-10.03% Liquid Assets Portfolio-Institutional Class(d) 111,267,309 111,267,309 ---------------------------------------------------------------------------------- Premier Portfolio-Institutional Class(d) 111,267,309 111,267,309 ================================================================================== Total Money Market Funds (Cost $222,534,618) 222,534,618 ================================================================================== TOTAL INVESTMENTS-97.99% (Cost $2,427,675,259)(e) 2,174,588,538 ================================================================================== OTHER ASSETS LESS LIABILITIES-2.01% 44,520,625 ================================================================================== NET ASSETS-100.00% $2,219,109,163 __________________________________________________________________________________ ==================================================================================
Investment Abbreviations: ADR - American Depositary Receipt Pfd. - Preferred Rts. - Rights
Notes to Schedule of Investments: (a) Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor's. (b) Non-income producing security. (c) Affiliated company during the period. The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The value of this security as of October 31, 2008 represented 0.61% of the Fund's Net Assets. See Note 3. (d) The money market fund and the Fund are affiliated by having the same investment advisor. (e) A majority of foreign securities were fair valued using adjusted closing market prices. See accompanying Notes to Financial Statements which are an integral part of the financial statements. 10 AIM INTERNATIONAL GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2008 ASSETS: Investments, at value (Cost $2,170,631,636) $1,938,462,078 ------------------------------------------------------- Investments in affiliates, at value (Cost $257,043,623) 236,126,460 ======================================================= Total investments (Cost $2,427,675,259) 2,174,588,538 ======================================================= Foreign currencies, at value (Cost $53,953,264) 52,766,400 ------------------------------------------------------- Receivables for: Investments sold 23,148,228 ------------------------------------------------------- Fund shares sold 3,614,184 ------------------------------------------------------- Dividends 5,170,370 ------------------------------------------------------- Investment for trustee deferred compensation and retirement plans 68,719 ------------------------------------------------------- Other assets 115,737 ======================================================= Total assets 2,259,472,176 _______________________________________________________ ======================================================= LIABILITIES: Payables for: Investments purchased 23,663,379 ------------------------------------------------------- Fund shares reacquired 13,357,662 ------------------------------------------------------- Accrued fees to affiliates 1,952,109 ------------------------------------------------------- Accrued other operating expenses 1,079,997 ------------------------------------------------------- Trustee deferred compensation and retirement plans 309,866 ======================================================= Total liabilities 40,363,013 ======================================================= Net assets applicable to shares outstanding $2,219,109,163 _______________________________________________________ ======================================================= NET ASSETS CONSIST OF: Shares of beneficial interest $2,459,730,508 ------------------------------------------------------- Undistributed net investment income 46,623,805 ------------------------------------------------------- Undistributed net realized gain (loss) (32,930,631) ------------------------------------------------------- Unrealized appreciation (depreciation) (254,314,519) ======================================================= $2,219,109,163 _______________________________________________________ ======================================================= NET ASSETS: Class A $1,452,468,925 _______________________________________________________ ======================================================= Class B $ 77,464,809 _______________________________________________________ ======================================================= Class C $ 125,171,717 _______________________________________________________ ======================================================= Class R $ 34,820,537 _______________________________________________________ ======================================================= Class Y $ 2,536,672 _______________________________________________________ ======================================================= Institutional Class $ 526,646,503 _______________________________________________________ ======================================================= SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE, UNLIMITED NUMBER OF SHARES AUTHORIZED: Class A 76,301,876 _______________________________________________________ ======================================================= Class B 4,421,997 _______________________________________________________ ======================================================= Class C 7,139,386 _______________________________________________________ ======================================================= Class R 1,851,807 _______________________________________________________ ======================================================= Class Y 133,256 _______________________________________________________ ======================================================= Institutional Class 27,204,749 _______________________________________________________ ======================================================= Class A: Net asset value per share $ 19.04 ------------------------------------------------------- Maximum offering price per share (Net asset value of $19.04 divided by 94.50%) $ 20.15 _______________________________________________________ ======================================================= Class B: Net asset value and offering price per share $ 17.52 _______________________________________________________ ======================================================= Class C: Net asset value and offering price per share $ 17.53 _______________________________________________________ ======================================================= Class R: Net asset value and offering price per share $ 18.80 _______________________________________________________ ======================================================= Class Y: Net asset value and offering price per share $ 19.04 _______________________________________________________ ======================================================= Institutional Class: Net asset value and offering price per share $ 19.36 _______________________________________________________ =======================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 11 AIM INTERNATIONAL GROWTH FUND STATEMENT OF OPERATIONS For the year ended October 31, 2008 INVESTMENT INCOME: Dividends (net of foreign withholding taxes of $8,301,439) $ 88,118,516 -------------------------------------------------------------------------------------------------- Dividends from affiliates (includes securities lending income of $1,427,710) 12,032,603 ================================================================================================== Total investment income 100,151,119 ================================================================================================== EXPENSES: Advisory fees 30,690,247 -------------------------------------------------------------------------------------------------- Administrative services fees 597,157 -------------------------------------------------------------------------------------------------- Custodian fees 2,061,924 -------------------------------------------------------------------------------------------------- Distribution fees: Class A 5,895,983 -------------------------------------------------------------------------------------------------- Class B 1,671,272 -------------------------------------------------------------------------------------------------- Class C 2,186,115 -------------------------------------------------------------------------------------------------- Class R 239,996 -------------------------------------------------------------------------------------------------- Transfer agent fees -- A, B, C, R and Y 6,274,211 -------------------------------------------------------------------------------------------------- Transfer agent fees -- Institutional 455,850 -------------------------------------------------------------------------------------------------- Trustees' and officers' fees and benefits 113,709 -------------------------------------------------------------------------------------------------- Other 1,250,491 ================================================================================================== Total expenses 51,436,955 ================================================================================================== Less: Fees waived, expenses reimbursed and expense offset arrangement(s) (542,276) ================================================================================================== Net expenses 50,894,679 ================================================================================================== Net investment income 49,256,440 ================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) FROM: Net realized gain (loss) from: Investment securities (21,331,894) -------------------------------------------------------------------------------------------------- Foreign currencies (1,466,493) ================================================================================================== (22,798,387) ================================================================================================== Change in net unrealized appreciation (depreciation) of: Investment securities (1,916,233,892) -------------------------------------------------------------------------------------------------- Foreign currencies (1,296,686) ================================================================================================== (1,917,530,578) ================================================================================================== Net realized and unrealized gain (loss) (1,940,328,965) ================================================================================================== Net increase (decrease) in net assets resulting from operations $(1,891,072,525) __________________________________________________________________________________________________ ==================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 12 AIM INTERNATIONAL GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS For the years ended October 31, 2008 and 2007
2008 2007 ----------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 49,256,440 $ 27,424,794 ----------------------------------------------------------------------------------------------------------- Net realized gain (loss) (22,798,387) 222,458,752 ----------------------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) (1,917,530,578) 684,346,483 =========================================================================================================== Net increase (decrease) in net assets resulting from operations (1,891,072,525) 934,230,029 =========================================================================================================== Distributions to shareholders from net investment income: Class A (13,953,858) (12,740,974) ----------------------------------------------------------------------------------------------------------- Class R (166,196) (100,532) ----------------------------------------------------------------------------------------------------------- Institutional Class (6,882,893) (3,274,673) =========================================================================================================== Total distributions from net investment income (21,002,947) (16,116,179) =========================================================================================================== Distributions to shareholders from net realized gains: Class A (147,126,696) (6,281,149) ----------------------------------------------------------------------------------------------------------- Class B (13,395,707) (852,746) ----------------------------------------------------------------------------------------------------------- Class C (15,052,389) (647,599) ----------------------------------------------------------------------------------------------------------- Class R (2,583,518) (66,584) ----------------------------------------------------------------------------------------------------------- Institutional Class (42,444,892) (1,013,220) =========================================================================================================== Total distributions from net realized gains (220,603,202) (8,861,298) =========================================================================================================== Share transactions-net: Class A (35,569,162) 356,453,495 ----------------------------------------------------------------------------------------------------------- Class B (76,697,974) (63,077,874) ----------------------------------------------------------------------------------------------------------- Class C (17,905,343) 30,168,251 ----------------------------------------------------------------------------------------------------------- Class R 15,737,049 20,631,701 ----------------------------------------------------------------------------------------------------------- Class Y 2,980,628 -- ----------------------------------------------------------------------------------------------------------- Institutional Class 154,809,196 407,775,574 =========================================================================================================== Net increase in net assets resulting from share transactions 43,354,394 751,951,147 =========================================================================================================== Net increase (decrease) in net assets (2,089,324,280) 1,661,203,699 =========================================================================================================== NET ASSETS: Beginning of year 4,308,433,443 2,647,229,744 =========================================================================================================== End of year (includes undistributed net investment income of $46,623,805 and $15,135,779, respectively) $ 2,219,109,163 $4,308,433,443 ___________________________________________________________________________________________________________ ===========================================================================================================
See accompanying Notes to Financial Statements which are an integral part of the financial statements. 13 AIM INTERNATIONAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS October 31, 2008 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 assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The Fund's investment objective is long-term growth of capital. The Fund currently consists of six different classes of shares: Class A, Class B, Class C, Class R, Class Y and Institutional Class. Class A shares are sold with a front-end sales charge unless certain waiver criteria are met and under certain circumstances load waiver shares may be subject to contingent deferred sales charges ("CDSC"). Class B shares and Class C shares are sold with a CDSC. Class R, Class Y and Institutional Class shares are sold at net asset value. Under certain circumstances, Class R shares are subject to a CDSC. Generally, Class B shares will automatically convert to Class A shares on or about the month-end which is at least eight years after the date of purchase. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE"). Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments. Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer's assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. 14 AIM INTERNATIONAL GROWTH FUND The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain/loss for investments no longer held and as unrealized gain/loss for investments still held. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. COUNTRY DETERMINATION -- For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment advisor may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America unless otherwise noted. D. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes. E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund's taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period. F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets. G. ACCOUNTING ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. I. REDEMPTION FEES -- The Fund has a 2% redemption fee that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions or exchanges of shares within 31 days of purchase. The redemption fee is recorded as an increase in shareholder capital and is allocated among the share classes based on the relative net assets of each class. J. SECURITIES LENDING -- The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities, if any. K. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated 15 AIM INTERNATIONAL GROWTH FUND into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. L. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. Fluctuations in the value of these contracts are recorded as unrealized appreciation (depreciation) until the contracts are closed. When these contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. The Fund could be exposed to risk, which may be in excess of the amount reflected in the Statement of Assets and Liabilities, if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES The Trust has entered into a master investment advisory agreement with Invesco Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Advisor based on the annual rate of the Fund's average daily net assets as follows:
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% ___________________________________________________________________ ===================================================================
Under the terms of a master sub-advisory agreement approved by shareholders of the Fund, effective May 1, 2008, between the Advisor and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and Invesco Trimark Ltd. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Advisor(s). Further, the Advisor has contractually agreed, through at least June 30, 2009, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Advisor receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds. For the year ended October 31, 2008, the Advisor waived advisory fees of $434,176. At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended October 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $29,040. The Trust has entered into a master administrative services agreement with Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain administrative costs incurred in providing accounting services to the Fund. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees. The Trust has entered into a transfer agency and service agreement with Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has agreed to pay IAIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the course of providing such services. IAIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IAIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust's Board of Trustees. For the year ended October 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees. The Trust has entered into master distribution agreements with Invesco Aim Distributors, Inc. ("IADI") to serve as the distributor for the Class A, Class B, Class C, Class R, Class Y and Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays IADI compensation at the annual rate of 16 AIM INTERNATIONAL GROWTH FUND 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority ("FINRA") impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the year ended October 31, 2008, expenses incurred under the Plans are shown in the Statement of Operations as distribution fees. Front-end sales commissions and CDSC (collectively the "sales charges") are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2008, IADI advised the Fund that IADI retained $173,692 in front-end sales commissions from the sale of Class A shares and $11,777, $203,541, $53,830 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed on redemptions by shareholders. Certain officers and trustees of the Trust are officers and directors of Invesco Aim, IAIS and/or IADI. NOTE 3--INVESTMENTS IN OTHER AFFILIATES The Investment Company Act of 1940 defines affiliates as those issuances in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough of the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the investments in affiliates for the year ended October 31, 2008.
CHANGE IN UNREALIZED VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED 10/31/07 AT COST FROM SALES (DEPRECIATION) 10/31/08 INCOME GAIN (LOSS) ------------------------------------------------------------------------------------------------------------------------------- Desarrolladora Homex S.A. de C.V-ADR $17,333,990 $15,866,453 $-- $(19,608,601) $13,591,842 $-- $-- _______________________________________________________________________________________________________________________________ ===============================================================================================================================
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended October 31, 2008, the Fund engaged in securities purchases of $75,114. NOTE 5--EXPENSE OFFSET ARRANGEMENTS The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended October 31, 2008, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $79,060. NOTE 6--TRUSTEES' AND OFFICERS' FEES AND BENEFITS "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officers' Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officers' Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund. During the year ended October 31, 2008, the Fund paid legal fees of $10,880 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. 17 AIM INTERNATIONAL GROWTH FUND NOTE 7--CASH BALANCES The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company, the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco Aim, not to exceed the contractually agreed upon rate. NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS PAID DURING THE YEARS ENDED OCTOBER 31, 2008 AND 2007:
2008 2007 -------------------------------------------------------------------------------------------------------- Ordinary income $ 21,012,881 $16,116,179 -------------------------------------------------------------------------------------------------------- Long-term capital gain 220,593,268 8,861,298 ======================================================================================================== Total distributions $241,606,149 $24,977,477 ________________________________________________________________________________________________________ ========================================================================================================
TAX COMPONENTS OF NET ASSETS AT PERIOD-END:
2008 ------------------------------------------------------------------------------------------------- Undistributed ordinary income $ 46,960,527 ------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) -- investments (256,770,550) ------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) -- other investments (1,227,799) ------------------------------------------------------------------------------------------------- Temporary book/tax differences (336,722) ------------------------------------------------------------------------------------------------- Capital loss carryforward (29,246,801) ------------------------------------------------------------------------------------------------- Shares of beneficial interest 2,459,730,508 ================================================================================================= Total net assets $2,219,109,163 _________________________________________________________________________________________________ =================================================================================================
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's net unrealized appreciation (depreciation) difference is attributable primarily to wash sales. The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits. Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions. Under these limitation rules, the Fund is limited to utilizing $29,246,801 of capital loss carryforward in the fiscal year ended October 31, 2009. The Fund has a capital loss carryforward as of October 31, 2008 which expires as follows:
CAPITAL LOSS EXPIRATION CARRYFORWARD* ----------------------------------------------------------------------------------------------- October 31, 2009 $ 5,995,076 ----------------------------------------------------------------------------------------------- October 31, 2016 23,251,725 =============================================================================================== Total capital loss carryforward $29,246,801 _______________________________________________________________________________________________ ===============================================================================================
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code. NOTE 9--INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended October 31, 2008 was $1,215,516,681 and $1,262,436,284, respectively. Cost of investments on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting period-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $ 224,137,247 ------------------------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (480,907,797) ================================================================================================ Net unrealized appreciation (depreciation) of investment securities $(256,770,550) ________________________________________________________________________________________________ ================================================================================================ Cost of investments for tax purposes is $2,431,359,088
18 AIM INTERNATIONAL GROWTH FUND NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES Primarily as a result of differing book/tax treatment of proxy costs, foreign currency transactions and passive foreign investment companies, on October 31, 2008, undistributed net investment income was increased by $3,234,533, undistributed net realized gain (loss) was decreased by $3,086,193 and shares of beneficial interest decreased by $148,340. This reclassification had no effect on the net assets of the Fund. NOTE 11--SHARE INFORMATION
SUMMARY OF SHARE ACTIVITY --------------------------------------------------------------- YEAR ENDED YEAR ENDED OCTOBER 31, 2008(a) OCTOBER 31, 2007 ----------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------------------------------------------------------------- Sold: Class A 19,910,599 $ 565,878,754 27,708,568 $ 890,397,567 -------------------------------------------------------------------------------------------------------------------------- Class B 709,506 18,970,270 1,297,473 38,416,797 -------------------------------------------------------------------------------------------------------------------------- Class C 1,508,599 41,270,149 2,814,402 83,803,226 -------------------------------------------------------------------------------------------------------------------------- Class R 1,103,116 31,288,523 1,036,987 33,005,271 -------------------------------------------------------------------------------------------------------------------------- Class Y(b) 134,135 2,998,043 -- -- -------------------------------------------------------------------------------------------------------------------------- Institutional Class 10,030,019 289,520,256 14,835,547 493,838,031 ========================================================================================================================== Issued as reinvestment of dividends: Class A 4,687,277 147,930,456 606,077 17,824,739 -------------------------------------------------------------------------------------------------------------------------- Class B 426,643 12,470,766 29,097 797,850 -------------------------------------------------------------------------------------------------------------------------- Class C 477,714 13,977,906 22,276 611,267 -------------------------------------------------------------------------------------------------------------------------- Class R 87,982 2,748,565 5,731 167,060 -------------------------------------------------------------------------------------------------------------------------- Institutional Class 1,506,370 48,158,659 143,556 4,270,787 ========================================================================================================================== Automatic conversion of Class B shares to Class A shares: Class A 2,175,520 61,688,875 1,444,005 45,912,636 -------------------------------------------------------------------------------------------------------------------------- Class B (2,356,007) (61,688,875) (1,553,917) (45,912,636) ========================================================================================================================== Reacquired:(c) Class A(b) (29,755,552) (811,067,247) (18,995,511) (597,681,447) -------------------------------------------------------------------------------------------------------------------------- Class B (1,802,439) (46,450,135) (1,924,093) (56,379,885) -------------------------------------------------------------------------------------------------------------------------- Class C (2,935,314) (73,153,398) (1,838,519) (54,246,242) -------------------------------------------------------------------------------------------------------------------------- Class R (675,005) (18,300,039) (398,545) (12,540,630) -------------------------------------------------------------------------------------------------------------------------- Class Y(b) (879) (17,415) -- -- -------------------------------------------------------------------------------------------------------------------------- Institutional Class (6,783,940) (182,869,719) (2,731,045) (90,333,244) ========================================================================================================================== Net increase in share activity (1,551,656) $ 43,354,394 22,502,089 $ 751,951,147 __________________________________________________________________________________________________________________________ ==========================================================================================================================
(a) There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 31% of the outstanding shares of the Fund. IADI has an agreement with these entities to sell Fund shares. The Fund, Invesco Aim and/or Invesco Aim affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco Aim and/or Invesco Aim affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. In addition, 7% of the outstanding shares of the Fund are owned by affiliated mutual funds. Affiliated mutual funds are other mutual funds that are also advised by Invesco Aim. (b) Effective upon the commencement date of Class Y shares, October 3, 2008, the following shares were converted from Class A shares into Class Y shares of the Fund:
CLASS SHARES AMOUNT ---------------------------------------------------------------------------------------------------- Class Y 133,308 $ 2,980,767 ---------------------------------------------------------------------------------------------------- Class A (133,308) (2,980,767) ____________________________________________________________________________________________________ ====================================================================================================
(c) Net of redemption fees of $146,051 and $221,782 which were allocated among the classes based on relative net assets of each class for the years ended October 31, 2008 and 2007, respectively. 19 AIM INTERNATIONAL GROWTH FUND NOTE 12--FINANCIAL HIGHLIGHTS The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
NET GAINS (LOSSES) NET ASSET ON SECURITIES DIVIDENDS DISTRIBUTIONS VALUE, NET (BOTH TOTAL FROM FROM NET FROM NET NET ASSET BEGINNING INVESTMENT REALIZED AND INVESTMENT INVESTMENT REALIZED TOTAL VALUE, END OF PERIOD INCOME (LOSS)(A) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS OF PERIOD(B) ----------------------------------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 $36.57 $ 0.40 $(15.91) $(15.51) $(0.18) $(1.84) $(2.02) $19.04 Year ended 10/31/07 27.85 0.28 8.72 9.00 (0.19) (0.09) (0.28) 36.57 Year ended 10/31/06 21.63 0.14 6.26 6.40 (0.18) -- (0.18) 27.85 Year ended 10/31/05 18.16 0.11 3.36 3.47 -- -- -- 21.63 Year ended 10/31/04 15.23 0.05 2.90 2.95 (0.02) -- (0.02) 18.16 ----------------------------------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 33.88 0.17 (14.69) (14.52) -- (1.84) (1.84) 17.52 Year ended 10/31/07 25.84 0.03 8.10 8.13 -- (0.09) (0.09) 33.88 Year ended 10/31/06 20.08 (0.05) 5.83 5.78 (0.02) -- (0.02) 25.84 Year ended 10/31/05 16.99 (0.03) 3.12 3.09 -- -- -- 20.08 Year ended 10/31/04 14.32 (0.07) 2.74 2.67 -- -- -- 16.99 ----------------------------------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 33.91 0.17 (14.71) (14.54) -- (1.84) (1.84) 17.53 Year ended 10/31/07 25.86 0.03 8.11 8.14 -- (0.09) (0.09) 33.91 Year ended 10/31/06 20.10 (0.05) 5.83 5.78 (0.02) -- (0.02) 25.86 Year ended 10/31/05 17.00 (0.03) 3.13 3.10 -- -- -- 20.10 Year ended 10/31/04 14.33 (0.07) 2.74 2.67 -- -- -- 17.00 ----------------------------------------------------------------------------------------------------------------------------------- CLASS R Year ended 10/31/08 36.18 0.32 (15.74) (15.42) (0.12) (1.84) (1.96) 18.80 Year ended 10/31/07 27.58 0.20 8.63 8.83 (0.14) (0.09) (0.23) 36.18 Year ended 10/31/06 21.43 0.07 6.21 6.28 (0.13) -- (0.13) 27.58 Year ended 10/31/05 18.04 0.07 3.32 3.39 -- -- -- 21.43 Year ended 10/31/04 15.14 0.01 2.89 2.90 -- -- -- 18.04 ----------------------------------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(f) 22.36 0.02 (3.34) (3.32) -- -- -- 19.04 ----------------------------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS Year ended 10/31/08 37.14 0.52 (16.17) (15.65) (0.29) (1.84) (2.13) 19.36 Year ended 10/31/07 28.26 0.42 8.84 9.26 (0.29) (0.09) (0.38) 37.14 Year ended 10/31/06 21.97 0.25 6.35 6.60 (0.31) -- (0.31) 28.26 Year ended 10/31/05 18.34 0.25 3.38 3.63 -- -- -- 21.97 Year ended 10/31/04 15.37 0.15 2.93 3.08 (0.11) -- (0.11) 18.34 ___________________________________________________________________________________________________________________________________ =================================================================================================================================== RATIO OF RATIO OF EXPENSES EXPENSES TO AVERAGE TO AVERAGE NET RATIO OF NET NET ASSETS ASSETS WITHOUT INVESTMENT NET ASSETS, WITH FEE WAIVERS FEE WAIVERS INCOME (LOSS) TOTAL END OF PERIOD AND/OR EXPENSES AND/OR EXPENSES TO AVERAGE PORTFOLIO RETURN(C) (000S OMITTED) ABSORBED ABSORBED NET ASSETS TURNOVER(D) -------------------------------------------------------------------------------------------------------------- CLASS A Year ended 10/31/08 (47.34)% $1,452,469 1.44%(e) 1.45%(e) 1.38%(e) 38% Year ended 10/31/07 32.55 2,899,666 1.44 1.47 0.87 22 Year ended 10/31/06 29.73 1,908,453 1.54 1.58 0.53 37 Year ended 10/31/05 19.11 1,447,049 1.69 1.74 0.54 37 Year ended 10/31/04 19.40 1,288,548 1.70 1.74 0.27 54 -------------------------------------------------------------------------------------------------------------- CLASS B Year ended 10/31/08 (45.03) 77,465 2.19(e) 2.20(e) 0.63(e) 38 Year ended 10/31/07 31.55 252,203 2.19 2.22 0.12 22 Year ended 10/31/06 28.80 247,939 2.29 2.33 (0.22) 37 Year ended 10/31/05 18.19 250,056 2.41 2.46 (0.18) 37 Year ended 10/31/04 18.64 301,380 2.40 2.44 (0.43) 54 -------------------------------------------------------------------------------------------------------------- CLASS C Year ended 10/31/08 (45.05) 125,172 2.19(e) 2.20(e) 0.63(e) 38 Year ended 10/31/07 31.57 274,266 2.19 2.22 0.12 22 Year ended 10/31/06 28.78 183,360 2.29 2.33 (0.22) 37 Year ended 10/31/05 18.24 132,387 2.41 2.46 (0.18) 37 Year ended 10/31/04 18.63 116,136 2.40 2.44 (0.43) 54 -------------------------------------------------------------------------------------------------------------- CLASS R Year ended 10/31/08 (44.78) 34,821 1.69(e) 1.70(e) 1.13(e) 38 Year ended 10/31/07 32.21 48,321 1.69 1.72 0.62 22 Year ended 10/31/06 29.41 19,070 1.79 1.83 0.28 37 Year ended 10/31/05 18.79 8,700 1.91 1.96 0.32 37 Year ended 10/31/04 19.15 2,450 1.90 1.94 0.07 54 -------------------------------------------------------------------------------------------------------------- CLASS Y Year ended 10/31/08(f) (14.85) 2,537 1.25(e)(g) 1.27(e)(g) 1.57(e)(g) 38 -------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS Year ended 10/31/08 (44.38) 526,647 1.03(e) 1.04(e) 1.79(e) 38 Year ended 10/31/07 33.13 833,977 1.02 1.05 1.30 22 Year ended 10/31/06 30.32 288,408 1.08 1.12 0.99 37 Year ended 10/31/05 19.79 98,912 1.07 1.12 1.16 37 Year ended 10/31/04 20.15 13,345 1.13 1.17 0.84 54 ______________________________________________________________________________________________________________ ==============================================================================================================
(a) Calculated using average shares outstanding. (b) Includes redemption fees added to shares of beneficial interest which were less than $0.005 per share. (c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year, if applicable. (d) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. (e) Ratios are based on average daily net assets (000's omitted) of $2,358,393, $167,127, $218,611, $47,999, $2,503 and $755,924 for Class A, Class B, Class C, Class R, Class Y and Institutional Class shares, respectively. (f) Commencement date of October 3, 2008. (g) Annualized. 20 AIM INTERNATIONAL GROWTH FUND NOTE 13--LEGAL PROCEEDINGS Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note. SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING On May 23, 2008, the Securities and Exchange Commission ("SEC") publicly posted its final approval of the Distribution Plans ("Distribution Plans") for the distribution of monies placed into two separate Fair Funds created pursuant to a settlement reached on October 8, 2004 between Invesco Funds Group, Inc. ("IFG"), Invesco Aim Advisors, Inc. ("Invesco Aim") and Invesco Aim Distributors, Inc. ("IADI") and the SEC (the "Order"). One of the Fair Funds consists of $325 million, plus interest and any contributions by other settling parties, for distribution to shareholders of certain mutual funds formerly advised by IFG who may have been harmed by market timing and related activity. The second Fair Fund consists of $50 million, plus interest and any contributions by other settling parties, for distribution to shareholders of mutual funds advised by Invesco Aim who may have been harmed by market timing and related activity. The Distribution Plans provide for the distribution to all eligible investors to compensate such investors for injury they may have suffered as a result of market timing in the affected funds. The Distribution Plans include a provision for any residual amounts in the Fair Funds to be distributed in the future to the affected funds. Because the distribution of the Fair Funds has not yet commenced, management of Invesco Aim and the Fund are unable to estimate the amount of distribution to be made to the Fund, if any. At the request of the trustees of the AIM Funds, Invesco Ltd. ("Invesco"), the parent company of IFG and Invesco Aim, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters. PENDING LITIGATION AND REGULATORY INQUIRIES On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to Invesco Aim and IADI (Order No. 05- 1318). The WVASC makes findings of fact that Invesco Aim and IADI entered into certain arrangements permitting market timing of the AIM Funds and failed to disclose these arrangements in the prospectuses for such Funds, and conclusions of law to the effect that Invesco Aim and IADI violated the West Virginia securities laws. The WVASC orders Invesco Aim and IADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. By agreement with the Commissioner of Securities, Invesco Aim's time to respond to that Order has been indefinitely suspended. Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, Invesco Aim, IADI and/or related entities and individuals, depending on the lawsuit, alleging: - that the defendants permitted improper market timing and related activity in the AIM Funds; and - that certain AIM Funds inadequately employed fair value pricing. These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid. The case pending in Illinois State Court regarding fair value pricing was dismissed with prejudice on May 6, 2008. All lawsuits based on allegations of market timing, late trading and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various Invesco Aim- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of ERISA purportedly brought on behalf of participants in the Invesco 401(k) plan. Based on orders issued by the MDL Court, all claims asserted against the AIM Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the MDL Court granted the Invesco defendants' motion to dismiss the Amended Class Action Complaint for Violations of ERISA and dismissed such Complaint. Plaintiff appealed this ruling. On June 16, 2008, the Fourth Circuit Court of Appeals reversed the dismissal and remanded this lawsuit back to the MDL Court for further proceedings. IFG, Invesco Aim, IADI and/or related entities and individuals have received inquiries from numerous regulators in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, among others, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost security holders. IFG, Invesco Aim and IADI have advised the Fund that they are providing full cooperation with respect to these inquiries. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, Invesco Aim and/or related entities and individuals in the future. At the present time, management of Invesco Aim and the Fund are unable to estimate the impact, if any, that the outcome of the Pending Litigation and Regulatory Inquiries described above may have on Invesco Aim, IADI or the Fund. 21 AIM INTERNATIONAL GROWTH FUND 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, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP December 16, 2008 Houston, Texas 22 AIM INTERNATIONAL GROWTH FUND CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or contingent deferred sales charges on redemptions, and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. With the exception of the actual ending account value and expenses of the Class Y Shares, the example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. The actual ending account and expenses of the Class Y shares in the below example are based on an investment of $1,000 invested as of close of business October 3, 2008 (commencement date) and held through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period (as of close of business October 3, 2008 through October 31, 2008 for the Class Y shares). Because the actual ending account value and expense information in the example is not based upon a six month period for the Class Y shares, the ending account value and expense information may not provide a meaningful comparison to mutual funds that provide such information for a full six month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions, and redemption fees, if any. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
--------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2,3) RATIO --------------------------------------------------------------------------------------------------- A $1,000.00 $630.10 $6.02 $1,017.75 $ 7.46 1.47% --------------------------------------------------------------------------------------------------- B 1,000.00 627.70 9.08 1,013.98 11.24 2.22 --------------------------------------------------------------------------------------------------- C 1,000.00 627.40 9.08 1,013.98 11.24 2.22 --------------------------------------------------------------------------------------------------- R 1,000.00 629.20 7.04 1,016.49 8.72 1.72 --------------------------------------------------------------------------------------------------- Y 1,000.00 851.50 0.92 1,018.85 6.34 1.25 ---------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008 (as of close of business October 3, 2008, through October 31, 2008 for the Class Y shares), after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. For the Class Y shares actual expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 29 (as of close of business October 31, 2008, through October 31, 2008)/366. Because the Class Y shares have not been in existence for a full six month period, the actual ending account value and expense information shown may not provide a meaningful comparison to fund expense information of classes that show such data for a full six month period and, because the actual ending account value and expense information in the expense example covers a short time period, return and expense data may not be indicative of return and expense data for longer time periods. (3) Hypothetical expenses are equal to the annualized expense ratio indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect a one-half year period. The hypothetical ending account value and expenses may be used to compare ongoing costs of investing in Class Y shares of the Fund and other funds because such data is based on a full six month period. 23 AIM INTERNATIONAL GROWTH FUND Supplement to Annual Report dated 10/31/08 AIM INTERNATIONAL GROWTH FUND ========================================== INSTITUTIONAL CLASS SHARES AVERAGE ANNUAL TOTAL RETURNS Please note that past performance For periods ended 10/31/08 is not indicative of future results. The following information has been More recent returns may be more or less prepared to provide Institutional Class Inception (3/15/02) 5.37% than those shown. All returns assume shareholders with a performance overview 5 Years 6.79 reinvestment of distributions at NAV. specific to their holdings. Institutional 1 Year -44.40 Investment return and principal value Class shares are offered exclusively to ========================================== will fluctuate so your shares, when institutional investors, including defined redeemed, may be worth more or less than contribution plans that meet certain ========================================== their original cost. See full report for criteria. information on comparative benchmarks. AVERAGE ANNUAL TOTAL RETURNS Please consult your Fund prospectus for For periods ended 9/30/08, most recent more information. For the most current calendar quarter-end month-end performance, please call 800 451 4246 or visit invescoaim.com. Inception (3/15/02) 8.97% 5 Years 12.92 1 Year -27.53 ========================================== 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 primarily due to differing sales charges and class expenses. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this supplement for Institutional Class shares was 1.03%. The expense ratios presented above may vary from the expense ratios presented in other sections of the actual report that are based on expenses incurred during the period covered by the report. A redemption fee of 2% will be imposed on certain redemptions or exchanges out of the Fund within 31 days of purchase. Exceptions to the redemption fee are listed in the Fund's prospectus. ========================================== NASDAQ SYMBOL AIEVX ========================================== Over for information on your Fund's expenses. THIS SUPPLEMENT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING. FOR INSTITUTIONAL INVESTOR USE ONLY This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use. [INVESCO AIM LOGO] invescoaim.com IGR-INS-1 Invesco Aim Distributors, Inc. -- SERVICE MARK --
CALCULATING YOUR ONGOING FUND EXPENSES EXAMPLE As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2008, through October 31, 2008. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
----------------------------------------------------------------------------------------------------------- HYPOTHETICAL (5% ANNUAL RETURN BEFORE ACTUAL EXPENSES) ------------------------------------------------------ BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING ACCOUNT VALUE PAID DURING EXPENSE CLASS (05/01/08) (10/31/08)(1) PERIOD(2) (10/31/08) PERIOD(2) RATIO ----------------------------------------------------------------------------------------------------------- Institutional $1,000.00 $631.40 $4.26 $1,019.91 $5.28 1.04% -----------------------------------------------------------------------------------------------------------
(1) The actual ending account value is based on the actual total return of the Fund for the period May 1, 2008, through October 31, 2008, after actual expenses and will differ from the hypothetical ending account value which is based on the Fund's expense ratio and a hypothetical annual return of 5% before expenses. (2) Expenses are equal to the Fund's annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/366 to reflect the most recent fiscal half year. AIM INTERNATIONAL GROWTH FUND APPROVAL OF INVESTMENT ADVISORY AGREEMENT The Board of Trustees (the Board) of AIM their assigned funds. During the contract ated the information provided differently International Mutual Funds is required renewal process, the Trustees receive from one another and attributed different under the Investment Company Act of 1940 comparative performance and fee data weight to the various factors. The to approve annually the renewal of the AIM regarding the AIM Funds prepared by an Trustees recognized that the advisory International Growth Fund's (the Fund) independent company, Lipper, Inc. arrangements and resulting advisory fees investment advisory agreement with Invesco (Lipper), under the direction and for the Fund and the other AIM Funds are Aim Advisors, Inc. (Invesco Aim). During supervision of the independent Senior the result of years of review and contract renewal meetings held on June Officer who also prepares a separate negotiation between the Trustees and 18-19, 2008, the Board as a whole and the analysis of this information for the Invesco Aim, that the Trustees may focus disinterested or "independent" Trustees, Trustees. Each Sub-Committee then makes to a greater extent on certain aspects of voting separately, approved the recommendations to the Investments these arrangements in some years than in continuance of the Fund's investment Committee regarding the performance, fees others, and that the Trustees' advisory agreement for another year, and expenses of their assigned funds. The deliberations and conclusions in a effective July 1, 2008. In doing so, the Investments Committee considers each particular year may be based in part on Board determined that the Fund's Sub-Committee's recommendations and makes their deliberations and conclusions of investment advisory agreement is in the its own recommendations regarding the these same arrangements throughout the best interests of the Fund and its performance, fees and expenses of the AIM year and in prior years. shareholders and that the compensation to Funds to the full Board. The Investments Invesco Aim under the Fund's investment Committee also considers each FACTORS AND CONCLUSIONS AND SUMMARY OF advisory agreement is fair and reasonable. Sub-Committee's recommendations in making INDEPENDENT WRITTEN FEE EVALUATION its annual recommendation to the Board The discussion below serves as a summary The independent Trustees met separately whether to approve the continuance of each of the Senior Officer's independent during their evaluation of the Fund's AIM Fund's investment advisory agreement written evaluation with respect to the investment advisory agreement with and sub-advisory agreements for another Fund's investment advisory agreement as independent legal counsel from whom they year. well as a discussion of the material received independent legal advice, and the factors and related conclusions that independent Trustees also received The independent Trustees are assisted formed the basis for the Board's approval assistance during their deliberations from in their annual evaluation of the Fund's of the Fund's investment advisory the independent Senior Officer, a investment advisory agreement by the agreement and sub-advisory agreements. full-time officer of the AIM Funds who independent Senior Officer. One Unless otherwise stated, information set reports directly to the independent responsibility of the Senior Officer is to forth below is as of June 19, 2008 and Trustees. manage the process by which the AIM Funds' does not reflect any changes that may have proposed management fees are negotiated occurred since that date, including but THE BOARD'S FUND EVALUATION PROCESS during the annual contract renewal process not limited to changes to the Fund's to ensure that they are negotiated in a performance, advisory fees, expense The Board's Investments Committee has manner that is at arms' length and limitations and/or fee waivers. established three Sub-Committees that are reasonable. Accordingly, the Senior responsible for overseeing the management Officer must either supervise a I. Investment Advisory Agreement of a number of the series portfolios of competitive bidding process or prepare an the AIM Funds. This Sub-Committee independent written evaluation. The Senior A. Nature, Extent and Quality of structure permits the Trustees to focus on Officer has recommended that an Services Provided by Invesco Aim the performance of the AIM Funds that have independent written evaluation be provided been assigned to them. The Sub-Committees and, at the direction of the Board, has The Board reviewed the advisory services meet throughout the year to review the prepared an independent written provided to the Fund by Invesco Aim under performance of their assigned funds, and evaluation. the Fund's investment advisory agreement, the Sub-Committees review monthly and the performance of Invesco Aim in quarterly comparative performance During the annual contract renewal providing these services, and the information and periodic asset flow data process, the Board considered the factors credentials and experience of the officers for their assigned funds. These materials discussed below under the heading "Factors and employees of Invesco Aim who provide are prepared under the direction and and Conclusions and Summary of Independent these services. The Board's review of the supervision of the independent Senior Written Fee Evaluation" in evaluating the qualifications of Invesco Aim to provide Officer. Over the course of each year, the fairness and reasonableness of the Fund's these services included the Board's Sub-Committees meet with portfolio investment advisory agreement and the consideration of Invesco Aim's portfolio managers for their assigned funds and sub-advisory agreements at the contract and product review process, various back other members of management and review renewal meetings and at their meetings office support functions provided by with these individuals the performance, throughout the year as part of their Invesco Aim, and Invesco Aim's equity and investment objective(s), policies, ongoing oversight of the Fund. The Fund's fixed income trading operations. The Board strategies and limitations of these funds. investment advisory agreement and concluded that the nature, extent and sub-advisory agreements were considered quality of the advisory services provided In addition to their meetings separately, although the Board also to the Fund by Invesco Aim were throughout the year, the Sub-Committees considered the common interests of all of appropriate and that Invesco Aim currently meet at designated contract renewal the AIM Funds in their deliberations. The is providing satisfactory advisory meetings each year to conduct an in-depth Board considered all of the information services in accordance with the terms of review of the performance, fees and provided to them and did not identify any the Fund's investment advisory agreement. expenses of particular factor that was controlling. In addition, based on their ongoing Each Trustee may have evalu- meetings throughout the year with the continued
24 AIM INTERNATIONAL GROWTH FUND Fund's portfolio manager or managers, the ity and efficiency of the services that implement any fee waivers or expense Board concluded that these individuals are Invesco Aim provides to the AIM Funds. The limitations for the Fund. competent and able to continue to carry Board concluded that Invesco Aim continues out their responsibilities under the to be responsive to the Board's focus on After taking account of the Fund's Fund's investment advisory agreement. fund performance. Although the independent contractual advisory fee rate, as well as written evaluation of the Fund's Senior the comparative advisory fee information In determining whether to continue the Officer only considered Fund performance discussed above, the Board concluded that Fund's investment advisory agreement, the through the most recent calendar year, the the Fund's advisory fees were fair and Board considered the prior relationship Board also reviewed more recent Fund reasonable. between Invesco Aim and the Fund, as well performance and this review did not change as the Board's knowledge of Invesco Aim's their conclusions. D. Economies of Scale and Breakpoints operations, and concluded that it was beneficial to maintain the current C. Advisory Fees and Fee Waivers The Board considered the extent to which relationship, in part, because of such there are economies of scale in Invesco knowledge. The Board also considered the The Board compared the Fund's contractual Aim's provision of advisory services to steps that Invesco Aim and its affiliates advisory fee rate to the contractual the Fund. The Board also considered have taken over the last several years to advisory fee rates of funds in the Fund's whether the Fund benefits from such improve the quality and efficiency of the expense group that are not managed by economies of scale through contractual services they provide to the AIM Funds in Invesco Aim, at a common asset level and breakpoints in the Fund's advisory fee the areas of investment performance, as of the end of the past calendar year. schedule or through advisory fee waivers product line diversification, The Board noted that the Fund's or expense limitations. The Board noted distribution, fund operations, shareholder contractual advisory fee rate was above that the Fund's contractual advisory fee services and compliance. The Board the median contractual advisory fee rate schedule includes seven breakpoints and concluded that the quality and efficiency of funds in its expense group. The Board that the level of the Fund's advisory of the services Invesco Aim and its also reviewed the methodology used by fees, as a percentage of the Fund's net affiliates provide to the AIM Funds in Lipper in determining contractual fee assets, has decreased as net assets each of these areas have generally rates. increased because of the breakpoints. improved, and support the Board's approval Based on this information, the Board of the continuance of the Fund's The Board also compared the Fund's concluded that the Fund's advisory fees investment advisory agreement. effective fee rate (the advisory fee after appropriately reflect economies of scale any advisory fee waivers and before any at current asset levels. The Board also B. Fund Performance expense limitations/waivers) to the noted that the Fund shares directly in advisory fee rates of other clients of economies of scale through lower fees The Board compared the Fund's performance Invesco Aim and its affiliates with charged by third party service providers during the past one, three and five investment strategies comparable to those based on the combined size of all of the calendar years to the performance of funds of the Fund, including four mutual funds AIM Funds and affiliates. in the Fund's performance group that are sub-advised by an Invesco Aim affiliate. not managed by Invesco Aim, and against The Board noted that the Fund's rate was E. Profitability and Financial the performance of all funds in the Lipper above the sub-advisory fee rates for the Resources of Invesco Aim International Multi-Cap Growth Funds Index sub-advised funds. and the Lipper International Large-Cap The Board reviewed information from Growth Funds Index. The Board also Additionally, the Board compared the Invesco Aim concerning the costs of the reviewed the criteria used by Invesco Aim Fund's effective fee rate to the total advisory and other services that Invesco to identify the funds in the Fund's advisory fees paid by numerous separately Aim and its affiliates provide to the Fund performance group for inclusion in the managed accounts/wrap accounts advised by and the profitability of Invesco Aim and Lipper reports. The Board noted that the an Invesco Aim affiliate. The Board noted its affiliates in providing these Fund's performance was in the third that the Fund's rate was above the rates services. The Board also reviewed quintile of its performance group for the for the separately managed accounts/wrap information concerning the financial one and five year periods and the second accounts. The Board considered that condition of Invesco Aim and its quintile of performance for the three year management of the separately managed affiliates. The Board also reviewed with period (the first quintile being the best accounts/ wrap accounts by the Invesco Aim Invesco Aim the methodology used to performing funds and the fifth quintile affiliate involves different levels of prepare the profitability information. The being the worst performing funds). The services and different operational and Board considered the overall profitability Board noted that the Fund's performance regulatory requirements than Invesco Aim's of Invesco Aim, as well as the was above the level of performance of the management of the Fund. The Board profitability of Invesco Aim in connection Lipper International Large-Cap Growth concluded that these differences are with managing the Fund. The Board noted Funds Index for the one, three and five appropriately reflected in the fee that Invesco Aim continues to operate at a year periods. The Board also noted that structure for the Fund. net profit, although increased expenses in the Fund's performance was below the recent years have reduced the performance of the Lipper International Based upon amendments to the Fund's profitability of Invesco Aim and its Multi-Cap Growth Funds Index for the one, contractual advisory fee schedule in affiliates. The Board concluded that the three and five year periods. The Board recent years, the Board concluded that it Fund's fees were fair and reasonable, and also considered the steps Invesco Aim has was not necessary at this time to discuss that the level of profits realized by taken over the last several years to with Invesco Aim whether to amend the Invesco Aim and its affiliates from improve the qual- contractual advisory fee schedule or providing services to the Fund was not excessive in light of the nature, quality and extent of the services provided. The Board considered whether Invesco Aim is continued
25 AIM INTERNATIONAL GROWTH FUND financially sound and has the resources research obtained through soft dollar have offices and personnel that are necessary to perform its obligations under arrangements may be used by Invesco Aim in geographically dispersed in financial the Fund's investment advisory agreement, making investment decisions for the Fund centers around the world, have been formed and concluded that Invesco Aim has the and may therefore benefit Fund in part for the purpose of researching and financial resources necessary to fulfill shareholders. The Board concluded that compiling information and making these obligations. Invesco Aim's soft dollar arrangements recommendations on the markets and were appropriate. The Board also concluded economies of various countries and F. Independent Written Evaluation of that, based on their review and securities of companies located in such the Fund's Senior Officer representations made by Invesco Aim, these countries or on various types of arrangements were consistent with investments and investment techniques, and The Board noted that, at their direction, regulatory requirements. providing investment advisory services. the Senior Officer of the Fund, who is The Board concluded that the sub-advisory independent of Invesco Aim and Invesco The Board considered the fact that the agreements will benefit the Fund and its Aim's affiliates, had prepared an Fund's uninvested cash and cash collateral shareholders by permitting Invesco Aim to independent written evaluation to assist from any securities lending arrangements utilize the additional resources and the Board in determining the may be invested in money market funds talent of the Affiliated Sub-Advisers in reasonableness of the proposed management advised by Invesco Aim pursuant to managing the Fund. fees of the AIM Funds, including the Fund. procedures approved by the Board. The The Board noted that they had relied upon Board noted that Invesco Aim will receive B. Fund Performance the Senior Officer's written evaluation advisory fees from these affiliated money instead of a competitive bidding process. market funds attributable to such The Board did not view Fund performance as In determining whether to continue the investments, although Invesco Aim has a relevant factor in considering whether Fund's investment advisory agreement, the contractually agreed to waive through at to approve the sub-advisory agreements for Board considered the Senior Officer's least June 30, 2009, the advisory fees the Fund, as no Affiliated Sub-Adviser written evaluation. payable by the Fund in an amount equal to currently manages any portion of the 100% of the net advisory fees Invesco Aim Fund's assets. G. Collateral Benefits to Invesco Aim receives from the affiliated money market and its Affiliates funds with respect to the Fund's C. Sub-Advisory Fees investment of uninvested cash, but not The Board considered various other cash collateral. The Board considered the The Board considered the services to be benefits received by Invesco Aim and its contractual nature of this fee waiver and provided by the Affiliated Sub-Advisers affiliates resulting from Invesco Aim's noted that it remains in effect until at pursuant to the sub-advisory agreements relationship with the Fund, including the least June 30, 2009. The Board concluded and the services to be provided by Invesco fees received by Invesco Aim and its that the Fund's investment of uninvested Aim pursuant to the Fund's investment affiliates for their provision of cash and cash collateral from any advisory agreement, as well as the administrative, transfer agency and securities lending arrangements in the allocation of fees between Invesco Aim and distribution services to the Fund. The affiliated money market funds is in the the Affiliated Sub-Advisers pursuant to Board considered the performance of best interests of the Fund and its the sub-advisory agreements. The Board Invesco Aim and its affiliates in shareholders. noted that the sub-advisory fees have no providing these services and the direct effect on the Fund or its organizational structure employed by II. Sub-Advisory Agreements shareholders, as they are paid by Invesco Invesco Aim and its affiliates to provide Aim to the Affili-ated Sub-Advisers, and these services. The Board also considered A. Nature, Extent and Quality of that Invesco Aim and the Affiliated that these services are provided to the Services Provided by Affiliated Sub-Advisers are affiliates. After taking Fund pursuant to written contracts which Sub-Advisers account of the Fund's contractual are reviewed and approved on an annual sub-advisory fee rate, as well as other basis by the Board. The Board concluded The Board reviewed the services to be relevant factors, the Board concluded that that Invesco Aim and its affiliates were provided by Invesco Trimark Ltd., Invesco the Fund's sub-advisory fees were fair and providing these services in a satisfactory Asset Management Deutschland, GmbH, reasonable. manner and in accordance with the terms of Invesco Asset Management Limited, Invesco their contracts, and were qualified to Asset Management (Japan) Limited, Invesco D. Financial Resources of the continue to provide these services to the Australia Limited, Invesco Global Asset Affiliated Sub-Advisers Fund. Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco Institutional (N.A.), The Board considered whether each The Board considered the benefits Inc. and Invesco Senior Secured Affiliated Sub-Adviser is financially realized by Invesco Aim as a result of Management, Inc. (collectively, the sound and has the resources necessary to portfolio brokerage transactions executed "Affiliated Sub-Advisers") under the perform its obligations under its through "soft dollar" arrangements. Under sub-advisory agreements and the respective sub-advisory agreement, and these arrangements, portfolio brokerage credentials and experience of the officers concluded that each Affiliated Sub-Adviser commissions paid by the Fund and/or other and employees of the Affiliated has the financial resources necessary to funds advised by Invesco Aim are used to Sub-Advisers who will provide these fulfill these obligations. pay for research and execution services. services. The Board concluded that the The Board noted that soft dollar nature, extent and quality of the services arrangements shift the payment obligation to be provided by the Affiliated for the research and execution services Sub-Advisers were appropriate. The Board from Invesco Aim to the funds and noted that the Affiliated Sub-Advisers, therefore may reduce Invesco Aim's which expenses. The Board also noted that
26 AIM INTERNATIONAL GROWTH FUND TAX INFORMATION Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors. The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific state's requirement. The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2008:
FEDERAL AND STATE INCOME TAX ---------------------------- Long-Term Capital Gain Dividends $220,593,268 Qualified Dividend Income* 100% Corporate Dividends Received Deduction* 0% Foreign Taxes 0.0414 Per Share Foreign Source Income 0.8563 Per Share
* The above percentages are based on ordinary income dividends paid to shareholders during the Fund's fiscal year. NON-RESIDENT ALIEN SHAREHOLDER INFORMATION The percentages of qualifying assets not subject to the U.S. estate tax for the fiscal quarters ended January 31, 2008, April 30, 2008, July 31, 2008 and October 31, 2008 were 99.82%, 99.87%, 99.93%, and 99.89%, respectively. 27 AIM INTERNATIONAL GROWTH FUND TRUSTEES AND OFFICERS The address of each trustee and officer of AIM International Mutual Funds (the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 103 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- INTERESTED PERSONS -------------------------------------------------------------------------------------------------------------------------------- Martin L. 2007 Executive Director, Chief Executive Officer and President, None Flanagan(1) -- 1960 Invesco Ltd. (ultimate parent of Invesco Aim and a global Trustee investment management firm); Chairman, Invesco Aim Advisors, Inc. (registered investment advisor); Director, Chairman, Chief Executive Officer and President, IVZ Inc. (holding company); INVESCO North American Holdings, Inc. (holding company); and, INVESCO Group Services, Inc. (service provider); Trustee, The AIM Family of Funds--Registered Trademark--; Vice Chairman, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business Formerly: Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco Aim and a global investment management firm); Chairman, Investment Company Institute; President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) -------------------------------------------------------------------------------------------------------------------------------- Philip A. Taylor(2) -- 1954 2006 Head of North American Retail and Senior Managing Director, None Trustee, President and Invesco Ltd.; Director, Chief Executive Officer and Principal President, Invesco Trimark Dealer Inc. (formerly AIM Mutual Executive Officer Fund Dealer Inc.) (registered broker dealer), Invesco Aim Advisors, Inc., and 1371 Preferred Inc. (holding company); Director, Chairman, Chief Executive Officer and President, Invesco Aim Management Group, Inc. (financial services holding company) and Invesco Aim Capital Management, Inc. (registered investment advisor); Director and President, INVESCO Funds Group, Inc. (registered investment advisor and register transfer agent) and AIM GP Canada Inc. (general partner for a limited partnership); Director, Invesco Aim Distributors, Inc. (registered broker dealer); Director and Chairman, Invesco Aim Investment Services, Inc. (registered transfer agent) and INVESCO Distributors, Inc. (registered broker dealer); Director, President and Chairman, IVZ Callco Inc. (holding company), INVESCO Inc. (holding company) and Invesco Canada Holdings Inc. (formerly AIM Canada Holdings Inc.) (holding company); Chief Executive Officer, AIM Trimark Corporate Class Inc. (formerly AIM Trimark Global Fund Inc.) (corporate mutual fund company) and AIM Trimark Canada Fund Inc. (corporate mutual fund company); Director and Chief Executive Officer, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services) (registered investment advisor and registered transfer agent) and Invesco Trimark Dealer Inc. (formerly AIM Mutual Fund Dealer Inc.) (registered broker dealer); Trustee, President and Principal Executive Officer of The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); Trustee and Executive Vice President, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only); and Manager, Invesco PowerShares Capital Management LLC Formerly: President, Invesco Trimark Dealer Inc.; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Director and President, Invesco Trimark Ltd./Invesco Trimark Ltee (formerly AIM Funds Management Inc. d/b/a INVESCO Enterprise Services); Senior Managing Director, Invesco Holding Company Limited; Trustee and Executive Vice President, Tax-Free Investments Trust; Director and Chairman, Fund Management Company (registered broker dealer); President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc.; and Director, Trimark Trust (federally regulated Canadian Trust Company) -------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES -------------------------------------------------------------------------------------------------------------------------------- Bruce L. Crockett -- 1944 1992 Chairman, Crockett Technology Associates (technology ACE Limited Trustee and Chair consulting company) (insurance company); Captaris, Inc. (unified messaging provider); and Investment Company Institute -------------------------------------------------------------------------------------------------------------------------------- Bob R. Baker -- 1936 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Frank S. Bayley -- 1939 2001 Retired Trustee Formerly: Partner, law firm of Baker & McKenzie; and None Director, Badgley Funds, Inc. (registered investment company) (2 portfolios) -------------------------------------------------------------------------------------------------------------------------------- James T. Bunch -- 1942 2003 Founder, Green, Manning & Bunch Ltd., (investment banking Director, Policy Trustee firm) Studies, Inc. and Van Gilder Insurance Corporation -------------------------------------------------------------------------------------------------------------------------------- Albert R. Dowden -- 1941 2000 Director of a number of public and private business None Trustee corporations, including the Boss Group Ltd. (private investment and management); Continental Energy Services, LLC (oil and gas pipeline service); Reich & Tang Funds (registered investment company); Annuity and Life Re (Holdings), Ltd. (reinsurance company), and Homeowners of America Holding Corporation/Homeowners of America Insurance Company (property casualty company) Formerly: Director, CompuDyne Corporation (provider of product and services to the public security market); Director, President and Chief Executive Officer, Volvo Group North America, Inc.; Senior Vice President, AB Volvo; Director of various public and private corporations -------------------------------------------------------------------------------------------------------------------------------- Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Century Group, Inc. Administaff Trustee (government affairs company); and Owner and Chief Executive Officer, Dos Angelos Ranch, L.P. (cattle, hunting, corporate entertainment) Formerly: Chief Executive Officer, Texana Timber LP (sustainable forestry company); and Discovery Global Education Fund (non-profit) -------------------------------------------------------------------------------------------------------------------------------- Carl Frischling -- 1937 1991 Partner, law firm of Kramer Levin Naftalis and Frankel LLP Director, Reich & Trustee Tang Funds) (15 portfolios) -------------------------------------------------------------------------------------------------------------------------------- Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None Trustee -------------------------------------------------------------------------------------------------------------------------------- Lewis F. Pennock -- 1942 1991 Partner, law firm of Pennock & Cooper None Trustee -------------------------------------------------------------------------------------------------------------------------------- Larry Soll -- 1942 2003 Retired None Trustee -------------------------------------------------------------------------------------------------------------------------------- Raymond Stickel, Jr. -- 1944 2005 Retired Trustee Formerly: Partner, Deloitte & Touche; and Director, Mainstay None VP Series Funds, Inc. (25 portfolios) --------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Flanagan is considered an interested person of the Trust because he is an officer of the advisor to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the advisor to the Trust. (2) Mr. Taylor is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. 28 AIM INTERNATIONAL GROWTH FUND TRUSTEES AND OFFICERS--(CONTINUED)
NAME, YEAR OF BIRTH AND TRUSTEE AND/ OTHER POSITION(S) HELD WITH THE OR OFFICER PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE -------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS -------------------------------------------------------------------------------------------------------------------------------- Russell C. Burk -- 1958 2005 Senior Vice President and Senior Officer of The AIM Family of N/A Senior Vice President and Funds--Registered Trademark-- Senior Officer Formerly: Director of Compliance and Assistant General Counsel, ICON Advisers, Inc.; Financial Consultant, Merrill Lynch; General Counsel and Director of Compliance, ALPS Mutual Funds, Inc. -------------------------------------------------------------------------------------------------------------------------------- John M. Zerr -- 1962 2006 Director, Senior Vice President, Secretary and General Counsel, N/A Senior Vice President, Chief Invesco Aim Management Group, Inc., Invesco Aim Advisors, Inc. Legal Officer and Secretary and Invesco Aim Capital Management, Inc.; Director, Senior Vice President and Secretary, Invesco Aim Distributors, Inc.; Director, Vice President and Secretary, Invesco Aim Investment Services, Inc. and INVESCO Distributors, Inc.; Director and Vice President, INVESCO Funds Group Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; and Manager, Invesco PowerShares Capital Management LLC Formerly: Director, Vice President and Secretary, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc.; Chief Operating Officer, Senior Vice President, General Counsel and Secretary, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company); Vice President and Secretary, PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker- dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator); General Counsel and Secretary, Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) -------------------------------------------------------------------------------------------------------------------------------- Lisa O. Brinkley -- 1959 2004 Global Compliance Director, Invesco Ltd.; and Vice President, The N/A Vice President AIM Family of Funds--Registered Trademark-- Formerly: Senior Vice President, Invesco Aim Management Group, Inc.; Senior Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark--; Vice President and Chief Compliance Officer, Invesco Aim Capital Management, Inc. and Invesco Aim Distributors, Inc.; Vice President, Invesco Aim Investment Services, Inc. and Fund Management Company; and Senior Vice President and Compliance Director, Delaware Investments Family of Funds -------------------------------------------------------------------------------------------------------------------------------- Kevin M. Carome -- 1956 2003 General Counsel, Secretary and Senior Managing Director, Invesco N/A Vice President Ltd.; Director and Secretary, Invesco Holding Company Limited, IVZ, Inc. and INVESCO Group Services, Inc.; Director, INVESCO Funds Group, Inc.; Secretary, INVESCO North American Holdings, Inc.; and Vice President, The AIM Family of Funds--Registered Trademark-- Formerly: Director, Senior Vice President, Secretary and General Counsel, Invesco Aim Management Group, Inc. and Invesco Aim Advisors, Inc.; Senior Vice President, Invesco Aim Distributors, Inc.; Director, General Counsel and Vice President, Fund Management Company; Vice President, Invesco Aim Capital Management, Inc. and Invesco Aim Investment Services, Inc.; Senior Vice President, Chief Legal Officer and Secretary, The AIM Family of Funds--Registered Trademark--; Director and Vice President, INVESCO Distributors, Inc. and Chief Executive Officer and President, INVESCO Funds Group, Inc. -------------------------------------------------------------------------------------------------------------------------------- Sheri Morris -- 1964 1999 Vice President, Treasurer and Principal Financial Officer, The N/A Vice President, Treasurer AIM Family of Funds--Registered Trademark--; and Vice President, and Principal Financial Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. Officer and Invesco Aim Private Asset Management Inc. Formerly: Assistant Vice President and Assistant Treasurer, The AIM Family of Funds--Registered Trademark-- and Assistant Vice President, Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc. -------------------------------------------------------------------------------------------------------------------------------- Karen Dunn Kelley -- 1960 2004 Head of Invesco's World Wide Fixed Income and Cash Management N/A Vice President Group; Director of Cash Management and Senior Vice President, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc; Executive Vice President, Invesco Aim Distributors, Inc.; Senior Vice President, Invesco Aim Management Group, Inc.; Vice President, The AIM Family of Funds--Registered Trademark-- (other than AIM Treasurer's Series Trust and Short-Term Investments Trust); and President and Principal Executive Officer, The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust and Short-Term Investments Trust only) Formerly President and Principal Executive Officer, Tax-Free Investments Trust; Director and President, Fund Management Company; Chief Cash Management Officer and Managing Director, Invesco Aim Capital Management, Inc.; and Vice President, Invesco Aim Advisors, Inc. and The AIM Family of Funds--Registered Trademark-- (AIM Treasurer's Series Trust, Short-Term Investments Trust and Tax-Free Investments Trust only) -------------------------------------------------------------------------------------------------------------------------------- Lance A. Rejsek -- 1967 2005 Anti-Money Laundering Compliance Officer, Invesco Aim Advisors, N/A Anti-Money Laundering Inc., Invesco Aim Capital Management, Inc., Invesco Aim Compliance Officer Distributors, Inc., Invesco Aim Investment Services, Inc., Invesco Aim Private Asset Management, Inc. and The AIM Family of Funds--Registered Trademark-- Formerly: Anti-Money Laundering Compliance Officer, Fund Management Company; and Manager of the Fraud Prevention Department, Invesco Aim Investment Services, Inc. -------------------------------------------------------------------------------------------------------------------------------- Todd L. Spillane -- 1958 2006 Senior Vice President, Invesco Aim Management Group, Inc.; Senior N/A Chief Compliance Officer Vice President and Chief Compliance Officer, Invesco Aim Advisors, Inc. and Invesco Aim Capital Management, Inc.; Chief Compliance Officer, The AIM Family of Funds--Registered Trademark--, Invesco Global Asset Management (N.A.), Inc. (registered investment advisor), Invesco Institutional (N.A.), Inc., (registered investment advisor), INVESCO Private Capital Investments, Inc. (holding company), Invesco Private Capital, Inc. (registered investment advisor) and Invesco Senior Secured Management, Inc. (registered investment advisor); and Vice President, Invesco Aim Distributors, Inc. and Invesco Aim Investment Services, Inc. Formerly: Vice President, Invesco Aim Capital Management, Inc. and Fund Management Company; and Global Head of Product Development, AIG-Global Investment Group, Inc. --------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Fund's prospectus for information on the Fund's sub- advisors. OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS 11 Greenway Plaza Invesco Aim Advisors, Inc. Invesco Aim Distributors, Inc. PricewaterhouseCoopers LLP Suite 100 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street Houston, TX 77046-1173 Suite 100 Suite 100 Suite 2900 Houston, TX 77046-1173 Houston, TX 77046-1173 Houston, TX 77002-5678 COUNSEL TO THE FUND COUNSEL TO THE INDEPENDENT TRANSFER AGENT CUSTODIAN Stradley Ronon Stevens TRUSTEES Invesco Aim Investment State Street Bank and Trust & Young, LLP Kramer, Levin, Naftalis & Services, Inc. Company 2600 One Commerce Square Frankel LLP P.O. Box 4739 225 Franklin Street Philadelphia, PA 19103 1177 Avenue of the Americas Houston, TX 77210-4739 Boston, MA 02110-2801 New York, NY 10036-2714
29 AIM INTERNATIONAL GROWTH FUND [GO PAPERLESS GRAPHIC] ==================================================================================================================================== GO PAPERLESS WITH EDELIVERY Visit invescoaim.com/edelivery to receive quarterly statements, tax forms, fund reports and prospectuses with a service that's all about eeees: o ENVIRONMENTALLY FRIENDLY. Go green by reducing the number of o EFFICIENT. Stop waiting for regular mail. Your documents will trees used to produce paper. be sent via email as soon as they're available. o ECONOMICAL. Help reduce your fund's printing and delivery o EASY. Download, save and print files using your home computer expenses and put more capital back in your fund's returns. with a few clicks of your mouse. This service is provided by Invesco Aim Investment Services, Inc. ==================================================================================================================================== FUND HOLDINGS AND PROXY VOTING INFORMATION The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund's semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The most recent list of portfolio holdings is available at invescoaim.com. From our home page, click on Products & Performance, then Mutual Funds, then Fund Overview. Select your Fund from the drop-down menu and click on Complete Quarterly Holdings. Shareholders can also look up the Fund's Forms N-Q on the SEC website at sec.gov. Copies of the Fund's Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 942 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-06463 and 033-44611. 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 Invesco Aim website, invescoaim.com. On the home page, scroll down and click on Proxy Policy. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the 12 months ended June 30, 2008, is available at our website. Go to invescoaim.com, access the About Us tab, click on Required Notices and then click on Proxy Voting Activity. Next, select the Fund from the drop-down menu. The information is also available on the SEC website, sec.gov. If used after January 20, 2009, this report must be accompanied by a Fund fact sheet or Invesco Aim Quarterly Performance Review for the most recent quarter-end. Invesco Aim--SERVICE MARK-- is a service mark of Invesco Aim Management Group, Inc. Invesco Aim Advisors, Inc., Invesco Aim Capital Management, Inc., Invesco Aim Private Asset Management, Inc. and Invesco PowerShares Capital Management LLC are the [INVESCO AIM LOGO] investment advisors for the products and services represented by Invesco Aim; they each provide -- SERVICE MARK -- investment advisory services to individual and institutional clients and do not sell securities. Please refer to each fund's prospectus for information on the fund's subadvisors. Invesco Aim Distributors, Inc. is the U.S. distributor for the retail mutual funds, exchange-traded funds and institutional money market funds and the subdistributor for the STIC Global Funds represented by Invesco Aim. All entities are indirect, wholly owned subsidiaries of Invesco Ltd. invescoaim.com IGR-AR-1 Invesco Aim Distributors, Inc.
ITEM 2. CODE OF ETHICS. As of the end of the period covered by this report, the Registrant had adopted a code of ethics (the "Code") that applies to the Registrant's principal executive officer ("PEO") and principal financial officer ("PFO"). There were no amendments to the Code during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees has determined that the Registrant has at least one audit committee financial expert serving on its Audit Committee. The Audit Committee financial expert is Raymond Stickel, Jr. Mr. Stickel is "independent" within the meaning of that term as used in Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. FEES BILLED BY PWC RELATED TO THE REGISTRANT PWC billed the Registrant aggregate fees for services rendered to the Registrant for the last two fiscal years as follows:
Percentage of Fees Billed Percentage of Fees Billed Applicable to Non-Audit Applicable to Non-Audit Services Provided for Services Provided for fiscal year end 2007 Fees Billed for Services fiscal year end 2008 Fees Billed for Services Pursuant to Waiver of Rendered to the Registrant Pursuant to Waiver of Rendered to the Registrant Pre-Approval for fiscal year end 2008 Pre-Approval Requirement(1) for fiscal year end 2007 Requirement(1) -------------------------- --------------------------- -------------------------- ----------------------- Audit Fees $251,425 N/A $233,535 N/A Audit-Related Fees $ 0 0% $ 0 0% Tax Fees(2) $ 49,217 0% $ 48,845 0% All Other Fees $ 0 0% $ 0 0% -------- -------- Total Fees $300,642 0% $282,380 0%
PWC billed the Registrant aggregate non-audit fees of $49,217 for the fiscal year ended 2008, and $48,845 for the fiscal year ended 2007, for non-audit services rendered to the Registrant. ---------- (1) With respect to the provision of non-audit services, the pre-approval requirement is waived pursuant to a de minimis exception if (i) such services were not recognized as non-audit services by the Registrant at the time of engagement, (ii) the aggregate amount of all such services provided is no more than 5% of the aggregate audit and non-audit fees paid by the Registrant to PWC during a fiscal year; and (iii) such services are promptly brought to the attention of the Registrant's Audit Committee and approved by the Registrant's Audit Committee prior to the completion of the audit. (2) Tax Fees for the fiscal year end October 31, 2008 includes fees billed for reviewing tax returns and consultation services. Tax fees for fiscal year end October 31, 2007 includes fees billed for reviewing tax returns and consultation services. FEES BILLED BY PWC RELATED TO INVESCO AIM AND INVESCO AIM AFFILIATES PWC billed Invesco Aim Advisors, Inc. ("Invesco Aim"), the Registrant's adviser, and any entity controlling, controlled by or under common control with Invesco Aim that provides ongoing services to the Registrant ("Invesco Aim Affiliates") aggregate fees for pre-approved non-audit services rendered to Invesco Aim and Invesco Aim Affiliates for the last two fiscal years as follows:
Fees Billed for Fees Billed for Non-Audit Services Non-Audit Services Rendered to Invesco Percentage of Fees Rendered to Invesco Percentage of Fees Aim and Invesco Aim Billed Applicable to Aim and Invesco Aim Billed Applicable to Affiliates for fiscal Non-Audit Services Affiliates for Non-Audit Services year end 2008 That Provided8for fiscal fiscal year end 2007 Provided for fiscal Were Required year end 2008 That Were Required year end 2007 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, Invesco Aim and Invesco Aim Affiliates to PWC during a fiscal year; and (iii) such services are promptly brought to the attention of the Registrant's Audit Committee and approved by the Registrant's Audit Committee prior to the completion of the audit. (2) Including the fees for services not required to be pre-approved by the registrant's audit committee, PWC billed Invesco Aim and Invesco Aim Affiliates aggregate non-audit fees of $0 for the fiscal year ended 2008, and $0 for the fiscal year ended 2007, for non-audit services rendered to Invesco Aim and Invesco Aim Affiliates. The Audit Committee also has considered whether the provision of non-audit services that were rendered to 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 18, 2006 STATEMENT OF PRINCIPLES Under the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and Exchange Commission ("SEC") ("Rules"), the Audit Committees of the Funds' (the "Audit Committee") Board of Trustees (the "Board") are responsible for the appointment, compensation and oversight of the work of independent accountants (an "Auditor"). As part of this responsibility and to assure that the Auditor's independence is not impaired, the Audit Committees pre-approve the audit and non-audit services provided to the Funds by each Auditor, as well as all non-audit services provided by the Auditor to the Funds' investment adviser and to affiliates of the adviser that provide ongoing services to the Funds ("Service Affiliates") if the services directly impact the Funds' operations or financial reporting. The SEC Rules also specify the types of services that an Auditor may not provide to its audit client. The following policies and procedures comply with the requirements for pre-approval and provide a mechanism by which management of the Funds may request and secure pre-approval of audit and non-audit services in an orderly manner with minimal disruption to normal business operations. Proposed services either may be pre-approved without consideration of specific case-by-case services by the Audit Committees ("general pre-approval") or require the specific pre-approval of the Audit Committees ("specific pre-approval"). As set forth in these policies and procedures, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committees. Additionally, any fees exceeding 110% of estimated pre-approved fee levels provided at the time the service was pre-approved will also require specific approval by the Audit Committees before payment is made. The Audit Committees will also consider the impact of additional fees on the Auditor's independence when determining whether to approve any additional fees for previously pre-approved services. The Audit Committees will annually review and generally pre-approve the services that may be provided by each Auditor without obtaining specific pre-approval from the Audit Committee. The term of any general pre-approval runs from the date of such pre-approval through September 30th of the following year, unless the Audit Committees consider a different period and state otherwise. The Audit Committees will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. The purpose of these policies and procedures is to set forth the guidelines to assist the Audit Committees in fulfilling their responsibilities. DELEGATION The Audit Committees may from time to time delegate pre-approval authority to one or more of its members who are Independent Trustees. All decisions to pre-approve a service by a delegated member shall be reported to the Audit Committee at its next quarterly meeting. AUDIT SERVICES The annual audit services engagement terms will be subject to specific pre-approval of the Audit Committees. Audit services include the annual financial statement audit and other procedures such as tax provision work that is required to be performed by the independent auditor to be able to form an opinion on the Funds' financial statements. The Audit Committee will obtain, review and consider sufficient information concerning the proposed Auditor to make a reasonable evaluation of the Auditor's qualifications and independence. In addition to the annual Audit services engagement, the Audit Committees may grant either general or specific pre-approval of other audit services, which are those services that only the independent auditor reasonably can provide. Other Audit services may include services such as issuing consents for the inclusion of audited financial statements with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. NON-AUDIT SERVICES The Audit Committees may provide either general or specific pre-approval of any non-audit services to the Funds and its Service Affiliates if the Audit Committees believe that the provision of the service will not impair the independence of the Auditor, is consistent with the SEC's Rules on auditor independence, and otherwise conforms to the Audit Committee's general principles and policies as set forth herein. AUDIT-RELATED SERVICES "Audit-related services" are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements or that are traditionally performed by the independent auditor. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; and agreed-upon procedures related to mergers, compliance with ratings agency requirements and interfund lending activities. TAX SERVICES "Tax services" include, but are not limited to, the review and signing of the Funds' federal tax returns, the review of required distributions by the Funds and consultations regarding tax matters such as the tax treatment of new investments or the impact of new regulations. The Audit Committee will scrutinize carefully the retention of the Auditor in connection with a transaction initially recommended by the Auditor, the major business purpose of which may be tax avoidance or the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with the Funds' Treasurer (or his or her designee) and may consult with outside counsel or advisors as necessary to ensure the consistency of Tax services rendered by the Auditor with the foregoing policy. No Auditor shall represent any Fund or any Service Affiliate before a tax court, district court or federal court of claims. Under rules adopted by the Public Company Accounting Oversight Board and approved by the SEC, in connection with seeking Audit Committee pre-approval of permissible Tax services, the Auditor shall: 1. Describe in writing to the Audit Committees, which writing may be in the form of the proposed engagement letter: a. The scope of the service, the fee structure for the engagement, and any side letter or amendment to the engagement letter, or any other agreement between the Auditor and the Fund, relating to the service; and b. Any compensation arrangement or other agreement, such as a referral agreement, a referral fee or fee-sharing arrangement, between the Auditor and any person (other than the Fund) with respect to the promoting, marketing, or recommending of a transaction covered by the service; 2. Discuss with the Audit Committees the potential effects of the services on the independence of the Auditor; and 3. Document the substance of its discussion with the Audit Committees. ALL OTHER AUDITOR SERVICES The Audit Committees may pre-approve non-audit services classified as "All other services" that are not categorically prohibited by the SEC, as listed in Exhibit 1 to this policy. PRE-APPROVAL FEE LEVELS OR ESTABLISHED AMOUNTS Pre-approval of estimated fees or established amounts for services to be provided by the Auditor under general or specific pre-approval policies will be set periodically by the Audit Committees. Any proposed fees exceeding 110% of the maximum estimated pre-approved fees or established amounts for pre-approved audit and non-audit services will be reported to the Audit Committees at the quarterly Audit Committees meeting and will require specific approval by the Audit Committees before payment is made. The Audit Committee will always factor in the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services and in determining whether to approve any additional fees exceeding 110% of the maximum pre-approved fees or established amounts for previously pre-approved services. PROCEDURES On an annual basis, A I M Advisors, Inc. ("AIM") will submit to the Audit Committees for general pre-approval, a list of non-audit services that the Funds or Service Affiliates of the Funds may request from the Auditor. The list will describe the non-audit services in reasonable detail and will include an estimated range of fees and such other information as the Audit Committee may request. Each request for services to be provided by the Auditor under the general pre-approval of the Audit Committees will be submitted to the Funds' Treasurer (or his or her designee) and must include a detailed description of the services to be rendered. The Treasurer or his or her designee will ensure that such services are included within the list of services that have received the general pre-approval of the Audit Committees. The Audit Committees will be informed at the next quarterly scheduled Audit Committees meeting of any such services for which the Auditor rendered an invoice and whether such services and fees had been pre-approved and if so, by what means. Each request to provide services that require specific approval by the Audit Committees shall be submitted to the Audit Committees jointly by the Fund's Treasurer or his or her designee and the Auditor, and must include a joint statement that, in their view, such request is consistent with the policies and procedures and the SEC Rules. Each request to provide tax services under either the general or specific pre-approval of the Audit Committees will describe in writing: (i) the scope of the service, the fee structure for the engagement, and any side letter or amendment to the engagement letter, or any other agreement between the Auditor and the audit client, relating to the service; and (ii) any compensation arrangement or other agreement between the Auditor and any person (other than the audit client) with respect to the promoting, marketing, or recommending of a transaction covered by the service. The Auditor will discuss with the Audit Committees the potential effects of the services on the Auditor's independence and will document the substance of the discussion. Non-audit services pursuant to the de minimis exception provided by the SEC Rules will be promptly brought to the attention of the Audit Committees for approval, including documentation that each of the conditions for this exception, as set forth in the SEC Rules, has been satisfied. On at least an annual basis, the Auditor will prepare a summary of all the services provided to any entity in the investment company complex as defined in section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of the engagement and the fees associated with those services. The Audit Committees have designated the Funds' Treasurer to monitor the performance of all services provided by the Auditor and to ensure such services are in compliance with these policies and procedures. The Funds' Treasurer will report to the Audit Committee on a periodic basis as to the results of such monitoring. Both the Funds' Treasurer and management of AIM will immediately report to the chairman of the Audit Committee any breach of these policies and procedures that comes to the attention of the Funds' Treasurer or senior management of AIM. EXHIBIT 1 TO PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES POLICIES AND PROCEDURES CONDITIONALLY PROHIBITED NON-AUDIT SERVICES (NOT PROHIBITED IF THE FUND CAN REASONABLY CONCLUDE THAT THE RESULTS OF THE SERVICE WOULD NOT BE SUBJECT TO AUDIT PROCEDURES IN CONNECTION WITH THE AUDIT OF THE FUND'S FINANCIAL STATEMENTS) - Bookkeeping or other services related to the accounting records or financial statements of the audit client - Financial information systems design and implementation - Appraisal or valuation services, fairness opinions, or contribution-in-kind reports - Actuarial services - Internal audit outsourcing services CATEGORICALLY PROHIBITED NON-AUDIT SERVICES - Management functions - Human resources - Broker-dealer, investment adviser, or investment banking services - Legal services - Expert services unrelated to the audit - Any service or product provided for a contingent fee or a commission - Services related to marketing, planning, or opining in favor of the tax treatment of confidential transactions or aggressive tax position transactions, a significant purpose of which is tax avoidance - Tax services for persons in financial reporting oversight roles at the Fund - Any other service that the Public Company Oversight Board determines by regulation is impermissible. PwC advised the Funds' Audit Committee that PwC had identified two matters that required further consideration under the SEC's auditor independence rules. First, PwC was engaged to perform services to an affiliate of INVESCO PLC, including (a) consulting with respect to the acquisition by the affiliate of certain assets from a third party; and (b) providing expert testimony in connection with any arbitration proceeding or litigation arising from or relating to the transaction. SEC rules provide that an accountant is not independent if, at any point during the audit and professional engagement period, the accountant provides expert services unrelated to the audit to an audit client. Specifically, PwC would not be permitted to provide expert testimony nor perform other services in support of the client or its counsel in connection with a proceeding. Within days of being engaged to provide the services it was determined that some of the services contemplated in the engagement terms would be inconsistent with the SEC's auditor independence rules. A review of the services performed pursuant to the original agreement was conducted. It was concluded that the services performed were not inconsistent with the SEC's independence rules. Following the review, the initial engagement terms were modified to limit PwC's services to those permitted under the rules. Second, an employee of PwC served as a nominee shareholder (effectively equivalent to a Trustee) of various companies or trusts since 2001. Some of these companies held shares of INVESCO Nippon Warrants Fund (the "Investment."), an affiliate of INVESCO PLC, formerly known as AMVESCAP PLC (the "Company"). The investment, which consisted of 2,070 shares, was initially entered into during July 1, 2001 - December 31, 2005. PwC informed the Audit Committee that the second matter could have constituted an investment in an affiliate of an audit client in violation of Rule 2-01(c)(1) of Regulation S-X. PwC advised the Audit Committee that it believes its independence had not been adversely affected as it related to the audits of the Funds. In reaching this conclusion, PwC noted that during the time of its audit, the engagement team was not aware of the investment, as it relates to the second matter, and that PwC did not believe either of these situations affected PwC's ability to act objectively and impartially and to issue a report on financial statements as the Funds' independent auditor. Based upon PwC's review and discussion, the audit committee concurred with PwC's conclusions in relation to its independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Investments in securities of unaffiliated issuers is included as part of the reports to stockholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 11. CONTROLS AND PROCEDURES. (a) As of December 16, 2008, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the PEO and PFO, to assess the effectiveness of the Registrant's disclosure controls and procedures, as that term is defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act"), as amended. Based on that evaluation, the Registrant's officers, including the PEO and PFO, concluded that, as of December 16, 2008, the Registrant's disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that material information relating to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. (b) There have been no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. 12(a)(1) Code of Ethics. 12(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. 12(a)(3) Not applicable. 12(b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: AIM International Mutual Funds By: /s/ PHILIP A. TAYLOR --------------------------------- Philip A. Taylor Principal Executive Officer Date: January 8, 2009 Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ PHILIP A. TAYLOR --------------------------------- Philip A. Taylor Principal Executive Officer Date: January 8, 2009 By: /s/ SHERI MORRIS --------------------------------- Sheri Morris Principal Financial Officer Date: January 8, 2009 EXHIBIT INDEX 12(a)(1) Code of Ethics. 12(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. 12(a)(3) Not applicable. 12(b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940.